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Are My Beneficiary Designations Trouble for My Heirs?

Are My Beneficiary Designations Trouble for My Heirs?


There are many account types that are governed by beneficiary designation, such as life insurance, 401(k)s, IRAs and annuities. These are the most common investment accounts people have with contractual provisions to designate who receives the asset upon the death of the owner.

Kiplinger’s recent article entitled “Beneficiary Designations – The Overlooked Minefield of Estate Planning” provides several of the mistakes that people make with beneficiary designations and some ideas to avoid problems for you or family members.

Believing that Your Will is More Power Than It Really Is. Many people mistakenly think that their will takes precedent over any beneficiary designation form. This is not true. Your will controls the disposition of assets in your “probate” estate. However, the accounts with contractual beneficiary designations aren’t governed by your will, because they pass outside of probate. That is why you need to review your beneficiary designations, when you review your will.

Allowing Accounts to Fall Through the Cracks. Inattention is another thing that can lead to unintended outcomes. A prior employer 401(k) account can be what is known as “orphaned,” which means that the account stays with the former employer and isn’t updated to reflect the account holder’s current situation. It’s not unusual to forget about an account you started at your first job and fail to update the primary beneficiary, which is your ex-wife.

Not Having a Contingency Plan. Another thing people don’t think about, is that a beneficiary may predecease them. This can present a problem with the family, if the beneficiary form does not indicate whether it is a per stirpes or per capita election. This is the difference between a deceased beneficiary’s family getting the share or it going to the other living beneficiaries.

It’s smart to retain copies of all communications when updating beneficiary designations in hard copy or electronically. These copies of correspondence, website submissions and received confirmations from account administrators should be kept with your estate planning documents in a safe location.

Remember that you should review your estate plan and beneficiary designations every few years. Sound estate planning goes well beyond a will but requires periodic review. If this is overlooked, something as simple as a beneficiary designation could create major issues in your family after you pass away.

Reference: Kiplinger (March 4, 2020) “Beneficiary Designations – The Overlooked Minefield of Estate Planning”

Read more Related Articles at :

7 Ways That Beneficiary Designations Can Mess Up Your Estate Plan

Here’s The Difference Between An Heir And A Beneficiary

Also, read one of our previous blogs at:

As a Trust Beneficiary, Am I Required to Pay Taxes?



family farm

Estate Planning for Family-Owned Farmland

Estate Planning for Family-Owned Farmland


Family farms, particularly in the Southeastern and Midwestern United States, are often maintained for generations. In many cases, these are one of or the dominant asset in the family. Family-owned farms and associated timberland are also a tradition for many private investors, which can be used for both commercial and recreational purposes.

As the number of heirs grows and family dynamics change, however, farm succession planning can be an extremely challenging task. There is no cookie cutter approach for estate planning, particularly for farms and farm assets, and typically farm transitions are a lengthy and complicated process.  The over-arching goal is to avoid breaking up the farm upon the death of the older generation in order to pay estate taxes. Below is a brief list of key issues to consider in order to successfully transfer farm businesses, farmland and timberland interests with the goal of keeping these generational assets within the family.

Heirs, Taxes and Family Dynamics

The timeline of farm transfer should be driven by the scope of the farm, the type of farm assets such as land, timber, equipment and livestock, and the personal goals of the each generation, including parity for non-farming heirs.   Large-scale family farmland succession involves legal, business and tax issues, as well as personal issues such as death, control and money, all of which should be treated with care.   Some farm and timber heirs are land rich and cash poor, making the estate tax settlement particularly challenging.  The use of lifetime financial transfers, such as taxable unified credit gifts and annual exclusion gifts, as well as life insurance proceeds on the older generation, are also part of a well-rounded estate plan.

Non-farming heirs may elect to be bought out in a manner that doesn’t break up the farm.  One option is to establish a ‘rent’ to be paid to them over time. Additionally, non-farming heirs that maintain their ownership interest can establish a salary to the heir who is managing the farm.

Business Entity Transfer

Transferring the farm or timber business typically precedes transfer of the actual farmland or timberland, and restating the partnership agreement or operating agreement is likely the first thing to be addressed. Primary issues are management rights and income rights.  To smooth out transfer of business interests from one generation to the next, a suitable business entity must be determined.  Certain legal structures, such as LLCs, partnerships and corporations, allow easy valuation, ownership record-keeping and book-keeping to facilitate gradual transfers by use of units or shares.   Trusts are also commonly used to prevent any heirs’ potential creditors and divorce, among other reasons, from putting in jeopardy the ownership of the farm.  Conservation Easement sales or donations on farmland, timberland and/or wetlands can also generate cash to facilitate the family’s estate plan, as these ‘qualified’ sales/donations entitle the owner to a number of worthwhile tax benefits.

Farmland/Timberland Transfer – Discounted Sales

As mentioned earlier, lifetime financial transfers are important for farm estate planning, particularly in certain ownership structures where discounted valuations of 20%-40% due to a minority interest and lack of marketability assist in the process.

Farmland & Timberland as Alternative Investments

These types of assets are viewed as low-correlating diversifiers to traditional stocks and bonds, as well as to commodities, hedge funds and private equity, and serve numerous purposes as alternative investments.   Agricultural and timberland are traditionally seen as inflation hedges through capital appreciation, and may also have the added benefit of income generation.  Furthermore, farmland has traditionally been a strong investment as suburban development takes more and more cropland and timberland acreage out of commission despite rising global food demand.

Read More Relaed Articles at :

Five Tips for Passing on the Farm

3 Succession Solutions for Family Farms

Also, read one of our previous Blogs at :

What Do Farmers Need to Create an Estate Plan?


blowing inheritance

5 Strategies to Keep Your Heirs From Blowing Their Inheritance

5 Strategies to Keep Your Heirs From Blowing Their Inheritance

Preserving the family money beyond a few generations isn’t an easy task.
From Kiplinger’s Personal Finance, November 2015

From shirtsleeves to shirtsleeves in three generations, goes the early 20th-century American proverb. Then there’s the 19th-century British version: Clogs to clogs in three generations. And from Italy, date uncertain: From the stable to the stars and back again. You’ll find similar sentiments in almost every language, all expressing the same thought: It’s nearly impossible to pass on family wealth and have it last beyond your grandkids.

Statistics back up the folklore. Studies have found that 70% of the time, family assets are lost from one generation to the next, and assets are gone 90% of the time by the third generation.

That’s because a crucial element of successful inheritances is often neglected. Traditionally, the focus has been on the givers of wealth, but it should rather be on the receivers. Investing assets wisely and crafting a good estate plan are crucial to success, but so is preparing the heirs. “Estate planning is a process to transfer wealth, but it doesn’t help the family develop an infrastructure to sustain it, or keep the family unified from one generation to the next,” says Debbie Dalton, a Bay Village, Ohio, resident, whose family is learning how to successfully steward the wealth that her father, a chemical engineer, amassed as founder of cryogenic equipment maker Chart Industries.

Preparing the next generation has a lot to do with financial literacy. But it has just as much (if not more) to do with passing down and putting into practice values that will sustain your family as well as your fortune. In other words, a successful inheritance is as much about parenting as it is about money management, and that goes as much for multimillionaires as for mom-and-pop investors with a six-figure portfolio to pass along.

Inheritances gone wrong

It’s counterintuitive to think about the downside of inherited wealth, and it may be off-putting for families of modest means. But giving money to kids can be fraught with danger, says Brad Klontz, a psychologist and certified financial planner. First-generation wealth creators, often coming from poverty or a middle-class background, have worked hard, made mistakes, picked themselves up and persevered. Along the way, they’ve become self-disciplined, resourceful and resilient.

“You assume that those values will trickle down automatically,” says Klontz. “But your children are having a vastly different experience of the world than you had.” Parents who strive to give their kids what they themselves never had (which is what many worked so hard for, after all) can wind up fostering financial de­pendence, and raising kids who lack drive, creativity or passion, Klontz says.

In the book Inherited Wealth, John Levy lists a number of challenges that accompany a family windfall, observed over many years of consulting with families on inheritance issues. According to Levy, inheritors can lack self-esteem if they suspect that their success stems from their wealth instead of their efforts. Or, feeling guilty, they find it hard to accept good fortune that they didn’t earn. Their emotional development can be delayed if they never face important life challenges. Boredom can be a problem, and because of the boredom, inheritors are at risk for substance abuse or other self-destructive behaviors. Finally, heirs can be stymied by too many options or paralyzed by a fear of losing their wealth.

Little wonder that rich people from Warren Buffett to Sting have vowed to “spare” their children from inheriting fortunes, choosing instead to give most of theirs away or spend it. Buffett has said the ideal inheritance for kids is “enough money so that they would feel they could do anything, but not so much that they could do nothing.” Sting told Britain’s Daily Mail last year, “I certainly don’t want to leave them trust funds that are albatrosses round their necks.”

But that attitude is rare among wealthy parents, says Rod Zeeb, CEO of the Heritage Institute, which trains advisers and works with families to prepare younger generations for their inheritances. “When it comes down to it, most parents don’t want to disinherit their kids,” he says. What they’d prefer is a game plan that will not only keep the family assets intact but also keep the kids grounded, healthy and productive.

Richard Hansen had a plan from the get-go. The retired Navy man, who lives most of the time in Virginia Beach, Va., has done very well as a military contractor for several government agencies, including the departments of State and Homeland Security. “I come from a working-class family,” he says. “I always intended that if I made something of myself, I’d give back and make sure my children and grandchildren did, too. They were not going to be that second- and third-generation family that didn’t understand where they came from.”

Hansen’s four adult kids all have jobs, and they are not wealthy — but they will be when they inherit. In preparation for that day, they’ve taken an active role in the family foundation, learning to invest money and to give it away wisely. Family members, including an 11-year-old granddaughter, support causes ranging from ending homelessness to animal rights to the arts. Each of them knows what’s involved in making the money to give away, how to pitch a project to a board of directors and how to analyze costs, set priorities and evaluate outcomes. “Each of my children can stand on his or her own anywhere in the business world,” says Hansen. “That’s the greatest thing I’ve been able to do for them — that, and making sure that they’re not rotten, spoiled brats.”

A five-point plan

A growing number of families are turning to advisers and specialized programs to help prepare the next generation for the riches they will inherit, in a way that goes beyond the benchmarks of money managers and the legalese of estate lawyers. Here’s some of what those advisers recommend.

Get over the money taboo. Family finances are often an unpopular topic of discussion, especially if parents are worried that family wealth might spoil their kids. “It becomes a big elephant in the room,” says Daisy Medici, managing director of governance and education at GenSpring Family Offices, a unit of SunTrust Banks. “The kids are surrounded by wealth and the opportunities that it brings, but the family doesn’t talk about it,” she says. Young people with no preparation who suddenly come into a trust fund because they’ve turned 21 — or, heaven forbid, the parents die in an accident — can be completely derailed, the same way lottery winners often are.

The same goes for spouses. “My father retired and a couple of years later was diagnosed with lung cancer. He died within six weeks,” says Dalton. The tragedy was compounded by the fact that Dalton’s mother was unprepared to take the financial reins, having been shielded from much of that responsibility during her marriage. “I was really angry at my dad for that. It was well intentioned, but my mother was paralyzed,” says Dalton. It didn’t help that the transition took place in 2008, as the family’s investments were being pummeled by a bear market. The family assets survived the bear market, and Heritage Institute coaching has since helped Dalton’s mom develop her own voice and leadership style. Coaching has also helped the family to coalesce around the Christian values they want to shape their legacy, says Dalton.

Sometimes parents are silent because they’re not sure their money will outlast the health challenges of old age or mercurial financial markets. Whatever the reason for the lack of communication, heirs who are ill-prepared are left to wonder why their parents thought they were incap­able of handling the information or couldn’t be trusted with it. Better to be up front about the wealth you have and your plans for it. And don’t forget about how it came to be in the first place, especially if the wealth was created several generations ago.

Embark on a mission. Make sure your legacy is about more than money. Many families find a mission statement helpful. After meeting with a family, wealth transition coaches at the Williams Group, in San Clemente, Calif., will have family members write on an easel the values they want to emphasize in their lives — say, education, philanthropy or self-sufficiency. “It takes half a day, and the paper is several feet long,” says founder Roy Williams. “Most of them frame it and hang it in their family offices.” In light of those core values, the family identifies the long-term purpose of their wealth in a mission statement.

Williams considers crafting the mission statement a crucial exercise. His study of 3,250 families found that a breakdown in trust and com­munication is behind 60% of failed inheritances. Involving the whole family in determining common objectives and deciding how they’ll be accomplished avoids the trap of Mom or Dad dictating the future to their children. It can also smooth tensions between family factions — between those running the family business, for example, and those not involved.

Raise money smart kids. From an early age, children should be taught bud­geting and delayed gratification, even if you can afford to give your kids everything they want and more. It doesn’t matter if the monthly budget is $3,000 or $30,000, “there’s no amount of money that can’t be spent through,” Medici reminds her clients. When kids are little, get them a piggy bank with three slots or three separate piggy banks — one for spending, one for saving and one for giving. Remind grandparents who are fond of cash gifts to make them in multiples of three.

Let older kids budget an allowance to cover their expenses. Figure the monthly average spent on a teen’s car insurance, cell phone and so on, and then give the young adult an allowance to pay those bills. The tough part is letting the phone get shut off or taking back the car if the bills are not paid. “It all goes back to the law of consequences,” says Zeeb. “Without a budget, kids never learn to prioritize or make decisions.”

Provide financial training wheels. Don’t make the mistake of delaying all access to the family fortune in order to preserve it. Brian Matter, a certified financial planner at Creative Capital Management, in San Diego, encourages clients to seed an investment account when children are in their late teens. Allow the child to make investment decisions, and agree to match a percentage of the returns earned over a specific time period. The child can withdraw money from the account, but the parent can’t add to the principal. This teaches the child about investing and spending, and it illustrates the power of compound growth as well as the opportunity cost of robbing a nest egg. “We had one client try this, and the child decided to withdraw all the money within the first six months for a lavish trip to Paris. The parents changed their estate plan as a result,” says Matter.

The Dalton kids and their cousin share responsibility with their parents for the management of a family lake house in upstate New York, owned jointly and organized under the legal structure of a limited liability corporation. Debbie Dalton says she expects that the kids will soon take an active role in directing some of the family’s charitable giving, as well. Such experiences boost the odds that when it’s the next generation’s turn to manage the family business or an investment portfolio, “they’ll have the skills, knowledge and insight to be effective,” says Jeff Ladouceur, a director at SEI Private Wealth Management.

Assemble a good team. In addition to a cadre of advisers that includes investment managers, tax preparers, estate planners and trust lawyers, bring in mentors for the next generation — especially for teens and young adults, who might not always see Mom and Dad as the font of all wisdom. Enlist qualified associates, such as financial advisers, board directors you may know and other successful businesspeople. “The smartest thing I did was bring in outside expertise at the highest level,” says Hansen, the contractor, of the board members he has enlisted for his foundation. “Several of them have managed millions — billions — of dollars. The value they add is incredible.”

A de facto advisory board comes in handy when your kids’ friends and classmates start to hit them up for contributions to investment schemes or business start-ups — the surest way, other than overspending, for young adults to fritter away an inheritance, says Zeeb. “They want to help their friends by nature, but the best way is to defer. If the committee says yes, the kid’s a hero; if it says no, it’s not his fault.”

In the end, you’ll have the best shot at preserving both your wealth and your family with a multigenerational effort that begins when your kids are born, not when you die. Dalton, for one, is pleased with the path her family is now on, and she urges others to get started. “Unlike investing, where timing can be critical, there’s no bad time to invest in your family’s legacy. You should start now.”

The power of a trust

As a parent, your vision of how your legacy is passed on to the next generation and beyond probably doesn’t linger on legal vehicles. But such structures are key to achieving your goals.

When it comes to distributing assets, many families turn to trusts. Trusts come in more flavors than Baskin-Robbins ice cream. Depending on the arrangement, they can minimize estate taxes, protect your estate from the mistakes of your heirs or maintain privacy by avoiding probate. The cost to set one up typically ranges from $3,000 to $10,000; it can be more, however, depending on complexity, with additional costs for individual tweaks and maybe 1% of assets to administer it.

revocable or living trust lets you keep control of your assets while you’re alive. Although assets usually pass directly to your heirs, bypassing probate, a revocable trust won’t spare you from estate taxes. If that’s your main goal, then an irrevocable trust, which effectively removes trust assets from your estate, is the way to go. A lifetime asset protection trust might be in order if you have concerns about the ability of your heirs to preserve your estate. Beneficiaries are protected against creditors, bankruptcy — even future ex-spouses — because assets belong to the trust, not the beneficiary.

Whichever trust you choose, consider inserting a personal message to your heirs to breathe life into an otherwise sterile document. You might include the stories behind family heirlooms, for instance. Or, instead of imposing edicts and tying distributions to certain achievements, express why you value education or entrepreneurship. “This is the last message we get to leave,” says John Warnick, of the Purposeful Planning Institute. “When it comes in a positive and warm way, it has a tremendous impact.”

Read more related articles at:

How to Keep Your Heirs from Blowing Their Inheritance

How to keep your kids from blowing the family fortune

Also read one of our previous Blogs at :

Should I Use a Trust to Protect My Children’s Inheritance?



Letter of instruction

A Letter of Instruction Can Spare Your Heirs Great Stress

A Letter of Instruction Can Spare Your Heirs Great Stress

While it is important to have an updated estate plan, there is a lot of information that your heirs should know that doesn’t necessarily fit into a will, trust or other components of an estate plan. The solution is a letter of instruction, which can provide your heirs with guidance if you die or become incapacitated.

A letter of instruction is a legally non-binding document that gives your heirs information crucial to helping them tie up your affairs. Without such a letter, it can be easy for heirs to miss important items or become overwhelmed trying to sort through all the documents you left behind. The following are some items that can be included in a letter:

  • A list of people to contact when you die and a list of beneficiaries of your estate plan
  • The location of important documents, such as your will, insurance policies, financial statements, deeds, and birth certificate
  • A list of assets, such as bank accounts, investment accounts, insurance policies, real estate holdings, and military benefits
  • Passwords and PIN numbers for online accounts
  • The location of any safe deposit boxes
  • A list of contact information for lawyers, financial planners, brokers, tax preparers, and insurance agents
  • A list of credit card accounts and other debts
  • A list of organizations that you belong to that should be notified in the event of your death (for example, professional organizations or boards)
  • Instructions for a funeral or memorial service
  • Instructions for distribution of sentimental personal items
  • A personal message to family members

Once the letter is written, be sure to store it in an easily accessible place and to tell your family about it. You should check it once a year to make sure it stays up-to-date.

Read more related articles at:

Leave a Letter of Instruction to Your Heirs

Letter of Instruction Benefits Heirs…and You

Also, read one of our previous Blogs at :

Is Your Estate Plan Like an Easter Egg Hunt?

Charitable giving

Charitable Giving and Your Estate Plan

Charitable Giving and Your Estate Plan. Americans are a country of generous people. We give to organizations that we feel connected to, and we give to charities that we feel are important. We also give to honor our loved ones, to make life better in our communities and to help when disaster strikes.

Most people don’t give to charity purely for the tax benefits, but charitable giving has long been a benefit of lowering income taxes during our lifetimes, as well as helping minimize estate taxes when we die, says the article “5 Ways to Incorporate Charitable Giving into Your Estate Plan” from Kiplinger. Therefore, if you are charitably minded, why not achieve the most tax-savings you can? Here are five ways to do this.

Appreciated Stock. Gifts of publicly traded stock that has grown or appreciated in value is a good way to support a charity while you are living. If you sell appreciated stock, you will need to pay capital gains tax on the appreciation. However, if you donate appreciated stock to a charity, you’ll receive a charitable income tax deduction equal to the full market value of the stock at the time of the gift. That avoids capital gains taxes. You get the benefit on the appreciated amount, without having to sell it. The charity can, if it wants, sell the stock without paying any capital gains taxes, because registered nonprofits are tax exempt.

Charitable Rollovers. If you are older than 70 ½, you may donate up to $100,000 per year to charities directly from your IRA. This is known as a Qualified Charitable Rollover, or a QCD. The QCD counts towards any Required Minimum Distributions (RMDs) that you need to take from your IRA annually. Under the recently passed SECURE Act, in the future RMDs must be taken by December 31, 2020, after the account owner celebrates their 72nd birthday. Because RMDs are taxable income, they are taxed at ordinary income rates.

By donating through a QCD, you can support a charity, fulfill your RMD requirement and exclude the amount that you donate from your taxable income. For those who don’t need their RMDs, that’s a win-win situation.

Bequest by Will or Revocable Trust. A more traditional way to support a charity, is to leave an amount in your will or revocable trust. The bequest is language in your will or trust that states the amount you want to leave to the charity, clearly identifying the charity you want to receive the funds, and if you want, stating the purpose that you’d want the charity to use the funds. An important point: make sure that you use the legally accurate name of the charity to avoid any confusion. This is a common error that causes no many problems for charities.

Consider also giving a donation that can be used for a charity’s “general purpose.” This lets the charity decide where to best allocate your donation, rather than tying the money to a specific program. If you chose to list a specific purpose, meet with the development office or the executive director at the charity to ensure that they are able to fulfill that desire. Otherwise, the charity may need to refuse the bequest.

Name a Charity as the Beneficiary of Retirement Accounts. This can be done by naming the charity as a beneficiary on the account documents. Be sure to use the legally correct name of the charity. The charity will be able to withdraw funds from the retirement account without paying taxes. People who receive funds from retirement accounts pay income tax rates on distributions, but charities do not. You may want to donate retirement account funds to charities, and non-taxable assets to heirs.

Charitable Remainder Trusts. This is a way to help the charity and provide for heirs. Your estate planning attorney would create a Charitable Remainder Trust (CRT) and names the CRT as the beneficiary of an IRA. A CRT is a “split interest trust,” where a person receives annual payments for the CRT for a set period of time. When the person or charitable organization’s interest in the CRT ends, the remaining funds are distributed to the charity of your choosing. There are very strict rules about how CRTs are structured, including the percentages that the charity must receive. An estate planning attorney will be able to create this for you.

Reference: Kiplinger (March 2, 2020) “5 Ways to Incorporate Charitable Giving into Your Estate Plan”

Read more about Charitable giving at:


How To Incorporate Philanthropic Giving Into Your Estate Plan/Forbes

Also read our previous Blog about Charitable Giving at :

George Michael’s Charity Continues


DIY Estate Planning

How Bad Can a Do-It-Yourself Estate Plan Be? Very!

How Bad Can a Do-It-Yourself Estate Plan Be? Very!  Here’s a real world example of why what seems like a good idea backfires, as reported in The National Law Review’s article “Unintended Consequences of a Do-It-Yourself Estate Plan.”

Mrs. Ann Aldrich wrote her own will, using a preprinted legal form. She listed her property, including account numbers for her financial accounts. She left each item of property to her sister, Mary Jane Eaton. If Mary Jane Eaton did not survive, then Mr. James Aldrich, Ann’s brother, was the designated beneficiary.

A few things that you don’t find on forms: wills and trusts need to contain a residuary, and other clauses so that assets are properly distributed. Ms. Aldrich, not being an experienced estate planning attorney, did not include such clauses. This one omission became a costly problem for her heir that led to litigation.

Mary Jane Eaton predeceased Ms. Aldrich. As Mary Jane Eaton had named Ms. Aldrich as her beneficiary, Ms. Aldrich then created a new account to receive her inheritance from Ms. Eaton. She also, as was appropriate, took title to Ms. Eaton’s real estate.

However, Ms. Aldrich never updated her will to include the new account and the new real estate property.

After Ms. Aldrich’s death, James Aldrich became enmeshed in litigation with two of Ms. Aldrich’s nieces over the assets that were not included in Ms. Aldrich’s will. The case went to court.

The Florida Supreme Court ruled that Ms. Aldrich’s will only addressed the property specifically listed to be distributed to Mr. James Aldrich. Those assets passed to Ms. Aldrich’s nieces.

Ms. Aldrich did not name those nieces anywhere in her will, and likely had no intention for them to receive any property. However, the intent could not be inferred by the court, which could only follow the will.

This is a real example of two basic problems that can result from do-it-yourself estate planning: unintended heirs and costly litigation.

More complex problems can arise when there are blended family or other family structure issues, incomplete tax planning or wills that are not prepared properly and that are deemed invalid by the court.

Even ‘simple’ estate plans that are not prepared by an estate planning lawyer can lead to unintended consequences. Not only was the cost of litigation far more than the cost of having an estate plan prepared, but the relationship between Ms. Aldrich’s brother and her nieces was likely damaged beyond repair.  that is how bad a Do-It-Yourself Estate Plan Be!

Reference: The National Law Review (Feb. 10, 2020) “Unintended Consequences of a Do-It-Yourself Estate Plan”

Read more about this at : Do it yourself Estate Planning by the American Bar Association

Is Do-it- yourself Estate Planning a Valid option? from Forbes

You can also read one of our previous Blogs at:  Do it yourself Wills go wrong- Fast




Avoiding Probate with a Trust

Avoiding Probate with a Trust. Privacy is just one of the benefits of having a trust created as part of an estate plan. That’s because assets that are placed in a trust are no longer in the person’s name, and as a result do not need to go through probate when the person dies. An article from The Daily Sentinel asks, “When is a trust worth the cost and effort?” The article explains why a trust can be so advantageous, even when the assets are not necessarily large.

Let’s say a person owns a piece of property. They can put the property in a trust, by signing a deed that will transfer the title to the trust. That property is now owned by the trust and can only be transferred when the trustee signs a deed. Because the trust is the owner of the property, there’s no need to involve probate or the court when the original owner dies.

Establishing a trust is even more useful for those who own property in more than one state. If you own property in a state, the property must go through probate to be distributed from your estate to another person’s ownership. Therefore, if you own property in three states, your executor will need to manage three probate processes.

Privacy is often a problem when estates pass from one generation to the next. In most states, heirs and family members must be notified that you have died and that your estate is being probated. The probate process often requires the executor, or personal representative, to create a list of assets that are shared with certain family members. When the will is probated, that information is available to the public through the courts.

Family members who were not included in the will but were close enough kin to be notified of your death and your assets, may not respond well to being left out. This can create problems for the executor and heirs.

Having greater control over how and when assets are distributed is another benefit of using a trust rather than a will. Not all young adults are prepared or capable of managing large inheritances. With a trust, the inheritance can be distributed in portions: a third at age 28, a third at age 38, and a fourth at age 45, for instance. This kind of control is not always necessary, but when it is, a trust can provide the comfort of knowing that your children are less likely to be irresponsible about an inheritance.

There are other circumstances when a trust is necessary. If the family includes a member who has special needs and is receiving government benefits, an inheritance could make them ineligible for those benefits. In this circumstance, a special needs trust is created to serve their needs.

Another type of trust growing in popularity is the pet trust. Check with a local estate planning lawyer to learn if your state allows this type of trust. A pet trust allows you to set aside a certain amount of money that is only to be used for your pet’s care, by a person you name to be their caretaker. In many instances, any money left in the trust after the pet passes can be donated to a charitable organization, usually one that cares for animals.

Finally, trusts can be drafted that are permanent, or “irrevocable,” or that can be changed by the person who wants to create it, a “revocable” trust. Once an irrevocable trust is created, it cannot be changed. Trusts should be created with the help of an experienced trusts and estate planning attorney, who will know how to create the trust and what type of trust will best suit your needs. this will help avoiding probate without a trust.

Reference: The Daily Sentinel (Jan. 23, 2020) “When is a trust worth the cost and effort?”

For more information, go to:  Probate in Florida

  Probate- Florida Courts

And read one of our previous blogs at:  How does a Probate Proceeding Work?


Successor Trustee

What’s Better, A Living Trust or a Will?

Everyone knows what a last will and testament is. However, a will is not always the best way to distribute your assets, explains the Times Herald-Record in the article “Living trusts are better choice than wills.” Most people think that by having a will alone, they will make it clear who they want to receive their assets when they die. However, wills are used by the court in a proceeding called “probate,” if the only estate plan you have is a will. The court proceeding is to establish that the will is valid. Depending upon where you live, probate can take a year before assets are distributed to beneficiaries.

Certain family members must receive notifications, when a will is submitted to probate. Some people will receive notices, even if they are not mentioned in the will. This can lead to all kinds of awkward situations, especially from estranged or unknown relatives. The person who is the executor of the will is required to locate these relatives, and until they are found and notified, the probate process comes to a standstill.

There are instances where a judge will allow a legal notice to be published in a local newspaper, after valid attempts to find relatives aren’t successful. If there is a disabled beneficiary, a minor beneficiary, a relative or beneficiary who can’t be located, or a relative who has been incarcerated, the judge often appoints lawyers to represent these parties’ interests and the estate pays for the attorney’s fees.

Depending on the situation, the executor may be required to furnish a family tree, or a friend of the decedent must sign an affidavit attesting that the person never had any children.

Thinking of disinheriting a child? Anyone who is disinherited in a will, receives a notice about that and is legally permitted to contest the will. That can lead to years of expensive litigation, including discovery demands, depositions, motions and possibly a trial. Like most litigation, will contests usually end in a settlement. The disinherited relative often gets a share of the inheritance, even when the decedent didn’t want them to get anything.

For many families, a living trust is a better alternative. They also serve as disability planning, naming people who will manage the assets of the trust, in case of incapacity. They are private documents, so their information does not become public knowledge, like the details of a will.

A qualified estate planning attorney will help you determine what estate planning tools will work best to achieve your goals, while maintaining your privacy and ensuring that assets pass to heirs in a discrete manner.

In many situations a living trust should be part of an estate plan.

Reference: Times Herald-Record (Oct. 26, 2019) “Living trusts are better choice than wills”

Joint Tenancy With Children Creates Problems for Parents

Parents putting children or other family members as joint owners of their assets. is another example of a simple solution for a complex problem. Joint tenancy doesn’t work, even though it seems as if it should.

As explained in the article “Beware the joint tenancy trap” from Monterey Herald, putting another person on an account, even a trusted child or life-long friend, can create serious problems for the individual, their estate and their heirs. Before going down that path, there are several issues to consider.

When another individual is placed as an owner on an account or on the title to real property, they have a legal ownership in that property equal to that of the original owner. This is called joint tenancy. If a child is made a joint tenant on a parent’s accounts, they would be entirely within their rights to withdraw every single asset from those accounts and do whatever they wanted with them. They would not need the original owner’s consent, counsel, or knowledge.

Giving anyone that power is a serious decision.

Making a child a joint owner of assets also exposes those assets to claims by the child’s creditors. If they file for bankruptcy, the original asset owner may have to buy back one-half of the asset at its current market value. Another example: if the child is in an accident and a judgment is recorded against the child, you may have to buy back one-half of your joint tenant property at its current market value to settle the claims.

There are other complications. If one joint owner of the asset dies, joint tenancy provides for the right of survivorship. The property transfers to the surviving joint tenant without going through probate and with no reference to a will. That’s what people focus on when they try this method as an end-run around estate planning. What they don’t realize, is that if the parent dies and the asset transfers directly to the joint tenant—let’s say a daughter—but the will says the assets are to be split between all of the children, her claim on the asset is “senior” to the rest of the children. That means she gets the assets and the four siblings split the remaining assets.

If there is any friction between siblings, not having equal inheritances could create a fracture in the family that can’t easily be resolved.

Tax exposure is another risk of joint tenancy. When someone is named a joint owner, they have an equal ownership interest in those assets, as the original owner’s cost basis. When one owner dies, the remaining owner gets a step up in basis on the proportion of the assets the deceased person owned at death.

Let’s say a son and father are joint owners on an account. When the father dies, the son gets a step up in basis on one-half of the assets—the assets that the father owned. His half of the assets retains the original basis. But if that account was owned solely by the father, all the heirs will get the full step up in basis on the father’s death.

Given the complexities that joint tenancy creates, parents need to think very carefully before putting children’s names on their assets and real property. A better plan is to make an appointment to speak with an estate planning attorney and find out how to protect the parent’s assets through other means, which may include trusts and other estate planning tools.

See how joint tenancy creates problems.

Reference: Monterey Herald (Sep. 11, 2019) “Beware the joint tenancy trap”

Think of Estate Planning as Stewardship for the Future

Despite our love of planning, the one thing we often do not plan for, is the one thing that we can be certain of. Our own passing is not something pleasant, but it is definite. Estate planning is seen as an unpleasant or even dreaded task, says The Message in the article “Estate planning is stewardship.” However, think of estate planning as a message to the future and stewardship of your life’s work.

Some people think that if they make plans for their estate, their lives will end. They acknowledge that this doesn’t make sense, but still they feel that way. Others take a more cavalier approach and say that “someone else will have to deal with that mess when I’m gone.”

However, we should plan for the future, if only to ensure that our children and grandchildren, if we have them, or friends and loved ones, have an easier time of it when we pass away.

A thought-out estate plan is a gift to those we love.

Start by considering the people who are most important to you. This should include anyone in your care during your lifetime, and for whom you wish to provide care after your death. That may be your children, spouse, grandchildren, parents, nieces and nephews, as well as those you wish to take care of with either a monetary gift or a personal item that has meaning for you.

This is also the time to consider whether you’d like to leave some of your assets to a house of worship or other charity that has meaning to you. It might be an animal shelter, community center, or any place that you have a connection to. Charitable giving can also be a part of your legacy.

Your assets need to be listed in a careful inventory. It is important to include bank and investment accounts, your home, a second home or any rental property, cars, boats, jewelry, firearms and anything of significance. You may want to speak with your heirs to learn whether there are any of your personal possessions that have great meaning to them and figure out to whom you want to leave these items. Some of these items have more sentimental than market value, but they are equally important to address in an estate plan.

There are other assets to address: life insurance policies, annuities, IRAs and other retirement plans, along with pension accounts. Note that these assets likely have a beneficiary designation and they are not distributed by your will. Whoever the beneficiary is listed on these documents will receive these assets upon your death, regardless of what your will says.

If you have not reviewed these beneficiary designations in more than three years, it would be wise to review them. The IRA that you opened at your first job some thirty years ago may have designated someone you may not even know now! Once you pass, there will be no way to change any of these beneficiaries.

Work with an experienced estate planning attorney to create your last will and testament. For most people, a simple will can be used to transfer assets to heirs.

Many people express concern about the cost of estate planning. Remember that there are important and long-lasting decisions included in your estate plan, so it is worth the time, energy and money to make sure these plans are created properly.

Compare the cost of an estate plan to the cost of buying tires for a car. Tires are a cost of owning a car, but it’s better to get a good set of tires and pay the price up front, than it is to buy an inexpensive set and find out they don’t hold the road in a bad situation. It’s a good analogy for estate planning.

Learn how a trust can prevent a child from getting too much too fast.

Reference: The Message (June 14, 2019) “Estate planning is stewardship.”

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