Approximately 60 million workers across the United States rely on the benefits of tax advantage savings accounts, such as a 401(k) when it comes to saving for their future. Many people are eligible to contribute as much as $19,500 to their 401(k) in 2021 but that limit can be updated from year to year for the purposes of keeping pace with inflation.
When you are able to invest $20,000 per year, this can have significant implications for your retirement as well as giving assets to your loved ones in the future. There are three primary reasons why most people choose to try to max out their 401(k) in a given year. These include:
Growing their wealth on a tax advantage basis.
Reducing their taxable income for the purpose of saving on taxes.
Saving enough money to truly retire one day.
Many people vastly underestimate how much they’ll need to retire and this is even more problematic given recent data on increasing longevity. Retirement, for example, could last up to 30 years or even longer. Setting aside over $19,000 a year in your 401(k) account is not necessarily easy. This makes it extremely important to have a consultation with an experienced financial planner and to discuss with an estate planning lawyer how all of this fits into your bigger estate plan.
So you just set up a time to meet with an estate planning lawyer- now what? What do you need to think about in advance or prepare to bring with you to that first meeting?
The important thing is that you’ve already taken the step to meet with a professional about how to align your estate planning goals with available strategies.
In your first meeting, prepare to bring a rough list of your assets and accounts that you have. This means that you can then discuss what should be part of your overall estate plan.
If you have other documents, such as beneficiary forms, wills, trusts, or other planning tools you created in the past, bring these as well. Whether you decide to revoke those previous creations and instead create new documents in line with your current plans.
If you have information on other items in your taxable estate that do not include account statements, such as vehicles or jewelry, you might want to list these out and also bring with you any papers on appraisals already accomplished by you. This is especially important if you believe that your estate might be close to the federal taxable limit and you want to be clear about whether or not you need advanced planning tools.
When you meet with your estate planning lawyer, you want to know that you have considered all the broad issues together and have a plan that meets your needs now and can also evolve over time to adjust to your life changes.
Another thing to bring with you to your first meeting is a list of questions you have for your lawyer. During your initial consultation, you can make the decision about whether or not this is the right fit for you to work with this lawyer. Bring a notebook to keep track of your answers to these important questions.
Probate has different processes in every state depending on where your loved one lived at the time they passed away. But it generally refers to the legal system through which that person’s individually owned property is passed on after their death. There are many different reasons and options available to avoid probate.
The most common method of avoiding probate is by using jointly held assets that include a right of survivorship. Bank accounts and real property can be placed on the name of more than one person, typically two spouses, in order to allow that property to seamlessly be passed on to the survivor after death.
The benefit of having an asset held in this manner is simplicity because the property will not be frozen when the first spouse passes away and the surviving member has the right to continue to use in possession as well as the option to transfer the property. Jointly held property, however, should still be outlined in an estate plan.
At some point, both property owners will pass away and the plan needs to include instructions regarding the distribution of that property. There is no protection for separate beneficiaries when it comes to jointly held property so the services of an estate planning lawyer should be used to ensure that this is protected especially in blended families.
Those approaching retirement today and looking forward to it in the next couple of years have likely navigated their entire life with a sense of purpose, and exiting the work market full time doesn’t mean you give up this purpose. A recent survey of retirees found that 55% of them said that retirement was viewed by them as a new chapter in their life.
That same study identified that over 95% of retirees felt that it was important to continue growing and learning at every age. In order to accomplish retirement goals and continue driving forward with a sense of purpose you need to be financially prepared.
Asking yourself some of the tough questions and engaging the right team of professionals can help you navigate this new process. This includes asking yourself questions, such as:
Will I still be able to retire at the age that I intended to?
Will I need to prioritize some of my goals because I don’t have the security that I anticipated as I get closer to retirement?
How will I incorporate estate planning intentions into my existing financial strategy and retirement options?
What role, if any, does philanthropy and charity play in my overall financial strategy?
It can be very rewarding to approach and live through your retirement purposefully but it is hard to do it alone. Having the support of a dedicated team of estate planning professionals and financial experts can help provide important questions and insight as you navigate this process.
Our NJ estate planning law office is here to help you no matter what questions you have on the process.
The current environment of your state and the federal economy and relevant laws can help you to determine whether or not your estate plan meets your goals or needs to be adapted. The Federal Reserve’s decision to keep interest rates very low has made a good environment for you to leverage advanced estate planning tools such as a grantor retained annuity trust or a charitable need annuity trust.
These are two techniques that allow for the transfer of wealth to occur at a reduced gift tax expense and provide that the future appreciation of any individual assets inside of them move on to the new beneficiary without exposure to the estate tax of the individual. A CLAT pays a fixed sum to a determined charity for a certain number of years after which point the remainder will pass to the creator of the trust’s family.
The GRAT pays a set sum back to the creator of the trust for a fixed number of years, then allowing the remainder to pass on to the family. Both of these advanced estate planning strategies can be most effective when you move an asset that has significant appreciation potential, such as a closely held business that you anticipate a successful sale of in the future. Given volatile capital markets currently and low interest rates, this is a good opportunity to evaluate these advanced strategies with your lawyer.
If you are currently in your 20s or 30s, it’s easy to brush off the idea of estate planning as something that is years down the road. But if the pandemic has shown us anything, it’s that you have to be prepared for the unexpected and that certainly is true for young adults and estate planning.
You don’t have to be only rich or old to have an estate plan in place. Even with modest assets and good health at a young age, you can benefit from putting a plan in place now with the support of an attorney. This is because estate planning goes so much farther than just determining how you want to distribute your money when you pass away. It also includes protecting yourself and taking care of yourself and the people that you love.
There are many major life events and financial decisions that happen after you graduate from college, start a family, get married or buy a house. These important steps, however, can make your life more complicated, meaning that it is even more complicated to have a comprehensive estate plan addressing these unique issues.
As your estate plan and list of assets becomes more complicated, you want to ensure you’ve thought through all the details and have the right planning aspects in place. Waiting too long could expose your family members to unnecessary challenges in the future.
Schedule a consultation with a trusted estate planning lawyer. Whether your estate planning documents grow or change in the future, you want to know that you’ve done what you can to protect yourself right now.
Are you an owner of cryptocurrency? A recent study might reflect some of the feelings that you have about your investment in your funds. According to the company Coin Cover, up to 90% of cryptocurrency investors are concerned about their funds if they pass away but plenty of them have ignored the opportunity to put together an estate planning strategy.
Fewer than 25% of the same study participants indicated that they were involved in a comprehensive plan for their digital asset. Cryptocurrency is not the only type of digital asset that you might have under your name. It is important to take necessary planning steps and precautions in order to protect your interests and ensure that you have considered all aspects of your digital accounts and ownership.
Owning cryptocurrency or any form of digital asset requires you to think about how it fits into your bigger picture and whether or not you have the right estate planning strategies for it. Although things like this might seem like newer forms of assets that can easily be overlooked, they might represent substantial ownership benefits for your heirs if you plan the right way. Since there are so many specifics to this form of currency and other digital assets, make sure you have a yearly meeting set aside with your financial professional and your estate planning attorney to ensure your plans are all up to date.
Schedule a consultation with a trusted estate planning attorney to learn more about how to prepare an estate plan with digital assets such as cryptocurrency in mind.
As a result of Covid-19, many people are thinking about estate planning and financial planning in a whole new different way. Having difficult conversations about end of life and long term care plans has become top of mind for many families who might have had to confront these issues directly.
Even if you’ve maintained your health and your family during this crisis, it’s a good opportunity to step back and plan for your own future. Incapacity planning and updating your estate should be some of your biggest priorities.
Having a loved one diagnosed with Covid-19 or having to prepare loved ones for who is responsible for making medical decisions in the event that you become incapacitated has become a common thread for communication throughout many different families. Many people are also exploring new financial opportunities including side jobs as a result of the uncertainty and significantly changing job market brought about by the pandemic.
A recent survey completed with nearly 2,000 Americans found that 41% of respondents saw a reduction in their work hours that impacted their income, nearly 17% were furloughed and just over 28% had lost their jobs.
The study looked at the many ways in which those people have attempted to pivot or respond, including deferring or adjusting essential payments, tapping into savings, taking out a loan or getting a side job. Now is a good opportunity to schedule a consultation with an experienced estate planning attorney to learn more about protecting your interests.
A YouGov study found that over three quarters of Americans recognize that estate planning is essential but only 40% of people within the country do have a plan in place. A trust is one of the easiest ways to add some more control and protection into your estate plan, but it’s often overlooked because people perceive them to be too difficult or only aligned with different estate planning needs and goals.
One of the most common strategies to protect your interests and ensure that you have thought about estate planning at the high level is the use of a trust. Trusts are an excellent resource to use for wealth preservation due to potentially favorable treatment for your heirs, a greater layer of privacy and control.
The perceived complexity that a trust is very difficult to create and put together is one of the most common reasons that people don’t use this tool. While it is true that some trusts can be very complicated, it is the variety of different kinds of trusts available for use that make it more likely for someone to skip over this estate planning strategy altogether.
A consultation with an attorney can provide a great deal of clarity around whether or not trusts do make sense for your situation and how to decide what assets should be placed inside the trust. A trust might not make sense for everybody’s individual estate planning needs but it’s a good idea to talk with a professional about whether or not this makes sense for you and your family.
Executive compensation packages have increasingly included stock options in the last several years. This means that from an estate planning perspective, you must think carefully about how and when these might affect you. Do you know how to maximize, for example, your stock options with a tax strategy?
Option based executive pay fell out of favor in the last 20 years but there are signs that it might have made a comeback as the stock market continued to grow. One major reason for this is that C corporations have become more attractive because of a 21% tax rate. Understanding stock options is critical for your overall financial picture and for estate planning purposes.
Stock options are a form of incentive compensation that are given to retain or reward valued employees. Typically up to 25% of that stock grant will last every year as a method for keeping employees at the company for a minimum period of time. Executives must have a comprehensive strategy that takes into account many different elements, including their personal balance sheet, their perception of risk, the company’s overall outlook and the stage that person is at in their life and career.
Speaking with experienced financial professionals and estate planning attorneys is strongly recommended if you have received stock options. The two primary types of stock options are nonqualified stock options and incentive stock options. The vesting of a compensatory stock option and a grant usually have no financial or tax implications. However, you’ll need to discuss the specifics of this strategy with your estate planning lawyer.
It has often been said that far too many people don’t have the necessary estate planning tools prepared and therefore put them and their family members at risk of problems after you have passed away.
Some of these estate planning mistakes can add additional time or could cost you money but it is important to realize that major life events should encourage you to schedule a sit down with your estate planning lawyer. It is all too common to see families with large amounts of wealth attempting to manage their own money.
However, a terminal diagnosis or a career milestone can change things. Major life events such as a divorce, getting remarried, the birth of a child or new grandchildren can all spark the need for professional expertise.
If you have been in do-it-yourself mode for a long period of time, that may no longer be effective as you work to shift towards future goals. You must accommodate for the additional complexity now included in your life and the only way to do this is to schedule a consultation with a knowledgeable estate planning lawyer who is highly familiar with your individual situation.
An experienced estate planning lawyer can advise you about strategies and tactics that are designed specifically for your individual needs and can ensure that you have peace of mind about what is required in terms of estate planning and how your goals and strategies must shift as your life needs change.
When you work with an estate planning lawyer on a regular basis and revisit your plan as life events emerge, this gives you the potential to avoid problems such as failing to update beneficiary designation forms and can ensure that you have all of your questions answered as they emerge. Minimize the potential for mistakes by scheduling a consultation with an estate planning attorney who cares about you and your family’s future.
There are many different reasons that you should put together an estate plan, not the least of which is giving yourself peace of mind. Some other examples of reasons to put together a comprehensive estate planning include control over your assets, privacy, and protections for your family.
But one other thing to consider has to do with time and money, the most basic of elements that can influence your loved ones after you have passed away. Any estate that does not include a will is referred to as intestate succession and will go to probate court.
This is both slow and costly for your loved ones and the average probate decision can take anywhere from a year to a year and a half if there are complicated factors involved. In addition to this, you must consider the financial strain of such a decision. Consider that Prince’s estate has already paid out nearly $6 million in expenses to sort out the challenges with his lack of estate planning. While this is an extreme case, it’s just one example of just how much money can be wasted by failing to schedule a consultation with an estate planning attorney. The average cost of probate court can be anywhere from 2% to 3% of the estate’s net value, which could be excessive as associated attorney’s fees and court costs can add up. Since probate nearly always costs several times as much as hiring an estate planning professional, add this to your list of reasons why you want to have a consultation with an estate planning lawyer. Having a consultation with an attorney doesn’t necessarily obligate you to work with him or her for the future of your estate but it’s a good idea to ask your questions now and do everything you can to minimize the possibility that your loved ones will be faced with difficult decisions, the time expended and the court process and the general frustration of having to go through probate.
While some people certainly are successful when winning the lottery or receiving a large inheritance, the vast majority are unsure of how to manage these significant financial windfalls, and this can be very frustrating to realize that happily ever doesn’t just materialize. In many situations, sudden money can leave people worse off than they were prior to the windfall. Many people who are not used to managing such a large sum mismanage the funds. Many people blow through an inheritance or financial windfall extremely quickly, according to economists. It can seem like play money and this is where the risks can lurk for someone who is not familiar with how to handle a large amount.
The easiest step to managing a large financial windfall is to understand that it might be best for you to do nothing. It might seem like taking a luxury cruise, buying a new car or upgrading your current housing situation would be the first thing on your list to accomplish. However, this can lead to a number of different purchases in the same manner that will all leave you feeling regret.
Waiting at least six months after receiving a large financial windfall before making any life-changing decisions is strongly recommended. It’s also not a good time to consider quitting your job, at least not right away. Many people who have been in the unfortunate situation of struggling to manage a major financial windfall don’t realize that making these decisions so early on in their process could put them in line for a significant problem down the road.
If you quit your job too soon and then blow through the money, you’ll be right back out on the job market, now with all of the shame and guilt of having to explain what happened if your receipt of an inheritance was in any way public. Make sure that you also think about estate and tax planning concerns.
Scheduling a consultation directly with an estate planning attorney is one way to accomplish these goals and to verify that you have spoken to a professional about what to expect. When your life changes in a big way, you also need to have corresponding changes in your estate planning and related tools.
Bankruptcy can play a role in asset protection planning but only when you have an attorney to help walk you through this. Bankruptcy, unfortunately, may be increasingly necessary for a company or an individual that is facing financial troubles. In fact, more than 2 million companies and individuals file bankruptcy on a yearly basis. Bankruptcy has an important role in protecting assets as well as in eliminating debts. Many debtors will use bankruptcy to protect their wealth in a downturned economy. Many consumers are overburdened with credit card debts, which means bankruptcy as a tool for asset protection planning has increased in recent years. Bankruptcy is not always the right answer for any person overburdened with financial challenges but it can be the right choice when a person has too many debts to be paid from selling their assets or from their future income. Bankruptcy can be valuable for protecting your assets because all civil actions against you must immediately stop when you file for bankruptcy.
This includes seizures, lawsuits, IRS claims, attachments, foreclosures, repossessions and levies. This is because every creditor has a legal responsibility to observe the automatic stay of legal action imposed by bankruptcy. Bankruptcy, therefore, gives you the chance to resolve your financial issues with creditors who might otherwise sell your assets or seize them. The timing of bankruptcy is critical as far as how it protects your assets.
Debtors often file too late or too soon and either way, lose out on critical benefits and advantages of bankruptcy. Collecting all tax refunds before you file are recommended. Any tax refunds that are due to you at the time you filed bankruptcy will be claimed by your trustee. You will want to consult with an experienced bankruptcy lawyer as well as an asset protection planning lawyer to clarify that you have addressed all of the most common issues and that the timing of bankruptcy is appropriate right now. If you are concerned about how to proceed, reach out to a team of professionals who can help you.
Your estate planning lawyer should also be included in these conversations.
More than $30 trillion will be transferred from baby boomers to future generations in the coming years, but most of this younger generation is not appropriately equipped to handle such a sudden influx of assets. Because of this, this is an excellent opportunity for people who wish to consult with an experienced estate planning attorney.
Those baby boomers who are intent on passing on assets to future generations should also consider a consultation with an estate planning lawyer to ensure that their own documents to protect themselves over the course of their life and after death, is important. According to a recent study of financial advisors, this asset transfer that is pending in the future poses significant risks, if planning opportunities are not taken.
Only one-third of advisors shared in a study completed by Investing Channel Inc. Insight, that some sort of asset transfers plan is in place for these baby boomers. That study included more than 700 financial professionals indicating that while estate planning is a crucial component for many people who are looking forward into the future, failing to follow through and develop the right tools can put clients at significant risk.
Anyone who is set to receive a massive inheritance in coming years should have the opportunity to develop their own team of professionals, including an estate planning lawyer and a financial advisor to protect their best interests and to articulate a long-term plan for their own needs and what they intend to accomplish with their estate planning in the future.
Far too many people put off the process of estate planning because they assume that it doesn’t affect them. But younger generations who might not even have any estate plan or a will at all, could receive significant inheritances from their grandparents, thus putting them in a difficult situation of having no estate plan and significant estate assets.
Have you ever heard about how a living trust can help you to accomplish your estate planning goals? Many people know that trusts are one type of tool that could be incorporated into your overall estate planning but with so many different types of trusts out there, and especially in what seems to be a regularly shifting environment surrounding the estate planning taxes, it might be hard to figure out which of these tools, if any, is most appropriate for you.
Of course, a sit-down consultation with an experienced estate planning lawyer is one of the most effective ways for someone who is thinking about incorporating a trust to ensure that any existing documents they have are updated to reflect their individual concerns, while also developing new tools and strategies as necessary. A living trust can be part of your retirement and estate planning.
It is important to think beyond just a simple estate planning process but also about the impacts that you plan can have in the future. For those seniors who have a surviving spouse, a family to support after they pass on, and significant assets, a will in and of itself is often not enough of an ideal document. Building a living trust is a critical structure to help you accomplish these additional goals. Your living trust might also be referred to as a revocable trust because it can be changed or dissolved based on the wishes of the person who establishes it.
The great thing about a living trust is that it helps serve as a bridge across the challenging process known as probate. Whereas in the probate process, your entire estate will fall into the temporary court possession, your living trust is a container that smoothly transitions your asset possession from court to the successor trustee. Your experienced state planning attorney is a valuable asset to help navigate this transition by pulling together the key documents and tools that you need. Consult with a knowledgeable estate planning attorney today about how to use a living trust.
Anyone who has an extremely high net worth must be mindful of the many different ways that their assets and their overall estate can be affected by taxes and retirement planning.
High net worth clients often come with complicated needs, making it all the more important to retain the services of an experienced asset protection planning and estate planning lawyer. Many of these needs include succession planning for business owners, behavioral consulting, estate planning, tax mitigation, and asset protection planning.
The services must often extend into the help of other professionals, including investment management. Any advisors that are not offering specialized services must be mindful of the fact that it may be challenging for them to retain high net worth clients. High net worth clients want to know that they have an advisor they can turn to over the duration of their relationship and get questions answered as their cases become more complex and as their needs shift over the course of life.
An estate plan that must be updated regularly is even more important for a person with high net worth as they may be continuing to grow that worth and have unique considerations that evolve over the course of time.
Do you currently own stock in any cryptocurrency? If so, it’s easy to forget about these funds inside your virtual wallet but they should definitely be included in your estate planning process. If you don’t articulate all of the details surrounding your cryptocurrency, there’s a good chance that the family members who intended to receive it may never actually see it.
This makes it all the more important to retain the services of a knowledgeable estate planning attorney who is staying on the cutting edge of cryptocurrency.
Cryptocurrency has become a recent phenomenon but it is one that is certainly important and should be incorporated into your estate planning documents. What many people forget about cryptocurrency is that in addition to passing on the assets themselves, you will need to share details surrounding the private key.
Your private key is essentially like a password that is used to access the assets. If you put it in your will that you want someone to receive your cryptocurrency benefits but don’t give them the information they need to use the private key, they will likely never be able to get access to your cryptocurrency. Scheduling a time to talk with an experienced estate planning attorney is strongly recommended if you have crypto currency or other special issues in your estate plan.
Part of estate planning is ensuring that the inheritance you pass on goes where you want it to after your death. But how can you ensure that your assets are protected long after you’re gone? Do you hope to pass on as many assets as possible? Do you know whether or not your beneficiaries could be exposed to risks that could cost them all of the assets you’ve worked so hard to build? In an increasingly litigious environment, proper asset protection planning using tools like trusts is a must.
People focus on avoiding probate and putting together a will during estate planning, but it turns out you may need more comprehensive strategies than that. If you died prematurely, became incapacitated, are involved in a rocky marriage that suddenly ends in divorce, or are sued in the next month, all of these are potential attacks on that inheritance you’ve worked so hard to build.
One opportunity to protect this is to use an appropriate trust. This means that there is a clear set of instructions inside the trust about when assets can be removed, such as for education and medical expenses. This can help to guard against the inheritance being squandered. Many people choose a trust because it gives an additional layer of control and peace of mind in the event that you were to become incapacitated or pass away suddenly. It is critical to have a plan in place to protect an inheritance from interference from outside threats, because unfortunately, many people minimize the likelihood of these outside threats.
Inheritance is set to increase significantly in the coming years and baby boomers will now be passing on record amounts of wealth to their younger relatives. Protection is an important consideration in all of your estate and financial planning and a trust may be the most appropriate tool to help you with it.
One of the most common reasons to include a trust in your estate plan, in addition to your will, is to protect your assets on death from being spent frivolously by children who may inherit these large sums of money without the appropriate maturity or experience to manage them properly. Trust structures are often created in wills similar to what happens in a will, in which assets are passed to chosen trustees to look after young beneficiaries.
The trustee maintains the responsibility to manage the asset and distribute to the beneficiaries when they believe that the beneficiary has personal circumstances and maturity at a high enough level to cope sensibly with a major inheritance. A discretionary trust or a life insurance trust are some of the key tools used in this process.