Category Archives: Estate Planning Blog

Avoid This Major Mistake When Adding an IRA to Your Estate Plan

Some people assume that because they’ve named a specific heir as the beneficiary of their IRA in their will or trust that there’s no need to list the same person again as beneficiary in their IRA paperwork. Because of this, they often leave the IRA beneficiary form blank or list “my estate” as the beneficiary.

But this is a major mistake—and one that can lead to serious complications and expense.

IRAs Aren’t Like Other Estate Assets
First off, the person you name on your IRA’s beneficiary form is the one who will inherit the account’s funds, even if a different person is named in your will or in a trust. Your IRA beneficiary designation controls who gets the funds, no matter what you may indicate elsewhere.

Given this, you must ensure your IRA’s beneficiary designation form is up to date and lists either the name of the person you want to inherit your IRA, or the name of the trustee, if you want it to go to a revocable living trust or special IRA trust you’ve prepared. For example, if you listed an ex-spouse as the beneficiary of your IRA and forget to change it to your current spouse, your ex will get the funds when you die, even if your current spouse is listed as the beneficiary in your will.

Probate Problems
Moreover, not naming a beneficiary, or naming your “estate” in the IRA’s beneficiary designation form, means your IRA account will be subject to the court process called probate. Probate costs unnecessary time and money and guarantees your family will get stuck in court.

When you name your desired heir on the IRA beneficiary form, those funds will be available almost immediately to the named beneficiary following your death, and the money will be protected from creditors. But if your beneficiary must go through probate to claim the funds, he or she might have to wait months, or even years, for probate to be finalized.

Plus, your heir may also be on the hook for attorney and executor fees, as well as potential liabilities from creditor claims, associated with probate, thereby reducing the IRA’s total value.

Reduced Growth and Tax Savings
Another big problem caused by naming your estate in the IRA beneficiary designation or forgetting to name anyone at all is that your heir will lose out on an important opportunity for tax savings and growth of the funds. This is because the IRS calculates how the IRA’s funds will be dispersed and taxed based on the owner’s life expectancy. Since your estate is not a human, it’s ineligible for a valuable tax-savings option known as the “stretch provision” that would be available had you named the appropriate beneficiary.

Typically, when an individual is named as the IRA’s beneficiary, he or she can choose to take only the required minimum distributions over the course of his or her life expectancy. “Stretching” out the payments in this way allows for much more tax-deferred growth of the IRA’s invested funds and minimizes the amount of income tax due when withdrawals are made.

However, if the IRA’s beneficiary designation lists “my estate” or is left blank, the option to stretch out payments is no longer available. In such cases, if you die before April 1st of the year you reach 70 ½ years old (the required beginning date for distributions), your estate will have to pay out all of the IRA’s funds within five years of your death. If you die after age 70 1/2, the estate will have to make distributions over your remaining life expectancy.

This means the beneficiary who eventually gets your IRA funds from your estate will have to take the funds sooner—and pay the deferred taxes upon distribution. This limits their opportunity for additional tax-deferred growth of the account and requires him or her to pay a potentially hefty income tax bill.

A Simple Fix
Fortunately, preventing these complications is super easy—just be sure to name your chosen heir as beneficiary in your IRA paperwork (along with at least one alternate beneficiary). And remember to update the named beneficiary if your life circumstances change, such as after a death or divorce.

Dedicated to empowering your family, building your wealth and defining your legacy,

Do Your Homework to Ensure Your Kids Are Properly Cared For No Matter What Happens

mother with son doing homework
It’s back-to-school time again, and when it comes to estate planning YOU may have homework to do. As a parent, your most critical—and often overlooked—task is to select and legally document guardians for your minor children. Guardians are people legally named to care for your children in the event of your death or incapacity.

If you haven’t done that yet, you should immediately do so – or come to one of our “Guardian Naming Workshops” and get it done there. Information on our next workshop can be found here.

Don’t think just because you’ve named godparents or have grandparents living nearby that’s enough. You must name guardians in a legal document, or risk creating conflict and a long, expensive court process for your loved ones—all of which can be so easily avoided.

Covering all your bases
However, naming permanent guardians is just one step in protecting your kids. It’s equally important to have someone (plus backups) with documented authority, who can stay with your children until the long-term guardians can be located and formally named by the court, which can take weeks or even months.

The last thing you want is for police to show up at your home and find your children with a caregiver, who doesn’t have documented or legal authority to stay with them and doesn’t have any idea how to contact someone with such authority. In such a case, police would have no choice but to call Child Protective Services.

Closing the gap
This is a major hole in many parent’s estate plans, as we know you’d never want your kids in the care of strangers, even for a short time. To fix this, we’ve created a comprehensive system called the Kids Protection Plan®, which lets you name temporary guardians who have immediate documented authority to care for your children until the long-term guardians you‘ve appointed can be notified and get to your children.

The Kids Protection Plan® also includes specific instructions that are given to everyone entrusted with your children’s care, explaining how to contact your short and long-term guardians. The plan also ensures everyone named by you has the legal documents they’d need on hand and knows exactly what to do if called upon. We even provide you with an ID card for your wallet and emergency instructions to post on your refrigerator, so the contacts and process are prominently available in case something happens to you.

A foolproof plan
With the Kids Protection Plan®, you’ll name one permanent guardian and one temporary guardian, along with two or more backups, in case the primary isn’t available or cannot serve. And we instruct caregivers to NEVER CALL POLICE IF YOU CANNOT BE REACHED UNTIL ONE OF THE NAMED GUARDIANS ARRIVES AND IS PRESENT WITH YOUR CHILDREN.

Finally, if there’s anyone you’d never want raising your children, we confidentially document that in the plan, preventing them from wasting the time, energy, and assets of the people you do want caring for your children.

With us as your personal family lawyer, you have access to the Kids Protection Plan® to ensure the well-being of your children no matter what. As your kids head back to school, do your homework by contacting us today.

Dedicated to empowering your family, building your wealth and defining your legacy,

The Ins and Outs of Collecting Life Insurance Policy Proceeds

Life-Insurance Stock 91024

Unlike many estate assets, if you’re looking to collect the proceeds of a life insurance policy, the process is fairly simple (provided you’re named as the beneficiary). That said, following a loved one’s death, the whole world can feel like it’s falling apart, and it’s helpful to know exactly what steps need to be taken to access the insurance funds as quickly and easily as possible during this trying time.

And if you’ve been dependent on the deceased for regular financial support and/or are responsible for paying funeral expenses, the need to access insurance proceeds can sometimes be downright urgent.

Here is an outline of typical procedure for claiming and collecting life insurance proceeds, along with some of the common hiccups in the process.
Filing a claim
To start the life insurance claims process, you first need to identify who the beneficiary of the life insurance policy is—are you the beneficiary, or is a trust set up to handle the claim for you?

We often recommend that life insurance proceeds be paid to a trust, not outright to a beneficiary. This way, the life insurance proceeds can be used by the beneficiary, but the funds are protected from lawsuits and/or creditors that the beneficiary may be involved with—even a future divorce.

If a trust is the beneficiary, the trustee will need to notify the insurance company of the policyholder’s death and provide them with a certificate of trust and a death certificate when one is available.

From there, the insurance company typically sends the beneficiary (or the trustee if a trust is named as beneficiary) more in-depth instructions and forms to fill out.

Multiple beneficiaries
If more than one adult beneficiary was named, each person should provide his or her own signed and notarized claim form. If any of the primary beneficiaries died before the policyholder, an alternate/contingent beneficiary can claim the proceeds, but he or she will need to send in the death certificates of both the policyholder and the primary beneficiary.

Minors
While policyholders are free to name anyone as a beneficiary, when minor children are named, it creates serious complications, as a minor child cannot receive life insurance benefits directly until they reach the age of majority.

If a child is named as a beneficiary and has yet to reach the age of majority, the claim proceeds will be paid to the child’s legal guardian, who will be responsible for managing those funds until the child comes of age. Given this, in the event a minor is named you’ll need to go to court to be appointed as legal guardian, even if you’re the child’s parent. Therefore we recommend never naming a minor child as a life insurance beneficiary, even as a backup to the primary beneficiary.

Rather than naming a minor child as a life insurance beneficiary, it’s often better to set up a trust to receive the proceeds. By doing that, the proceeds would be paid into the trust, and whomever is named as trustee will follow the steps above to collect the insurance benefits, put them in the trust, and manage the funds for the child’s benefit.
Insurance claim payment
Provided you fill out the forms properly and include a certified copy of the death certificate, insurance companies typically pay out life insurance claims quickly. In fact, some claims are paid within one-to-two weeks of the start of the process, and rarely do claims take more than 60 days to be paid. Most insurance companies will offer you the option to collect the proceeds via a mailed check or transfer the funds electronically directly to your account.

Sometimes an insurance company will request you to send in a completed W-9 form (Request for Taxpayer Identification Number and Certification) from the IRS to process a claim. Most of the time, a W-9 is requested only if there is some question or issue with the records, such as having an address provided in a claim form that doesn’t match the one on file.

While collecting life insurance proceeds is a fairly simple process, it’s always a good idea to consult with a trusted legal advisor to ensure the process goes as smoothly as possible during the often-chaotic period following a loved one’s death.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Signature Blogs

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 2

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Last week, I shared the first part of this series explaining the powers and duties that come with serving as trustee. Here in part two, I discuss the rest of a trustee’s core responsibilities.

Being asked to serve as trustee can be a huge honor—but it’s also a major responsibility. Indeed, the job entails a wide array of complex duties, and trustees are both ethically and legally required to effectively execute those functions or face significant liability.

To this end, you should thoroughly understand exactly what your role as trustee requires before agreeing to accept the position. Last week, I highlighted three of a trustee’s primary functions, and here we add on to that list, starting with one of the most labor-intensive of all duties—managing and accounting for a trust’s assets.

Manage and account for trust assets
Before a trustee can sell, invest, or make distributions to beneficiaries, he or she must take control of, inventory, and value all trust assets. Ideally, this happens as soon as possible after the death of the grantor in the privacy of a lawyer’s office. If assets are properly titled in the name of the trust, there’s no need for court involvement—unless a beneficiary or creditor forces it with a claim against the trust.

In the best case, the person who created the trust and was the original trustee—usually the grantor—will have maintained an up-to-date inventory of all trust assets. If not, gathering those assets can be a major undertaking, so contact a trusted legal advisor to help review the trust and determine the best course of action.

The value of some assets, like financial accounts, securities, and insurance, will be easy to determine. But with other property—real estate, vehicles, businesses, artwork, furniture, and jewelry—a trustee may need to hire a professional appraiser to determine those values. With the assets secured and valued, the trustee must then identify and pay the grantor’s creditors and other debts.

Be careful about ensuring regularly scheduled payments, such as mortgages, property taxes, and insurance, are promptly paid, or trustees risk personal liability for late payments and/or other penalties. Trustees are also required to prepare and file the grantor’s tax returns. This includes the final income tax return for the year of the decedent’s death and any prior years’ returns on extension, along with filing an annual return during each subsequent year the trust remains open. For high-value estates, trustees may also have to file a federal estate tax return.

During this entire process, it’s vital that trustees keep strict accounting of every transaction (bills paid and income received) made using the trust’s assets, no matter how small. In fact, if a trustee fails to fully pay the trust’s debts, taxes, and expenses before distributing assets to beneficiaries, he or she can be held personally liable if there are insufficient assets to pay for outstanding estate expenses.

Given this, it’s crucial to work with a trusted legal advisor and a qualified accountant to properly account for and pay all trust-related expenses and debts as well as ensure all tax returns are filed on behalf of the trust.

Personally administer the trust
While trustees are nearly always permitted to hire outside advisers like lawyers, accountants, and even professional trust administration services, trustees must personally communicate with those advisors and be the one to make all final decisions on trust matters.

So even though trustees can delegate much of the underlying legwork, they’re still required to serve as the lead decision maker. What’s more, trustees are ultimately responsible if any mistakes are made. In the end, a trustee’s full range of powers, duties, and discretion will depend on the terms of the trust, so always refer to the trust for specific instructions when delegating tasks and/or making tough decisions.

Clear communication with beneficiaries
To keep them informed and updated as to the status of the trust, trustees are required to provide beneficiaries with regular information and reports related to trust matters. Typically, trustees provide such information on an annual basis, but again, the level of communication depends on the trust’s terms.

In general, trustees should provide annual status reports with complete and accurate accounting of the trust’s assets. Moreover, trustees must permit beneficiaries to personally inspect trust property, accounts, and any related documents if requested. Additionally, trustees must provide an annual tax return statement (Schedule K-1) to each beneficiary who’s taxed on income earned by the trust.

Entitled to reasonable fees for services rendered
Given such extensive duties and responsibilities, trustees are almost always entitled to receive reasonable fees for their services. Determining what’s “reasonable,” however, can be challenging. Entities like accounting firms, lawyers, banks, and trust administration companies typically charge a percentage of the funds under their management or a set fee for their time. In the end, what’s reasonable is based on the amount of work involved, the level of funds in the trust, the trust’s other expenses, and whether the trustee was chosen for their professional experience.

Since the trustee’s duties are comprehensive, complex, and foreign to most people, if you’ve been asked to serve as trustee, it’s critical you have a professional advisor who can give you a clear and accurate assessment of what’s required of you before you accept the position. And if you do choose to serve as trustee, it’s even more important that you have someone who can guide you step-by-step throughout the entire process.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Signature Blogs

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 1

 

USA, New Jersey, Jersey City, Women chatting on sofa

If a friend or family member has asked you to serve as trustee for their trust upon their death, you should feel honored—this means they consider you among the most honest, reliable, and responsible people they know.

However, being a trustee is not only a great honor, it’s also a major responsibility. The job can entail a wide array of complex duties, and you’re both ethically and legally required to effectively execute those functions or face significant liability. Given this, agreeing to serve as trustee is a decision that shouldn’t be made lightly, and you should thoroughly understand exactly what the role requires before giving your answer.

Of course, a trustee’s responsibility can vary enormously depending on the size of the estate, the type of trust involved, and the trust’s specific terms and instructions. But every trust comes with a few core requirements, and here I’ll highlight some of the key responsibilities.

First off, serving as trustee does NOT require you to be an expert in law, finance, taxes, or any other field related to trust administration. In fact, it’s almost always a good idea for a trustee to seek assistance from professionals in these fields, and funding to pay for such services should already be set aside for this in the trust.

Adhere to the trust’s terms
Every trust is unique, and a trustee’s obligations and powers depend largely on what the trust allows for, so you should first carefully review the trust’s terms. The trust document outlines all the specific duties you’ll be required to fulfill as well as the appropriate timelines and discretion you’ll have for fulfilling these tasks.

Some trusts are relatively straightforward, with few assets and beneficiaries, so the entire job can be completed within a few weeks or months. Others, especially those containing numerous assets and minor-aged beneficiaries, can take decades to completely fulfill.

Act in the best interests of the beneficiaries
Trustees have a fiduciary duty to act in the best interest of the named beneficiaries at all times, and they must not use their position for personal gain. Moreover, they cannot commingle their own funds and assets with those of the trust, nor may they profit from the position beyond the fees set aside to pay for the trusteeship.

If the trust involves multiple beneficiaries, the trustee must balance any competing interests between the various beneficiaries in an impartial and objective manner for the benefit of them all. In some cases, grantors try to prevent conflicts between beneficiaries by including very specific instructions about how and when assets should be distributed, and if so, you must follow these directions exactly as spelled out.

However, some trusts leave asset distribution decisions up to the trustee’s discretion. If so, when deciding how to make distributions, the trustee must carefully evaluate each beneficiary’s current needs, future needs, other sources of income, as well as the potential impact the distribution might have on the other beneficiaries. Such duties should be taken very seriously, as beneficiaries can take legal action against trustees if they can prove he or she violated a fiduciary duty and/or mismanaged the trust.

Invest trust assets prudently
Many trusts contain interest-bearing securities and other investment vehicles. If so, the trustee is responsible not only for protecting and managing these assets, they’re also obligated to make them productive—which typically means selling and/or investing assets to generate income.

In doing so, the trustee must exercise reasonable care, skill, and caution when investing trust assets, otherwise known as the “prudent investor” rule. The trustee should always consider the specific purposes, terms, distribution requirements, and other aspects of the trust when meeting this standard.

Unless specifically spelled out in the trust terms, it will be up to the trustee’s discretion to determine the investment strategies that are best suited for the trust’s goals and beneficiaries. But trustees should not invest trust assets in overly speculative or high-risk stocks and/or other investment vehicles. A financial adv

 If a friend or family member has asked you to serve as trustee for their trust upon their death, you should feel honored—this means they consider you among the most honest, reliable, and responsible people they know.

However, being a trustee is not only a great honor, it’s also a major responsibility. The job can entail a wide array of complex duties, and you’re both ethically and legally required to effectively execute those functions or face significant liability. Given this, agreeing to serve as trustee is a decision that shouldn’t be made lightly, and you should thoroughly understand exactly what the role requires before giving your answer.

Of course, a trustee’s responsibility can vary enormously depending on the size of the estate, the type of trust involved, and the trust’s specific terms and instructions. But every trust comes with a few core requirements, and here I’ll highlight some of the key responsibilities.

First off, serving as trustee does NOT require you to be an expert in law, finance, taxes, or any other field related to trust administration. In fact, it’s almost always a good idea for a trustee to seek assistance from professionals in these fields, and funding to pay for such services should already be set aside for this in the trust.

Adhere to the trust’s terms
Every trust is unique, and a trustee’s obligations and powers depend largely on what the trust allows for, so you should first carefully review the trust’s terms. The trust document outlines all the specific duties you’ll be required to fulfill as well as the appropriate timelines and discretion you’ll have for fulfilling these tasks.

Some trusts are relatively straightforward, with few assets and beneficiaries, so the entire job can be completed within a few weeks or months. Others, especially those containing numerous assets and minor-aged beneficiaries, can take decades to completely fulfill.

Act in the best interests of the beneficiaries
Trustees have a fiduciary duty to act in the best interest of the named beneficiaries at all times, and they must not use their position for personal gain. Moreover, they cannot commingle their own funds and assets with those of the trust, nor may they profit from the position beyond the fees set aside to pay for the trusteeship.

If the trust involves multiple beneficiaries, the trustee must balance any competing interests between the various beneficiaries in an impartial and objective manner for the benefit of them all. In some cases, grantors try to prevent conflicts between beneficiaries by including very specific instructions about how and when assets should be distributed, and if so, you must follow these directions exactly as spelled out.

However, some trusts leave asset distribution decisions up to the trustee’s discretion. If so, when deciding how to make distributions, the trustee must carefully evaluate each beneficiary’s current needs, future needs, other sources of income, as well as the potential impact the distribution might have on the other beneficiaries. Such duties should be taken very seriously, as beneficiaries can take legal action against trustees if they can prove he or she violated a fiduciary duty and/or mismanaged the trust.

Invest trust assets prudently
Many trusts contain interest-bearing securities and other investment vehicles. If so, the trustee is responsible not only for protecting and managing these assets, they’re also obligated to make them productive—which typically means selling and/or investing assets to generate income.

In doing so, the trustee must exercise reasonable care, skill, and caution when investing trust assets, otherwise known as the “prudent investor” rule. The trustee should always consider the specific purposes, terms, distribution requirements, and other aspects of the trust when meeting this standard.

Unless specifically spelled out in the trust terms, it will be up to the trustee’s discretion to determine the investment strategies that are best suited for the trust’s goals and beneficiaries. But trustees should not invest trust assets in overly speculative or high-risk stocks and/or other investment vehicles. A financial advisor familiar with trusts can help guide the trustee in following sound and reasonable investment strategies.

Next week, I’ll continue with part two in this series explaining the scope of powers and duties that come with serving as trustee.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Signature Blogs

What is a Charitable Remainder Trust?

People Discussion Meeting Give Help Donate Charity Concept

 

 

If you have highly appreciated assets like stock and real estate you want to sell, it may make sense to use a charitable remainder trust (CRT) to avoid income and estate taxes—all while creating a lifetime income stream for yourself or your family AND supporting your favorite charity.

A CRT is a “split-interest” trust, meaning it provides financial benefits to both the charity and a non-charitable beneficiary. With CRTs, the non-charitable beneficiary—you, your child, spouse, or another heir—receives annual income from the trust, and whatever assets “remain” at the end of the donor’s lifetime (or a fixed period up to 20 years), pass to the named charity(ties).

How a CRT works
You work with us to set up a CRT by naming a trustee, an income beneficiary, and a charitable beneficiary. The trustee will manage the trust’s assets to produce income that’s paid to you or another beneficiary.

The trustee can be yourself, a charity, another person, or a third-party entity. However, the trustee is not only responsible for seeing that your wishes are carried out properly, but also for staying compliant with complex state and federal laws, so be sure the trustee is well familiar with trust administration.

With the CRT set up, you transfer your appreciated assets into the trust, and the trustee sells it. Normally, this would generate capital gains taxes, but instead, you get a charitable deduction for the donation and face no capital gains when the assets are sold.

Once the appreciated assets are sold, the proceeds (which haven’t been taxed) are invested to produce income. As long as it remains in the trust, the income isn’t subject to taxes, so you’re earning even more on pre-tax dollars.

Income options
You have two options for how the trust income is paid out. You can receive an annual fixed payment using a “charitable remainder annuity trust (CRAT).” With this option, your income will not change, regardless of the trust’s investment performance.

Or you can be paid a fixed percentage of the trust’s assets using a “charitable remainder unitrust (CRUT),” whereby the payouts fluctuate depending on the trust’s investment performance and value.

 Tax benefits

Right off the bat, as mentioned above, you can take an income tax deduction within the year the trust was created for the value of your donation—limited to 30% of adjusted gross income. You can carry over any excess into subsequent tax returns for up to five years.

And again, profits from appreciated assets sold by the trustee aren’t subject to capital gains taxes while they’re in the trust. Plus, when the trust assets finally pass to the charity, that donation won’t be subject to estate taxes.

You will pay income tax on income from the CRT at the time it’s distributed. Whether that tax is capital gains or ordinary income depends on where the income came from—distributions of principal are tax free.

 If you have highly appreciated assets you’d like to sell while minimizing tax impact, maximizing income, and benefiting charity, give us a call, so we can find the best planning options for you.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Signature Blogs

Appoint a Guardian to Keep Your Kids In Safe Hands At All Times

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Putting politics aside, I imagine every parent who has watched the news lately has been troubled over what’s happening to families at the US-Mexican border. As you likely know, more than 2,300 children have been separated from their parents at the border recently.

Again, regardless of your political views, I’m sure you don’t relish the thought of children being taken from their parents. What’s more, perhaps these events have got you thinking about how it would be for your children to be taken into the custody of strangers. And if not, let this be the moment you willingly feel that fear on a personal level and decide to ensure your child’s well-being and care by only the people you want no matter what happens.

It can happen to your family
Even though most people think that something like that could never happen to their family, they’re just plain wrong. While your kids almost certainly won’t be taken into custody by U.S. border agents, your children could be taken into the care of strangers if something happens to you—even if your family or friends are on the scene.

Understand the risk
While it may seem like a long shot, the consequences are serious enough that you must consider the real possibility of what could happen and ensure you’ve taken right actions to protect your loved ones. Let’s say you and your spouse have gone out to dinner together and left the kids with a babysitter. But on the way home, you’re in a car accident. The police will get to your house, find your children home with a babysitter, and have no choice but to take your kids into the care of the authorities (strangers) until they can figure out what to do.

This is the case even if you have friends or family living nearby. If you haven’t left proper legal documentation, the authorities may have no option but to call child protective services—that is, unless you’ve legally given them an alternative.

Know your options and your responsibility
The sad thing is, this all can be completely (and very easily) prevented. However, to ensure your children are never taken into the care of strangers you must take action now. Please do not leave this to chance. You have the right – and the responsibility – to guarantee your children are never taken into the care of strangers.

And if you think you’ve already done the right thing because you’ve “asked” someone to look after your children if something happens to you, or you have a will that names legal guardians for your children, think again. We’ve found that in most cases, even parents who worked with a lawyer to name legal guardians have made at least one of six common mistakes that leave their children at risk.

These mistakes are made because unfortunately, most lawyers do not know what’s necessary for planning and ensuring the well-being and care of minor children.

Here’s how to get started
If you’ve already created a will, we can help you identify whether you’ve made any of the six common mistakes that could leave your children at risk. If you have not yet taken any action, we can help you take the first steps and make the very best decisions for the people you love.

Whatever your situation, you should act now to make certain your children are never taken into the care of strangers. Call us and mention this article to receive a complimentary consultation.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Garlett 91024

Protecting the Financial Future of Your Child with Special Needs

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It always surprises me to hear parents who have a child with special needs tell me that they were not aware of what they needed to do to ensure the future well-being and care of their child is properly handled. Or sometimes, they tell me they didn’t know they needed to do anything at all.

If that’s you, and you have a child with special needs at home, this article is for you. And if you have friends or family who have a child with special needs, please share this article with them.

Every parent who has a child with special needs MUST understand what’s needed to provide for the emotional, physical, and financial needs of their child, if and when something happens to them.

Naming Guardians
Of course, the first and most critical step in ensuring the well-being and care of your child with special needs’ future is to name both short and long-term legal guardians to take custody of and care of your child, in the event of your death or incapacity. And as you well know, this responsibility doesn’t end at age 18, if your child will not grow into an adult who can independently care for him or herself.

While we understand this lifetime responsibility probably feels overwhelming, we’ve been told repeatedly by parents that naming legal guardians in writing and knowing their child will be cared for in the way they want, by the people they want, creates immense relief.

Beyond naming a guardian, you’ll also need to provide financial resources to allow your child to live out his or her life in the manner you desire. This is where things can get tricky for children with special needs. In fact, it may seem like a “Catch-22” situation. You want to leave your child enough money to afford the support they need to live a comfortable life. Yet, if you leave money directly to a person with special needs, you risk disqualifying him or her for government benefits.

Special Needs Trusts
Fortunately, the government allows assets to be held in what’s known as a “special needs trust” to provide supplemental financial resources for a physically, mentally, or developmentally disabled child without affecting his or her eligibility for public healthcare and income assistance benefits.

However, the rules for such trusts are complicated and can vary greatly between different states, so a comprehensive special needs trust needs to be properly structured and appropriate for your child’s specific situation.

There are two ways to set up a special needs trust. In certain situations, we build it into your revocable living trust, and it will arise, or spring up, upon your death. From there, assets that are held in your revocable living trust will be used to fund your child’s special needs trust.

In other cases, we can set up a special needs trust that acts as a vehicle for receiving and holding assets for your child now. This makes sense if you have parents or other relatives who want to give your child with special needs gifts sooner rather than later.

Once the trust is funded, it’s the trustee’s job to use its funds to support the beneficiary without jeopardizing eligibility for government benefits. To handle this properly, the trustee must have a thorough understanding of how eligibility for such benefits works and stay current with the law.  The trustee is also required to pay the beneficiary’s taxes, keep detailed records, invest trust property, and stay current with the beneficiary’s needs.

If you need help creating a special needs trust for your child, contact us. We can develop a sustainable living plan for your child with special needs that will provide her or him with the financial means they need to live a full life, while preserving their access to government benefits.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Garlett 91024

What You Should Know About Guardianship—In Case A Parent or Loved One Becomes Incapacitated

adult_child_talking_to_mom_on_couch 91024Whether through illness, injury, or other means, anyone can require a guardian if they become mentally incapacitated. In such cases, if there is no estate planning in place (or insufficient planning) to keep family or other loved ones out of court, a guardianship or conservatorship must be established via court process.

Obtaining guardianship can be an extraordinarily challenging and expensive process. It begins with filing a petition in court for guardianship and requesting the court declare the incapacitated person incompetent. In some cases, these types of filings are made “ex parte”, or in secret, and a guardianship can be established before family or close friends even know what’s happening. In other cases, such a filing can result in a heated dispute between family members and/or friends, who may claim they’d be better suited for the role. Given this, things can get quite costly very quickly.

Of course, this assumes these matters haven’t already been decided through proper and up-to-date estate planning, including a valid durable power of attorney and advance health care directives, which are the best methods for ensuring this massive responsibility is handled as effectively as possible. Sadly, most people don’t think of the costly possibility of incapacity and therefore leave their families at risk.

If you do have a loved one who needs a guardian, here are some of the things you’ll need to know:

Who can be appointed as guardian?
Unless specified in a valid legal document, any family member or other interested person can petition for guardianship—even a close friend can do it if they prove they’re best suited for the position. That said, most courts give preference to the ward’s spouse or other close family members. In some cases, the guardian is required to post a bond, which typically requires good credit and some level of deposit to be held in the event of the guardian’s wrongdoing. This bond requirement often disqualifies many friends and family, who either don’t have good credit or the resources to post a bond.

If a relative or friend is not willing—or capable—of serving, the court will appoint a professional guardian or public guardian. This is one of the ways an estate can be drained extremely quickly. If you want to hear more about how this can happen, read this terrifying article about the way public and professional guardians are stealing from our elders.

What are a guardian’s responsibilities?
Depending on the extent of the ward’s mental capacity, a court-appointed guardian can be given near complete control over a person’s life and finances. Some of the most common duties include:

  • Paying the ward’s bills
  • Determining where they live
  • Monitoring their residence and living conditions
  • Providing consent for medical treatments
  • Deciding how their finances are handled, including how their assets are invested and if any assets should be liquidated
  • Managing real estate and other tangible personal property
  • Keeping detailed records of all their expenditures and other financial transactions
  • Making end-of-life and other palliative-care decisions
  • Reporting to the court about the ward’s status at least annually

What’s more, the court often requires detailed status reports, such as financial accounting, at regular intervals or whenever important decisions are made, such as the sale of assets.

Are guardians compensated?
Yes, guardians are entitled to reasonable compensation for their services based on the ward’s financial ability to pay. The appointed guardian is paid directly from the ward’s estate. In most cases, the compensation must be approved by the court ahead of time, and the guardian must carefully account for all of their services, the time spent on tasks on behalf of the ward, and any associated out-of-pocket expenses.

Given the huge level of responsibility and loss of control that comes with guardianship, the best course of action would be to get proper and updated estate planning in place ahead of time to ensure that if you or anyone you love becomes incapacitated, you can stay out of the court process altogether if possible.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Garlett 91024

Safeguard Your Cryptocurrency Assets With Estate Planning

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One of the biggest appeals of cryptocurrency, such as Bitcoin, is that it is decentralized, unregulated, and anonymous. There are no financial institutions controlling it, and unless you tell someone you own digital currency, it remains a secret.

When it comes to estate planning, however, that kind of secrecy can be disastrous. In fact, without the appropriate planning protections in place, all your crypto wealth will likely disappear the moment you die or become incapacitated, leaving your family with absolutely no way to recover it.

Indeed, we’re facing a potential crisis whereby millions—perhaps billions—of dollars’ worth of family wealth could potentially vanish into thin air unless cryptocurrency owners take action to protect their digital assets with estate planning. Fortunately, putting the appropriate safeguards in place is a fairly simple process for an attorney experienced with cryptocurrency.

The first step in securing your crypto assets is to let your heirs know you own it. This can be done by including your digital currency in your asset inventory (such as the one we prepare for our clients) listing all your assets and liabilities. Along with the amount of cryptocurrency you own, you should also include detailed instructions about where it’s located and how to find the instructions to access it. But you want those instructions to be kept in a secure location because anyone who has them can take your cryptocurrency.

Even if your heirs know you own cryptocurrency, they won’t be able to access it unless they know the encrypted passcodes needed to unlock your account. Indeed, there are numerous stories of crypto owners losing their own passcodes and then being so desperate to recover or remember them that they dug through trash cans and even hired hypnotists.

The best way to secure your passcodes is by storing them in a digital wallet. The safest option is a “cold” wallet, or one that is not connected to the internet and thus cannot be hacked. Cold wallets include USB drives as well as “paper” wallets, which are simply the passcodes printed on paper—and ideally stored in a fireproof safe or safe deposit box.

Since digital currency is such a recent phenomenon, not all estate planning attorneys are familiar with it.  And although I don’t advocate any of my clients invest in it – that is their own personal choice – I have helped many safeguard their digital wealth just as effectively as all their other assets.

Why? Because at my firm we don’t just draft documents; we ensure clients make informed and empowered decisions about life and death, for themselves and the people they love. After all, that’s what estate planning should really be all about.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Garlett 91024