Category: The Wealth Advisor

Reader’s Choice Awards

The Like Law Group was voted the #2 Favorite Law Firm in Bloomington in the Herald-Times Reader’s Choice Awards. Thank you to all of our clients and friends who voted for us.  The complete results can be found here.  2015 Reader’s Choice Awards.  Now, on to the article.

Three Liability Planning Tips for Physicians You Can Use Too

The practice of medicine is a profession fraught with liability.  It’s not just medical malpractice claims either – employment related issues (wrongful termination, sexual harassment, and discrimination), careless business partners and employees, and contractual obligations (personal guarantees, leases, business agreements, etc.), coupled with personal liabilities (divorce, vehicular accidents, rental real estate), add to the increased risk assumed by a physician in private practice.  Unfortunately, in our litigious society, these liability risks are not unique to physicians.  A broad range of people, including business owners, board members, real estate investors, and retirees, need to protect their hard earned assets from a variety of liabilities too.  In this issue you will learn:

• Types of liability insurance you need to have in place;
• State exemptions that will protect certain assets from the claims of creditors; and
• The role of business entities in liability planning.

Tip #1 – Insurance is the First Line of Defense Against Liability
Liability insurance is the first line of defense against a claim.  Liability insurance provides a source of funds to pay legal fees as well as settlements or judgments. Types of insurance you should consider include (as applicable):

• Homeowner’s insurance
• Property and casualty insurance
• Excess liability insurance (also known as “umbrella” insurance)
• Automobile and other vehicle (motorcycle, boat, airplane) insurance
• General business insurance
• Professional liability insurance
• Directors and officers insurance

Planning Tip #1:  You should not rely on insurance as your sole means of liability protection since the cost of a comprehensive policy may be prohibitive, and each type of policy has numerous exceptions to coverage.  Instead, insurance should be used as one of a multiple layer of strategies designed to place a barrier between your business and personal assets and the claims of a plaintiff.  In addition, you should work with an insurance professional who can explain the purpose of each type of coverage, make recommendations for liability limits and deductibles, and shop around for the best coverage on an annual basis.
 
Tip #2 – State Exemptions Protect a Variety of Personal Assets From Lawsuits
Each state has a set of laws or constitutional provisions that partially or completely exempt certain types of assets owned by residents from the claims of creditors.  While these laws vary widely from state to state, in general you may be able to protect the following types of assets from a creditor seeking to enforce a judgment:

• Primary residence (referred to as “homestead” protection in some states)
• Qualified retirement plans (401(k)s, profit sharing plans, money purchase plans, IRAs)
• Life insurance (cash value)
• Annuities
• Property co-owned with a spouse as “tenants by the entirety” (only available to married couples; and may only apply to real estate, not personal property, in some states)
• Wages
• Prepaid college plans
• Section 529 plans
• Disability insurance payments
• Social Security benefits

Planning Tip #2:  You will need to consult with an experienced asset protection attorney and perhaps a bankruptcy attorney to determine which state exemptions are available to you and how much can be protected.  It is also important to understand the pros and cons of each type of exemption.  For example, while tenants by the entirety co-ownership between you and your spouse may make sense in the short term, in the long run it can become completely useless if you divorce or after one spouse dies.  As with liability insurance, exemption planning is best used as one layer of an overall asset protection strategy.
 
Tip #3 – Business Entities Protect Business and Personal Assets From Lawsuits
Business entities include partnerships, limited liability companies, and corporations.  Just like physicians who own their practice, business owners need to mitigate the risks and liabilities associated with owning a business. Business entities can also help real estate investors mitigate the risks and liabilities associated with owning real estate.  The right structure for your enterprise should take into consideration asset protection, income taxes, estate planning, retirement funding, and business succession goals.
 
Business entities can also be an effective tool for protecting your personal assets from lawsuits.  In many states, assets held within a limited partnership or a limited liability company are protected from the personal creditors of an owner.  Depending on the type of business entity and the state of formation, the personal creditors of an owner may be prevented from taking over control of the business.  Instead, the creditor is limited to a “charging order” which only gives the creditor the rights of an assignee.  This is beneficial to the owners, because an assignee generally only receives distributions from an entity if and when they are made.
 
An added benefit of using a limited partnership or limited liability company to protect your personal assets is the leverage that can be created for gifting and wealth transfer planning through the use of valuation discounts.  With a properly structured limited liability entity, assets held within the entity will be entitled to a discounted valuation for tax purposes because of lack of control, lack of marketability of the interests in the entity, and the inability of owners to simply to walk away from the business and take their ownership interests with them.  Discounts on the value of the entity’s underlying assets can range from 20% to over 50%. Valuation discounts allow you to gift entity interests for cents on the dollar and at a reduced use of the lifetime gift tax exemption.  
 
Planning Tip #3:  Creating a business entity that protects your assets from lawsuits involves much more than just filing some forms with the state and paying an annual fee.  Business formalities must be observed and documented; otherwise a creditor can attack the entity through “veil piercing” or “alter ego” arguments.  In addition, state laws governing business entities vary widely and are constantly changing due to legislative action and court decisions.  Therefore, it is important to work with an attorney to properly chronicle business activities and modify governing documents as applicable laws change.  Finally, as with liability insurance and state exemptions, business entities should be used in conjunction with other asset protection strategies.
 
Final Advice for Protecting Your Assets
Liability insurance, exemption planning, and business entities should be used together to create a multi-layered asset protection plan.  We are experienced with helping physicians, business owners, real estate investors, board members, and retirees alike create and maintain effective liability protection plans.  Please call us if you have any questions about this type of planning and to arrange for your liability protection consultation. 
 
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies. 

Why You Should Think Twice Before Ruling One Out

When most people hear the term “dynasty trust,” they assume it’s something for only the wealthiest of families. However, dynasty trusts are not as out of reach as you might think, and can be used by many more families of a greater wealth spectrum than currently use them.

Demystifying dynasty trusts

Dynasty trusts keep your wealth within your family for a long time. When properly designed, they can last forever. Dynasty trusts are, however, irrevocable and are therefore perceived by some as inflexible. Since adjustments to this type of trust require a great deal more work than they do for a garden-variety revocable living trust you are probably more familiar with, we need to have an in-depth understanding of your needs and goals to create your family’s dynasty trust.

But for many families, the benefits far outweigh the drawbacks of irrevocability and perceived lack of flexibility. While there are several types of laws affecting these trusts that vary state-to-state, dynasty trusts offer several benefits:

• They consolidate and build intergenerational wealth, allowing you to create long-term security for your family.
• They help avoid estate, gift, and generation-skipping transfer taxes. Although these taxes are unpopular with President Trump and Congressional Republicans, history tells us that tax policy can change after any election. Any comprehensive estate plan must consider this possibility.
• They protect your beneficiaries’ inheritance from creditors and divorce.
• When creatively designed, they can even incentivize desirable behavior from your trust beneficiaries.

How is a dynasty trust different than other types of irrevocable trusts?

Simply put, a dynasty trust is one that is designed to consolidate and build intergenerational wealth over a very long time. Other common types of irrevocable trusts you’ve heard about (like GRATs, ILITs, QPRTs, CRTs, etc.) are created to achieve a particular tax result. Dynasty trusts build on these planning strategies and are appealing because they allow you to take a long view of estate planning for your family.

Why is now the time to explore this option?

In today’s favorable tax and legal environment, dynasty trusts can make more sense than ever – especially if your family has significant life insurance policies, a small business, or other assets that might increase in value significantly (like founder’s stock or vacant land in a fast growing area).

Families haven’t always had such wide opportunities to explore dynasty trusts. Many states have laws against perpetuity designed to prevent trusts from lasting many generations. While these laws still exist in some states, there is a trend toward less rigid application or even outright removal of these rules. Admittedly, one reason for the growth in popularity of these trusts is that financial institutions stand to benefit from management fees associated with them. But your family benefits as well because wealth that’s consolidated and managed (as in the case of a dynasty trust) tends to be more likely to be preserved and successfully pass from one generation to the next versus wealth that’s divided and distributed (as in the case of many garden-variety estate plans).

Is a dynasty trust right for you and your family?

Most people think of dynasty trusts as something only the highest net worth families would even consider. And while they do require the help of a skilled estate planning attorney who can navigate the complex interplay between state and federal laws, they can be an attractive option for your family. Dynasty trusts offer an excellent method to pass along lifelong financial security to your loved ones for generations to come.

Give us a call today to talk about how we might build a dynasty trust that stays with your family through whatever the future may bring. We will make sure it complies with all applicable laws, provides maximum protection for your legacy and furthers your goals.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

A will or trust contest can derail your final wishes, rapidly deplete your estate, and tear your loved ones apart.  But with proper planning, you can prevent a disastrous will or trust contest.  In this issue you will learn:  

• What a will or trust contest is
• Who can contest a will or trust
• When a will or trust contest can be filed
• The legal grounds for contesting a will or trust
• How you can avoid a will or trust contest

If you want to learn more about how you can protect your estate plan against a will or trust contest, please call our office now.
 
What is a Will or Trust Contest?
A will or trust contest is a type of lawsuit that is filed to object to the validity of a will or trust.
 
If a will or trust is successfully contested (i.e., declared invalid), then the court “throws out” the will or trust. This essentially places your family in the position it would have been without the challenged will or trust. This can be a disastrous outcome for your intended beneficiaries.
 
Who Can Contest a Will or Trust?
Only a person who has legal “standing” can file a lawsuit.  Standing means that a party involved in a lawsuit will be personally affected by the outcome of the case. 
 
The following people may have standing to question the validity of a will or trust:  

• Disinherited or disadvantaged heirs at law – Family members who would inherit or would inherit more under applicable state law if you failed to make a valid will or trust

• Disinherited or disadvantaged beneficiaries –Beneficiaries (such as family, friends and charities) named or given a larger bequest in your prior will or trust

Planning Tip:  Not everyone involved in your life will have standing to challenge the validity of your estate plan.  For example, even if a friend or business associate suspects that your will or trust is invalid, they will not have standing to contest it (unless they are your heir at law or named in your prior will or trust).
 
When Can a Will or Trust Contest Be Filed?
Nine states’ laws allow residents (and in some states nonresidents) to establish the validity of their estate plan before they die:  Alaska, Arkansas, Delaware, New Hampshire, Nevada, North Dakota, and Ohio.  This pre-death validation process allows you to confirm your estate planning decisions while you are capable of defending them, which, in turn, will bar challenges to the plan after your death.  
 
The time limit and procedures for contesting a will is determined by the law and rules of the state in which the probate case is filed.
 
With regard to trusts, the time frame and procedures to contest them varies greatly from state to state.  In some states, your heirs can be limited to as little as a few months to contest your trust, while in other states the time frame can be as long as a few years. 
 
Planning Tip:  It is important to understand the time limits that an interested party has to file a will or trust contest, since in many states missing the deadline will completely bar the party from filing one.
 
What Are the Legal Grounds for Contesting a Will or Trust?
In general there are four grounds to challenge the validity of your will or trust:
 
1.      The will or trust was not signed as required by state law.  Each state has specific laws that dictate how a will or trust must be signed in order for it to be legally valid (usually wills not entirely in your handwriting must be signed in the presence of two witnesses who meet certain requirements). 
 
2.      The person making the will or trust lacked the necessary capacity.  The capacity to make a will means that the person understands (a) their assets, (b) their family relationships, and (c) the legal effect of signing a will or trust.  Each state has laws that set the threshold that must be overcome to prove that a person lacked sufficient mental capacity to sign a will or trust.  Some states apply the same standard to establishing a trust and others apply the standards for capacity to make a contract (understand the purpose and effect of the contract).
 
3.      The person making the will or trust was unduly influenced into signing it.  As people age and become weaker both physically and mentally, others may exert influence over decisions, including how to plan their estate.  Undue influence can also be exerted on the young and the not so young.  In the context of a will or trust contest, undue influence means more than just nagging or verbal threats.  It must be so extreme that it causes you to give in and change your estate plan to favor the undue influencer.
 
4.      The will or trust was procured by fraud.  A will or trust that is signed by someone who thinks they are signing some other type of document or a document with different provisions is one that is procured by fraud. 
 
Planning Tip:  While it is easy to assume that a will or trust that was signed in an attorney’s office is valid, this is not always the case.  Attorneys who do not specialize in estate planning may be unfamiliar with the formalities required to make a will or trust legally valid in their state.  Therefore, it is important for you to work with an attorney who is familiar with the estate planning laws of your state. Ensuring that an estate plan is protected against these legal grounds is particularly important if you wish to disinherit or favor one part of your family.
 
How Can You Avoid a Will or Trust Contest?
When you create or update your estate plan, one of your goals should be to insure that your final wishes are fulfilled.  If you are concerned about challenges to your estate plan, consider the following:
 
1.      Do not “do it yourself”!  If you are concerned about an heir contesting your estate plan, only an experienced estate planning attorney will be able to help you create and maintain a plan that will discourage lawsuits.  Also, note that unintended consequences can result from a “do it yourself” plan because a box or DVD cannot give legal advice and it’s impossible to work around laws you know nothing about.
 
2.      Let your family members know about your estate plan.  It is not necessary to let family members know about all of the intimate details of your estate plan; at the very least they need to know that you have taken the time to create one.
 
3.      Use discretionary trusts for problem beneficiaries.  Instead of completely disinheriting a beneficiary who may squander their inheritance or use it against your wishes, you can require the beneficiary’s share to be held in a lifetime discretionary trust and name a third party, such as a bank or trust company, as trustee.  This will allow you to control when the beneficiary will receive distributions and who will inherit anything that is left when the beneficiary dies.
 
4.      Keep your estate plan up to date.  Estate planning is not a transaction, it is an ongoing process.  Therefore, as circumstances change, so should your estate plan.  An up to date plan shows that you took the time to review and revise the plan as your family and financial situations changed.  This, in turn, will discourage challenges since your plan will encompass your current estate planning goals.
 
The Bottom Line on Will and Trust Contests
Will and trust contests are on the rise.  Putting together an estate plan that is designed to head off challenges will go a long way to giving you and your loved ones peace of mind. 
 
If you are interested in learning more about how to create and maintain an estate plan that will be difficult to overturn, please call our office now.
 

To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person and (ii) each taxpayer should seek advice from their tax adviser based on the taxpayer’s particular circumstances.

What to do with a Confusing, Old Trust

Estate plans evolve. Or at least they should. Any plan that fails to achieve your goals and doesn’t match your current financial and family circumstances is out of date and is in need of an overhaul. We can help you revitalize the obsolete aspects of your plan and get you back on track for the future.

How to know if you have an outdated trust

If you or anyone you know signed a will or trust in 2012 or before, an immediate review should be on your to-do list. There have been many legal and policy changes since 2012, and your documents may not work as well as they could.

If you signed your will or trust after 2013 and it’s been more than a year since we talked, now is the time to make sure your plan still meets your needs and avoids confusion along with needless complexity, costs, and taxes.

You may also be the beneficiary of a deceased loved one’s will or trust. These older trusts left by a parent or grandparent can often benefit from a “remodel” or modernization.

Quality estate planning is an ongoing process

Like investment or financial planning, tax planning, health and fitness, and so many other aspects of life, proper estate planning is an ongoing process that you must revisit regularly. We make it our business to keep up with the latest developments in legislation and know how to make changes to your plans to avoid risks and seize opportunities. But, we need your help and your engagement in the process to help you avoid the negative consequences of outdated or obsolete planning.

You are not trapped by old plans, even when they’re “irrevocable.”

Now that you are aware of an outdated trust posing a potential risk to your family’s long-term well-being, we can work with you to restate or amend your revocable trust or your last will and testament. This is a straightforward solution that can update and modernize your trusts and make them ready for the current realities of the legal and financial landscape we live in today.

You may also have an irrevocable trust of some kind as well, an inheritance from a parent or grandparent or even one you made yourself. There are more boundaries and modernization is a more involved process for an irrevocable trust, but we have an array of tools (decanting, trust protector restatement, judicial modification, or non-judicial settlement) at our disposal to “remodel” or modernize an existing irrevocable trust. Decanting is an increasingly popular option and borrows its name from the decanting process used for wine. Just as you can decant wine by pouring it from its original bottle into a new bottle, leaving the unwanted sediment in the original bottle, you can pour the assets from one trust into a new trust, leaving the unwanted terms in the original trust.

Just as there are many ways to remodel a home, there are many strategies and legal tools that can be used to modernize old estate plans. Since each plan is unique, the way to update it will be as well. Coming up with the most effective strategy requires careful consideration of your current goals and needs, as well as your tolerance for risk.

Even though there is no way to know for sure what to do until some analysis is complete, it’s better to have an informed choice rather than acting upon the assumption that your plan will work as intended, especially if it hasn’t been professionally reviewed. These are complex legal processes, and there is no one-size-fits-all answer.

We want you to have the best possible plan for your family. Since you and your circumstances are unique, give us a call today and let’s explore the options. We look forward to hearing from you.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

As Valentine’s Day brings heart-shaped chocolate boxes and roses by the dozen into your imagination, seize the moment to learn about the drawbacks of “I love you” wills and introduce yourself to the estate planning move that’s actually going to ensure you do well by your loved ones: a lifetime beneficiary trust.

Rise above the misconceptions

No aspect of estate planning brings out as much emotional decision-making as the division of assets. Many people think, “I love you,” so I’ll leave you everything. In order to understand why “I love you” wills are, contrary to their name, not the most caring of estate planning gestures, it’s important to understand the risks of “I love you” wills.

Simply put, an “I love you” will is a common name for a will in which the maker leaves all of his or her assets outright to his or her surviving spouse. Many people consider or even use this approach because they think that leaving assets in trust shows they don’t trust their spouse. They may also think that a lack of federal estate taxes protects their assets from getting into the wrong hands. Sadly, many people also think that a will can be used to avoid probate. Unfortunately, none of these things are true.

Understand why “I love you” wills aren’t effective

Say you want to make sure your spouse, Lisa, gets access to your wealth upon your death. In the case of an “I love you” will, Lisa will have to go to the probate court in order to validate your will and ultimately transfer the assets. However, you may have your affairs arranged so that upon your death all assets will pass to your surviving spouse without a probate. This may include owning assets in joint name and designating your spouse as beneficiary of life insurance, retirement accounts, and other assets.

Since Lisa receives the assets outright, Lisa’s estate plan will eventually control the distribution of whatever assets are left at her death. This could be a significant problem because Lisa could alter her estate plan at any time. Any verbal agreements about what will be done with those assets could go out the window, contrary to your wishes or any agreements you may have made.  This may not be a significant concern, especially if this is long-time first marriage, but it is something you need to understand.

• You could inadvertently disinherit your children. If you use an “I love you” will, your assets are now Lisa’s assets for her to leave however she wants. For example, Lisa could leave her assets to her own kids, a charity, a lover, or a new husband. Likewise, assets left outright to children could be lost in a divorce.
• Basic planning with outright inheritance sets your heirs up for asset protection issues. Once your assets are owned outright by your beneficiaries through a direct inheritance, those assets can be seized by creditors, divorcing spouses, or lost in bankruptcy. Even if your estate is below the exemption for the death tax, predatory creditors and lawsuits could still spell trouble.
• These wills still have to go through probate. Surviving spouses do not receive an exemption from probate. Even a simple will still has to go through the process, which you may not be anticipating — especially if you had hoped to keep the details of the will private. Trusts, however, don’t need to go through probate.
• An “I love you will” does not protect against guardianship or conservatorship court involvement for you or for your beneficiaries. For example, if you leave all of your assets to Lisa and she develops dementia, her entire estate (her assets plus the inheritance she received from you) could be under the control of a guardianship or conservatorship court.
• Basic plans pile more assets into survivors’ estates. Although portability between spouses can help, it still doesn’t prove useful with the generation-skipping transfer tax (GSTT). Portability isn’t available for non-spouse beneficiaries. This will only affect a very narrow group of people with very high net worth, and we don’t know yet what will happen with tax policy under the new Trump presidency. In a changing tax policy landscape, keeping yourself as informed as possible is an important tactic for ongoing success.

Explore lifetime beneficiary directed trusts

Comprehensive, trust-based estate planning with lifetime beneficiary trusts is a better option than outright inheritance for surviving spouses, children, grandchildren, or other beneficiaries. If you leave your assets in lifetime beneficiary trusts, you retain control over where assets end up in the long run. Plus, your beneficiaries obtain robust asset protection features that can keep wealth safe from courts, creditors, and divorcing spouses. Your family’s private information can stay out of public record. You can also take advantage of more sophisticated tax planning than you can with a basic will or trust with outright distributions.

Understand, this is just one approach and it may not be right for ever situation. We cover these options in our meetings and you decide. Regardless of what approach you choose, once you have a comprehensive plan in place, you can focus enjoying your life with the knowledge that a qualified estate planning attorney is working for your best interests now as well as down the road. Now that’s something to love and truly expresses “I love you” to your beneficiaries.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

Why It’s the Perfect Time to Set Your Kids Up for Success

In this “spring break” season, the parents of young adults experience a mixed bag of emotions.

It can be exciting to see your children branching out and becoming successful adults in their own right — a time full of hard work and self-discovery that hopefully lays the groundwork for a fulfilling career in the coming years.

But, it can also be a time of anxiety for some parents. We all want to know that we are doing absolutely everything we can to make sure our kids stay safe, healthy, and secure so they can pursue their dreams to the fullest.

Preparing for legal adulthood

Whether your child is just turning the corner on their senior year of high school or they’re already in the midst of their undergraduate studies, their 18th birthday undoubtedly marks the transition to adulthood when it comes to their legal affairs. This can impact you as their parent in a few distinct ways:

• Medical decisions: When your children become legal adults, you no longer have the authority to know their medical details or make healthcare decisions on their behalf. Without proper legal documents in place, you may need to petition a court to be named as guardian or conservator — a time consuming, expensive, and distracting process.Also, I have had clients tell stories of the difficulty they have had in getting information about their child who was away at college and had been involved in an accident. Due to the medical privacy rules it is critical to have appropriate documents in place so this does not happen to you.  
• Probate: Many young people own cars, have a checking or savings account, and have life insurance — assets that could end up in a probate court if inadequate planning, like only using the beneficiary form at the insurance company, is done. A basic trust may be all that’s necessary now for your children’s estates. Some people are concerned about planning “too early.” But, since revocable trusts can be updated as your child’s circumstances change, there’s never really a time that’s too early.However, perhaps a revocable trust is more planning than may be needed. There are other ways of avoiding probate for a young person including the use of “transfer on death” or “pay on death” designations on accounts and even automobile titles that may act to avoid probate but be more economical for you and your children. By working with your children now, you’ll instill a great habit of being proactive when it comes to legal affairs while providing protection for your family along the way.

A simple way forward

Turning 18 isn’t just an opportunity to be able to vote or serve in the military. It’s also the first time individuals need to come in and have a conversation about estate planning.

As a parent, it’s an opportunity to help your child enter the world of adulthood and maturity. It also presents a unique opportunity for families to work together toward a common goal and can serve as a bond-strengthening experience for parents and children alike.

Here are some of the preliminary documents we can use to lay the foundation of your children’s estate plans:

• Asset inventory: Asset inventories are a great way to get the ball rolling for those brand new to estate planning. Include assets like insurance policies, valuable or meaningful personal property or heirlooms, savings accounts, real estate, investments, and retirement plans.  
• Basic will: Wills contain instructions for the management and distribution of assets after death. However, since wills must go through probate, many people would like an alternate plan for their estates upon their death.  
• Living will: This document records the individual’s wishes in the event of terminal incapacity.  
• Revocable trust: A revocable living trust is a great way to keep an individual’s assets out of reach from potential court interference. And since they are revocable, these trusts can be altered as often as necessary throughout the course of one’s life.  
• Financial power of attorney: A financial power of attorney is the document used to appoint a person to handle the individual’s financial affairs.  
• Healthcare power of attorney: This type of power of attorney covers medical decision-making that could impact an individual’s health and lifestyle if they become unable to make those decisions themselves due to mental or physical impairment. In concert with a revocable trust, a financial power of attorney and healthcare power of attorney can provide a powerful plan for incapacity that sometimes strikes younger people (like the well-known case of Terri Schiavo, who became legally incapacitated in her late 20s).

Now is the right time to act

Estate planning for young adults doesn’t need to be prohibitively expensive or time-consuming. Work with us to build a comprehensive plan so you and your children can get back to the business of being in such an exciting part of life.

Whether your children are returning from spring break trips or getting ready for graduation in a few months time, now is a great opportunity to give us a call today to discuss how we can work together to keep your children and family fully protected, no matter what life brings their way.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

Welcome to 2017! We hope you’re recovering nicely from the holidays and settling back into a routine.

As you assess your goals for the year ahead, take a moment to review your legacy planning. You’ve hopefully already handled a few key pieces—set up and funded a trust, signed a will, created a power of attorney, etc.

But does your plan offer you and your family the greatest possible protection for the circumstances in your life right now? Ask yourself these questions:

1. Does your plan provide adequate safeguards to prevent disputes and confusion among your family if you become incapacitated or upon your death?
2. Does your plan designate someone and provide appropriate authority to a person you trust to handle your affairs if you are unable to do so?
3. Does your plan protect your heirs and their inheritances against financial mismanagement, lack of foresight, bankruptcy, divorce, or court interference?
4. Have you had your trust, will, and other documents professionally reviewed in the last two years?

If you answered an enthusiastic “yes” to each of these questions, then you are probably doing pretty well on your estate planning. Of course, there are other reasons to discuss or update your plan, like the tax changes that are probably coming under the Trump administration, so always feel free to call us if you have questions.

On the other hand, if you can’t answer an enthusiastic “yes” to each question, that’s okay. Effectively transferring wealth to the next generation can be a tricky business. Read on to learn more about how we can incorporate the power of trusts into your legacy plan.

How trust-based planning gives you more control and flexibility

Placing your assets in trust provides protection for you and your family. If you become incapacitated, your successor trustee can step in to fulfill your stated wishes. You also get greater power and flexibility over how your wealth is distributed to your heirs, providing them with long-term protection against court control, divorce, bankruptcy, and financial mismanagement.

To illustrate, let’s look at two scenarios:

SCENARIO 1

Through hard work and saving, you’ve accumulated an estate worth $300,000, which includes a home, a bank account, and a life insurance policy valued at $100,000 each. You want to divide these assets equally to your three children, Alisha, Becky, and Cameron. You name Alisha as a joint tenant on the bank account, Becky as the beneficiary of the life insurance policy, and set up a transfer on death deed for Cameron to receive the house upon your death. But over time, you decide to sell the house and deposit the money in the bank account, and you cancel the life insurance because the premiums were increased. If you pass away at this point, what happens?

Without a trust:

Becky and Cameron receive nothing because there is no house and no life insurance policy. Alisha receives the $200,000 bank account (minus the costs of probate and taxes), and she has sole discretion at that point over whether to share with her siblings. Alisha’s inheritance is also at risk from seizure by a bankruptcy court or a divorcing spouse, since she receives it outright and there’s no trust “wrapper” protecting it. This is not an ideal result for anyone in the family.

With a trust:

By placing all your assets into a revocable living trust and naming the trust as the beneficiary of the life insurance policy, you avoid the piecemeal approach from above. Your trust essentially becomes the clearinghouse for the management and distribution of all your assets. Even if the life insurance lapses, your successor trustee will divide whatever assets are in the trust amongst your children equally, all without probate costs. In this case, Becky, Cameron, and Alisha would split the $200,000 bank account (minus any taxes and trust administration expenses). Another advantage of the trust is that you can create lifetime trust shares rather than outright distributions, which protects each child’s inheritance against bankruptcy, creditors, divorce, or a spending spree.

SCENARIO 2

After working and saving for 30 years, you’ve accumulated $500,000 in your retirement account, to be divided equally among your five children. For now, let’s focus on your youngest, an impulsive 23-year-old, Tim, who hasn’t learned how to handle money properly. What happens to Tim’s portion when you pass away?

Without a trust:

With a plain-old beneficiary designation, Tim can withdraw all the money at any time. Of course, as Tim cashes in the account, the government swoops in and takes about a third of it for taxes. Instead of reinvesting the remaining amount, he spends it, perhaps on a sports car he’s always wanted. At this point, his inheritance (a depreciating sports car) is vulnerable to many pitfalls, from physical damage from a crash to a forced sale to pay for debts, divorce settlements, or other situations. Best case scenario: his wealth no longer grows, but instead shrinks. In seems that Tim certainly did not receive any long-term benefit from his inheritance.

With a trust:

It’s not only revocable living trusts that you need to have in your estate planning toolkit. By setting up a standalone retirement trust (SRT), you can control how Tim receives his portion of the inheritance. The “stretch-out” feature of the SRT allows the account to continue growing tax-deferred over Tim’s expected lifetime while the trustee distributes a minimum amount each year. Although Tim won’t have the benefit of instant gratification, his $100,000 inheritance can result in millions over the years, enabling him to afford multiple sports cars if he wants them. Additionally, this trust protects his inheritance against creditors, ex-spouses, and others risks.

An SRT provides flexibility to customize the distribution of your IRA separately for each beneficiary, so they each receives the maximum benefit or their situation. For example, if you have another adult child facing financial difficulties and possible bankruptcy, you can structure the trust so the trustee can delay payments and protect the inheritance from the bankruptcy court.

These are just two brief examples of how trust-based estate planning gives you greater flexibility and benefit to your family. No matter what type of estate planning circumstance you have, there’s probably a trust that can help you achieve your goals. If you are interested in learning more about trust-based planning or would like to discuss your specific needs, please call anytime.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

As 2016 draws to a close and 2017 approaches, it’s an excellent time to begin making plans for growth in the upcoming year.

According to a study conducted by Fidelity Investments, 37 percent of Americans considered making at least one finance-based New Year’s resolution for 2016, up from 31 percent in the previous year. Those numbers are likely to increase again this year, especially since we won’t have a Presidential election to focus on during 2017. While many people avoid making New Year’s resolutions for fear that they will only break them, the same study indicated that more than half of people who made financial New Year’s resolutions ended the year in better financial shape than when they began.

To that end, below are 9 financial New Year’s resolutions designed to help you grow your wealth in 2017. Enjoy!

1. Set realistic, reachable financial goals.
If it seems a bit ironic that our first resolution or goal is to have goals, that’s because this is where most people fail at the outset. Either they don’t have specific financial goals in mind, or they set the bar so high that their goals are virtually impossible to reach, causing them to lose heart and give up. Don’t let the perfect be the enemy of the good: Set your benchmarks now.

2. Prepare for changes in the tax laws.
When President-Elect Trump takes office on January 20, 2017, changes in the tax codes will almost certainly follow. If you haven’t already done so, talk to us, your financial advisor, and your tax advisor now to strategize about changes to your estate, financial, and tax plans.

3. Review your investment portfolio.
The beginning of a new year and the last few days of 2016 are good times to take a detailed look at your investments, to see which investments are performing well, which are not, and where to reinvest and diversify.

4. Review and track your income and expenses and look for ways to get your budget under control.
Examine your income and expenses for 2016 so you know your starting point. Then, throughout 2017 pull year-to-date reports so you can identify and correct problem areas before they become out of control. Analyzing your expenses regularly helps you identify when money is being spent on things that have less importance to your long term goals.

5. Look for creative ways to increase income.
If you own or operate a business, are there new strategies you could implement to reach untapped markets or otherwise increase revenue? If you work as an employee, are you due for a raise this year? Do you own any intellectual property you’re not currently exploiting for royalties? Brainstorm, and use your imagination to find additional ways to increase your personal income.

6. Deal firmly with debt.
Debt is dead weight and the interest charges can be an anchor on an otherwise good financial plan. Bite the bullet, and get on a debt reduction or elimination plan in 2017.

7. Review your life insurance coverage.
Your policy may be out of date and not have features now commonly available on insurance policies. Worse yet, you may be underinsured if your family’s financial needs have changed. Put the coverage under the microscope to build an action plan. Once you’ve decided on changes with your insurance advisor, coordinate the beneficiary designation with us, so it completely aligns with your estate planning goals.

8. Review your retirement plan.
If you have a 401(k) or an IRA, how is it performing? Is it time to increase your contributions? Should you roll over to a different plan? If you don’t have a retirement strategy, start now, and get to it. Now’s also a great time to verify that your beneficiary designation coordinates with your estate plan. We’re here to help if you have questions.

9. Plan for your heirs.
If you don’t have a trust, consider working with us to establish one in 2017. If it’s been more than three years since your trust was last looked at, it’s time for a checkup. Are there any life changes (e.g., marriage or divorce) that need to be considered and incorporated into your plan? Even if your assets are modest, a trust prepared by a qualified estate planning attorney can provide privacy for your family as well as protect your heirs and legacy from the IRS, creditors, and court interference.

“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki

This quote reminds us of a couple of important concepts: first, wealth doesn’t come without a plan; and second, we don’t accumulate wealth just for ourselves. Make a commitment in 2017 to set solid financial goals and craft an estate plan that successfully passes on your financial legacy to the next generation.

We are here to help. Call today to schedule an appointment. From our family to yours, have a happy holiday season and a safe and Happy New Year.

On January 20, 2017, Donald Trump will become the 45th President of the United States. Earlier in January, the Senate and House will convene with Republican majorities. How you update and manage your estate plan and financial plan under the Republican controlled Congress and Presidency can make a significant difference in your tax burdens and the way your wealth continues to accumulate. We’re here to help guide you during this time of transition and change.

We are monitoring the situation vigilantly, and we are already strategizing for a wide range of potential tax and regulatory changes in order to provide you with the best possible advice about any changes to your estate plan.

Let’s look briefly at how some of the preliminary details of President-elect Trump’s proposals could affect your estate.

Donald Trump’s proposals

Donald Trump has proposed across-the-board reforms in the tax codes, and while he promises to close up some loopholes, the general trajectory of his proposals is toward lowering taxes overall.

You can find the details of his tax plan on his website, but the most pertinent points are:

• Lowering income tax rates across the board, including significant raises to the standard deductions
• Reducing the number of individual income tax brackets from 7 to 3, with a maximum tax rate of 33 percent (down from 39.6% today)
• Reducing the business tax rate from 35 percent to 15 percent
• Eliminating the estate tax

  Remember that any change to the tax laws requires Congressional approval and won’t happen automatically. In spite of Republicans being in control of the Presidency and Congress, there will still be negotiation and compromise reflected in the “final” tax law that comes out of Washington. And remember, the rules are only “final” until the government decides to change them again. This is one reason you must remain in contact with us as 2017 begins.

  Recommendations, assuming President-elect Trump’s agenda is put into law:

• Be cautiously optimistic. The elimination of the estate tax in particular is likely to be welcome news if you have higher net worth (or even if you are on your way there), but this proposal may be subject to opposition or compromise in Congress. This compromise could range from a “sunset” provision to gradual phase-in or something else entirely. We’ll have to wait and see. Don’t assume that the “death tax” is automatically gone on Day 1 of the Trump Presidency.
• It’s more than taxes. Although taxes have long had top billing in many conversations about estate planning, the real reasons for estate planning are present, no matter who is in the White House and Congress. This includes planning for medical or financial decisions during incapacity, directing your financial legacy to your intended beneficiaries, asset protection, and more. No matter how hard Congress may try, they can’t seem to legislate away lawsuits, wasteful spending by young beneficiaries, and other issues that can be overcome through proper planning. The great news is that we might soon be able to focus our time with you on these issues almost entirely.
• Stay tuned for updates. As tax and regulatory reform starts being fleshed out in Washington and ultimately enacted, we will provide recommendations to you.

Preparing your estate for the next administration

With all the volatility surrounding this now-concluded election cycle, the only thing of which we can be certain is change. Regardless of who you supported, any election requires you to take some action to protect yourself. Proactivity is the best way to protect your wealth against any changes to come.

Between now and when President-elect Trump becomes President Trump, you would be wise to schedule an appointment with us for a full review of your will, trust, and estate plan. Depending on your circumstances, there may be actions that need to be taken now, some that might need to wait, and some that need to be back burnered until we know the “final” tax rules that come from President Trump and the Republican Congress.

As always, we are here to help. Give us a call today to schedule an appointment.

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.

You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.

Many of us labor a lifetime to build up our assets and fight for causes that matter to us. Few things are more fulfilling than the thought of sharing wealth and legacy with our family.

Of course, it’s impossible to plan for every eventuality, but careful planning can mitigate against the two primary risks.

a)    Your intentions regarding your estate weren’t made clear, resulting in the potential for costly, time-consuming conflict.

b)    Your family did not understand or share your wealth management vision, resulting in the possibility of asset dissipation.

The good news is both of these issues can be prevented through honest communication with your family now. While it’s not necessarily comfortable to broach this topic, a family gathering at the holidays might be the best time to have a conversation with your children and loved ones about your estate plan.

Why it’s important to talk to your family

Passing along our wealth is one thing, but what about passing along the values of work ethic and generosity that enabled us to acquire and grow that wealth in the first place? Too many fortunes built by one generation are lost by the next, not due to bad luck or the IRS, but due to a lack of understanding of wealth management and preservation. Also, when your family doesn’t appreciate the rationale behind your estate planning choices like the use of lifetime trusts, this lack of understanding can lead to conflict and resentment among family members. In a worst case scenario, your heirs end up suing one another. No one relishes the idea of family being torn apart over antiques, heirlooms, or who gets the house on Long Island. Nevertheless, it happens far more often than anyone cares to admit.

Should you tell your children about their inheritance?

The question of whether to tell the children about their inheritance is the subject of ongoing debate. Many people express concern that this information might reduce a child’s work ethic or make them feel otherwise entitled, killing their motivation to seek a career and a “normal” life. Depending on the child’s temperament, this might be a legitimate point. On the other hand, inexperience and lack of understanding about wealth can result in a quickly lost inheritance, only because your heir didn’t know what to do.

The best path for most of us is a “happy medium,” sharing your plan in general terms with your heirs, without necessarily telling them the dollar values. You might even entrust some heirs with some responsibility for investment and entrepreneurial opportunities now before they inherit anything. This way, they begin to share your guiding values, and they are therefore better prepared to handle, manage and even grow their inheritance when they ultimately receive it.

Communication now prevents conflict later

You have put careful thought into which assets go to which beneficiaries and why. But, when the details of a plan are sprung on people, especially during a time of grief, differing opinions can create conflict. If your family unexpectedly discovers upon your death that there is a significant amount of money to be distributed, and you haven’t shared your rationale behind the decisions you’ve made, then you’ve set the stage for conflict and infighting – possibly even a costly and lengthy lawsuit.

To overcome these challenges, frame your estate planning around your guiding principles, communicate your intentions thoroughly in the trust, and explain your vision clearly to your trustees and beneficiaries while you’re still around to explain things. By attaching your values to your estate planning and involving your family in the process, your estate plan now becomes a family plan, minimizing the risk of conflict.

What should you discuss at the family meeting?

Once you’ve committed to discussing your estate planning with your family, what should you share specifically? Should you detail the entire plan with them, or just an outline of it? Should you go into detail about who gets what?

The specifics of what should and should not be discussed about your estate will depend on your family, your circumstances, and your overall level of comfort with how much knowledge they possess. You don’t necessarily have to violate your privacy, and there’s typically no need to reveal specific dollar amounts at this meeting. One big caveat – if there’s anything in your plan that might stir controversy, concealing it now serves to invite conflict later. Thus, a good basic rule of thumb is to share as much as is necessary to get everyone on the same page.

Tips for a successful estate planning family meeting

When you hold your family meeting, a bit of awkwardness is to be expected at first—after all, no one in your family (presumably) is likely eager to discuss what will happen when you die. Likewise, you need to be prepared to talk through some of the choices you’ve made that are likely to generate some pushback. However, the end of the meeting is often more comfortable than the beginning. The following guidance can help you get there.

• Plan the meeting after the holiday, if possible. If you’re gathering the family at a holiday like Thanksgiving or Christmas, try to arrange the actual meeting to take place after the holiday itself, so a potentially uncomfortable conversation doesn’t spoil any planned festivities.
• Invite your financial advisor, estate planning attorney, and accountant to be in attendance. (More to this point momentarily.)
• Schedule the meeting in a quiet place that encourages candid conversation. A public place is probably not appropriate for this discussion. Your financial advisor or estate planning attorney might have access to space if you need it and prefer a “neutral” site over your living room.
• Arrange for child care. This meeting should be an adults-only gathering so everyone can participate without distractions from babies and children.
• Set an agenda. Encourage open conversation, especially on any controversial points, but have a clear list of points to be covered, so you don’t forget anything in the midst of emotional moments.
• Set a start and stop time. This step will help the meeting stay on track without meandering away from the main points. If something significant comes up, you can always continue the discussion later.
• Strike an inclusive tone. While you should not suggest that your decisions are open to challenge or discussion (it is your estate plan after all), try to convey that you are inviting the family to share your vision and goals. If you can get them on board with you at the outset, the risk of disputes will be significantly reduced later.

Why involve your financial advisor, attorney, and accountant?

Some people might have misgivings about having a third party advisor present at an otherwise private family gathering, and it’s certainly not a mandatory step. However, you might want to consider inviting your financial advisor, estate planning attorney, or accountant to the meeting for the following reasons:

• The presence of your financial and legal team can add a sense of authority to the conversation, reinforcing that your choices have not been arrived at lightly.
• With your permission, your team can review the structure of your estate plan with your family, highlight its benefits, and make the meeting easier for you to conduct.
• In some cases, there might be questions from your family. Your team can, with your permission, answer questions, especially those of a technical nature.

Tailor the role of your financial advisor, attorney, and accountant in your family meeting to your specific needs. Whoever you include can give a brief presentation of your estate plan as part of the proceedings, or simply be on hand to clarify points. When appropriate, someone from your team can even act as a facilitator or moderator for the meeting itself.

We are here for you

In whatever way you choose to address this sensitive subject with your family, remember that we are here to help, from a full review of your estate plan to offering guidance on how to include your loved ones in a family vision for your estate. When you’re ready, call us for an appointment to discuss your needs. 

This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.