The bad news is that there are enough beneficiary mistakes to warrant two blog posts. The good news is that all of these are preventable with just a little planning. Let’s take a look at some of the other common errors you might be making with beneficiaries and what you should do instead.
Mistake #4: Not Naming a Contingent Beneficiary
Remember how the post yesterday talked about not updating your beneficiaries enough? This is particularly problematic if you never name a contingent beneficiary and the original beneficiary has passed away or not updated. If you’re not sure whether you named it, contact the company in charge of your account. Get the paperwork if you need to add one.
Mistake #5 Forgetting to Remove Your Former Spouse
In some states, a divorce does not automatically remove a spouse from a product like a retirement account, qualified plan, or life insurance. As soon as you have obtained a divorce, it’s a good time to update your documents appropriately. Don’t forget to add a primary and a contingent beneficiary..
Mistake #6: Naming a Minor Child as a Life Insurance Beneficiary
This has good intentions, but a life insurance company won’t payout to a minor. This usually means that a court proceeding has to be initiated to establish a conservator or a custodian, ultimately delaying access of the funds for the child in question. Not to mention – it may not be a good idea for an 18 year-old to receive a large cash inheritance anyway.
Skip these mistakes and prevent mistakes in the future by conducting an annual review of all your estate planning documents. Get started today at firstname.lastname@example.org.
Too often, the process of naming a beneficiary gets overlooked as the “easy part” of estate planning, but this also means that many mistakes can lead to problems down the line. Here is part one of the most common mistakes made in the process of naming a beneficiary. Tune in tomorrow for another post on the same topic!
Mistake #1 : Not Reviewing Them Often Enough
Naming a beneficiary is not a “one and done” process. Don’t make the mistake of skipping an annual review. You might find out that now-estranged or deceased individuals are on your beneficiary designation. You may also discover that your needs have changed and a new beneficiary needs to be included.
Mistake #2: Failing to Plan for Special Needs
Even if you have the best of intentions, it’s possible to miss out on planning that is aligned with those who have special needs. Naming an individual with special needs on a life insurance policy might seem like a good idea, but it could actually disqualify the beneficiary from other government benefits. Make sure you do your homework before making this mistake.
Mistake #3: Naming an Individual As a Business-Owned Policy Beneficiary
It’s quite common for a business to get life insurance on key employees or owners, but naming a family member or members as the beneficiary to the policy is not wise. The proceeds can be considered taxable income to the beneficiary either as dividends or ordinary income. The beneficiary on policies of this type should always be the business, not an individual.
Thinking it’s time for a beneficiary review? Set up a meeting today to walk through all your policies and documents and ensure they have the correct details inside. Schedule an appointment through email@example.com.
In a recent case out of Wyoming involving Greenhunter Energy and Western Ecosystems Tech, the Wyoming Supreme Court rendered a decision that allowed the piercing of the limited liability veil. This modern interpretation of the law raises concerns about how the perception of veil piercing has evolved.
Approaches like the one taken in Wyoming illustrate that new interpretations diminish the importance of complying with formalities and instead evaluates the circumstances surrounding whether an LLC entity was simply used to carry out an injustice. When Western Ecosystems consulted with GreenHunter Wind Energy (the LLC in this case), the LLC never paid out for the work done. Western replied by suing for breach of contract, but Western was not able to collect the judgment they were awarded because it appeared that the LLC had no assets to pull from.
Western responded by bringing action against the sole member of the LLC: Greenhunter Energy, Inc. Since the LLC never carried a capital account balance sufficient to cover debts, Greenhunter just transferred funds in to cover accounts payable, but they skipped loading the account to pay the judgment for Western.
The Wyoming Supreme Court found the LLC could be pierced because the LLC did not have any employees of its own, Greenhunter and the LLC shared the same business address, the IRS considered the LLC a “disregarded entity”, and the employees at Greenhunter kept the books and financial records for the LLC. The final opinion references that LLCs and corporations are entities that are legally separated from their owners so long as that veil of protection doesn’t lead to injustice. Injustice, it seems, is one of the “rare circumstances” where courts will pierce the veil.
LLC structure and management is crucial for protecting assets and ensuring the meeting of objectives. To learn more about how we can help, contact us at firstname.lastname@example.org.
It’s not always easy to think about the inevitable or to get knee deep in the financial or other details of your estate plan, but it’s not an exercise you should assume you can do once and be done with it. More often than not, people make the mistake of assuming that once they have copies of their documents, it’s best to store them in a fire-proof box and forget about it.
While you definitely should store your estate planning documents in a safe place, you should also set a calendar reminder to dig them out and review them. A lot can change in your life even in the span of just one year, so an annual review is a great opportunity to make any necessary changes. The same goes for when there’s a big event in your life like a marriage, divorce, or birth of a child. All of these are “trigger events” that should remind you that it’s time to update beneficiaries and conduct some evaluations of your existing documents.
Let your estate planning specialist walk you through it to be sure you’re getting the most out of the strategies you have selected. Our office is always available to help you start your estate planning or to review what you’ve already got to make sure it’s in line with your needs. Set up a meeting today: email@example.com.
Estate planning is a valuable exercise at just about any stage of life, but an often-overlooked aspect of planning has to do with communicating the results to those impacted in the future. Failing to communicate your plans reduces the chances of having family members with difficult questions or unresolved conflicts down the road. Even families with strong communicating skills may falter when it comes to estate planning, because it’s difficult to discuss mortality and finances alone, much less together.
If you’re stuck about how to bring up the subject, try doing a practice round first. Trying to anticipate potential questions might make you feel less in the hot seat when the conversation rolls around. A comfortable environment can go a long way towards putting family members at ease. Everyone who is involved in the conversation should be treated like a partner and should be given the opportunity to both speak and listen actively.
Working with an adviser in advance can also help you work through possible questions and answers regarding your selected estate plan. You may even want to have your adviser explain tricky concepts to family members, if necessary. Get started today by reaching out to us at firstname.lastname@example.org.
Over the next several decades, trillions of dollars will be passed on to younger family members, representing what is considered the largest transfer of wealth from one generation to another in history.
During the next thirty years, it’s estimated that around $16 trillion will be passed on to family members, many of them children of individuals with high net worth. This raises a lot of questions, as each person’s situation may require unique planning. It’s no longer expected that all the assets will transfer directly to a child or that this is the best approach for every family, and that’s why an array of tools and strategies have emerged so that customized planning makes the most of asset transfer.
The U.S. will see the greatest amount of these wealth transfers, with approximately $6 trillion in wealth expected to pass to other generations in the next 30 years. Most of this is in liquid assets, which allows for quite a bit of flexibility in planning. But the planning process is not something that should be avoided until the last minute, however. Just because some of these transfers are 30 years away doesn’t mean that the current owners should skip planning until down the road. Prudent planning now can maximize opportunities while minimizing tax consequences. To get started on your own plan, give us a call at 732-521-9455.
Many business owners want to pass on the family business to their kids, but it’s important to remember that this should be a decision made after careful consideration. In the event that you are transferring it outside of the family, there’s no traditional approach that guarantees your success. The conversation about transferring the business should happen long before the new partner or partners is brought into the process.
Formalizing the relationship should be the next steps, and the basic business agreement like the LLC or partnership agreement can be the framework under which the discussions continue. You should set up an appointment with your estate planning and business succession attorney in advance so that there are no surprises and to ensure that you have covered all your bases in the planning process. There are a few key issues that will likely be decided when you pass on the business, such as:
The division of income
Who will own what business assets
How labor will be divided in the new arrangement
How business control will be allocated among key stakeholders
How management decisions will be made
These are all important considerations. To discuss specific planning techniques for businesses and estate planning, send us an email at email@example.com
Even in the tightest of families, talking about money can make anyone nervous. If you’ve got an aging parent, though, it’s a wise idea to schedule a time to sit down and discuss critical issues with your loved one.
Come prepared with a list of what you’d like to discuss. This can help keep you on track and make sure that you accomplish everything during one session. You’ll possibly want to make copies of any relevant documents, too, so bring a folder along to keep everything organized. Here are some of the documents or items you may wish to discuss during your meeting:
List of important contacts (preferred doctor, attorney, financial advisor, etc)
Security and access information location for banks and other accounts
Plans for pets
Letters to you or other loved ones
Planned funeral arrangements or wishes
List of debts
Any business ownership information
Location of personal property
It’s not always easy to have these discussions, but being prepared can give you a lot of peace of mind. To talk more complex planning needs for you or your loved ones, contact us today for an appointment at firstname.lastname@example.org.
Whether you need a will or a trust in your estate plan is dependent on numerous factors, especially your income, the value of your assets, and how taxes will impact your estate. Clients with higher incomes or highly-valued assets tend to require more complex estate plans.
A living trust that is revocable can be a good choice if you want to be able to update the terms of the document any time in the future. Trusts can provide a layer of privacy that is not available to estates going through the probate process. Having a trust also requires a trustee who manages the administration.
Although a trust is more complex than a basic will and allows for the avoidance of probate, trusts can also be highly flexible and tailored to your needs. There are some situations where a will is absolutely a must, such as for couples with minor children. In this situation, wills may allow for the creation of a testamentary trust so that an adult can manage money for minor children who are not eligible to inherit money.
Determining the proper tools for your needs is a matter for an experienced estate planning attorney. Schedule your appointment today at 732-532-9455.
It’s the most popular time of year for people to be setting goals, so it’s in your best interest to cash in on this extra motivation and set some financial resolutions for the new year. Here are a few tips to make sure you’ve considered your plans and made any necessary changes.
Evaluate Retirement Plans
Take a look over what you’ve been able to accumulate over the previous year: are you on target for your savings goal? Is it possible there are other strategies that could help to maximize your savings? Be aware of how much you may be able to contribute to IRAs and other retirement accounts.
Review Insurance Policies
Especially if you’ve had any major life changes over the past year, it’s a good opportunity to review insurance policies and determine whether beneficiaries need to be changed. If your income or needs have changed, evaluate whether those changes can be incorporated into your existing policies. If term life insurance policies are nearing their end, it’s a good time to shop around for new protection. Never let an old policy lapse before a new one is in place.
Capitalize on these planning opportunities by reaching out to our office for a review of your existing plans. Schedule your appointment today at email@example.com.
Every year it’s a good idea to check in and see what changes are coming about with regard to taxes as this may influence your tax planning strategies for the new year and beyond. This year there are four tax changes or rules you should know.
Rule #1: Gift Tax Exclusions Stay the Same
Many people are aware already that they can pass $14,000 along to another individual each year (the exclusion doubles if the gift is from a married couple). Although the gift tax exclusion changes with inflation, the changes were small enough to keep the amount at previous levels.
Rule #2: Estate Tax Exemption Rising to $5.43 Million
This is an increase of $90,000 over previous years. Talk with your planner about how giving other gifts during your lifetime can influence this exclusion.
Rule #3: Married Couples Can Double Estate Tax Exemptions
In the past, complex trusts may have been required to ensure that two spouses got their maximum exclusion amount, but now a deceased spouse’s benefits can be available to a surviving spouse later in time if they weren’t used initially. This can really save couples when it comes to tax liability.
Rule #4: Bear in Mind That Some Gifts Are Exempt from Estate/Gift Tax
There are some gifts and bequests that don’t fall under taxation requirements, like the marital deduction or charitable donations. Talk with your planner in advance to be sure you’re getting the most out of your gifting.
For more 2015 tips and to schedule a meeting, send us a message at firstname.lastname@example.org.
High net worth clients often face a challenge when it comes to figuring out how much should be left behind for their children. And the number of people affected by this challenge is on the rise, too: there are now over 1.8 million households with assets totaling $3 million or higher.
Figuring out how much money is a good amount to allow children to start their lives but also thrive independently is a tricky situation, but one that can be properly evaluated with adequate planning. There are several ways to plan for the transfer of wealth that allows independence while also enforcing boundaries, if this is something that is important to you.
Some clients may elect to use an inheritance limit or trusts that give some power and control to the person establishing it. Others may find it helpful to distribute assets on a schedule, gifting children every couple of years.
The bottom line is that there are many different kinds of trusts and planning strategies that can be adjusted for your family. To learn more about transferring wealth onto your children, contact us today for a consultation at email@example.com.
As a business owner, you have multiple responsibilities to different people, and one of them involves critical long-term planning for your company. There are multiple occasions where it makes sense to review your existing documents and planning strategies, such as:
The formation of agreements between business partners
Companies in the start-up phase
One common strategy is to conduct gift planning during the start-up stages, like putting stock inside a trust for children to access later. Letting the stock appreciate inside the trust is often a better approach than trying to transfer it to children once the stock has already appreciated.
In the event of liquidity of some sort, it may make sense to gift to charity before the event happens. That way the client isn’t paying taxes on the appreciation and the charity of choice will receive a greater benefit in the form of funds. Reach out to us at 732-521-9455.
Did you know that marriage proposals that occurred during November and December make up more than one quarter of all marriage proposal throughout the year? In the excitement over planning your wedding and enjoying the engagement, there are many details to consider as you combine your new life together.
One of the first things that you want to do is change the names of the beneficiaries on your insurance policies and retirement accounts, assuming that you do want to list your spouse as the primary beneficiary. All of your estate planning documents should be updated to reflect your marriage, and if you haven’t already created them, now is a good time to communicate with a New Jersey estate planning attorney.
You may also want to consider some additional documents like a power of attorney. Having a conversation about your medical wishes if you were to become incapacitated is also important to discuss with your future spouse. Make sure that your spouse always knows about your wishes and that they are documented properly in writing so that your desires are carried out in the event that something happens to you. To plan a pre-wedding meeting to discuss your estate planning needs, contact us at firstname.lastname@example.org.
The holidays are certainly a busy time, but it’s also a good opportunity to get your family members together and discuss critical estate planning issues. If you weren’t able to have a family talk about estate planning this year at the holidays, pencil it into your calendar for the first quarter of 2015.
There are several issues that might be discussed depending on whether you are meeting with grown adult children or your elderly parents. In either case, however, there are several issues that you might bring up during a family meeting about essential estate planning concerns:
Investment account information, such as whether you own any retirement accounts or other investment accounts;
The name and contact information for your financial advisor, should your children need to reach him or her;
The location of your estate planning documents, like a power of attorney, living trusts, or a will. These should always be kept in a safe location in the event of a fire or other natural disaster;
Your plans for future living arrangements, in the event that you are no longer able to live independently. Plans might include reference to long-term care policies or facilities in the area to which you wish to be transferred;
Burial or funeral instructions. It’s not necessary to discuss all of the details if you intend to provide your loved ones with the location of written instructions.
Want to review your documents and update them? Contact us at email@example.com to schedule an appointment.
Many business owners have put in a lot of hours and lost a lot of blood, sweat and tears in the process of building their business. That’s why it can be so difficult when a spouse decides on a divorce, possibly putting business assets in jeopardy. According to the National Marriage Project at the University of Virginia, as many as 40 to 50 percent of first time marriages end in divorce, so you should carefully consider how your business might be impacted from a marital split.
This can be especially difficult when the company starts relatively small but grows over time, giving the spouse a stake in the growth and development of that company. Some of the best ways to include planning for your business in the event of a possible future divorce include:
Keeping records for business and family very separate.
Consider whether paying yourself a good salary in the short term and using the excess to fund your own retirement is a good option. Banking on selling the business and taking a lower salary in the short term can be dangerous if you find yourself strapped for cash and your retirement dreams washed away because of a divorce.
Consider what other assets you’d be willing to give up. You may want to fight for 100 percent ownership of the business interest, but you may need to negotiate by giving up other things.
Buy-sell agreements, insurance, and trusts are all tools that can be used to held shield the business from unexpected changes in your personal life.
Discuss specifics with a New Jersey business and estate planning attorney by contacting firstname.lastname@example.org.
When it comes to retirement accounts, it may feel like you have more questions than answers, even if you have had your retirement account for a long period of time. Assets that are held in qualified plans and IRAs have no current income tax liability, but the distribution of assets in those plans to participate or participant beneficiaries in future tax years can generate income tax liability at typical income tax rates.
There are tax penalties if you attempt to request a distribution from an account before you have actually retired. The IRS actually imposes a tax penalty for funds that are withdrawn too soon and those that were not drawn out soon enough. For example, if you attempt to tap assets before reaching age 59 1/2, you’ll be responsible for paying both the ordinary income tax on the amount as well as a 10% tax penalty on those early distributions (although there are some limited exceptions to this. You may also be responsible for paying state income tax in some locations, too. You should always consult with your tax specialist before making a decision to tap into those assets.
As with all accounts, it’s important to know how you plan to use them in your own lifetime but also how future generations or a beneficiary is intended to use those accounts. Regardless of your age, it’s wise to add an account beneficiary. To talk about how to incorporate retirement accounts into your estate plan, give us a call at 732-521-9455.
The weather certainly full of numerous stories about the ill planning or mistakes made by celebrities when it comes to their states. But there’s another lesson to take away from these experiences as well, and the estate of Joan Rivers is just the latest example.
The media has already picked up stories about the contents of the will, highlighting the very public nature that estate planning can be when careful steps are not taken to ensure privacy. For example, court documents released this last week indicate that the comedian was worth more than $150 million and that her daughter Melissa was given all tangible property. Other beneficiaries in the will included a niece, nephew, and a grandson, amounts were also left to her publicist and personal assistants as well as some funds being distributed to charity.
While many individuals, celebrity or not, may not feel that their estate is worth hiding, for others it’s simply a matter of privacy and confidentiality. Joan Rivers is just the latest celebrity whose estate has served as a spectacle for all to see, a process which could have been avoided with proper estate planning. If privacy is important to you or the beneficiaries in your will, think carefully about how they may be impacted by probate and consider discussing strategies for long-term planning with our specialists. Let us know how we can help at email@example.com.