Category: The Wealth Counselor

Your Clients’ Legacies: How Do They Want to Be Remembered? 

As trusted advisors, we often discuss with our clients all aspects of the future, whether it be their financial future, the future support of their loved ones, or what the future will look like when they are no longer a part of it. Epitaph Day is an opportunity to center your discussion on how your clients would like to be remembered. 

As Thomas Campbell, physicist and the author of My Big TOE, once said, “To live in the hearts we leave behind is not to die.” When we lose a loved one, we often have memories of special events and occasions, support they provided us, or specific qualities of that person we will never forget. An epitaph, by definition, is a brief phrase or sentence expressing a sentiment, often inscribed on a tombstone. Epitaph Day is a symbolic event dedicated to the contemplation and creation of our desired epitaphs. It is a gentle and meaningful reminder of the impermanent nature of life and the importance of estate planning. 

An Estate Plan Can Help Them Be Remembered

In the rush and routine of daily life, it can be easy to postpone essential matters like estate planning. Although Epitaph Day has recently passed, now is a great opportunity for clients to pause and consider the importance of ensuring that their wishes, the things they own, and their legacies are handled according to their preferences after their departure from this world. Your clients may be surprised to learn more about the ways that they can incorporate their own desired epitaph into the planning process. 

A Trust Can Help Your Clients Guide Their Loved Ones

While it is true that a trust is a valuable estate planning tool, it is much more than that. A trust can memorialize your client’s values and aspirations for their loved ones. By incorporating provisions that incentivize beneficiaries to pursue an education, hone a new craft, contribute to the community through volunteering, or even embark on entrepreneurial ventures, your clients can craft a legacy of encouragement, motivation, and support. Their trust can become a continuation of their presence, guiding their beneficiaries in ways that align with their wishes and vision for their future.

A Trust Keeps Your Client Part of Memorable Experiences 

For those clients who cherish experiences and the creation of lasting memories, it can be invaluable to incorporate clauses within their trust that allocate money specifically for ventures like traveling, exploring new places, or even family reunions and celebrations of important events. These provisions not only facilitate experiences but also foster a deeper connection, ensuring that their family bonds remain strong even in their absence.

A Trust Can Provide Monetary Support 

An estate plan is a powerful tool that can reflect your clients’ dedication and commitment to the well-being and success of their loved ones. For those who have provided financial support to loved ones in their lifetime, their estate plan offers them an opportunity to define and detail the nature and extent of their continued monetary support. Through meticulous planning, they can be remembered not just for the wealth they have accumulated but also for the love, care, and foresight indicated by the provisions incorporated in their plan. 

Now Is the Perfect Time for Clients to Start Planning

Epitaph Day creates an opportunity for clients to proactively engage in the estate planning process and provide them with both peace of mind as well as clarity and ease for their loved ones in the future. This can help ensure that your clients’ desires, whether about distribution of their hard-earned money and property, funeral arrangements, or messages to their loved ones, are clearly articulated and legally secure. 

Let us help your clients embark on the crucial journey of estate planning, ensuring that their legacy is honored and that their loved ones are spared unnecessary difficulties in honoring your clients’ lives and wishes for the future. 

The Real Story Behind Trust Fund Kids 

When we hear the phrase “trust fund kid,” words like “entitled,” “privileged,” and “financially irresponsible” might come to mind. But another word we should associate with “trust fund kid” is “protected.” 

What Is a Trust Fund Kid?

According to a Forbes article published in 2021 about trust fund kids, three of the most common misconceptions are that trust fund kids all come from ridiculously rich families, they have it easy, and everyone who has serious money must have a trust fund. While these misconceptions may apply to some trust fund kids, it does not apply to the majority. The reality is that a trust fund kid does not necessarily live a life filled with lavish trips, designer clothes, and expensive cars— they are simply a young beneficiary of a trust. When most people hear the word “trust,” they envision an endless pot of money freely accessible to the beneficiary. Trusts are created for a variety of reasons, however, and are not just planning tools that benefit the ultrawealthy. 

Why Do Trust Fund Kids Have Such a Bad Reputation? 

This bad reputation stems from a fundamental misunderstanding of trusts and the benefits they can provide. A trust often indicates that an individual has taken the time to intentionally plan for their children’s or loved one’s future, and instead of deciding to leave money to these individuals outright with no protections or conditions, they have decided to protect those funds. Whether the amount held in trust is millions of dollars or far less, trusts can be structured to ensure that the money lasts, is used for specific purposes, or is even held for the future benefit of children or loved ones. Added benefits of utilizing a trust are privacy, as trusts are not filed with courts and therefore are not subject to the public eye, and avoiding the probate process, which in some cases can be costly and time-consuming. 

Preventing the Negative Consequences

Limit Control

After enlightening your clients about the real story behind trust fund kids, they may want to learn more about the positive ways a trust could benefit their own children or loved ones. To avoid the negative stereotypes surrounding trust fund kids, your clients will want to consider how much control they want to give the beneficiary over their own trust. Granting too much control could lead to uncontrolled spending or unreasonable purchases. 

Make a Beneficiary Earn Their Inheritance

Clients may want to avoid the perception that their children or loved ones have it easy and should therefore consider building in provisions that will require their children or loved ones to “earn” portions of their trust. This structure can incentivize their children or loved ones to achieve more by reaching certain milestones such as completing postsecondary education, finishing trade school, serving in the military, or starting a business. Clients can elect to have the trustee purchase certain assets, such as a home, in the name of the trust to ensure that the assets are provided to the beneficiary, while the trustee is responsible for ensuring that it is properly maintained and not sold on a whim. 

Consider Loans Instead of Outright Gifts

You may encounter clients who have worked hard to build their wealth and want to leave protected funds that can benefit their children or loved ones in a different way. There are many wealthy individuals who do not want to leave money to their children or loved ones because they believe it may disincentivize them to pave their own way. As it is, the majority of young adults do not have the ability to obtain financing with favorable terms on their own. For your clients who want to provide a more conservative form of support, they can allow their trust to provide favorable loans to beneficiaries that they will have to pay back with interest, allowing the principal to grow for future generations. 

We Can Help Your Clients Avoid the Downsides of a Trust Fund Kid

Although being a trust fund kid often has negative connotations, your clients will likely want to make their own children or loved ones trust fund kids if they are educated about the positive aspects. We can help further educate your clients about how a trust can benefit them, protect their children or loved ones, and support their children or loved ones in the future. 

This Thanksgiving We Are Thankful for Your Collaboration

It is no secret that having a solid network of quality professionals allows us to address more than just one of our clients’ concerns. It takes a team to plan for life’s foreseen and unforeseen events. Working with quality professionals like you enables us to ensure that our clients are receiving the best possible comprehensive plan and that it is done the right way. 

Our clients can feel secure knowing that all facets of their future are being considered when we collectively strategize the best structures and tools to adequately address their finances, businesses, and tax considerations, all while achieving the end goal of promoting family harmony. 

There Are Many Opportunities for Us to Work Together

Irrevocable Trusts

Irrevocable trusts provide higher-net-worth clients with a variety of benefits, such as avoidance of estate inclusion and reducing future estate taxes. Consequently, clients will likely require assistance addressing the higher income tax liability and understanding any potential tax implications associated with the trust being the owner of the money and property they have worked so hard for. 

Business Succession Planning

We often encounter business owners and entrepreneurs while creating an estate plan. As part of our process, we often implement strategies on the estate planning side to address business succession and management in the event of death or incapacity. Additionally, we discuss clients’ goals of achieving asset protection for their real property, which may involve us advising them to transfer their property to a business entity. While we can address some aspects of business ownership, our clients benefit from the guidance of an experienced professional who can assist them in determining which business entity type may be the most appropriate, and even further, ensuring that they have the proper formation and operational documents in place once it is established. In addition, clients will likely need to be educated about proper management and any filing requirements associated with entity ownership. 

Liquidity for Minor Beneficiaries

Planning for minor children is often at the top of our clients’ priority list. Trusts are often a great tool to create a plan for minor children in the event of a client’s death. This form of planning involves examining a client’s assets and ensuring that there is an available source of liquidity to fund the trust for the benefit of these children. 

We Are Thankful to Have a Go-To Person 

We are thankful to have you as a part of our incredibly valuable network. We appreciate the contributions you make to ensuring that our mutual clients have a comprehensive plan for the future. Our world is constantly changing, prompting clients to have evolving concerns that need to be addressed by knowledgeable professionals. Having knowledgeable professionals like you allows us to be the go-to person when clients call us looking for guidance. Thank you for being a part of our network, and we look forward to continued opportunities to collaborate to better serve our clients. 

Top 3 Reasons Your Clients Need an Estate Plan

Although we live in a world where information is easily accessible through the internet, there are still many misconceptions surrounding estate planning. Most individuals do not dedicate their time to learning more about a topic that they do not believe they need or could benefit from. There are some common beliefs that clients may have about estate planning that are inaccurate: that having a will avoids probate, being married means everything a spouse owns goes to their surviving spouse, and a person does not need an estate plan if they own few assets. Educating people on the importance of an estate plan is key to saving time, money, and heartache that can be associated with lack of planning. As an advisor, you understand the importance of having an estate plan and can help your clients understand that a comprehensive estate plan can not only contemplate what will happen after death, but also protect clients and their loved ones in the event of incapacity. 

While there are many important reasons to create an estate plan, we are going to focus and elaborate on three. 

Reason # 1: An estate plan lets loved ones know what the client wants.

People tend to avoid thinking about death and dying and do not discuss these topics with their loved ones. While these topics often evoke strong emotions, it can be important to discuss several aspects of what they want to happen after they die with their loved ones. Their loved ones probably know them best but may not know what steps to take when faced with loss and grief. Encouraging your clients to provide the important people in their life with guidance through estate planning will hopefully reduce any confusion or additional stress following their death. 

By establishing a comprehensive estate plan, your clients can decide and communicate what they want to happen with their money and property, but also make some important decisions regarding the care of their minor children, pets, and their own final arrangements. You should discuss the benefits of conveying their wishes to their family through estate planning because depending on their goals, there may be appropriate strategies that an experienced estate planning can educate them on that they may not have been previously aware of. 

Reason # 2: An estate plan is a legally enforceable way to carry out the client’s wishes.

When speaking to your clients about establishing an estate plan to ensure their wishes are carried out, some may believe that they do not need to memorialize these decisions because they are confident that their loved ones will follow their wishes. However, as many of us are aware, it is hard to predict what will happen in the future and when faced with financial difficulties or struggles, their loved ones may act differently than what they had wanted. For example, while some clients believe that adding children to their real property or bank accounts will protect them in the event of incapacity, and avoid probate, these situations come with significant risks. Adding a child to their property grants an ownership interest in said property, and when the parents die, the child becomes the sole owner and can do with the real estate as they please. This could result in the unfortunate result of their child cutting out siblings or other intended beneficiaries after the client’s death without recourse. While this is only one scenario, this is a great example to provide to your clients as to why creating an enforceable estate plan will make sure that all they have worked so hard for will end up with who they want. 

Reason # 3: The client gets to choose what happens.

Your clients may be hesitant to meet with an estate planning attorney to establish their estate plan for a variety of reasons, including a lack of education on the benefits of estate planning. It is important to let them know that if they do not create their own plan, the state will have one for them. The default estate plan (known as a state’s intestate statute) that controls the distribution of an estate may not align with their wishes. The state’s plan will not consider your client’s unique relationships and family structure. Blended families, parents of minor children, business owners, and unmarried couples are just a few groups that should strongly consider the consequences of not establishing a plan. 

An estate plan can protect clients from the consequences of incapacity that can occur as a result of an accident, injury, or illness. Without a plan, clients could be faced with a court-supervised conservatorship or guardianship, in which a court will delegate control of their person and property to another person, whom your client may not have chosen. As part of an estate plan, clients can choose who can act on their behalf in the event of incapacity. 

Everyone should have a choice in their future. A qualified estate planning attorney can help your clients create a plan that illustrates their wishes. If you or your clients have any questions or want to get started with the estate planning process, give us a call.

Estate Planning Roll Call: Crucial Legal Tools

As with any roll call, it is important to make sure that everyone is present and accounted for. Similarly, when assessing an estate plan, several tools, or documents, should be in attendance to create a complete and comprehensive plan. Most of your clients have likely heard the term estate planning, but they may not be familiar with which legal tools typically comprise a complete estate plan. You can teach them about the legal tools they should include in their plan and what protections and benefits each tool can provide.  

Will or Trust

As with many other structures, a well-rounded estate plan must be built on a solid foundation. To establish a foundation for an estate plan, the use of either a will or a trust is necessary. Wills and trusts are legal tools designed to direct and control the distribution of assets that a client owns. While a will can only provide direction at death, a trust has the added benefit of providing direction in the event of a client’s incapacity during their lifetime, as well as upon their death. Consequently, there are multiple considerations that go into whether using a will or trust as a foundational tool makes the most sense for a client. 

Will

A will often requires that the client’s assets go through the probate process upon their death, although certain assets can be transferred outside of probate if a beneficiary designation has been used or the asset was jointly owned with right of survivorship. In a will, clients elect an individual to be in control of carrying out their wishes and state who gets the client’s assets at their death. This person is commonly known as the executor, executrix, or personal representative, and they must be formally appointed by a probate court. It should be noted that some states have restrictions on who can serve in the role of executor, executrix, or personal representative. It is very important that clients meet with an experienced estate planning attorney to understand who to elect to serve in this role, as choosing the wrong individual can result in unnecessary delays. 

Trust

Alternatively, the use of a trust as a foundational estate planning tool can allow your clients to avoid the probate process and keep their affairs private. However, a trust can only avoid probate if it is properly and fully funded with the bank accounts and property that a client owns prior to death or transferred to their trust at their death. Additionally, trusts have the added benefit of protecting clients and their assets if they become incapacitated. 

Your clients may be surprised to find out that even when utilizing a trust as a foundational tool, they will still need a will. The type of will used in conjunction with a trust differs from a standalone will. Instead, a pour-over will is used, which essentially “pours” into the trust any assets that were not titled in the trust at the time of the client’s death. While a pour-over will ensures that assets not funded into the client’s trust during their lifetime are funded at their death, it also provides other essential benefits. A will allows a client to nominate a guardian for minor children and pets and provide direction for their funeral arrangements (in some states). 

A testamentary trust is another tool that may be appropriate for clients in certain circumstances. The terms of the trust are stated in a will during the client’s lifetime and the trust is created upon the client’s death. Like with a revocable living trust, clients can customize the provisions that control the distribution of assets through the trusts. However, this type of trust is created during the probate process.

There are a variety of considerations that can go into whether a will or trust is the right foundational tool for each client, which is why clients need to work with an experienced estate planning attorney to help ensure they have the right foundational tools for their unique situation. 

Financial Power of Attorney

Most of your clients have likely heard the term power of attorney before. However, they may not realize that each power of attorney and the level and type of authority granted within it varies based on its contents. A financial power of attorney can often be customized to accomplish specific goals, but may have some limitations depending on state law. It is helpful to first understand the roles within a financial power of attorney. The person who creates it is known as the principal, and the person who receives the authority through it is the agent. An agent’s role is to act as a fiduciary and on behalf of the principal for a variety of purposes. 

Under a limited power of attorney, the agent is limited to performing very specific duties, such as executing a deed for a real estate transaction or transferring a vehicle. On the contrary, a general power of attorney allows the agent to step into the principal’s shoes and manage almost all aspects of their finances and property ownership to the extent of what is allowable under state law.

A financial power of attorney can take effect immediately (or as soon as the agent has officially accepted the role) or it can be springing. A springing power of attorney requires that a certain event occur before the agent can exercise their power. This is usually upon the declaration that the principal can no longer act for themselves. It is important to note that not all states allow for a springing power of attorney.

Lastly, there is a durable power of attorney. A durable power of attorney lasts through the principal’s incapacity, making it crucial for incapacity planning. 

Medical Power of Attorney

Our health and the way we manage it is largely dependent on our own beliefs and preferences. If we were unable to make our own medical choices, we would want to make sure that the person making our medical decisions was someone that we trusted would follow our wishes. It is important that clients understand that through their estate plan they can decide who will manage their care and make medical decisions in the event they are unable to do so. To have this control, their estate plan should include a medical power of attorney. A medical power of attorney is known by several names depending on what state you are in, such as a healthcare power of attorney or a designation of health care surrogate. Your client will designate an agent and several successor agents in their medical power of attorney to act on their behalf. Some states allow clients to choose to delay the effect of the authority granted until incapacity. 

Advance Directive

A comprehensive estate plan will also include an advance healthcare directive, also commonly known as a living will. This legal tool serves the important purpose of allowing your clients to memorialize what forms of end-of-life care they would like. Within a living will, they can record their wishes as it relates to being placed on life support if they are in a persistent vegetative state or diagnosed with a terminal illness with no probable chance of recovery. This tool is commonly confused with a do not resuscitate order, which is not part of an estate plan and is instead typically filled out at the hospital and applies specifically to resuscitation. 

HIPAA

Health Insurance and Accountability Act of 1996 (HIPAA) authorizations allow an individual to designate who the hospital or medical facilities can provide medical records and information to. These authorization forms became necessary following the enactment of the federal Health Insurance and Accountability Act of 1996, which provides guidelines to the healthcare industry for the protection of patient information. This is an important legal tool to have if there are multiple individuals who are not nominated under the client’s medical power of attorney, but the client wants them to have access to their medical information in the event of illness or injury. While the individuals will not have decision-making authority, they will be able to stay informed about the client’s medical condition. 

Appointment of Guardian

Planning for children is a high priority for parents. There are some states that have a separate legal document for guardianship of minor children. While a lot of states allow a client to include this information in their will, it is important for your client to meet with an estate planning attorney who can create a standalone legal tool if it is appropriate within your client’s state of residence. 

Temporary Guardianship or Delegation of Parental Authority 

There are circumstances in which clients may not be able to be with their children, commonly due to extended travel. This can be an appropriate circumstance for your client to nominate a temporary legal guardian to make decisions on behalf of the minor child. There are state-specific guidelines for the length of these temporary guardianships in addition to other limitations as to how and what decisions can be delegated to another individual. 

Roll call complete! Now that you have learned about the legal tools that should be present in a client’s estate plan, you can further educate your clients and offer to connect them with an estate planning attorney to ensure that they have all of the essentials in attendance. 

Do Not Let Your Clients Become a Statistic 

You spend countless hours helping clients establish a solid financial plan for the future, so why not take the time to tell them about the benefits of creating an estate plan to align with their financial plan? As a trusted advisor to your clients, we are confident that you do not want to see them become a statistic because of a lack of planning. 

Most People Do Not Have a Will or Trust

Only one in three Americans have a will or trust. This statistic is not surprising due to the amount of misinformation and fear around establishing an estate plan. One in three Americans who do not have a will or trust believe they do not have enough money or property to justify having an estate plan. The belief that estate planning is only for the wealthy is just one reason people put off planning; other reasons include being too busy, viewing it as too complicated or expensive, or fear of discussing death. 

It Is Not Always Known if Someone Has an Estate Plan

Some people may not see the point in discussing death with their loved ones, but having this difficult discussion can serve several purposes. Surprisingly, 52 percent of people do not know where their parents keep their estate planning documents, and only 46 percent of will executors are aware that they are named in someone’s will. It is important that your clients tell their loved ones where they store their important legal documents, as loved ones may need to access original legal documents for multiple reasons. Additionally, when establishing a plan, your clients must tell the individuals named in their documents that they have been chosen to serve in these roles. These discussions should focus on what their responsibilities are and highlight the client’s wishes. Some estate planning attorneys offer family meetings after an estate plan is created to educate the individuals named in the client’s plan on the role they will play. 

Conflicts Are Common

According to a survey conducted by LegalShield, 58 percent of adults in the United States say they or someone they know have experienced familial conflicts due to not having an estate plan or a will. Conflicts can arise from a lack of proper planning. Often these conflicts are related to arguments over how assets should be distributed after a loved one’s passing. You should advise your clients that working with an experienced estate planning attorney can assist in reducing family conflicts and disagreements that could ultimately end in estrangement. 

Now Is the Right Time for Your Clients to Plan

Proper planning has always been important. American retirees expect to transfer more than $36 trillion to their families, friends, nonprofits, and additional beneficiaries over the next 30 years. This figure indicates an increased need to have a comprehensive financial and estate plan. You can help benefit your clients by assisting them in creating their financial plan and encouraging them to avoid the estate planning statistics. If you or your clients have any questions about creating or updating an estate plan, please reach out to us.

September is recognized as Hunger Action Month, originally established by Feeding America in 2008. Hunger Action Month is an annual nationwide campaign that occurs each September to raise awareness about hunger in America and inspire action. According to the USDA, more than 34 million people, including 9 million children, are food insecure. Food insecurity is defined by the USDA as “a lack of consistent access to enough food for every person in a household to live an active, healthy life.” Sadly, the pandemic increased this issue among families with children and communities of color. Consequently, food insecurity has a wide impact, contributing to serious health issues and lack of nutrition for young children and forcing families to choose between food, rent, medicine, healthcare, and transportation. 

Numerous methods exist to contribute to the mission of eradicating hunger in the United States. As a financial advisor, one effective approach is to educate your clients about supporting charitable causes by incorporating charitable planning structures into their estate plans. Your clients who wish to make charitable contributions might not be fully aware of the diverse opportunities and tax advantages possible through this type of planning. Among various other strategies, two commonly used trusts are the charitable remainder trust and the charitable lead trust, each offering multiple tax benefits for clients.  

A charitable remainder trust is an irrevocable trust that is tax-exempt at the trust level and designed to allow for a partial charitable tax deduction. This trust structure works well when funding assets that have grown in value over the years (i.e., low-basis assets). Once the account or property is funded into the trust, the account is liquidated or the property is sold, and the money is invested to ultimately produce a stream of income. The sale avoids capital gains tax at the trust level because the trust is liquidating the account or selling the property. However, the noncharitable recipient of the income stream will be responsible for any income tax on the distributions. This structure allows your client to maintain the benefit by receiving distributions annually for a term of years, and at the end of the term, the charity your client has designated will receive the remainder. Also, the client is able to remove further appreciation from their estate. 

A charitable lead trust is similar in that this irrevocable trust is funded with property or accounts that have grown in value, but it differs in that the charity receives the income stream for a term of years, and at the end of the term, the beneficiaries the client has chosen will receive the remainder. With a charitable lead trust, the client or trust (depending on the type of charitable lead trust created) will pay the income tax, but the client will receive a tax deduction at either the beginning or end of the trust depending on the type of charitable lead trust used. While not all clients can benefit from these planning techniques, charitably inclined clients still have the ability to contribute by leaving a portion of their estate to local food banks, soup kitchens, or other qualified tax-exempt organizations fighting to end hunger. 

Some clients may be eager to support the crucial goal of ending hunger but may not have the ability or inclination to engage in complex charitable planning within their estate. However, there are still incredibly meaningful ways for these clients to contribute to this vital cause. One approach is by making financial donations to their local food banks, Feeding America, or other charitable organizations actively working to fight hunger. These gifts could be made during your clients’ lifetimes, or the organization can be left a sum of money at your clients’ death through their wills or trusts.

Moreover, actively participating in volunteer activities at local food banks or soup kitchens can be a rewarding and enlightening way to directly support the mission of ending hunger. Clients can play an essential role in tackling this issue by engaging on the front lines and dedicating their time and effort to these local organizations. In addition, involving their children in volunteer activities can foster a sense of responsibility and compassion for this important cause, creating a charitable legacy of giving that could span generations. 

Empowering your clients to support charitable causes through their estate planning, donations, and volunteering can all be meaningful ways to contribute to ending hunger in the United States. By educating your clients about the opportunities and associated benefits, you can help them make a positive impact on society while also providing them with valuable tax benefits. 

If you are interested in learning more about how your clients can increase their impact on charities that are close to their hearts, call us to schedule an appointment.

September is National Self-Care Awareness Month. The purpose of this observance is to raise awareness about the importance of regular self-care. What constitutes self-care can vary widely depending on who you are speaking to. Regardless of the exact definition, taking action to engage in self-care is essential to overall emotional and physical well-being and should be prioritized. You may be wondering what role you can play in assisting your clients in prioritizing self-care this month. 

Self-care is not a term that can be limited to one definition. Achieving self-care varies depending on the individual and their current needs and circumstances. For one client, self-care could be scheduling a day full of pampering, from pedicures to shopping for new clothes, while for another client, self-care could include going for a run, visiting a therapist, and having a family dinner. The importance of self-care hinges on taking actions to ensure mental and physical well-being. It is important to acknowledge that self-care takes many forms, and as a trusted advisor, you are positioned to help your clients celebrate self-care this month in a unique and valuable way.  

While it is natural to include in the definition of self-care tasks that address an immediate need or want, we should also include actions that can provide us with peace of mind for the future. Many individuals avoid taking steps to plan for the future out of fear and uncertainty. Their fear likely stems from not knowing how to solve potential future problems. Most clients share common fears, such as not having saved enough, not being able to retire when they would like, not being fully protected in the event of disability, or their loved ones not being fully protected in the event of the client’s death. Luckily, you can help clients reduce their fear and anxiety by addressing their concerns and assisting them in creating a well-rounded financial plan. You should take the time to address their concerns by discussing their current monthly expenses and how much they need in savings for an emergency, their retirement goals and how much they should be contributing currently, and how much they should maintain in both life insurance and disability insurance to adequately plan for death and disability. 

Discuss with your clients the benefits of working with an estate planning professional who can help them understand what will happen if they become unable to work or make their own decisions. They will have to carefully consider whom they would want to make both their financial and medical decisions if they are unable to do so themselves. Most married individuals choose to name each other as well as additional individuals who could act if their spouse cannot. For financial decisions, a client should consider what characteristics are important to them in deciding who would manage their finances. Clients may seek to appoint an individual who is financially prudent, trustworthy, and level-headed. Once the decision is made as to who should serve, a financial power of attorney should be created to memorialize this decision. Individualized provisions may need to be included if your client is a business owner, anticipates the need to apply for governmental benefits, or is utilizing a trust as part of their estate plan. 

For medical decisions, your client may want to choose an individual who is comfortable with medical decision-making, is dependable, and will honor the client’s wishes. A designation of healthcare surrogate or medical power of attorney will grant the individual they choose the necessary legal authority to make medical decisions in the event they are unable to do so. Clients may name the same individual to make their financial and medical decisions, but they should carefully consider the characteristics that matter the most to them when appointing individuals to act on their behalf. You can also help prepare your clients for this important conversation by advising them that an attorney will likely discuss with them what level of life-sustaining care they would like to receive if they are diagnosed with an end-stage medical condition or terminal illness or are in a persistent vegetative state. Their decisions will be reflected within a living will or advance directive. While making these decisions can be difficult, creating a living will can ease the burden caused by tasking a loved one with these choices. Lastly, a HIPAA designation can also be created to allow clients to designate who should have access to their medical information. While creating a comprehensive estate plan may result in difficult and uncomfortable conversations, it allows your clients to make decisions proactively rather than in the midst of a crisis. Ultimately, this process can provide them with peace of mind by removing the lingering uncertainties that can accompany common fears of future events. 

Uncertainty about what will happen to ourselves in the event of severe injury, illness, or death can contribute to a less-than-ideal mental state. Encouraging your clients to face these issues head-on and engage in self-care by answering these questions proactively and implementing a plan truly embraces the spirit of Self-Care Awareness month and can allow your clients to enjoy the peace of mind that comes with knowing they are protected no matter what.

If you are interested in discussing additional ways we can collaborate to help clients care for themselves and their loved ones with a comprehensive estate and financial plan, please give us a call.  

National Grandparents Day: Three Things to Consider Before Your Clients Make a Gift to Their Grandchild

Grandparents often love the opportunity to shower their grandchildren with gifts. In most cases, these gifts are given on holidays and birthdays and commonly consist of an item that may have been at the top of their grandchild’s wish list. However, as you are discussing your client’s financial plans for the future, it is not uncommon for those plans to include the desire to leave more substantial gifts to their grandchildren. Christmas and birthday gifts can leave lasting impressions on grandchildren, but some grandparents seek to provide more substantial gifts that may assist their grandchildren in building their savings account, furthering their education, or purchasing their first home, to name just a few. Here are some often overlooked considerations to assist you in guiding your clients and analyzing the important details of making a gift. 

1. When do they want to make the gift?  

The initial and crucial discussion with your clients should revolve around determining the ideal timing for gifting to their grandchildren. Various factors can influence your clients’ decisions regarding when to leave a gift. If their grandchildren are slightly older and considering college, your clients might consider gifting them funds to support their chosen educational path. Similarly, if they have adult grandchildren who are on the verge of buying a home, planning a wedding, or expecting their first child, this could prompt your clients to offer a monetary gift sooner rather than later to assist during these significant life moments. The act of giving a gift during their lifetime enables your clients to witness the profound impact it can have on the recipients, which can be exceptionally fulfilling. 

While gifting during one’s lifetime certainly has its advantages, gifts given after your client has passed away, in the form of an inheritance, can carry equal significance. For younger grandchildren, planning for their postsecondary education, purchasing their first home, or starting their own business may be in the distant future. In cases such as these, your clients may feel more comfortable leaving money to their grandchildren at their death since the need is not immediate. Ultimately, your clients’ goal may be to provide their grandchildren with a gift at death that provides them with future assistance and leaves them with a lasting memory of their love and generosity. 

1. Can they afford to leave a gift to them?  

As a trusted financial advisor, your role often involves assisting clients in creating long-term financial plans to achieve their goals while considering the ever-changing cost of living. In this process, you may need to inform clients that some of their aspirational financial gifts may not be feasible given their current financial situation.

When clients express the desire to leave a gift to their grandchildren, your responsibility is to help them determine if it is financially viable. Planning for aging clients requires careful consideration and discussion of potential costs for future care, especially if they might require substantial or institutionalized medical or long-term care. The Administration on Aging estimates that at least 70 percent of people who are 65 today will require care in some context. Notably, the national median annual costs for nursing home care in 2023 have risen to approximately $108,405 for a private room, compared to $92,376 in 2016. The average length of stay in long-term care is 3.2 years. Just over 20 percent of residents will require care for 5 years or longer. In the case of married clients, leaving gifts to grandchildren should be approached with caution, considering the potential needs of a surviving spouse who may rely on any remaining funds to support themselves.

While clients may have the noble intention of providing their grandchildren with financial gifts either during their lifetime or after their passing, it may not always be practical or feasible based on their current and future financial circumstances. If clients are determined to make such gifts, it is advisable to recommend consultation with an experienced estate planning attorney. This way, a well-crafted plan can be developed to make the gift to grandchildren when the client is no longer living, if possible.

It is essential to educate clients about their options for gifting from a financial perspective, as some may have sufficient assets to make gifts during their lifetime or as part of their estate, while others may not. As a trusted advisor, your guidance can help clients make informed decisions about their financial future and the legacy they wish to leave behind.

1. What impact will the gift have? 

Lastly, the best approach for ensuring that your clients understand the full impact of their gift is to discuss both the potential positive and negative aspects of gifting to grandchildren. Gifting to a grandchild and the gift’s subsequent impact may depend largely on your clients’ goals in making the gift. As it is, giving grandchildren monetary gifts can accomplish the goal of providing opportunities that may not have been available to your clients in their youth. Ultimately these gifts can create a profound and lasting impact on their grandchildren’s future. 

On the other hand, depending on how the gift is structured, it could impact the grandchild’s ability to receive assistance with education by impacting the assets required to be listed on their Free Application for Federal Student Aid (FAFSA). In some cases, providing a large sum of money to a child or young adult can have the negative consequence of disincentivizing them to obtain or maintain employment or work toward a higher education. It could also result in excessive or irresponsible spending habits. You should advise your clients that the negative side effects can often be mitigated by working with an experienced estate planning attorney who can create a strategic plan to leave an inheritance while avoiding potential pitfalls. 

If you have clients who are looking for ways to gift money or property to their grandchildren and would like to discuss different ways to plan and execute those gifts, give us a call.

Important Planning Points to Cover with Parents

Life can get hectic for parents when the school year starts. Parents often juggle many different responsibilities, which increase with the number of children they have and activities the children participate in. Most parents feel like they need to be in five places at once! 

It may feel difficult to motivate clients that are parents of minor children to establish a comprehensive estate plan because they feel pulled in so many directions; however, they are a market that need an estate plan. You can educate these clients that a lack of proper planning can result in their children and loved ones being forced to go through complex and emotionally draining legal processes that can easily be avoided.  

Begin the discussion.

As a trusted advisor, you are in a unique position to discuss important aspects of your clients’ lives that they may not feel comfortable discussing otherwise. Most clients with minor children are busy making important day-to-day decisions about their children’s lives, but may have not taken the time to consider what would happen if they were no longer around to make those decisions for their children. 

What will happen at their death?

Speaking with your clients about what would happen if they were no longer living can be a difficult conversation, but you should emphasize to them that they should be proactive in planning so that they can make decisions about who would raise their children and how they should be raised. Every parent has beliefs and values that are important to them, and putting a plan in place can ensure that their children are raised in a way that emphasizes both. 

What are your client’s goals?

As part of your planning process, you have likely already spent time discussing your client’s long-term financial goals. Your clients should not only be considering retirement, but also how to best structure their finances to ensure that their children will continue to be raised how your clients want in the event of their deaths. It is impossible to predict the future or how long we will live, however, you can help your clients develop a plan by calculating the costs of providing for their children at their death under multiple scenarios. This process may begin by asking your clients questions about what they envision for their children, such as whether they want their children to have a private education, attend college, or start a business. As an advisor, you can provide your clients with the financial tools and strategies to develop a plan to make their vision for their children’s future a reality.  

Every client needs a plan.

It is not uncommon for clients to come into your office without an estate plan. Most clients do not start the planning process until they experience losing a loved one. It is important to encourage your clients to connect with a qualified estate planning attorney who can assist them to ensure that the financial plan you have created for them is accompanied by a comprehensive set of estate planning documents to implement and maintain said plan. There will be the clients who have established an estate plan prior to meeting with you; when dealing with these types of clients, it is always beneficial to remind them that their plan should be reviewed regularly to ensure it still serves the purpose it was established for. We would love the opportunity to assist your clients in creating or reviewing their estate plan. 

Not all children are responsible enough to handle a large lump sum inheritance at age eighteen without some guidance. Most children would be tempted to spend it all on fast cars, designer clothes, lavish vacations, or maybe even to quit their job. It is important to educate your clients on the options available to them when it comes to leaving an inheritance to their children. 

How a Continuing Trust Works

A continuing trust is a great option for clients to ensure that the money they worked so hard for lasts to provide their children with the future they envision. A continuing trust holds money for a specific period of time and does not distribute it outright. This type of trust can allow for small distributions when a child reaches certain ages, and then distribute the remainder at a specified age, or continue indefinitely. You should speak with clients to help them decide the ages and amounts that would be appropriate to disburse to their children. The specifics will largely depend on what clients want their children to use the funds for and whether any special circumstances affect their children. 

1. Protecting Minor Children

Continuing trusts can be particularly beneficial for situations in which a child may inherit funds or property while they are a minor. Minor children are unable to own property or inherit an amount over $15,000 in many jurisdictions. If children are set to receive more than $15,000, most states require that a conservatorship or guardianship be put in place until the child reaches the age of majority (eighteen or twenty-one depending on the state). This court process requires additional fees and court filings for the duration of the guardianship or conservatorship. And ultimately, the child would still receive a large lump sum when they turn eighteen or twenty-one (when they may still be immature). Establishing a continuing trust prevents the need for a conservatorship or court-monitored guardianship. 

1. Other Ways a Continuing Trust Can Help

Continuing trusts can also be beneficial in other circumstances. They can help preserve money for adult children who are financially irresponsible and tend to exercise poor judgment when it comes to spending. They can also protect children who suffer from addiction from having a lump sum given to them that could be used to fuel their addiction. Additionally, this type of trust may protect money and property from lawsuits if a child works in a high-risk occupation. 

1. Potential Issues with a Continuing Trust

Continuing trusts provide a lot of benefits, but they can be problematic if not drafted properly. There may be a circumstance in which a child needs a large sum of money that the client would have otherwise given, but without the proper authorization in the trust document, the trustee may be reluctant to make the distribution. Additionally, if a child requires government aid, these trusts may disqualify them if the trust does not contain specific language and provisions to enable the benefits to be preserved. 

Trusts Can Be Expensive

When counseling clients on the use of continuing trusts, it is important to let them know that in most cases, managing a trust costs money. The amount that it will cost can be quite substantial depending on how long the trust exists. The most common expenses associated with continuing trusts are trustee fees and income taxes. Both should be considered by your clients when determining how long they would like the trust to remain in existence for. There can be provisions that can give the trustee authority to dissolve the trust if it becomes financially impractical to maintain or if the original purpose of the trust is no longer applicable. 

Choosing the Right Trustee Is Crucial

Another important consideration of continuing trusts is that managing a trust takes time. These types of trusts are created to last for a long time and require a trustee who has the time to dedicate to the proper management of the trust. One of the more difficult decisions that clients must make is choosing who should serve as trustee. There are many considerations that go into trustee selection, and the following questions should be asked: How old is the successor trustee? Does this person have the time and capacity to manage a trust? Will selecting this person put them in a position where it could strain their relationship with the beneficiary? Some clients feel it would be better to select an entity rather than a family member; they should ask the following questions: How accessible is this institution? Will they be in business long enough? Is there a minimum trust value requirement? What fees do they charge for management?  

If you are interested in learning more about continuing trusts and how you can discuss them with your clients, feel free to call us to set up a meeting.

There are certain reasons that establishing an estate plan can be of the utmost importance. Having minor children or grandchildren is one of those reasons. Most parents do not have time to keep up with their own tasks, let alone consider what would happen if they died while their children were still minors, but having a comprehensive plan in place for their children is very important. You can motivate your clients by letting them know that a well thought-out and carefully drafted plan can last over eighteen years. Most parents have carefully considered what values they want to instill upon their children, but what many parents may not realize is that establishing a trust can allow them to essentially parent from beyond the grave. In addition, grandparents may want to provide a lasting gift to their grandchildren, but may be unsure of how to make a gift that truly has a lasting impact. Trusts are not a “one size fits all” planning method—in fact, there are different forms of trusts that can help your clients accomplish a variety of goals. 

1. Health and Education Exclusion Trust

Every parent wants to provide their child with opportunities, and grandparents also find great value in contributing to the success of their grandchildren. Education is often a major stepping stone to bigger opportunities. Many times, grandparents will tell their children that they want to leave funds for their grandchildren’s education. Your clients and their parents may be unaware of a health and education exclusion trust (HEET). A HEET could be ideal for clients who want to mitigate financial burdens on their loved ones caused by the rise in tuition and health care. These trusts allow grandparents to set aside funds to be used for their grandchildren’s and other distant descendant’s health and/or education expenses. Your clients will not directly benefit from these trusts, but they receive the ultimate peace of mind in having the trust cover their children’s educational and health care costs. 

HEETs can pay for tuition costs at any education level. These trusts can be particularly beneficial for high net worth grandparents, as they can serve the dual purpose of adding a charity as a beneficiary. Additionally, grandparents can avoid generation-skipping transfer (GST) tax liability on funds transferred to the trust. Further GST (and gift tax) liability can be avoided on funds disbursed as qualified transfers. This is also an opportunity to reduce a grandparent’s taxable estate and therefore save on or avoid estate taxes. Qualified transfers are defined as funds that are transferred directly from the trust to the educational institution or medical provider. 

1. Incentive Trusts

How likely are children to go out of their way to do the dishes, walk the dog, clean their room, or cook dinner? How much does the likelihood increase if they are offered money for completing these tasks? Most parents would agree that incentivizing young children works like magic. How surprised would your clients be to learn that, even if they were not around, they could continue to guide and motivate their children by incentivizing them from beyond the grave? 

Incentive trusts are becoming a popular choice for parents of young children that want their children to achieve certain goals in life. Incentive trusts provide parents with the flexibility to set goals and appropriate rewards through distributions once a child reaches the goal. Parents can set multiple and separate goals for each child. 

There are a variety of goals that can be addressed with incentive trusts. Some of the more common goals are achieving a higher education, receiving good grades, starting a business, and maintaining a paying job. As you can imagine, these goals are best defined by a parent who knows their children’s abilities and limitations. 

Asking your client to imagine not being a part of their young children’s lives can be difficult. However, incentive trusts can offer their children guidance and support if the parents are unable. 

1. Beneficiary-Controlled Trust 

You may have clients that feel that their children are financially responsible and exercise good judgment, and they would like to avoid giving another individual control of the money they leave. Even with strong financial management skills, the money left to children is still vulnerable to creditors’ claims, divorce, lawsuits, or estate taxes. By using a beneficiary-controlled trust, these risks can be reduced while allowing the child some control over their own trust. A beneficiary-controlled trust is much like it sounds, in that a trust can be established for a beneficiary, who can also serve as the sole trustee or a co-trustee. 

These trusts grant the beneficiary a considerable amount of control over their inheritance while still allowing parents to place certain restrictions on its use. When a beneficiary acts as sole trustee, they can be allowed to make distributions based on an ascertainable standard—for example, distributions for the beneficiary’s health, education, maintenance, and support (HEMS). In circumstances in which the beneficiary acts as sole trustee, under many states’ laws, most creditors cannot reach the beneficiary’s interest or compel a distribution when the trust contains the HEMS standard. However, once a distribution has been made to the beneficiary, it may be susceptible to the beneficiary’s creditors. 

A beneficiary-controlled trust may be ideal for clients who want to save on administration costs, because the costs of administration are often reduced when the beneficiary serves as sole trustee. 

It is important to tell your clients that while there are many ways to establish trusts, the best way for them to ascertain which structure best addresses their goals is to work with a qualified estate planning attorney. 

Just as spending a day under the summer sun without proper protection can leave you with a painful sunburn, a poorly crafted or out-of-date estate plan can inflict harm on your clients and their loved ones. In this newsletter, we explore the importance of creating a comprehensive estate plan to protect your client’s legacy and ensure a smooth transition to future generations. 

Why Your Client’s Relationship with Their Parents and Children Is Important

Your client’s relationship with their parents and with their own children is important for several reasons, including developing an effective estate plan. Simply maintaining a loving relationship with a parent does not necessarily guarantee inheritance rights. A legal right to inherit depends largely on the legal relationship between a child and that child’s parent, the existence of a valid estate plan, or if no estate plan exists, the applicable laws of intestacy in a given jurisdiction. Generally, children can inherit from their parents whether their parents are biological or adoptive, but in most jurisdictions, there is no legal right for a child to inherit unless they are a minor or it can be shown that they were accidentally left out of a parent’s estate plan. In some jurisdictions, if there is no estate plan, a child may be entitled to a percentage of the parent’s estate. 

Any discussion with your client about estate planning concerns should include a review of the legal relationship between parents and children. In what manner is your client a “child” of their parents? Are your client’s children their biological children? Or are they legally adopted? Are they stepchildren? Or is their relationship something else altogether?

When it comes to a child’s legal ability to inherit from parents, there is no difference between adopted children and biological children—they are considered equal in the eyes of the law. However, situations involving stepchildren or presumed parents can be more complicated. 

Stepparents. A stepparent is typically someone who is married to or in a civil partnership with one of the biological parents of a child. With few exceptions, stepparents have no legal obligation to provide any legacy to a stepchild or stepchildren. And unless they were legally adopted, stepchildren have no legal right to expect an inheritance from their stepparent. The ability of stepchildren to inherit from stepparents can depend on the laws of the jurisdiction where the parents are located and that jurisdiction’s laws of intestacy. Stepparents can choose to provide for stepchildren in their estate plan, and in that case, the stepchildren would benefit in the same manner as any other beneficiary. If a stepchild is included in a stepparent’s estate plan under their will or trust, that stepchild can inherit money or property in the same manner as your client’s biological or adopted children under the same instrument. However, if there is no provision made for stepchildren under your client’s estate plan, they will likely not be entitled to any share of your client’s estate.

Presumed parents. In some cases, a person may be considered a presumed parent, which means that they are legally recognized as the parent of a child, even if they are not the biological or adoptive parent. Legal recognition for presumed parents is based on public policy that certain individuals should be treated as parents because of their relationship with a child and the role they assume in that child’s life. 

The criteria for being a presumed parent can vary by jurisdiction, but they often include the following: 

1. Biological connection. In some jurisdictions, a person who is the biological parent of a child is automatically considered a presumed parent, regardless of their marital or relationship status.
2. Birth or adoptive parent. A person who has legally adopted the child (with their consent) or given birth to the child is considered a presumed parent.
3. Marriage or domestic partnership. If a person is married to or in a legally recognized domestic partnership with the child’s biological or adoptive parent at the time of the child’s birth or conception, they may be presumed to be a parent.
4. Intent to parent. If an individual openly and actively takes on the role of a parent and demonstrates their intent to parent the child, they may be considered a presumed parent. This can include factors such as receiving the child into their home, providing financial support, making important decisions regarding the child’s upbringing, and establishing a parent-child relationship.
5. Length of time and stability. The length of time the person has been involved in the child’s life and the stability of their relationship with the child may be considered when determining presumed parenthood. 

The relationship between a parent and child can take many forms. It is therefore important that you discuss with your clients the need to have an estate plan that clearly identifies their intended beneficiaries and the legal relationship of those beneficiaries to your client. Your discussion should also examine relationships with any individuals who may not be immediate or obvious family members. Your client will appreciate your thoroughness, and you can rest assured that your client’s wishes regarding inheritance will be clear and properly documented so they can be legally enforced.

As summer approaches and open waters beckon, it is important to consider a unique aspect of estate planning that can often be overlooked by your clients—their boats and watercrafts. These vessels bring your clients joy and unforgettable memories, but they also warrant special attention when it comes to safeguarding your clients’ legacies as part of a comprehensive estate plan. 

There are several estate planning strategies that can be tailored specifically to boats and other vessels or personal watercraft. By implementing these strategies, your clients can ensure a seamless transition of ownership, mitigate potential tax burdens, avoid family squabbles, and pave the way for future generations to enjoy the pleasures of being out on the open water.

One planning strategy is to use a trust structure for boat ownership. Setting up a trust can enable your client to maintain control over their boats while simplifying the transfer process. A revocable living trust allows clients to retain enjoyment during their lifetime while designating beneficiaries who will inherit the boats upon their passing. This approach helps bypass probate, ensuring a smoother transition for managing and distributing the boat after your client’s passing and potentially minimizing costs. It is important to note, however, that holding a boat in a trust may not be ideal from a liability perspective. In case of accidents or damages that result in injury or death, trial lawyers may try to pursue damages beyond liability insurance coverage limits based solely on the fact that the boat is owned by a trust. Additionally, transferring the boat to a trust could potentially incur state or local taxes at the transfer and may increase insurance premiums.

Another planning strategy involves gifting and lifetime transfers by your client. For clients who wish to pass on their boats during their lifetime, gifting or lifetime transfers can be viable options. By transferring ownership of a boat to family members or loved ones, your client can experience firsthand the joy of gifting them while also potentially reducing estate taxes by removing the boat from their taxable estate. The downsides to this approach are that your client may need to file a gift tax return, the boat may become subject to the gift recipient’s creditors, and your client will not have any further control over the boat once the gift is completed.

A third planning strategy that is becoming more popular with boat owners is the use of a limited liability company (LLC). Establishing an LLC can offer significant benefits when it comes to managing and transferring boat ownership. By placing a boat into an LLC, your client could use a trust to own the membership interest in the LLC. This approach may provide personal liability protection by separating the boat’s ownership from personal accounts and property. However, it is essential to understand not only how changing ownership will impact insurance premiums but also any other legal and financial considerations specific to your client’s jurisdiction. For example, securing adequate insurance coverage is essential for your client to protect their boat and ensure a smooth transition in the event of an unexpected loss. 

Whichever planning strategy your clients employ, it is important to remember that each client’s situation is unique, so they should work closely with a qualified estate planning professional who can tailor these strategies to their specific needs and goals. By proactively addressing the complexities of boat ownership in a client’s estate plan, you can help them sail through life’s adventures with peace of mind.