Category: The Wealth Counselor

As a trusted advisor, you provide expert guidance to your clients regarding many financial planning matters. It makes sense that you will come across clients who ask about estate planning. Even if they do not ask, you can start the conversation by inquiring if they have thought about what would happen to their money and property if something were to happen to them. 

You do not need to be an expert in estate planning to help a client get started. However, you should refer them to an attorney after your initial discussion and encourage them to develop a comprehensive plan that contains the right legal tools to meet their goals. You can lay the groundwork by explaining how important it is to have a comprehensive estate plan.

Clients who already have an estate planning attorney may only see them once every few years to review their plans, while others may not have spoken to their estate planning attorney since they first created their estate plan many years ago. You may see the client more often and know of changes in their life, investments, and beneficiaries that can greatly affect their estate and long-term goals. You can remind your clients that they may need to visit their estate planning attorney due to changes you have discovered or discussed.

1. Does your client currently have a will or trust?

Many people procrastinate about creating a will or trust, often thinking they do not own enough to need an estate plan or wanting to avoid what they think will be a complex, expensive process. You can address these misconceptions so they can move forward with protecting themselves and their loved ones. 

If your client has not done an estate plan, remind them that the state has an estate plan for them—the intestate law for those who die without a will or trust—and that plan may not be what they want, especially if they have a blended family. There is a hierarchy that the state follows when determining which family members receive a person’s money and property and how much they will receive. In most cases, these laws do not account for stepchildren or unmarried partners. If the client wants to determine who will receive their money and property, they need to proactively plan with the assistance of an experienced estate planning attorney. 

If your client already has a will or trust, ask when it was last reviewed or updated. Explain why estate planning is not a one-and-done project. Changes in family dynamics and life events will affect their estate plan. Over time, people change their minds, get married or divorced, have children and grandchildren, and buy and sell investments and property. These changes can impact who the client chooses as their trusted decision-makers, who they want to receive their money and property, and how much they want certain people or charities to receive. The client’s estate plan needs to evolve with the client to ensure that their wishes are carried out.

2. Does your client have people they trust to make financial or medical decisions for them in emergencies?

If your client has not chosen people to make financial and medical decisions for them, if they are unable to make their own decisions, they need to think about who they would want to do so. When choosing trusted decision-makers to serve as agents under a financial or medical power of attorney, your client must consider whether a person has the necessary qualities and skills to handle the role, whether they are willing to accept the role, and whether they understand their responsibilities. 

If your client has chosen people to serve as decision-makers, it is important that these people understand your client’s wishes should they need to step in and act. Your client can communicate their wishes by having a conversation with the decision-makers, providing their wishes in writing, or stating their wishes in a video. Your client should also periodically evaluate whether the people they have chosen are still the right people for the job. 

If your client is unable to make decisions for themselves and they have not properly named someone to act for them under financial and medical powers of attorney, a judge will have to decide who will make the financial and medical decisions on the client’s behalf. It can be time-consuming and costly for family members, as well as emotionally overwhelming, particularly in a medical emergency. In addition, the judge may appoint someone whom the client would not have chosen.

3. Does your client have minor children?

If your client has minor children, the client must nominate temporary and permanent guardians to care for them in the event the client and the other parent are unable to care for them. If the client has already nominated someone to serve as a guardian, they should review this selection and make sure the person is still able and willing to care for the children should something happen. If your client does not nominate someone, the state will choose a person to care for the children. If no family members are available, it could be a professional guardian who is a stranger. 

Starting your client on their estate planning journey offers them the incredible opportunity to preserve their legacy and protect their loved ones. Reminding your clients to review their existing estate plan ensures that their loved ones and legacy will continue to be protected. We are happy to work with any of your clients who have questions about creating or updating their estate plans.

Attorneys are bound by many different sets of rules regarding how they interact with clients, prospects, and referral sources. To properly represent a client, an attorney may need to refer the client to another attorney or advisor for their specialized expertise, such as a financial professional, tax advisor, or insurance agent.

To ensure that all parties have a mutually beneficial relationship, the following are some American Bar Association model rules that attorneys must adhere to when working with other professionals.

American Bar Association Model Code of Professional Conduct Rule 7.2: Communications Concerning a Lawyer’s Services

The American Bar Association’s rules of conduct protect attorneys, clients, and referral sources. Lawyers can establish reciprocal referral relationships with other attorneys and nonlawyer professionals as long as those referral relationships are not exclusive. For example, if our estate planning client needs assistance from a financial advisor, we must recommend a few different advisors. In selecting who to refer to the client, we must also ensure that our recommendations do not interfere with our professional judgment and the client knows about the arrangement. This ensures transparency and allows the client to make informed decisions when looking for other professionals. 

As a matter of ethics and integrity, lawyers cannot receive financial incentives or compensation in exchange for referrals. However, referrals can express appreciation through nominal gifts of little monetary value as a gesture of gratitude. This rule prevents conflicts of interest that may arise from financial arrangements between attorneys and other professionals.

American Bar Association Model Code of Professional Conduct Rule 1.6: Consent for Involvement of Non-Clients

Attorney-client privilege protects confidential communications between a lawyer and their client. Rule 1.6 protects this privilege and the client’s privacy. Clients must consent before an attorney can share privileged information with referral sources, other professionals, or the client’s family members. Your clients may want their advisors involved in the estate planning process because they have relevant information to share (e.g., bank account balances, policy information, prior tax filings) and can offer helpful insight. 

We welcome the opportunity to work with you to better serve our mutual clients. To make sure that we fulfill our ethical obligations, we may have the client sign a third-party waiver form that grants us permission to share relevant information with you or to have you be part of the planning session we have with the client.

To help ensure that our clients have a comprehensive estate plan, we sometimes need to assemble a team of trusted professionals who can contribute their expertise to achieve incredible client outcomes. We appreciate working with you and look forward to working with you more in the future. 

You want to ensure the efficient financial management and transfer of your clients’ wealth from one generation to the next. For people with significant wealth, successful strategies include minimizing the impact of estate taxes. The Tax Cuts and Jobs Act (TCJA), passed in 2017, introduced considerable changes to the estate tax law. Many of these changes will sunset at the end of 2025, potentially reversing the estate tax exemption of $13.61 million to somewhere between an estimated $6.4 and $7 million. This means that more people will likely be subject to the federal estate tax.

Certain clients, including business owners, farmers, and those with large investment portfolios, may need to reevaluate their estate plans this year.

Estate Tax Planning for Business Owners

Business owners should be acutely aware of the impending sunset of the TCJA tax exemption provisions. Many family-owned businesses may not be subject to federal estate tax at the current exemption amount. However, if these exemptions revert in January 2026, it may become necessary to revisit business succession planning strategies. If your client is not prepared, a significant estate tax bill may require a payment plan with the Internal Revenue Service (IRS). It could also result in liquidating or selling the business, leading to income loss for the owner and job loss for family employees and others.   

Start by reevaluating the business and property, including equipment, inventory, liabilities, earnings, and projected earnings. Encourage your business owners to consider options such as gifting or using family limited partnerships to minimize their business and estate for tax purposes.

Estate Tax Planning for Farmers

Farmers often have much of their wealth tied up in land, and the sunset of the TCJA tax exemption provision can significantly affect their estate planning. While the increased exemption limits currently protect many farmers from federal estate tax, the sunsetting of the high exemption amount in January 2026 may change this. Like with other business owners, it may be necessary to reevaluate their succession plan. Planning ahead could help the farmer’s loved ones avoid being hit with a monstrous estate tax bill, requiring an IRS payment plan, potential sale of the farm, and lost jobs. 

Work with your high-net-worth farmers to explore options like land valuations, gifting strategies, and structuring irrevocable trusts to protect their farmland, crops, equipment, equity, and retirement funds. As with other businesses, entity formation such as family limited partnerships or limited liability companies could also be beneficial in mitigating estate taxes, depending on the circumstances. 

If your client is getting ready to sell their farm, talk to them about deferring capital gains by structuring an installment sale or creating a related-party trust for the benefit of kids or grandkids. 

Estate Tax Planning for Clients with Large Investment Portfolios

In preparation for the potential sunset of the TCJA provisions, clients with large investment portfolios should revisit their allocation of stocks, bonds, and other investments. They should take a closer look at basis planning and ways to minimize capital gains tax liabilities for heirs.

Clients with substantial investment portfolios should consider revising their gifting strategies. While the higher exemption limits are in place, they can gift items to loved ones or create trusts to shelter money and property from estate taxes. The 2024 gift tax limit is $18,000 per individual.

One of the most common and effective strategies for high-net-worth estate planning is establishing trusts for complex situations, such as protecting savings for future generations. If your clients are relying on their portfolio to support their loved ones after the clients’ death, you may need to evaluate how quickly items in their portfolio can be transferred or liquidated in case of an emergency. 

Charitable giving can be another effective way to reduce estate tax liability. Help your clients explore options like charitable remainder trusts (CRTs) or charitable lead trusts (CLTs) to support both charitable causes and estate planning goals.

Educating Your Clients

As the sunset of the TCJA at the end of 2025 approaches, you should proactively guide your clients through options for changing estate tax strategies with the worst-case scenario in mind—reduction of the exemption amount. Business owners, farmers, investors, and high-net-worth professionals all need to reassess their estate planning strategies and investigate the tax implications for heirs when redistributing property.

Many clients who are currently exempt from federal estate taxes may face significant tax liabilities in the future. The key to successful estate planning is flexibility, adaptability, and staying ahead of regulatory changes to achieve your clients’ goals effectively.

Your clients and their loved ones may be exposed to future estate tax burdens, and the time to act on the sunsetting Tax and Jobs Act is now—not in 2025. Developing and implementing the right estate planning and tax strategies takes time, so you are sure to be busy as the deadline approaches. 

Which Clients Should You Reach Out To?

Meet the Andersons, a well-off family living in a state with a high cost of living. Robert Anderson, the father, is a successful entrepreneur who built a thriving business over the years. His wife, Sarah, is an accomplished artist, and together they have accumulated a substantial estate of $8 million each, for a total of $16 million. Their estate is primarily composed of their business assets, valuable artwork, life insurance, a family residence, a vacation home, and other lucrative investments. They have two adult children, James and Emily, both actively involved in the family business.

Their Unique Estate Tax Situation

With the generous federal estate tax exemption set at $10 million adjusted for inflation per individual in 2017, steadily increasing to $13.61 million in 2024, the Andersons have felt relatively secure about avoiding estate taxes. Their primary concern has been preserving the family legacy and ensuring a smooth transition of their assets (business, accounts, and property) to the next generation. They have taken some initial estate planning steps, such as creating a will, discussing the use of a family limited partnership, and exploring gifting strategies to transfer assets to their children gradually.

If the estate tax exemption sunsets to $5 million adjusted for inflation, the Andersons may face several estate tax issues that require professional advice before the end of 2025. The Andersons need to find other ways to protect their money and property.

Business Succession Planning

The family business represents a significant portion of the Andersons’ estate, and the sunsetting exemption could have profound implications for its continued viability. Robert and Sarah need to develop a comprehensive business valuation and succession plan now to minimize the total estate tax burden and ensure a smooth ownership transition to James and Emily later. 

Property and Investments

Given the potential changes in the estate tax landscape, the Andersons need to revisit the valuation of their financial accounts, retirement and life insurance investments, personal property, real estate, and artwork to ensure accurate assessments. Then they need to determine which items will affect the estate tax calculation and any remaining exemption they have left from prior legacy planning. Depending on their assets’ values, these items can easily put them over the potentially soon-to-be lower estate tax exemption, exposing them to a 40 percent tax rate that could cost them millions. 

Lifetime Gifting

With the uncertainty surrounding the estate tax exemption, the Andersons may want to consider accelerated lifetime gifting strategies—including contributions to tax-advantaged accounts like 529 plans for their grandchildren—to reduce the taxable estate while the higher exemption is in place. The Internal Revenue Service declared in 2019 that individuals who take advantage of the increased estate and gift tax exclusion from 2018 to 2025 will not be negatively impacted after 2025 if the exclusion amount drops. Gifting up to $13.6 million in 2024 has a zero tax liability. But gifting over $6.4 million in 2026 could have major consequences.

Life Insurance

Help your client determine how much life insurance they may need to ensure that their loved ones are provided for at their passing. They may want to fund an irrevocable life insurance trust to own the life insurance policy and be the recipient of the death benefit. This removes the value of the policy from the Andersons’ estate and protects the death benefit for their chosen beneficiaries

Marital Deduction Planning

The significant portfolios of high-net-worth and ultra-high-net-worth families may require advanced tax planning techniques, including an AB trust, to optimize each spouse’s estate tax exemption and potentially minimize their estate tax liability. At the client’s death, an amount equal to the current estate tax exemption amount is placed in one trust, which uses the exemption, and the remainder is placed in a second trust for the surviving spouse’s benefit, which qualifies for the unlimited marital deduction. This results in no estate tax being owed at the death of the first spouse.

Portability and the Deceased Spouse Unused Exemption Amount

Spouses are able to give an unlimited amount of money and property to each other without having to worry about estate or gift tax. Because of this, some clients may not have an estate tax issue at the first spouse’s death because everything (or a substantial portion) went to the surviving spouse. Because they are utilizing the unlimited marital deduction, the deceased spouse’s exemption is not needed. However, even if this is the case, it may be advisable to file an estate tax return at the first spouse’s death to document how much of that spouse’s exemption is being used, if any, and that the remainder is going to the surviving spouse. This will allow the surviving spouse to add the deceased spouse’s unused exclusion (DSUE) to the surviving spouse’s own exemption amount and apply that combined amount against their own estate at the time of death. 

Charitable Giving

If the Andersons are philanthropically inclined, another great option would be to engage in charitable giving through the use of a charitable remainder trust. Setting up this type of trust can be time-consuming—sometimes the process is fairly straightforward but often highly complex, requiring advanced planning and consideration.

Your Role as a Trusted Advisor

Clients like the Andersons require your expert guidance to address potential estate tax issues and evaluate the impact a potential sunsetting of the high estate tax exemption amount may have on their estate. After reevaluating a list of their most significant items and investments, you can provide options for protecting, preserving, and passing down valuable property.

Finding the best strategy may require collaboration with other trusted professionals. We welcome the opportunity to collaborate with you to develop a comprehensive plan to protect your clients. 

Counting Down to 2026: Will We Keep the $10 Million Estate Tax Exemption?

The year 2026 is fast approaching, and it brings substantial changes to discuss with your clients regarding estate taxes. The Tax Cuts and Jobs Act (TCJA) introduced a significant increase in the federal estate tax exemption, setting it at an impressive $10 million, adjusted for inflation, per individual. However, the countdown has begun for the potential sunset of this generous exemption—what is not taxable today might be taxable tomorrow. 

History of the Estate Tax Exemption

Delving into the history of the estate tax exemption offers insight into arguments for and against its continuation. The federal estate tax was first enacted in 1916 to generate revenue for the government. Over the years, it has undergone various changes in exemption limits and rates.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) gradually increased the estate tax exemption and reduced the tax rate until it reached zero in 2010. However, the estate tax was set to return to the 2001 amounts for deaths occurring in 2011 unless further legislative action was taken. In 2011, the estate tax exemption was restored to $5.0 million.

Legislative Intent

In 2017, the TCJA was developed to stimulate economic growth and job creation. Doubling the estate tax exemption from $5.49 million to nearly $11 million was a key part of this strategy. At $13.61 million in 2024, it continues to adjust for inflation, offering individuals an unprecedented opportunity to pass on substantial wealth tax-free.

The TCJA’s Sunset Provision

A sunset provision was embedded within the TCJA. The increased estate tax exemption, which will reach $13.61 million in 2024, is set to expire on December 31, 2025. Without legislative intervention, it will revert to the 2017 limit of $5 million adjusted for inflation. Adjusting for inflation, the Congressional Budget Office estimates the exemption amount will be $6.4 million in 2026. This may create a potential estate planning crisis for high-net-worth families with larger estates who previously were not subject to the estate planning tax. These individuals must prepare for both scenarios—the sooner, the better.

Why the Current Estate Tax Exemption May Continue

Maintaining the high estate tax exemption could be seen as a move that benefits the wealthy, broadening the tax burden for others. It can also be seen as maintaining the status quo. And the current law ensures that most people will not be subject to federal estate taxes. 

A higher estate tax exemption was intended to foster economic growth and capital investment by allowing wealthier individuals and families to reinvest their wealth in businesses and job creation. Yet the federal government relies on estate tax revenue to fund various programs and initiatives and obviously will not want to reduce a lucrative revenue source. Without the estate tax, other revenue sources would have to foot the bill for these programs and face cuts in the benefits and services provided.

For the estate tax exclusion to remain at the higher amount beyond 2025, Congress will need to take action.

Why the Estate Tax Exemption May Revert Back

The TCJA was part of a short-term tax cut package. Lawmakers had to make room in the budget for the tax cuts introduced by the legislation. They did this by temporarily increasing the estate tax exemption. 

Proponents of sunsetting the estate tax exemption maintain that a lower exemption amount will generate more revenue by increasing the number of people who pay the tax and increasing estate tax exposure to those with net wealth above the current exemption amount. This means that people with estates valued at less than $10 million may once again be impacted by federal estate tax law. Estate tax revenues are projected to increase sharply after 2025 with the drop in the exemption amount. Over the 2021–2031 period, combined estate and gift tax revenues are estimated to be $372 billion. 

Commitment to the Trusted Advisor Role

As we begin 2024, it is crucial to inform your clients about the potential changes in the federal estate tax exemption and help them prepare for possible scenarios. Encourage them to review their estate plans to ensure that their money and property are protected and their financial legacy is preserved. There may be several strategies to navigate potential estate taxes effectively.

Advise your clients to make informed decisions based on the current legal framework before 2025 while keeping a watchful eye on any developments in the future. Preparation offers families new planning opportunities and peace of mind. Whether the exemption is set at $6.4 million or $13.6 million, it still provides protection from estate taxes. 

Pets sometimes outlive their owners. A client’s accident or illness can leave their pet without a caregiver, which, without the proper planning, can result in the pet being sent to an animal rescue or shelter. Compiling a list of common expenses is the first step in protecting a beloved pet’s future. You can assist your client in determining the right amount of funds to set aside for their pet’s continued living arrangements.

Create a Checklist 

There are many online resources to help develop a list of pet expenses. Pet owners should consider the following types of expenses.

Nutrition 

This is a primary expense for any pet, but larger animals will incur higher food costs. Include the following when calculating how much to budget for:

• Regular pet food purchases 
• Treats 
• Recommended supplements or vitamins 

Veterinary Care 

Healthcare keeps pets feeling their best and able to provide joy, entertainment, and companionship. Routine care can help prevent medical emergencies, but your client should still budget for the unexpected, including the following:

• Routine check-ups and vaccinations
• Preventive medications (flea, tick, heartworm)
• Emergency vet visits
• Dental cleanings and care
• Spaying or neutering

Medications 

Medication is sometimes necessary for illnesses, injuries, and aging. Some animals and breeds of animals are known for having certain health conditions during their lifetime. Most medications are based on weight, so larger pets may also have higher medication expenses. Common medications or preventative treatments include:

• Prescription medications for chronic conditions or illnesses
• Flea, tick, and worming treatments
• Pain relief or anti-inflammatory drugs

Grooming and Hygiene 

Some animals only need occasional grooming to supplement self-grooming techniques, while others require extensive care to maintain their coat, teeth, or nails. It may be a matter of preference and appearance. If you have a show animal that is regularly entered in events or contests, the costs can be significant:

• Shampoo, conditioner, grooming tools
• Nail trimming and filing
• Haircuts or professional grooming services

Pet Insurance 

Insurance helps make certain medical visits affordable when a pet suffers from an unexpected illness or injury. Depending on the type of pet and risks for injury, the cost of insurance can be a few dollars to a few hundred a month for most small animals. Large animals such as horses can have much higher premiums:

• Monthly or annual premiums for pet insurance coverage
• Deductibles and copayments for medical expenses

Pet Supplies

Every type of pet needs certain supplies to provide them with a comfortable environment. Again, the size of the pet usually dictates the initial cost of these items, and many items need replacement over time:

• Bedding or crate
• Leashes, collars, harnesses
• Litter, litter boxes, waste bags
• Toys and enrichment items

Boarding

Due to work schedules and vacations, a pet may need to be boarded, cared for by a petsitter, or attend daycare, for which the following costs must be considered:

• Boarding fees at a kennel or other boarding facility for vacations or trips
• Petsitting services in the home
• Daycare for socialization and exercise during the workday

Travel and Transportation

If you travel a lot, smaller pets can travel with you in cars or planes; larger pets require hauling in trucks and trailers:

• Travel crates or carriers
• Transportation fees (public transportation services)

Identification

To comply with local laws and ensure you can track and identify your animal, different types of identification can be purchased or may be required:

• Microchipping
• Pet tags and collars
• Licensing fees

After a budget is created, your client will have a detailed list of expenses to share with potential pet caregivers and an estimate for how much future pet-related expenses may be. This estimate can act as the basis to determine how much money should be set aside for the pet’s care and where that amount of money will come from in the event of the client’s death.

Next Step

Once your client has a budget in place, the next step is to meet with their planning team (financial advisor, insurance agent, tax preparer, and estate planning attorney) to put a plan in place that protects their pet and provides the funds necessary to care for them in the event the client passes away before their beloved pet. If you are interested in learning more about pet planning and the role you can play, please give us a call.

If your client has a severe illness or accident or passes away, who will look after their pet? There are many ways to ensure that a client’s pet continues to have a loving home, and the process begins with finding the right caregiver.

Guardian of Their Minor Children

If your clients also have minor children, the nominated guardian of their minor children can be a good first choice to take care of the family pet. The guardian is already taking on the large responsibility of caring for the client’s children, so they may also be willing to take care of the client’s pet. In addition, having the beloved family pet stay with the children may comfort them during a difficult time in their lives. It is important that your client discuss this with their nominated guardian to ensure that they are willing to undertake the additional responsibility.

Family or Friends

When selecting a caregiver for their pet, most people look to a trusted family member or friend. This person has probably spent time with the pet and knows their typical routines and behaviors, making them more comfortable taking on the responsibility. This choice may also provide a pet with a familiar environment. However, caring for a pet is a big responsibility that requires clients to consider the following in a potential caregiver:

• Does this person’s lifestyle, home, and comfort level with pets make them a good fit for caregiving? 
• Do they already have other pets? If yes, do the pets get along with each other?
• Do they understand the expectations and level of care that the pet requires? 
• Are there specific instructions or preferences they may not be able to accommodate?
• Can they afford the financial responsibility of supporting a pet?

Animal Welfare Organizations

Sometimes, family and friends are not available to help. Animal welfare organizations such as shelters, rescue groups, sanctuaries, or foundations can take your client’s pet and find a suitable home. They should locate reputable organizations in the area and visit them to assess their cleanliness, staff interactions with animals, and overall environment. Pet owners should select an organization they feel can provide a safe and comfortable space for their pet while waiting to be placed in a loving permanent home. Your client might also consider whether the organization mandates euthanasia if the pet is not adoptable. Creating a comprehensive profile of the pet, including their medical history, behavior, preferences, and any special needs, with photographs and videos, could make the adoption process easier for the organization.

Executor’s or Trustee’s Choice

Depending on the client’s situation, the client may feel more comfortable giving the person who winds down their affairs (the executor or trustee) the authority to choose the most suitable home for their pet animals. Because things can change unexpectedly, providing this level of flexibility can help ensure that the client’s pet goes to a suitable, loving home, even if it is not a home that was initially considered by the client.

Memorialize the Client’s Wishes in Their Estate Plan

Your client must memorialize the caretaker of their pets in their estate plan, typically in a will or trust, and keep this information easily accessible to the designated caretaker. They must also let family members, executors, or trustees know the location of any necessary documentation to care for the pet.

Make sure the client reviews their estate planning documents annually for any changes in your client’s circumstances, their pet’s health, behavior, routines, or preferences. We are available to meet with your clients if they are having trouble selecting the right pet caretaker or want to discuss the best way to protect their pet. Give us a call to schedule a time to discuss ways we can partner together to serve clients with pets.

Help Your Clients Provide Financial Support for Their Pet in Uncertain Times

As of 2023, 66 percent of US households own a pet. A Forbes Advisor survey of more than 5,000 dog owners found that 41 percent of dog owners spend between $500 and $1,999 a year on their dogs and 8 percent spend more than $2,000 annually. In addition to the annual cost of care, there is always the potential for emergency veterinary care, which can be costly. Your clients are likely concerned about what will happen to their pets if they die or are unable to make decisions or care for their pets. Several options are available to your clients to ensure that funds are available so their beloved furry family members continue to receive the same level of care and support they have always received.

Pet owners should evaluate the weekly, monthly, and annual costs associated with their pet’s needs and create a budget. This budget can help clients determine a specific amount of money to be put aside to cover the pet’s anticipated lifetime expenses. There are a few options available to structure the money set aside for the care of a client’s pets.

Lump Sum to the Caregiver

One option to financially provide for a pet is for the client to give a lump sum to the person they choose to care for the pet at their death. This option is the easiest to carry out and does not involve any ongoing oversight or administration costs. However, because the money goes directly to the caregiver, no one will monitor the use of the funds. The client must trust that the funds will be used for the pet’s benefit and must be okay with simply trusting their chosen caregiver.

Pet Trust With the Caretaker as the Trustee 

This approach to planning for a pet is a little more complicated than just handing money to the caregiver. In this scenario, money would be set aside in a trust specifically to care for the pet. There may be administrative requirements that the caretaker, as trustee, must do, such as submitting an accounting of the trust’s income and expenses to a specified person under the trust. Despite these requirements, this approach does have some flexibility because the caregiver and the trustee are the same person, meaning that a third party does not need to be consulted before expenses are paid or the caregiver is reimbursed for out-of-pocket costs. It is important to note that with one person serving in both roles, there is still a risk that funds may not be spent appropriately on the pet without oversight by a third party. 

Pet Trust With Separate Parties Serving as Caretaker and Trustee

The final option provides the maximum protection for the money set aside for the pet. The pet trust will contain funds to care for the pet, but the caretaker will need to work with a separate trustee to gain access to the funds in the trust. The trustee can ensure that the money is being used for the pet. This may be a wise option for clients who have animals that cost a lot to care for such as horses or exotic animals, because the amount necessary to care for them could be more than the client feels comfortable handing over to someone without any oversight.

Keep the Plan Up-to-Date

By proactively planning for their pets, pet owners can ensure that their pet is cared for and supported if they are unable to do so themselves due to incapacity or death. If clients already have an estate plan that provides for their pets, encourage them to schedule an annual review to address any changes in circumstances, such as additional pets, increasing pet needs, the designated caregiver’s situation, or the client’s finances.

As an experienced estate planning attorney, we can help your clients create the appropriate legal documents for the care of their pet within the applicable laws and regulations of their state. Pet owners deserve peace of mind knowing that their pets will transition to a new caregiver smoothly, with as little disruption in care as possible. Taking care of a loved one’s future, including pets, is priceless. If you are interested in collaborating on pet planning for your clients or would like to discuss pet planning further, give us a call.

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.