Why DIY Estate Planning is a Bad Idea For the People You Love

America is a nation of do-it-yourselfers, but building a deck and creating a legally valid estate plan are two entirely different things – and a less-than-perfect deck won’t devastate your family’s financial future or the relationships among the people you care about most.

The prevalence of online legal services has led many people to believe that they can create legal documents cheaply and those documents will be just as effective as if they had visited an estate planning attorney.  And this is why that is wrong:

No legal advice – these sites are little more than document mills that churn out the same generic forms over and over.  They are not attorneys and cannot advise or warn you if you make a mistake. Plus, who will be there for your family when something happens to you if you’ve used an online document drafting service?

Think your family doesn’t need an advisor to support them when you are gone?  Think again.

Consider this: Erica’s father was killed in a motorcycle accident. Dad didn’t leave much behind, but he did leave an estate plan prepared by a trusted family attorney.  Had the family attorney not been there for Erica and her brother, they would have taken what dad did leave and drowned their sorrows in a European backpacking trip.  Thanks to this family attorney, though, Erica and her brother now have a healthy trust fund set up for them for life with the proceeds of a successful wrongful death case.

Leaving it to your family to know what to do after you’re gone is a big mistake for the people you love.

One size doesn’t fit all – your family is different from everyone else’s family.  Just like every state has different inheritance laws, every family has different situations.  An online form will not help you protect a special needs child or relative, or protect a child’s inheritance from creditors or a nasty divorce.  An online form cannot tell you how to protect assets from taxes or help you achieve your goals.

And, an online form cannot keep your family out of conflict during a time of grief.  Even if you don’t have a lot of assets you are leaving behind, whatever you do have will be subject to distribution between the people you care most about.  Some of the biggest disagreements we’ve seen after death, aren’t about loads of money, but about the little things and those little things aren’t going to be dealt with well with form documents.

Save now, pay later – you may think you are saving money by using an online service to create your will or trust, but it is impossible to make a fair comparison since the services provided are entirely different.

An estate planning attorney creates an entire plan tailored to your individual needs in a legal document that will stand up in court, and advises you on ways to cut taxes and save for retirement and long-term care.  No online service does that.

In addition, your trusted advisor is going to be there for your family when you cannot be. The people you love will need someone to turn to after you are gone.  Do you want them to be stuck with figuring out who that should be during their time of grief? Or do you want to leave behind the gift of having taken care of things well during your lifetime and a trusted advisor to hold their hand when you no longer can?

We invite you to take advantage of our specialized legal services for families with a Family Wealth Planning Session.  Call our office today to schedule a time for us to sit down and talk about designing an estate plan that fits the needs of you and your family.

When Duty Calls: Navigating the Sandwich Generation with Ease

The average age of parents raising children in the US continues to rise, leaving many middle-aged Americans in a category commonly referred to as the the “sandwich” generation.

This growing population of professionals are often still raising kids at home when they become responsible for the care of their own aging parents. The stress and financial strain of managing the affairs of both children and parents can become overwhelming. The following tips can help make this challenging life stage manageable and more enjoyable.

Assess the Financial Situation

Taking time to thoroughly understand the financial picture for your own household is imperative as you step into a role of responsibility for your aging parent. Prepare for the inevitable and avoid surprises by working with a professional to consider how your role in the care of your parent will affect the plans you are making for your family’s financial future. Take advantage of our Family Wealth Planning Session process, a comprehensive planning process that ensures your legal, financial and insurance needs are covered appropriately.

Plan Ahead

Benjamin Franklin is quoted as saying that, “Failing to plan is planning to fail.” Planning for your family’s future means preparing for the worst and hoping for the best. As you move through helping your aging parent with important Estate Planning decisions, take time to be sure your own wishes are legally binding as well.

Be sure to include:

  • Medical power of attorney – appoints a person to make medical decisions if you are unable to do so
  • Durable power of attorney – designates a person to make financial decisions if you are unable to do so
  • Living will – expresses your wishes for end of life decisions
  • Will – carries out your wishes in the event of your death
  • Kids Protection Plan – designates a legal guardian for your minor children in the event of your incapacitation or death

Pay Attention to Red Flags

Even if your aging parent is still quite capable, work together to assess their financial situation carefully and be on the lookout for signs that anything is falling through the cracks. Common red flags are:

  • Frequent calls from creditors
  • Forgetfulness when it comes to bills and deadlines
  • Unopened mail

Utilize professional legal and financial support when necessary and communicate clearly so everyone knows who is responsible for what.

Practice Good Self Care

Stress is one of the most common consequences of caring for two generations at once. Balancing the responsibilities of raising children and caring for aging parents with relaxation and play is vital over the long-haul. Remember that adequate rest and good nutrition will provide you with the extra energy you’ll need when times get tough. Most importantly, remember that you don’t have to do it alone! As your Personal Family Lawyer®, we are ready to assist you when duty calls.

Now is the perfect time to schedule a Family Wealth Planning Session, where we’ll review your current financial situation in light of your future responsibilities. With our assistance, you’ll gain the confidence of knowing you’re making the most empowered, informed and educated legal and financial decisions for yourself and the ones you love.

We, at GP Schoemakers PLLC, don’t just draft documents, we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Family Wealth Planning Session™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. Begin by calling our office today to schedule a Family Wealth Planning Session.

Avoid these 10 Common Estate Planning Mistakes

As a Personal Family Lawyer®, I see many of the same estate planning mistakes made time and again by people who either fail to plan properly or who use “do-it-yourself” estate planning websites or forms in an effort to save money.

Without professional guidance, this can cause more problems for your heirs and end up depleting estate assets by far more than what you could potentially “save” by doing it yourself online.

A qualified estate planning attorney or Personal Family Lawyer® can help you avoid these 10 common estate planning mistakes:

  1. Failure to leave any written documentation of your assets, including a list of your online accounts and passwords
  1. Failure to let family members know where to find important estate planning documents
  1. Failure to name a guardian for minor children or choosing a guardian who lives far away without planning for temporary, local guardianship (solved with a comprehensive Kids Protection Plan®)
  1. Failure to name recipients for your personal possessions
  1. Failure to designate beneficiaries for retirement and other financial accounts
  1. Failure to name secondary beneficiaries
  1. Failure to name alternative trustees or executors
  1. Failure to properly fund or title assets to any trusts you have established
  1. Failure to update your estate plan as life circumstances change
  1. Failure to create an estate plan of any kind and instead leaving it to the court system to decide how your assets will be distributed

If you’d like to learn more about how to avoid common estate planning mistakes that could cost your heirs dearly, call our office today to schedule a time for us to sit down and talk.

Life Changes that Require an Update to Your Estate Plan

Even if you do not have an estate plan that you’ve created, the State has one for you. And it’s likely one you won’t like. It may be time for you to review the plan the State has for you and make more informed, empowered choices for your family.

If you have created an estate plan with a lawyer, or on your own, it may be time for a review and an update.

Estate planning is simply not something you do once, set it and forget it. In the same way your life, the law and your assets change, your estate plan must change as well.

Far too many people spend thousands of dollars on a plan, only to have it sit on a shelf getting stale, and then end up leaving their family with a huge mess they thought they had invested time and money to prevent.

Don’t let this be the case for your family. Your family is worth more than that.

The bare minimum, your plan should be reviewed every three years. We do recommend that your Family Wealth Inventory (or listing of your assets) be updated annually. You may want to check to make sure you even have an asset inventory included with your plan. Most plans don’t have this included.

Unfortunately, most lawyers (and every do it yourself) system overlooks this and there are Billions of dollars in our State Departments of Unclaimed Property as a result.

In addition to the minimum review every three years, your plan needs to also be reviewed in the event of any of these life changes:

  • significant changes in the value of your estate;
  • changes in your “income level or requirements,” such as retirement;
  • an out of state move;
  • job changes;
  • changes to family situations, such as births, marriages, deaths, and major illnesses;
  • changes to business interests;
  • significant purchases or payoffs;
  • major changes in insurance coverage; and
  • the death or major illness of someone named as your executor, trustee, power of attorney, or child guardian.

As part of our standard service, we create a Family Wealth Inventory of your assets so nothing is lost to the State Department of Unclaimed Property when you become disabled or die. In addition, we review your plan at no additional charge every three years, and have membership program options to review your plan annually plus make changes to your plan at no additional cost to you.  And, that’s just the beginning.

If it’s time to create or review your plan, contact us for a Family Wealth Planning Session. You’ll get more financially organized than you’ve ever been before and make informed, empowered decisions for yourself and your family. Because you and they are worth it.

This article is a service of Gratia P. Schoemakers,  Personal Family Lawyer,® who develops trusting relationships with families for life.  That’s why we offer a Family Wealth Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a time for us to sit down and talk because this planning is so important.

Five Reasons To Never Give An Outright Inheritance To Your Children – and What to Do Instead!

 

If you’re like me, you want to leave an inheritance for your children.  It’s likely part of what you are working so hard to do. But, far too often, the way we leave those inheritances actually does more harm than good. Something no parent wants.

Giving outright ownership of our assets to the kids could put everything you’ve worked so hard to leave behind at risk. Why, how and what can you do about it?

Let me share with you the five reasons leaving an outright inheritance to your kids is a mistake and then show you the way to protect your kids’ inheritance for many, many generations.

  1. Your Child’s Future Divorce

According to current statistics, forty-two percent (42%) of our children will divorce during their lifetime.  In most divorces property is divided evenly.  So if you have a married child, or a child who will get married in the future, and you leave them an inheritance, and they later divorce, as much as half of their inheritance could go to their ex-spouse.  You aren’t working as hard as you are to support your child’s future ex-spouse, right? Good news, there is an alternative!

  1. Extreme Debt/Bankruptcy

Your child may incur such extreme debt that the only possible relief will come through bankruptcy.

Possible causes of such debt are a business venture gone bad, a health event, such as addiction, mental illness, accident, or disease that results in either a temporary or permanent inability to work in combination with staggering medical bills, or an accident, resulting in judgment, as  discussed below.

Bankruptcy does happen to good people and you can ensure that the inheritance you leave behind will never be at risk due to a mistake or health issue.

  1. Lawsuit 

Unintended neglect that injures someone’s person or property  could wipe out an inheritance you leave your  children.  For example, ACE Financial Services, Inc. in 2012 found these lawsuit judgments:

  • $49 million in California for an automobile accident where the family of 21-year-old college student sued drivers of two vehicles involved in the multi-vehicle crash. The plaintiff’s counsel claimed one defendant was sleep-deprived, while the other was on their cell phone. The plaintiff was in a coma for one month and is expected to require lifetime 24-hour care.
  • $20 million in Florida for an ATV accident where a teenage male was killed while riding an ATV on the neighbor’s property. The neighbor had invited him to drive the ATV, permitting him to operate it without proper safety equipment and without adult supervision. The teenage male struck a fence and was decapitated.
  • $11.9 million in Florida for an internet defamation suit brought by a Florida consultant against a Louisiana woman for posting defamatory statements about the plaintiff on an internet bulletin board. The defendant called the plaintiff a “crook” and a “fraud.”
  • $5.9 million in Maryland in a dog-bite case where a 16-month-old child was attacked and killed by a pit bull kept at the home of a family friend.

In the Florida ATV case, the defendants thought they were doing the neighbors’ son an act of kindness by allowing him the “fun” of driving the four wheeler around the family property.  Apparently, they didn’t tell the young man about the barb wire on the property.  Their good intended neglect, resulting in the decapitation of their neighbor’s son, was not seen as good by the parents or the court, who ordered the $20 million judgment.

In my own personal life, a friend recently called me because he accidentally left a faucet running at a friends’ house where he was visiting and the resulting flood causes $413,000 in damage that the insurance company is now looking to collect. If he had an inheritance, it would be wiped out by this potential claim.

As we can see, well intended, but neglectful behavior on the part of your children could wipe out any inheritance you leave them.

  1. Mismanagement

I have many clients who tell me they do not trust their children to manage money.  This could mean that their children are spendthrifts, unwise investors, or easily manipulated out of the money.  And, the statistics support this for nearly 20% of inheritors.

According to Prof. Jay L. Zagorsky of Ohio State University, 40% of individuals inheriting less than $100,000 will spend or lose the entire inheritance and 18.7 % of individuals who inherit more than $100,000 will spend or lose the entire inheritance. It’s quite likely that if that inheritance was left in a different way those numbers would greatly improve. I’ll share more with you about that below.

  1. Lost Work Ethic:

My father once said, “Some people can’t handle prosperity.”  He was right. In fact, most people cannot.

For example, Thomas Stanley and William Danko in their book, The Millionaire Next Door, uncovered research showing that children who received an inheritance were worth four-fifths less than others in their same profession who didn’t.

Vic Preisser, of the Institute for Preparing Heirs, says that unprepared children who inherit money are susceptible to excessive spending, identity loss, and guilt over receiving money they didn’t earn. Preisser says, “In a year to 18 months, everything falls apart — marriage, finances — and if there is a drug problem it becomes worse.”  Thus leaving an outright inheritance to our kids, may do harm instead of good.  But there is an alternative!

As we can see, an outright inheritance is NOT the best answer for your kids.

Most lawyers would tell you that the answer is to leave your kids’ their inheritance in a Trust and they’d be right, but they would likely still distribute that Trust outright to your kids at specific ages or stages.

We’ve got a plan for your family that is far, far better.

The Alternative

An alternative to an outright inheritance to your children (“outright” meaning they both personally own and can personally lose the inheritance) is to gift your assets to your children at the time of your death via a Lifetime Asset Protection Trust.

A Lifetime Asset Protection Trust can be drafted to give your children full control of their inheritance (if you choose), but ensure they never own the inheritance. And because the rule of law is you can’t lose what you never owned, you are gifting your children with airtight asset protection, of the kind they couldn’t give themselves at any price.

When you gift an inheritance to your children via a Lifetime Asset Protection Trust, the trustees of the trust own the property, not your children.  Thus, if your children ever get divorced, file bankruptcy, or are ordered to pay damages in a lawsuit, they can’t lose the inheritance, simply because they never owned it.

You can use the Lifetime Asset Protection Trust as a vehicle for educating your children about investing, giving, and even business by allowing them to become a Co-Trustee of the Trust, with someone you’ve chosen and trust to support their education.

And you can even build in provisions to allow your child to become the Sole Trustee of the Trust or the right to become Sole Trustee at specific intervals, as well, giving them effective full control without the risk of ownership.

There are quite a few nifty additional ways we can structure this trust to meet the needs of your unique family and children.

When you come in for a Family Wealth Planning Session, if you desire to provide the most airtight form of asset protection for your child, and set up a structure that incentivizes them to invest and grow their inheritance rather than squander and waste it, we will discuss all the options with you then.

One of the benefits of a Family Wealth Planning Session is that you will get more financially organized than you ever have been before and understand all of the options for ensuring everything you are working so hard to leave behind to the people you love is handled with the ease, grace and care you desire.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer,®  who develops trusting relationships with families for life.  That’s why we offer a Family Wealth Planning Session,™ where we can review your family wealth needs and help identify the best strategies for you and your family. You can begin by calling our office today to schedule a time for us to sit down and talk because this planning is so important.

You can always contact us at any time through our website, or book your next appointment online.

Learn From the Expensive Mistakes & Smart Decisions Made By Actor James Gandolfini In Planning for His Estate

James Gandolfini, the actor best known for his portrayal of Tony Soprano on HBO’s The Sopranos, died suddenly last month while on vacation in Italy.  His will is already on the Internet, available for everyone to read – which is the first lesson we should all take away from what he did and did not do right in his estate plan: establishing a trust keeps your private financial matters private!

Estate planning attorney Julie Garber, who writes a column on Wills & Estate Planning on About.com, lists 5 other estate planning lessons learned from James Gandolfini:

Lifetime trusts are often better for beneficiaries.  James Gandolfini’s 13-year-old son and infant daughter will inherit a large portion each of the actor’s estimated $70 million estate once they reach the age of 21.  It may have been better to establish lifetime trusts for each of the children, then making them co-trustees at 25 or 30, then sole trustees at the more mature age of 35 or 40.  This would have protected their inherited assets for life, from creditors, bankruptcy, lawsuits and divorce.

If you own foreign real estate, you need a foreign estate plan.  James Gandolfini owned property in Italy, which his will specified should be turned over to his children.  However, Italy has forced heirship laws that may trump the will.  He should have consulted with an Italian attorney and had an Italian will drawn that passes the property in accordance with Italian law.

Update your will regularly.  James Gandolfini had updated his will just six months prior to his death, and a few months following the birth of his daughter.  By taking action to update his will following the new birth, he saved his heirs a lot of headaches and heartaches. But unfortunately, he missed a big one — he didn’t update for estate taxes.

Irrevocable Life Insurance Trusts are a smart move.  James Gandolfini established an ILIT for his son Michael and funded it with a $7 million life insurance policy.  By setting up an ILIT, the proceeds from the insurance policy flow directly to the trust, with no New York or federal estate taxes on the $7 million.

Multiple executors and trustees can provide necessary checks and balances.  James Gandolfini had two children with two different wives.  He named his sister, his current wife and one of his attorneys as co-executors of his will and co-trustees of the testamentary trusts set up in his will, which was a savvy move to prevent any one beneficiary from being favored.

The one thing that Gandolfini and his lawyers did not think about enough was his estate taxes.  He’ll owe nearly $30,000,000 in estate taxes and much of it could have been avoided with good planning in advance.

As a Personal Family Lawyer®, I can further advise you on all your options and make things as easy as possible for your family during a Family Wealth Planning Session.  If you would like to have a talk about estate planning for your family, call our office today to schedule a time for us to sit down and talk.

10 Common Errors When Naming Life Insurance Beneficiaries That Will Hurt the People You Love – and How to Fix Them

If you make a mistake in naming beneficiaries for your life insurance policy, the people you love will end up being hurt.  Insure.com recently provided a list of the 10 life insurance beneficiary mistakes to avoid.  We elaborate on how they’ll affect you and how to fix them.

  1. Naming minor children. If proceeds of your life insurance are directed to your minor child (instead of to a trust for his/her benefit), a Judge will decide who controls the proceeds and when your child receives them.  And your child could get access to all of that money at 18! That’s bad news. And unnecessary.  A Personal Family Lawyer® can counsel you on the best way to leave life insurance proceeds to minor children.
  1. Naming a person with special needs. By naming a child with special needs child or other person eligible for government benefits as a beneficiary, you could unwittingly disqualify them from receiving those benefits. Instead, you could name a special needs trust. We can help you with that.
  1. Not considering community property and/or spousal rights. You don’t have to name your spouse as a beneficiary, but if you live in a community property state, your spouse will need to sign a waiver before you can name someone else as beneficiary. And, if you name a married adult child as the beneficiary of your policy (without a trust), you could be putting your child’s inheritance at risk inadvertently.
  1. Ignoring tax consequences. While life insurance proceeds are usually income tax-free, they are subject to the estate tax.  Talk to us about these issues so we can identify any traps for the unwary.
  1. Trying to use your Will. A properly executed beneficiary designation form always trumps your Will, so don’t make the mistake of thinking you can change beneficiaries by naming someone else to receive insurance proceeds through your Will.
  1. Failing to update. Many ex-spouses are enriched by a life insurance benefit because their ex forgot to update the policy’s beneficiary form.  Review your beneficiary designations every time you have a significant life change, or at least every three years.
  1. Not being specific. You should name your beneficiaries in as specific a manner as possible, which means using their legal names, not just a designation such as “my spouse” or “my children.”
  1. Not informing family or losing track of policies. If you have a life insurance policy, tell your family about it.  Otherwise, it may be overlooked and the benefit never claimed.  We track our clients’ assets using a Family Wealth Inventory that is updated regularly so no assets are lost after your passing.
  1. Not considering individual circumstances. If you leave a large sum of money to an adult child with a substance abuse problem or someone not equipped to handle money, this can lead to more problems.  Consider establishing a trust that can protect your beneficiaries’ inheritance.  We can even protect these assets from bankruptcy, creditors and divorce, for multiple generations.
  1. Naming only one beneficiary. If you name only one beneficiary and that beneficiary dies at the same time, or before you, the proceeds of your insurance could go end up directed by State law or a Judge.  To prevent this from happening, name secondary and tertiary beneficiaries.

If you would like to learn more about protecting the inheritance you’ll leave behind, call our office today to schedule a time for us to sit down and talk.

How to Avoid Family Conflict When Making an Estate Plan

Unfortunately, money has a habit of bringing out the worst in people, even in the best of families.  One of the most important reasons to get your Texas estate plan handled is to keep your family out of conflict.  And, yet, without the right counsel, your estate plan could actually cause conflict!

Here’s what to do to make sure that’s not the case for your family:

Communicate Your Plans Ahead of Time.  In our office, we recommend inviting adult children into the planning process and let them know ahead of time why you have made the decisions you have made.  This can be a difficult conversation and one we are extremely skilled at handling.  We don’t recommend doing it without the guidance of trusted counsel.

Do Not Put One Sibling In Charge of Another Sibling’s Inheritance.  Unless agreed to ahead of time by both siblings, putting one sibling in charge of another will almost always lead to resentment and disagreement.  You can avoid this with strong communication and agreement ahead of time. Or you can appoint someone else to care for your child’s inheritance. We can help you think that through, so call if a child in your family will need inheritance protection.

Transfer Some Now Instead of All Later.  Consider how you can begin to transfer assets to your children during your lifetime when you can influence how they use those assets and you can pass on your values right along with them, instead of waiting until you are gone to pass on everything you’ve worked so hard for.

Make Changes When Necessary.  Estate planning is an ongoing process, and when changes occur in your life – even if it’s the divorce of a child or a new grandchild – your plan needs to change as well.

Pass On More Than Just Your Money.  Most estate plans focus only on your tangible assets, but your most valuable assets are your values, insights, stories and experience. We have a unique process in our office for passing on these assets that are most often lost when someone dies. And, honestly, they are what will keep your family focused on what really matters after you are gone.

Choose the right advisor.  Developing a strong working relationship with a Personal Family Lawyer® that will allow you the freedom to frankly discuss your family dynamics, plan accordingly and keep the family involved every step of the way.

If you would like to create or update your estate plan, call our office today to schedule a time for us to sit down and talk.

The Risks of Poorman’s Estate Planning: How to Pass on Property & Avoid Probate the Right Way

They call it the “poor man’s estate planning.”  Put your child on the title to your deed and avoid probate.  Yet this “poor man’s” planning often ends up, well, poorly; and costing a lot more for the people you love. Here’s why and what you can do about it:

Risk #1 of Poorman’s Estate Planning: If the deed is titled with the name of parent and child (or any time there is more than one name on title and the parties are not married to each other) ownership of the property could be categorized as tenants in common – meaning that if one property owner dies, his or her interest in the property goes to an heir via probate, not directly to the other owner(s).  That’s exactly what the poorman’s estate planning was trying to avoid.

Solution: To accomplish the desired objective, the deed would have to stipulate ownership as joint tenants with the right of survivorship or similar language. Even then, passing property outside of probate using a deed may create problems because if both joint tenants die or become incapacitated at the same time (such as in an accident) the property is headed right into probate.

Risk #2 of Poorman’s Estate Planning: If the child you put on title to the property is sued or has some other type of creditor issue, even divorce, the property could be at risk.

Risk #3 of Poorman’s Estate Planning: Gifting property to your children, which is what happens when you put a child’s name on title to your property, could create adverse tax consequences.  One of the benefits of death (probably the only one) is that your heirs take your property at a new basis equal to fair market value of your property.  This may not happen if you’ve added your child to the title of the property if it’s determined that you made a gift of the property, your kids inherit your tax basis and lose valuable tax savings.

If you would like to learn more about strategies for protecting your assets and avoiding probate, call our office today to schedule a time for us to sit down and talk.