Far too many people make mistakes related to their beneficiaries on their bank accounts, retirement accounts or life insurance policies. These mistakes usually end up being a problem after the fact for your loved ones when they are not able to receive the assets and benefits that you intended.
There are seven common mistakes that can easily be avoided by conducting an annual review of your estate planning documents with an experienced estate planning attorney. Far too many of these mistakes can be easily avoided with a little bit of regular review and more often than not, the planning mistakes relate to situations in which you haven’t updated your materials after a major life change. The biggest mistakes include:
- Not naming a beneficiary at all.
- Naming your estate as the beneficiary of your retirement plan.
- Having outdated beneficiaries.
- Naming a special needs loved one as a direct beneficiary.
- Naming a minor as a direct beneficiary.
- Naming a child as the co-owner of an investment or deposit account.
- Naming separate children or just one beneficiary for separate accounts.
These can all lead to catastrophic problems for your loved ones down the line and should be avoided with the help of an experienced lawyer.
Most doctors are hesitant about unnecessary paperwork in their life but because of this, they avoid taking on critical planning responsibilities as it relates to their estate. Estate planning can even seem morbid or excessively time consuming for someone with an already busy schedule. However, you should definitely start to put together your own estate plan if you’re a physician because you already face a heightened risk of lawsuits and a need for asset protection planning. There are several different steps that doctors can take in order to increase their chances of successful estate planning.
Estate planning doesn’t have to be complicated and should instead be in line with your direct needs. Some of the most important steps that doctors can take are relatively simple and can be accomplished in an afternoon. These include:
- Looking into long term life insurance to provide critical benefits for your family members if something were to happen to you.
- Ensuring that your practice has an appropriate business succession plan in place should you become disabled or suddenly pass away, enabling your loved ones to take action and step in if necessary.
- Verify your beneficiary designations have been updated on an annual basis in reflection with any life changes.
- Ensure that you have at least a basic will in addition to other trusts and tools that can be used to help to protect your loved ones.
Some people may not anticipate being a caregiver in the future, but that’s something they need to check in with their parents about. Adult children are not always aware that their parents are planning to use them as a caregiver. A lack of long term care insurance and other assets that could be used to pay for critical health benefits in the future may mean that some parents are planning on their adult children to take care of them. Although parents often have unmet expectations of their children, this rarely comes up until the caregiving issue is in an emergency state.
Parents who may be left with no one else to help them around the house or to bring them to doctor’s appointment can be a devastating situation for an adult child who is less able to save for their own future as they help pay for their parents’ future care. A study completed by Bay Alarm Medical shows that more than 55% of parents anticipate that their children will be the ones taking care of them, financially or physically, as they get older but most children did not agree with that notion or even know about it. In the Midwest, for example, only approximately one-third of adult children expected that they were responsible for caring for their aging parents.
Although participants in other regions of the United States were much more likely to say that they felt an obligation to take care of their aging parents, the ones most likely to step up for responsibility were the children who were closest with their parents. Many families avoid talking about this or other money related topics because it is an uncomfortable subject. However, it can also be an important one if you anticipate that your children will be the ones taking care of you.
Millennials and estate planning sounds like it might not necessarily go together but far too many millennials jump to this conclusion and their family members are left dealing with the aftermath. No matter how much money is generated over the course of a lifetime, it is not real wealth if it is not effectively transferred to future generations. Estate planning is one of the most neglected aspects of wealth building and personal finance today, even among high-income professionals and successful entrepreneurs.
An increasing number of both of these individuals happen to be millennials. Many people assume that they are neither rich enough nor old enough to make estate planning a top priority. Millennials are managing their money just as effectively as baby boomers and generation X, according to recent studies, may have a lot to lose falling for this myth. Estate planning can be a misnomer because it does seem to imply that it is only for the wealthy, leaving far too many of these millennials to ignore the estate planning process and expose themselves and their family members to problems in the event of an accident.
Sudden incapacity or death of millennial without an estate plan can lead to probate disputes and other problems after the fact. Estate planning is simply a prudent look ahead to protect family members and loved ones in the event that something unexpected happens and is increasingly important for millennials who are garnering more and more wealth in the current economy.
If a person already has a trust established with the help of an experienced estate planning attorney, they may be curious about whether a second trust could revoke the terms of the first one. The simple answer to this question is generally no because the creation of a second trust does not immediately revoke a prior trust.
This is because there is a significant difference between trusts and wills that many people struggle to understand. Although wills contain a provision that a new will revokes all prior wills, trusts typically do not include the same language or apply in the same way. There is an exception to this rule fi the second trust is a complete amendment of or a restatement of the first trust. However, a restatement is not a new trust in and of itself, but rather an amendment to the first trust already created.
It is a complete amendment but still an amendment to the trust already generated. A trust may also contain a provision that revokes the first trust but this would technically classify as revocation in a written form of the first trust and would usually work to revoke the first one. However, many people may need to consult with an experienced estate planning attorney about their intentions to do this and the possible problems that may arise as a result of it.
Have you put off an estate plan because you don’t think you need it? Far too many families wind up dealing with the impact of a loved one’s loss without any planning in place.
Many people don’t realize the value of estate planning until it’s too late. Most people set up their initial consultations with an estate planning attorney after they’ve had a negative experience with a friend or family member, or perhaps after they have seen a news about a celebrity’s death that prompted numerous estate planning issues.
Estate planning involves so much more than simply ensuring that your stuff ultimately gets passed on to your loved ones.
It might be easy to think of estate planning as simply putting together a will and outlining how your physical possessions will pass on to future generations, but you should consider that a good estate plan takes care of you during the course of your life, as well as your individual family members after you pass away.
Tools like wills, trusts, powers of attorney and more can help to articulate the individual decisions and desires you have if something were to happen to you unexpectedly. The right estate planning attorney is an invaluable asset as you navigate these complex processes and articulate a plan that protects you and your loved ones now and well into the future.
The new federal exemption amount has increased as a result of the new tax law, which means that the amount you or your estate can pass on to your heirs free of taxes has increased to approximately $11 million this year from $5.49 million in 2017.
An existing will that already includes a reference to the federal exemption amount rather than a specific amount for calculating children’s inheritance could mean that more is going to the children and less to your spouse than intended. If you intend to pass on significant wealth to your children and your spouse, you may need to consider reevaluating estate plan based on the wording inside your will. Your spouse could end up with a smaller portion of your estate than you intended due to the new estate tax rules if you have unclear wording in your will. For wealthy individuals who have wills drawn up prior to 2018, there’s a chance that no specific dollar amount is included directly inside the will. This means that it may not be clear how much money goes into a trust for your children.
Rather, the will might refer to the current federal estate tax exemption amount which has changed since you put together the original will. This is why it is worth scheduling a consultation with an experienced estate planning lawyer as soon as possible to give you the clarity you need to restructure your will or include new wording that is clear.
A company that you started with your spouse decades ago may hold sentimental value for you but it also has significant financial value and possible future value if your children or other heirs intend to take it over. There are multiple different things you need to consider in the process of business succession planning for a family-owned business.
Often the emotions and conflicts that are present in a family owned business may be more difficult to deal with, highlighting the importance for an experienced business succession planning attorney. First of all, you must consider exit strategies. You must evaluate whether or not your children have the desire and the qualifications to take it over and to outline the appropriate exit strategy for the family from a financial perspective. Transferring a business can generate major tax implications if you don’t do advance planning.
You might lose 30% or more to taxes which could impact the departing business owner’s retirement. Communication with key employees and family members is another crucial component of business succession planning. Discussing the plan helps remove uncertainty about the business’s future and involving advisors to help with the streamlined process can keep everyone informed and confident. Business succession planning should also coordinate with individual estate planning tools. Transferring assets to children is a common concern for people in this situation but this needs to be done carefully and with the guidance of a lawyer who has worked in this field for many years.
Eleven years after the death of James Brown, his estate planning has fallen short in the plan to distribute his wealth efficiently. None of the beneficiaries in the will have received even a dime of the money. This includes underprivileged children in South Carolina and Georgia. Mr. Brown intended to donate significant amounts of money to these entities, however, a number of legal disputes have emerged and kept the estate dispute alive for more than 10 years. A dozen separate lawsuits related to the estate were initially filed after Mr. Brown passed away in 2006 on Christmas Day. The most recent of these was filed last month in California.
Nine of the children and grandchildren of Mr. Brown are suing the widow and the estate administrator, arguing that copyright deals made by the widow were improper and illegal. Another lawsuit alleges that the widow was not actually ever James Brown’s wife. His will initially set aside $2 million to underwrite scholarships for his grandchildren and it gave his household effects and costumes to the six children he did recognize, a bequest that was estimated approximately $2 million.
The will was challenged, however, and an initial settlement was proposed that would give the children and grandchildren a quarter of the estate and the widow another quarter. However, that was overturned by the Supreme Court due to asset distribution that did not appear to be in line with James Brown’s original goals.
You may not need to necessarily record a trust although an important component of your trust strategy is to fund it after you have put it together. Far too many people stop after the establishment of a trust and fail to follow through with the funding. There are many different estate planning concepts included in the answer to the question about why a will needs to be recorded or filed. When you leave a will, you leave a clear set of instructions that help to determine how your property is distributed to your heirs after you pass away.
Someone must have the authority to transfer this property and this authority is granted by a court after the will is appropriately filed. The process of presenting the official will triggers the beginning of the probate process. A trust, however, is an entity that is generated when a trustee and a settlor enter into a trust agreement. A person who does not control the trust may have more challenges than a person who establishes themselves as a key player in the trust. Although you can’t touch or see a trust as you would a printed will, this is a legally recognizable entity that contains some distribution instructions after you pass away.
However, the court does not have the authority to grant the settlor’s final instructions included in a trust. This is a major departure from a will. Since the trust can survive the settlor and the trustee is granted the authority in such an agreement under state law, no court involvement may be required. Schedule a consultation today with an experienced estate planning attorney to learn more about your options with regard to estate planning.
When most people think of estate planning, they are looking at their individual opportunities available with putting together critical documents and strategies to protect them and their loved ones. The truth is however, that if you play a critical role in any business, you can also benefit from estate planning for the company. Without a proper plan in place, you’ll leave many difficult questions to be answered and problems that may arise if you need to suddenly exit the company or if something happens to you. There are five primary reasons why you need to consider the benefits of estate planning in your business.
- It helps ensure the longevity of your business so that your brand lasts well beyond your lifetime.
- It minimizes your taxes since estate taxes can put significant financial problems in front of a business. Transferring business assets to your children is one such example.
- It gives you the option of a buy/sell agreement. Estate panning allows you to use a buy/sell agreement that can be beneficial if you have multiple co-owners of a company. This means that they may be eligible to automatically purchase a deceased owner’s interest in the company and this can prevent unintended beneficiaries from accidentally becoming owners or key players in the business.
- It allows your business to look forward towards the future. Estate planning allows you to look to the future of your business while you’re still around and maintain your message in years to come. Since no one knows what the future holds, estate planning for the business is important.
- It generates a succession plan, if you want to include multiple components in your business succession plan, including strategies to keep the employee, outside directors that may be used to bring objectivity, support training and development of successors and the delegation of responsibility and authority to successors.
Schedule a consultation with an experienced estate planning lawyer to learn more
Although in the previous three blogs, we’ve discussed getting rid of unnecessary paperwork and clutter after three months, one year and seven years, some documents should be kept on hand forever.
This is because they are so important that you may need to reference them at any point in time and it may be a good idea to keep copies and backups. These should always be stored in a safe location, such as a box that is safe from a fire. These documents should be maintained forever:
- Personal identification documents like your social security card or birth certificate.
- Income tax returns.
- Legal documents such as lawsuit settlements, divorce and marriage certificates, and estate planning materials, unless they have been replaced by amended materials.
- Loans for your car and vehicle titles. These should be kept for at least three years from the date the transaction is finalized. This information can prove helpful long after the transaction is finished, however, so you may wish to keep it forever.
- Educational records such as transcripts, degrees and diplomas.
- All major receipt purchases.
- Any relevant financial planning documents and records, like pension plan documents, power of attorney designations, burial information, medical details, and living trusts and wills.
Talk to your estate planning lawyer to learn more about how to safely store these items.
It can be difficult to figure out which documents you’ll need to have on hand, which ones should be stored in a safe deposit box and have a copy at your lawyer’s office, and those that you can eventually get rid of after some time.
This is because there are so many different periods of time associated with holding on to particular documents, and in an effort to clear out clutter and ensure that you are legally protected in the event of a problem, you’ll need to be mindful of both. Some documents need to be kept for at least seven years before you can dispose of them safely. These include:
- 1099 and W2 forms that can be used for tax audits and prove your income for loans
- Tax related receipts which can become helpful if the IRS comes asking questions
- Bank statements which should be kept for at least a year in electronic or printed form. These can be helpful if you have issues of identity theft, fraud or other challenges with your account.
- Cancelled checks for mortgage, home improvement, business and tax purposes. Some people like to keep all of their cancelled checks, but this is an unnecessary process if you want to cut down on clutter.
- Disability records or unemployment income stubs. Any paperwork you receive that is directly from the government related to an income source should be kept.
Consulting with an experienced estate planning lawyer in addition to other professionals on your team can be valuable for ensuring that you have the appropriate paperwork, and drafting the paperwork for your estate planning purposes when you don’t have it yet.
Some documents need to be kept longer than the three-month period as discussed in yesterday’s blog. These should be stored in a safe location so that they can be accessed quickly in the event of a sudden problem, or in the event that your financial power of attorney agent needs to step in and make critical administrative or financial decisions on your behalf.
These documents can be disposed of safely such as using a shredding service after a one-year period. These include:
- Paycheck stubs
- Monthly mortgage statements
- Investment account statements
- Insurance records and statements
- Undisputed medical receipts and bills
- Checkbook ledgers
Only hold on to these documents if you currently have a case dealing with the insurance company or a personal injury case.
After you receive your annual W2, there’s no reason to hold on to your paycheck stubs and your annual tax statements can be used in lieu of monthly mortgage statements. Investment account statements can include trade confirmations and monthly statements, but these materials don’t need to be kept longer than one year
Many people worry about having the appropriate documents on hand. In this four-part series, we’ll explore the various issues associated with keeping documents so that you know exactly what to hold on hand for the long term and what can be disposed of in a safe manner after an appropriate period of time. Certain documents should only be kept for three months or less.
These might initially seem important or have personally identifying information on them, but they don’t need to be kept over the long haul and could actually expose you to a higher risk of identity theft if they’re floating around your home.
These may be good to keep for a couple of months, in case you become incapacitated and your financial power of attorney agent needs to step in. These documents to keep for 90 days or less include:
- Utility bills
- Receipts for everyday purchases
- Credit card receipts
- ATM receipts
Unless you have specific issues, like business deductions on your income tax return or company reimbursement practices, these receipts become inconsequential after a three-month period and can only add to the clutter in your office or your home. Your canceled checks or credit card and bank statements can be proof of payment for regular purchases and utilities. Certain documents need to be kept on hand for longer and we will explore these in tomorrow’s blog.
Do you think you don’t need estate planning?
Perhaps you did estate planning in the past, but you think that new high estate tax exemptions mean that it doesn’t make sense to engage in this process.
Many estate planning attorneys and clients alike, were interested in how the most recent tax bill will play out. Although plenty of people are still digging into the mechanics of what this tax bill will actually mean for people planning on the ground, the high estate tax exemption is the subject of the most commonly asked question.
Taxes are at the front of many people’s minds these days, even more so than usual. The Tax Cuts and Jobs Act will double the gift tax exemption and the estate tax exemption. However, many estate planning attorneys expect to still find themselves helping clients of all types to put together an appropriate estate plan. The biggest anticipated growth in coming years is likely to be with income tax planning, with more than 45% of those attorneys expecting to see more work.
Just over one-quarter of estate tax planning attorneys expected to see less of this kind of work for estate tax planning purposes. Many believe that the current changes to the estate tax are not likely to last over the long run, meaning that people will eventually wind back up in their estate planning lawyer’s office.