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Timeshare

Timeshare Inheritance: Why Inheriting That Beautiful Timeshare Can Bust Your Wallet

Timeshare Inheritance: Why Inheriting That Beautiful Timeshare Can Bust Your Wallet. While that timeshare interest may seem idyllic, it can also come with a hefty roster of fees and assessments, enough to turn what seems like a vacation opportunity into little more than a “suitcase full of bills.”

That last quotation comes from Red Week correspondent Jeff Weir, who used those words in a recent discussion with CNBC, as part of an online article that’s well worth your time.

Dubbed “Why Inheriting That Beautiful Timeshare Can Bust Your Wallet,” the piece is a thorough and even-handed look at the struggles that consumers face when navigating the timeshare industry – particularly when it comes to extricating oneself from an unwanted commitment to a timeshare interest.

Something of Value or More of a Hassle?

As the article points out, many families are put in this position when they are asked to inherit the timeshare interest of a loved one who has passed away – and who likely believed that they would be leaving their heirs something of value, since, as Weir puts it, they were pitched that they could “pass it on down like a suitcase full of money.”

In reality, timeshare ownership is typically an expensive proposition even under the best of circumstances, given the existence of assessments and annual maintenance fees, which tend to increase, year over year. What’s more, timeshare ownership is an obligation that comes with a unique set of frustrations, among them “the inability to book during prime weeks,” as CNBC puts it.

For these reasons and more, plenty of people who stand to inherit a timeshare see it as “more of a hassle than an asset,” as estate and tax attorney Michael Burns told CNBC.

The CNBC article also dives into the story of one such family, who found themselves burdened with a timeshare interest after the passing of a parent. According to CNBC, Deborah Howerton and her brother Carl were named as the beneficiaries for their parents’ Florida timeshare weeks.

The piece continues:

Now that their parents have passed away, Deborah and Carl are the new owners — and responsible for the $900 annual fee attached to each week.

“In no way do I want this, nor does my brother,” said Deborah. “It was great for my mom and dad, because they used it every year since they bought it, and they thoroughly enjoyed it. They also had the luxury of time and flexibility to use it. We, however, do not.”

“It’s impossible to sell, and I’m afraid not paying the fees will ruin my credit,” she said.

Her fears aren’t hyperbolic. In fact, according to CNBC, Deborah received a delinquency notice from her resort’s property association “with an 18 percent interest rate tacked on” – and all for timeshare weeks that “likely have no value,” as Weir explained.

How to get out of the obligation.

So, what can timeshare owners do to extract themselves from an unwanted obligation, given the dearth of a viable resale market for timeshares and the prevalence of scammers preying on owners?

For some intriguing thoughts on these matters, we encourage you to read the rest of the CNBC piece, which dives into the ins and outs of several mechanisms for timeshare relief, including renting out an interest, turning to a third party exit company, and reaching out directly to your resort company. You can check out the full text, including Weir’s salient insights, here. Timeshare Inheritance: Whether getting out of the obligation or is important to you,  Inheriting That Beautiful Timeshare Can Bust Your Wallet.

Read more related articles here:

What Happens To Your Timeshare When You Die?

How to Transfer a Timeshare Deed

 

Also, read one of our previous Blogs here:

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

Elder Trusts

Living Trusts and How They Help Seniors

Living Trusts and How They Help Seniors

It’s unfortunate that seniors are frequently common targets for financial abuse and scams. Sadly, the elderly are often taken advantage of by strangers – and sometimes even their own family members. That’s why it’s important that planning is in place to help seniors protect themselves and their assets.
As we age, it can become increasingly difficult to manage our assets. Most of us will, at some point, need assistance with these details to help ensure that our financial and other assets aren’t depleted. If you or an aging loved one are looking for ways to safeguard assets, a Living Trust is often the best way to do so. Living Trusts allow seniors to rest assured that their finances and assets are managed by a trusted person.
What is a Living Trust?
Living Trusts help protect and manage the assets of those who cannot do so themselves due to age, illness, or disability. Many seniors assume that a will is the only protection they need. However, trusts are designed to safeguard the assets of the living, while wills only outline what happens to a person’s assets when they pass away. Furthermore, wills must go before a probate court, while Living Trusts allow beneficiaries to avoid probate after their loved one’s passing.
To establish a Living Trust the owner, or grantor, places assets within the trust. The grantor then appoints a trustee to manage it and names beneficiaries to receive the assets of the trust when the time comes.
There are different types of Living Trusts. Below are three types of trusts and the ways these trusts can benefit seniors.
1. Testamentary Trust
A Testamentary Trust protects an elderly person’s assets when a spouse dies. Assets of the deceased are transferred into a trust – enabling the appointed trustee to make all financial decisions regarding those assets. This helps a surviving spouse by protecting him or her from fraud or mismanagement of assets. Trustees can help the surviving senior generate income from remaining assets via sales or investments and take advantage of tax benefits.
2. Revocable Living Trusts
A Revocable Living Trust safeguards seniors by making it more difficult for non-trustee family members to mismanage money or assets. The grantor (senior) can amend or revoke the trust at his or her own discretion without the consent of the beneficiary. This type of trust allows the grantor to stay in control of assets by either serving as a trustee or appointing one. In this case the grantor, serving as trustee and beneficiary of the trust, appoints a successor in the event he or she becomes incapacitated or dies. This appointed person is then responsible for disposal of the trust’s assets.
3. Irrevocable Living Trusts
An Irrevocable Living Trust is one that cannot be changed or revoked by the trustmaker. This means that the grantor/trustmaker gives up his or her rights to the assets once they are transferred. Seniors over 65 who are eligible for Medicaid often choose to transfer assets into an Irrevocable Living Trust to avoid having to dispose of assets in order to remain eligible for Medicaid coverage or long-term care benefits. Once assets are in an irrevocable trust, they cannot be counted for Medicaid eligibility purposes, but there could be a penalty for transferring assets to an irrevocable trust.
An elder law attorney can assist in determining the best way to set up this type of trust and how to best transfer assets based on Medicaid stipulations. An Irrevocable Living Trust can provide income for seniors and their spouses. It also protects their property and other assets from being seized to pay for medical costs, without impacting Medicaid eligibility. This type of trust can also remain in place for a surviving spouse after the grantor’s death.
The sooner assets are placed in an Irrevocable Living Trust the better, as a penalty will be assessed by Medicaid during the first 5 years the trust is in existence (if Medicaid is required during that time).
Ultimately, Living Trusts give seniors more control over their assets than a will, allowing them to set parameters and stipulations and appoint a trusted advisor to help them make decisions.
Read more related articles at:

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Medicaid Look Back Period

Medicaid Look Back Period 2022

Medicaid Look Back Period 2022

The majority of nursing home residents receive some Medicaid assistance. When considering nursing home care or other senior living decisions, knowing about the Medicaid look-back period helps reduce the possibility of penalties or disqualification from Medicaid for a period of time.

Learn about the Medicaid look-back period and how it potentially affects you or your loved one considering senior care or senior living options.

What Is The Medicaid Look Back Period?

The Medicaid look back period likely seems confusing for some individuals, particularly with changes made in recent years.

If you or your family member needs nursing home care, the individual must meet requirements for limited income and assets to qualify for Medicaid coverage for nursing home costs. Medicaid, a “last-resort” means of paying for nursing home costs, requires that a nursing home resident first use other means of paying for care before Medicaid begins providing coverage.

Medicaid helps make sure money and assets are not simply transferred to avoid paying out-of-pocket when a person has the means to pay at least some of the costs associated with nursing home senior care and senior living services. Medicaid does this in part by using the “Medicaid look-back period” to determine if there are violations of rules regarding transfer of assets.

The agency considers or “Looks back” over the previous five years to see if any assets were sold for less than true asset value, given away or otherwise transferred within the same time period when determining eligibility for Medicaid coverage and any violations that restrict or delay eligibility.

How Does The Medicaid Look Back Period Work?

The Centers for Medicare & Medicaid Services (CMS) explains that when applying for Medicaid to pay for nursing home care and other services associated with senior care while in a nursing home, the Medicaid eligibility worker asks if the individual recently gave away any assets such as vehicles or money. The representative also asks if the person sold property for less than its fair market value at the time of the sale within the past five years.

This transferring of assets usually results in a penalty, meaning that the person seeking senior living at a nursing home is ineligible for Medicaid, “For as long as the value of the asset should have been used” to pay for the nursing home care.

The site uses the example that if nursing home care costs $5,000 per month and the individual transferred $10,000, then the person is ineligible for Medicaid for two months. The penalty begins the month of the Medicaid application, not the month the individual transferred the property.

The individual then potentially qualifies for Medicaid benefits after the Medicaid look back penalty ends. That qualification is contingent upon the person not transferring any assets in any months while serving the initial look-back period penalty.

What Happened To The Three Year Medicaid Look Back Period?

It is true that the Medicaid look-back period was initially three years in most states. The CMS reported on the new regulations, effective February 2006, after the passing of the Deficit Reduction Act of 2005.

The DRA brought about several changes to the Medicaid look-back period. California, which still abides by its 30-month look-back period, became the only state not to extend the look-back period from three years to five years.

This potentially affects many people seeking nursing home senior care paid for by Medicaid, perhaps leaving some individuals to consider other means of paying for senior living options.

Another rule that changed is the fact that the Medicaid look-back period previously started with the day you transferred your assets. Now it begins 60 months prior to the date the person applies for Medicaid.

Are There Ways To Avoid Medicaid Look Back Period Penalties?

There are several exceptions to penalties for transferring assets during the Medicaid look-back period. If your transferred asset is a home and you transferred title to your spouse, there is no penalty. If your child lived with you for at least two years before you enter the nursing home and that child provided care to you during that period so you could continue living at home, you also avoid the penalty. If you have a child under age 21 who is blind or totally and permanently disabled under state-specific guidelines or if you transferred the home to your sibling who has an equity interest in that home and lived there for at least a year prior to your entering a nursing home there is no penalty.

NOLO points out that other exempt assets include household goods, personal effects, one automobile and some pre-paid funeral plans.

When considering nursing home senior care and senior living, make sure you avoid improper transfer of assets and know other guidelines of the Medicaid look-back period.

Read more related articles at:

Understanding the Medicaid Look-Back Period and Penalty Period

Understand Medicaid’s Look-Back Period; Penalties, Exceptions & State Variances

Also, read one of our previous Blogs at:

MEDICAID ALERT: New Medicaid Community Care Look Back Rules Start October 1, 2022

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

QIT

Things to Know About a Qualified Income Trust

Things to Know About a Qualified Income Trust

An estimated 58% of men and 79% of women aged 65 and older will need long-term care at some point in their lives. Long-term care is costly. The average cost of a private nursing home room is $8,121.00 per month nationwide (and over $9,703.00 per month in Florida). Many people assume that Medicaid will cover this cost, but if your income and assets exceed the state’s threshold, you may need to set up a qualified income trust.

In order to qualify for Medicaid long-term care, you cannot exceed the state’s income and asset limits. A qualified income trust will reduce your income levels to below the applicable limit, allowing you to use Medicaid to cover your long-term care costs.

Not everyone will benefit from a qualified income trust (which is also commonly referred to as a “Miller Trust”). Here are seven things to know before creating one.


1. A Qualified Income Trust (QIT) Must be Managed Carefully

A QIT must be managed very carefully. Every month that Medicaid long-term care is required (whether it is for those receiving care at home, in an ALF, or in a nursing home), the income trust must be properly funded.

If your monthly income exceeds the state’s limit, funds must be deposited into the QIT every month that long-term care is required. Enough funds must be deposited to ensure your income is below the threshold, and this amount should be more than just the bare minimum needed to qualify for Medicaid.

To prevent a lapse in coverage and care, it is crucial to ensure that your QIT is funded and administered properly.


2. If Your Income Does Not Exceed the State’s Levels, a QIT May Not Be Required

If your income does not exceed the state’s limits, then a QIT may not be necessary. However, if there is a chance that your income may exceed the threshold on any given month, a QIT will help ensure that you don’t lose your Medicaid benefits.

As an example, for those who have gross incomes that are close to Florida’s Medicaid income cap, we will suggest a QIT to prepare for the possibility of increased income (annual nationwide raise in social security retirement income). To find out what is the Florida Medicaid Income Cap, click this link for Important Medicaid Numbers for Florida.


3. QIT Income May Still Go to the Nursing Home

If you are a single applicant, the funds in your QIT will be dispersed to the facility that’s administering your care. If you are married and your spouse is living at home, the income may be dispersed to him or her, depending on your spouse’s income.

In short, yes, your QIT income will still go to the nursing home if you are a single applicant.

If you are not in a nursing home, you may still need a QIT and you will not lose any of your income (funds deposited into the QIT can be withdrawn to pay for needed health and care expenses at home or in an assisted living facility).


4. A QIT May Require a Proper Durable Power of Attorney

A QIT is an important part of the Medicaid planning and estate planning process.

A proper durable power of attorney is required in order to create a QIT should the Florida Medicaid applicant become incapacitated (a little known fact is that a spouse can also create a QIT without a durable Power of Attorney. But if there is no spouse and the Medicaid applicant is incapacitated, their durable power of attorney must have the power to create the trust, and all documents must be signed properly. The ability for your agent, under a Florida POA, to create a Miller Trust is referred to as a “super power” that must be initialed. Otherwise, the power of attorney will not have the power to create the trust.


5. Income Must be Deposited Properly

Medicaid applicants can choose to deposit at least the minimum amount of income required (i.e. whatever exceeds the Florida income cap). Some choose to deposit more than what is strictly necessary (or even all of their income to a QIT).

However, it’s important to count gross income. The amount of social security that is deposited into your bank account is NOT the full income amount, because Medicare premiums are automatically deducted.  Some pensions also deduct amounts for fees, paying for life insurance, and other expenses. All of this must be added back to calculate gross income (not net).

Only income should go into a QIT, no assets.


6. Upon Death, Assets in a QIT Will be Given to the State

Upon the Medicaid applicant’s death, any remaining income in the QIT will likely be returned to the state. The state may take the income to recover the expenses paid by Medicaid for the beneficiary’s care. Any funds that remain after the state has been reimbursed will be paid to other trust beneficiaries.

Normally, all deposited income is spent each month, so most QITs are usually empty at the time of the applicant’s death. If there is some small amount left over, it will likely not wind up in the hands of heirs.


7. QITs Should be Established by an Experienced Elder Care Attorney

Anyone who may be eligible for Medicaid can establish a QIT, but the trust can only be used when long-term care is required.

With that said, the process of setting up, and properly funding/managing a QIT can be complex, and you do not want to take the risk of compromising critical long-term care. The establishment of a QIT is best handled by an experienced elder care attorney, who focuses on Medicaid planning.  This legal specialist will know how to navigate the process of establishing the income trust and ensuring that it is administered properly.

While it is possible to establish a Florida income trust on your own, one misstep or error can result in you being ineligible for Medicaid and losing valuable long-term care coverage.

If you or a loved one require long-term care or want to plan for long-term care, it is crucial to hire a Medicaid planning attorney. A qualified attorney will help you navigate the complex process of establishing a QIT to ensure you are eligible for Medicaid long-term care.

Read more related articles here:

Qualified Income Trusts.

Long Term Care of Elderly: The Qualified Income Trust

Also, read one of our previous Blogs at:

How Medicaid Planning Trusts Protect Assets and Homes from Estate Recovery

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

Business succession

8 Keys to Passing Down a Family Business

8 Keys to Passing Down a Family Business

8 Keys to Passing Down a Family Business. Learn how to transfer a family business to the next generation.

When it comes to transferring a business to a new generation, do not improvise.

At least half of the companies in the U.S. — even those listed on the stock exchange — are family businesses, according to Harvard Business School.

These businesses are not only “the backbone of the American economy,” but also tend to perform better than nonfamily companies during economic crises, says Pramodita Sharma, a professor at the University of Vermont School of Business and an expert in family businesses.

But what happens when the founders decide to retire and hand over the reins to a new generation? For many family businesses, that involves one of the most complex processes and generates the most challenges.

3 Pitfalls to Avoid

A successful transition

Henry Suárez had a career in the pharmaceutical industry. His last job was as an executive for Upjohn (now Pfizer). In 1990, at 50, he decided to go out on his own and created Suiphar, a drug distributor. He started the business with his three sons.

That was the first step in a successful generational transition, years before it happened. The sons not only learned the details of the business, but also contributed to creating the company. “My father always got us involved in his business, ever since we were just kids,” said Jaime E. Suárez, a board of directors member of Suiphar group and company shareholder along with his two brothers, Henry H. and Luis A. The three of them have equal shares.

Eight years ago, their father gave them control of Suiphar, a group of nine companies with headquarters in Sunrise, Fla., and offices in five Latin American countries, including a production plant in Bogota. The company generates annual revenue of almost $50 million.

The Suárez family’s generational transition was successful for several reasons: The sons were trained to run the business; they had a clear interest in the company; and they had earned their participation through effort and not simply by being the boss’ sons. They contributed their own capital and effort to the enterprise.

The following are the eight most important aspects in the generational transition of a family business, according to several experts.

1. Business plan

The transition from one generation to the next must be thoroughly planned. “The family must meet to define where the company is now and where it wants to go in the future: the technology it will need, what will be the capital requirements, and what type of human resources will be needed, among other subjects,” says Wayne Rivers, president of the consulting firm Family Business Institute. “This is part of a business plan that, in 95 percent of the cases, [the companies undergoing this process] don’t have.”

Jaime E. Suárez adds: “When we transitioned, we did the strategic planning for the company for the 2010-2015 period. And it’s a plan we revise every five years.”

2. Real commitment

The new generation must never think that their place in the company is guaranteed because they are part of the family. Working for a family business must be an opportunity, and the owners must be very clear about the employment conditions of their children — from benefits to performance policies — to avoid giving the rest of the employees the wrong perception, says Paul Karofsky, a family business consultant.

 

3. Corporate governance structure

Every company must have a professional management system. Establishing a board of directors composed of industry experts, attorneys, accountants and others from outside the family will lead to better decisions. However, “having a good board of directors that includes mom and dad as advisers is essential,” says Greg McCann of McCann & Associates, a consulting firm specializing in family businesses. A small business that cannot afford to have a board of directors with paid professionals can have a board of advisers made up of relatives, friends, attorneys and accountants.

4. Gift or sale?

A common dilemma is whether the new generation should get stock as a gift or should contribute capital to buy the company. “The most advanced usually have a combination of both in the transition plans,” Sharma says. “Showing economic commitment to the company is important for the company’s success throughout the generations.” For Suiphar, the commitment from the second generation was clear from the beginning because the sons worked with the father to create the company.

5. Preparation

The generation taking over must receive the training required to take control. The generation giving up ownership needs a plan that clearly defines the conditions of their exit, and whether, for example, they will remain as advisers or keep a position with specific duties. “In my experience, the time needed to make sure all parts are ready for a successful transition is between five and 10 years,” McCann says.

6. Management first, then ownership

Transferring the company to the next generation is not only a matter of naming the children as owners. The first step is transferring the management of the company and ensuring that the new generation is trained to lead the business. “When the new leadership is strengthened and it is shown that they are competent, then the property transition process can begin,” Rivers says. If needed, professional managers can be hired until the relatives are ready to take over complete control of the business.

7. Resolution of conflicts

All families have problems and conflicts to be resolved. Karofsky says it is vital to remove interpersonal conflicts from the day-to-day operations of the business and to define ways for the family to resolve differences. Conflicts not only “can destroy the family, but also the business,” he says. According to Jaime Suárez, it is fundamental to have a family pact, a document that governs how relatives behave inside the business and within the family, and “how conflicts are resolved among family members.”

8. Key documents

The generational change process includes documents that family businesses should pay attention to. According to Karofsky, they are:

  • Family pact: Establishes the terms and restrictions for a family member to be able to transfer their shares of stock. It also establishes the rules to join and leave the company, how conflicts will be resolved, educational requirements, and compensation and promotion policies.
  • Will: Specifies what will happen with the stock if a shareholder dies.
  • Code of conduct: Establishes the rules of behavior for family members within the company and information-confidentiality matters.

Read more related articles at:

Four Considerations When Passing The Family Business To The Next Generation

Transferring Power in The Family Business

Also, read one of our previous Blogs at:

How to Start Family Business Succession – The Earlier the Better

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

asset protection

Asset Protection Planning

Asset Protection Planning

Which United States jurisdictions allow for the creation of asset protection trusts?

Domestic asset protection trusts are permitted under the laws of Alaska, Delaware, Hawaii, Missouri, Nevada, New Hampshire, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Virginia and Wyoming.

What other areas of law should an estate planning attorney be familiar with before practicing asset protection planning?

In addition to a working knowledge of taxation and business entities, an estate planning attorney wishing to engage in asset protection planning should be familiar with general concepts of bankruptcy law and creditor/debtor law. Specifically, knowledge of how applicable fraudulent transfer/conveyance laws apply to proposed planning (either under the UFTA or UFCA) is absolutely essential.

Who should consider establishing an asset protection trust?

Asset protection trusts are typically established by individuals in high risk occupations (i.e., doctors and real estate developers) and very wealthy individuals that realize they are targets for creditors due to their net worth. Asset protection trusts can also be used in lieu of a prenuptial agreement.

Are there any tax reasons to establish an asset protection trust?

In certain situations an asset protection trust can be used to eliminate or reduce the imposition of state income taxes. An asset protection trust may also be used to remove assets from a grantor’s estate while still allowing the grantor to potentially benefit from the trust assets.

Read more related articles here:

Make Your Estate Creditor-Proof

How to Protect Your Assets From a Lawsuit or Creditors

The 2021 Florida Statutes

Also, read one of our previous Blogs at:

How Medicaid Planning Trusts Protect Assets and Homes from Estate Recovery

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

financial advisor

7 Mistakes People Make When Choosing a Financial Advisor

7 Mistakes People Make When Choosing a Financial Advisor

Choosing a financial advisor is a major life decision that can determine your financial trajectory for years to come.

A 2020 Northwestern Mutual study found that 71% of U.S. adults admit their financial planning needs improvement. However, only 29% of Americans work with a financial advisor.1

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.2

Consider this example: A recent Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.3

1.

Hiring an Advisor Who Is Not a Fiduciary

By definition, a fiduciary is an individual who is ethically bound to act in another person’s best interest. Fiduciary financial advisors must avoid conflicts of interest and disclose any potential conflicts of interest to clients..

2.

Hiring the First Advisor You Meet

While it’s tempting to hire the advisor closest to home or the first advisor in the yellow pages, this decision requires more time. Take the time to interview at least a few advisors before picking the best match for you.
3.

Choosing an Advisor with the Wrong Specialty

Some financial advisors specialize in retirement planning, while others are best for business owners or those with a high net worth. Some might be best for young professionals starting a family. Be sure to understand an advisor’s strengths and weaknesses – before signing the dotted line.
4.

Picking an Advisor with an Incompatible Strategy

Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style.

5.

Not Asking about Credentials

To give investment advice, financial advisors are required to pass a test. Ask your advisor about their licenses, tests, and credentials. Financial advisors tests include the Series 7, and Series 66 or Series 65. Some advisors go a step further and become a Certified Financial Planner, or CFP.
6.

Not Understanding How They are Paid

Some advisors are “fee only” and charge you a flat rate no matter what. Others charge a percentage of your assets under management. Some advisors are paid commissions by mutual funds, a serious conflict of interest. If the advisor earns more by ignoring your best interests, do not hire them.
7.

Not Hiring a Vetted Advisor

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one. Do your research. Reach out to other professionals for referrals.

Read more related articles at:

Don’t make these 6 mistakes when choosing a financial adviser

Choosing-a-financial-advisor-five-mistakes-to-avoid

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Also, read one of our previous Blogs here:

A Financial Advisor’s Role in Estate Planning

Estate vs Succession planning

Succession Planning vs. Estate Planning – Why They Are Both Important

Succession Planning vs. Estate Planning – Why They Are Both Important

Vancouver Business Journal

One of the biggest misconceptions is that estate planning and succession planning are one in the same
Succession plans are critical to the sustainability of a business. Even the most successful closely held business owners find succession planning more difficult than other critical business decisions. One of the biggest misconceptions is that estate planning and succession planning are one in the same.Succession planning directly relates to the actual business itself. It is the strategy that will enable it to continue to operate smoothly and effectively as it is passed onto future generations, partners, or successor owners. Estate planning relates to all the assets in an individual’s estate including any ownership interests in closely held businesses.

For succession planning, important questions to consider when developing your succession plan include:

  • Is the business viable into the next generation? If so, do family members not currently in the business intend to join the business and what is their vision? How do their individual visions align with the current vision of the business and other family members interested in the business as well?
  • Should the business be sold to provide liquidity for future financial security?
  • Who will take over running the business if not sold and are they properly qualified and appropriately trained to do so? If not, can they be and how so?

For business success, it is important to promote training and leadership preparation inside the organization and to keep in mind the future needs of the business.

Business succession planning should solidify the continuity structure for your business, whatever your wishes may be, while estate planning allows the opportunity to carry out your wishes for all of your assets (business and otherwise) during your lifetime, during a period of incapacity, and after your death.

Important questions a business owner should consider when developing an estate plan include:

  • What are the individual’s sources of wealth (all types of assets) and their potential estate tax exposure?
  • How does the individual define financial security and how much of their current wealth is below or in excess of that amount?
  • Are any insurance and investment portfolios owned? Can they be used as liquidity to pay estate tax liabilities?
  • What is the plan for final health care directives, funeral costs, and a distribution of the assets?

Estate planning also has the capability of reducing exposure to estate and other taxes, arranging for professional investment management for yourself or future generations, and bypassing probate.

Not surprisingly, conversations about ownership, wealth, and responsibility of the family and key business personnel could be awkward and can lead to disagreements within the family and/or owners. Without consideration of a complete plan that includes both a succession plan for the business and an estate plan, serious financial and emotional consequences can affect your family business.

For example, if the issue of estate equalization among all family members is a priority of the business owner, the succession plan and the estate plan must be coordinated. If the estate plan leaves the business to those children who are involved in the business, then the plan must provide how the uninvolved children will receive their “share” of the estate. If the estate is subject to estate taxes and a plan has not been made to provide liquidity for payment of taxes, the results could leave the uninvolved children with no assets while the involved children receive the business; or the business may have to be sold to pay the taxes and the business owner’s succession plan is thwarted.

Lack of a succession plan can result in (i) unclear direction for the business without a known leader; (ii) loss of employee faith in company leadership; (iii) power struggles among middle management; (iv) family units broken apart over disagreements; and (v) a potential loss in value due to a key person discount when surviving shareholders go to sell the business.

Lack of estate planning often results in (i) unforeseen estate tax liability; (ii) probate court costs; (iii) delay in distribution of assets and resolution of the estate; and (iv) potential litigation costs associated with the disagreements among living family members.

If you own a business, both types of planning are essential to help to streamline the transfer of your assets, to maximize family harmony, and ultimately to protect the legacy you’ve worked hard to create. The old adage “don’t put off until tomorrow what you can do today” perfectly applies to business succession and estate planning.

This article summarizes aspects of the law.  It does not constitute legal advice nor does it create an attorney client relationship.  For legal advice for your situation, you should contact an attorney.

Read more related articles here:

Estate Planning vs. Succession Planning – What’s the Difference and Why Are They Important?

Legal Corner: What’s the difference between a succession and an estate plan?

Also, read one of our previous Blogs here:

Business Succession Planning: 5 Ways to Transfer Ownership Of Your Business

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Don’t Be Like Johnny Depp, Get a Prenup

Don’t Be Like Johnny Depp, Get a Prenup

Not having a prenuptial agreement can be a costly mistake — not just for Johnny Depp, but for you as well.

Depp, 52, and his wife of just 15 months, Amber Heard, 30, are heading for splitsville. Heard filed a divorce petition earlier this week, citing irreconcilable differences, and requested spousal support. Depp’s response, according to The Associated Press, asked the judge to deny Heard’s support request — and asked that Heard pay her own attorney’s fees.

The couple reportedly did not have a prenuptial agreement, which could leave Captain Jack Sparrow’s treasure rife for plundering.
“Depp would be a poster boy for a prenup,” said Arlene Dubin, chair of the matrimonial and family law practice at Moses & Singer in New York. “If you were checking off the boxes [of who should consider one], he pretty much has them all.”

Generally speaking, she said, prenups are an important consideration for:

  • older couples;
  • those who come into the marriage with assets (as he did with a reported $400 million);
  • people who have children from prior relationships (as he does);
  • people who expect future celebrity and significant income (as he could, despite dismal reviews of “Alice Through the Looking Glass”).

Without one, the process of getting unhitched can lead to protracted and expensive legal battles, or result in a less-fair division of assets.

A multimillion-dollar net worth isn’t required to benefit. Hammering out a prenuptial agreement — or for unmarried couples, a cohabitation agreement — can make sense for many regular folks, too, said Joslin Davis, president of the American Academy of Matrimonial Lawyers. “It requires people to think ahead,” she said.
Take the case of older couples and those who are remarrying. A prenup can protect your assets not just in divorce, but in death, said Davis, who is also a principal of Allman Spry Davis Leggett & Crumpler, P.A., in Winston-Salem, North Carolina.

Many jurisdictions prevent spouses from being disinherited, she said, so a court could easily void provisions in a will that leaves everything to your kids from a prior marriage. But a prenup could be worded to require your new spouse to waive their right to dissent or take an elective share in your estate.

For young couples, a prenup offers the chance to hash out divorce handling of issues like joint efforts to pay off one partner’s student-loan debt, or how a partner might be compensated for leaving the workforce to care for their children.

“This way, the two people can write their own deal at the beginning of the relationship, at a time when they are in love and looking out for each other,” said Dubin, who is also the author of “Prenups for Lovers: A Romantic Guide to Prenuptial Agreements.”

Already married? Postnups are generally harder to come by. “Sometimes, one party may be advised that they are better off without one,” said Davis. “The law already favors them.”

Read more related articles at:

A Tale of Two Celebrity Marriages and One Prenuptial Agreement

We Don’t Need No Stinkin’ Prenup: Lessons for Johnny Depp

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

Bills

What if your inheritance turns out to be just a pile of bills?

What if your inheritance turns out to be just a pile of bills?

What if your inheritance turns out to be just a pile of bills? Debt collectors are on your tail. Blogger John Schmoll’s father left a financial mess when he died: a house that was worth far less than the mortgage, credit card bills in excess of $20,000—and debt collectors who insisted the son was legally obligated to pay what his father owed.

Fortunately, Schmoll knew better.

“I’ve been working in financial services for two decades,” says Schmoll, an Omaha, Nebraska, resident who was a stockbroker before starting his site, Frugal Rules. “I knew that I wasn’t responsible.”

Baby boomers are expected to transfer trillions to their heirs in coming years. But many people will inherit little more than a pile of bills.

Nearly half of seniors die owning less than $10,000 in financial assets, according to a 2012 study for the National Bureau of Economic Research. Meanwhile, debt among older Americans is soaring. It used to be relatively unusual to have a mortgage or credit card debt in retirement. Now, 23% of those older than 75 have mortgages, a fourfold increase since 1989, and 26% have credit card debt, a 159% increase, according to the Federal Reserve’s latest data from the 2016 Survey of Consumer Finances.

If your parents are among those likely to die in debt, here’s what you need to know.

You (probably) aren’t responsible for their debts. When people die, their debts don’t disappear. Those debts are now owed by their estates. Some estates don’t have enough assets (property, investments and cash) to pay all of the bills, so some of those bills just don’t get paid. Spouses may have the responsibility for certain debts, depending on state law, but survivors who aren’t spouses usually don’t have to pay what’s owed unless they cosigned for the debt or applied for credit together with the person who died.

What’s more, assets that pass directly to heirs often don’t have to be used to pay the estate’s debts. These assets can include “pay on death” bank accounts, life insurance policies, retirement plans and other accounts that name beneficiaries, as long as the beneficiary isn’t the estate.

You need a lawyer. Some parents hope to avoid creditors or the costs of probate, which is the court process that typically follows a death, by adding a child’s name to a house deed or transferring the property entirely. Either of those moves can cause legal and tax consequences and should be discussed with a lawyer first. After a parent dies, the executor must follow state law in determining how limited funds are distributed and can be held personally responsible for mistakes. That makes consulting a lawyer a smart idea — and the estate typically would pay the costs. (The costs of administering an estate are considered high-priority debts that are paid before other bills, such as credit cards.)

At his attorney’s advice, Schmoll sent letters to his dad’s creditors explaining the estate was insolvent, then formally closed the estate according to the probate laws of Montana, where his dad had lived.

A lawyer also can advise you how to proceed if a parent isn’t just insolvent, but also doesn’t have any assets at all. In that situation, there may not be a reason to open up a probate case and deal with collectors, Sawday says.

“Sometimes, I advise clients just to lay the person to rest and do nothing,” Sawday says. “Let a creditor handle it.”

You need to take meticulous notes. The financial lives of people in debt are often chaotic — and sorting it all out can take time. As executor of his dad’s estate, Schmoll dealt with over a dozen collection agencies, utilities and lenders, often talking to multiple people about a single account. He kept a document where he tracked details such as the names of people he talked to, dates and times of the conversations, what was said and required follow-up actions as well as reference numbers for various accounts.

You shouldn’t believe what debt collectors tell you. Some collectors told Schmoll he had a moral obligation to pay his father’s debts, since the borrowed money might have been spent on the family. Schmoll knew they were trying to exploit his desire to do the right thing, and advises others in similar situations not to let debt collectors play on their emotions.

Read more related articles here:

Can you inherit your dead parent’s debts?

Can You Inherit Debt?

Also, read one of our previous blogs at:

Will I Get A Bill as My Inheritance?

Click here to check out our On Demand Video about Estate Planning.

Click here for a short informative video from our own Attorney Bill O’Leary.

 

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