Is Your Family “Too Young” to Need an Estate Plan?

Young families face different estate planning needs and challenges than those who have had a long life behind them. While established families may be concerned about what will happen to their family when they pass on, young, growing families can be more focused on what is happening to their family in the present. And you even may find it hard to justify planning for an “estate” you haven’t yet established!

But here’s the thing … if you have children or anyone else you care about, you may not have an “estate”, but you do need estate planning if you want to ensure your loved ones wouldn’t be stuck in Court and/or conflict, if anything happens to you.

Here are a few estate-planning issues important for young couples to consider as soon as they start a family:

The Care and Custody of Your Children

If you die or become incapacitated before your children reach 18, they will need a legal guardian. To ensure your children are only ever in the care of people you want and choose, you need to name both temporary and long-term guardians for your children.

Identifying friends or family as the “godparent” of your child isn’t enough. You need to legally document your choice. And, naming just one person or a couple won’t cover it either. Name at least 3 options, in case back-ups are needed.

Also, ensure that you have not just named legal guardians in your Will, for the long-term.

If something happens to you and your child is home with a babysitter, or at school, you want to also name local people, friends or family, who would immediately be able to be called upon by authorities. And, those people need to have legal documentation on hand to step in and make immediate, short-term decisions for your littles.

We recommend a comprehensive Kids Protection Plan® to ensure there are no gaps, for even a minute, in the care of the people you love most.

The Management of Your Children’s Inheritance

Remember, when you die, the assets left to your minor children will need to be managed by someone at least until they turn eighteen. If no one is identified for this task, the court steps in and appoints “professionals” to take over the role, which can cost your children their entire inheritance.

And, it’s totally unnecessary. With just a bit of prior planning, you can keep your loved ones out of the Court system entirely and give total control to the people you know, love and trust.

The Authority to Make Decisions for You

Finally, no matter what your age is, or how big or small your assets are, you want to put in place the documentation that appoints the people you would want making decisions for you if you cannot make your own decisions.

Once again, the focus here is on keeping the people you love out of Court during what would be a hugely stressful time for them.

Estate planning is a key part of growing up, and showing up for the people you love. So, yes, you may be a young family, but once you’ve become a family, you’re not too young to plan well to make things as easy as possible for the people you love.

As your Personal Family Lawyer®, we will help you make the very best financial and legal decisions throughout your life, and for the beyond.  Far from being a morbid task, estate planning can give your young family the peace of mind, confidence, and security you desire when it comes to the future well-being of all members of your family.

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. You can begin by calling our office today to schedule a Family Wealth Planning Session to find out how to protect your family.

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.

Spring Cleaning For Your Legal and Financial Affairs

Spring has officially sprung and that means it’s spring cleaning time. Shake out the rugs, clean out the cupboards, and get your legal and financial affairs in order.

For plenty of folks, it’s easy to know what to do when it comes to home organization, but the idea of legal and financial ordering can be complex and confusing.

This article will give you a few places to start:

  1. Review Your Beneficiary Designations

Request updated beneficiary designation forms from your life insurance account and retirement account custodians. Look at the form and identify whether you have a minor designated as either a primary or contingent beneficiary. If you do, those assets will be tied up in Court, unnecessarily, and may not be available to the people you’ve named to care for your children.

Consider designating your life insurance and retirement accounts to be distributed to a trust for the benefit of your heirs, providing Court and creditor protection, and ensuring your children do not inherit money before they are properly prepared.

  1. Update Your Family Wealth Inventory

Your Family Wealth Inventory is where we document the assets that you own, so that in the event you become incapacitated or when you die, your family will know how to find what you own.

Without an updated Family Wealth Inventory, your assets could be lost to the state department of unclaimed property. There’s currently FOUR (4) billions of dollars of assets in our state department of unclaimed property because most people do not leave a clear record of their assets at the time of their incapacity or death.

  1. Consider If You Need to Name New Guardians (Long or Short-Term)

Review your guardian nomination designations. Have you named guardians for both the short-term (local) and the long-term (people you would trust to raise your kids fully)? If so, do they need to change? Is there anyone you would wish to exclude? Does the ID card for your wallet need to be updated? This is the time to check.

  1. Check Out the Title to Your House

Get a copy of the deed to your house and make sure that your trust is listed as the owner on the deed, if you want your house to stay out of court in the event of your incapacity or death. If you see your personal name on the deed, and there is not a trust listed, you can be sure that would result in your house having to go through the court process of probate in the event of your death. If you don’t want that, now is the perfect time to spruce up your planning.

  1. Come In and Meet With Us For a Family Wealth Planning Session

Last, but far from least, this is the perfect time of  year to come in and meet with us for a Family Wealth Planning Session, whether you’ve done planning in the past or not.  We will have a 2-hour working meeting that will get you more financially organized than you’ve likely ever been before (unless you’ve already done planning with us) and give you the confidence of knowing you’ve made the most empowered, informed and educated legal and financial decisions for the people you love.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer®. We 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.

Call our office to schedule a time for a private conversation about your family wealth via a Family Wealth Planning Session, where we can identify the best ways for you to ensure your legacy of love and financial security for your family.

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.

Estate Planning with Gifts to Grandchildren

If you are in your “golden years” and are looking for ways to spread your wealth, you should consider the various tools that will allow you to financially protect and benefit your grandchildren. Carefully planning your gifts to your grandchildren is not only a generous act, but can also be a financially wise move in your estate planning and in growing your overall family wealth as well.

So, where do you start with your gifting? You must consider how much you are comfortable with giving. Currently, the Internal Revenue Service permits you to gift up to $14,000 per year, per beneficiary, tax-free. This amount can be doubled to $28,000 if you are married and both spouses make a gift. As you can see, you can gift a substantial amount free of the gift tax, but it is important to confirm that you can afford to do it without it having a negative financial impact on you.

What are the ways to wisely “gift” part of your wealth to your grandchildren? Of course, you could simply hand over a check to them, but that doesn’t provide you with any estate planning benefits nor does it incentivize or encourage your grandchildren to grow that wealth instead of just spend it.  Here are several other options you should consider:

  • Establish and deposit the money into a tax-favored 529 Plan, which is an account created to pay for your grandchild’s educational expenses. You can add money to this fund as you can afford it and there is typically a state tax credit for your donations.
  • Create and fund a “Wealth Creation Trust” for the benefit of your grandchildren. A “Wealth Creation Trust” provides you with substantial flexibility to control, invest, and protect the gifted money for the benefit of your grandchildren as well as incentivizes them to grow the gift instead of squander it.
  • Set-up a custodial bank account for each grandchild to hold the funds — this is basically the same as an outright gift and not advised as this account will be at risk from their creditors, lawsuits, bankruptcies and future divorce.
  • Purchase a life insurance policy with a cash-value component and with your grandchild named as the beneficiary of the death benefit. If you use this strategy, consider using an Irrevocable Life Insurance Trust to own the life insurance so it remains outside of your estate and their estate for successive generations.
  • Explore the opportunities offered by websites such as Upromise and Babymint. These websites allow members to accumulate rebates on items purchased at participating stores and direct those funds into your grandchild’s 529 account or wherever else you choose. Over time, these funds can grow into a substantial amount.

The above list is just a few examples of ways you can provide for your grandchildren’s financial future while also obtaining a tax benefit. Call our office today to schedule a time for us to sit down and talk through a Family Wealth Planning Session, where we can identify the best strategies for you and your family.

5 Ways to Keep Your Family Out of Court After You Die

You have likely heard over and over that there are many advantages to creating a comprehensive estate plan. One of the most important benefits for many individuals is that it allows you to help prevent disputes among your loved ones after you are gone. Below are a few steps to follow when establishing your estate plan to help prevent litigation over your estate:

  • Act while you are healthy. Establishing your estate plan while you are healthy and able to properly get your affairs in order is the most effective way to ensure that your goals are met and your loved ones are protected. Don’t wait until you think it’s time to think about estate planning — the time is now, if you are reading this article.  Your family is worth it.
  • Confirm capacity. When it comes to disputes over estate planning documents, a common issue is whether the decedent had adequate mental capacity to sign the documents. Therefore, to avoid this type of lawsuit, if the individual signing the documents is elderly, have an examination by a physician immediately prior to executing the estate planning documents and confirm he or she has the required mental capacity to sign legal documents. Get that confirmation in writing.
  • Get the family involved. The earlier you can get your whole family involved in the process of estate planning, the better. If you wait until after death for family members to find out about your estate plan, there could be questions and conflicts that are unresolvable. Consider having one lawyer for the whole family (with appropriate understanding of potential conflicts) who can understand everyone’s interests and needs and support a cohesive plan for communication and understanding.
  • Professional executor. If you are aware of conflicts between your family members and you are concerned there will be fights over your estate and you are not willing to address those while you are living, appointing a professional executor may be a wise choice. Although it will cost money, if it can prevent expensive lawsuits and arguments among your loved ones and could be worth the added cost.
  • Disinheritance. If you decide to disinherit somebody, it is important to make your intentions clear and concise. The language used must make it obvious that the disinheritance is intentional. You do not need to provide a reason for why the individual is being disinherited because this could provide a basis for the disinherited person to challenge it. If you do want to provide a reason, do so in a separate, confidential writing that is given to your attorney to hold and use only if the disinherited party tries to contest the disinheritance.

Call our office to schedule a time for a private conversation about your family wealth via a Family Wealth Planning Session, where we can identify the best ways for you to ensure your legacy of love and financial security for your family.

Legacy Planning: Leaving More to Your Loved Ones Than Money That Will Be Lost Quickly

The assets you leave to your loved ones can either be a source of relief or, sometimes, a source of panic if they don’t know how to manage those assets. Unless properly prepared, your loved ones may not know how to deal with sudden wealth — even just fifty thousand dollars can either be squandered quickly or built into a true legacy of love.  Your loved one’s may lack trusted advisors to help them, and they may not always share your values or your vision on how to put the money to good use or ensure it lasts for future generations.

Unfortunately, there are many stories of heirs who have spent their inheritances unwisely, or who have neglected to consult with knowledgeable attorneys or financial planners on the best ways to minimize taxes while maximizing the opportunity to grow that inheritance. I’m sure you can even think of a friend or family member who squandered what they were left quickly.

There are some things you can do to help prepare your loved ones for the inheritance they will receive some day. Consider these questions in evaluating their ability to handle an inheritance:

Are they capable of managing an inheritance alone or do they need help?  If they need help, be sure your estate planning takes this into consideration.

Do they need some time to acclimate to their inheritance?  If so, you can put their inheritance into a trust to stagger the distributions over time.

Are you leaving assets in the hands of trustees or executors they don’t know?  Be sure your heirs know about your team of advisors and your wishes for retaining them to manage business, real estate or other important assets.

Are they aware of your wishes and values when it comes to managing their inheritance?  If not, then consider taking advantage of our legacy planning process, where we help you pass on those valuable intangibles through a special recording that reveals who you are through your own history, insights, values and experience. It’s a gift your family will cherish forever, and we are honored to be able to provide it for our clients.

Call our office to schedule a time for us to sit down and talk about a Family Wealth Planning Session, where we can identify the best ways for you to ensure your legacy of love and financial security for your family.

How to Pass Along Family Heirlooms Peacefully

A recent Wall Street Journal article noted that boomers and seniors are more interested in passing along family heirlooms and history, leaving a legacy for future generations that extends beyond money.

Citing a 2012 survey by Allianz Life Insurance that found 86% of boomers and 74% of Americans aged 72+ said keeping family history alive was the most important piece of their own legacies, the WSJ article also noted that family mementoes and heirlooms are viewed by these groups as a key inheritance item.

This is why we build Family Wealth Legacy Interviews into our planning process with all of our clients, at no extra fee.  We just see it as part of the planning.

Unfortunately, family mementoes are one of the most common causes of conflict among heirs.  Here are some tips for helping to keep your family out of conflict over the things you (and they) love:

  1. Talk to your family about who will get what when the time comes, and work out the details beforehand. Then make sure all family members are aware of the choices you have made and why.
  1. Have a complete estate plan that includes a memorandum that explains the specific bequests or consider including that in a recorded audio you leave to your family so they not only hear your voice, but the stories behind the mementoes as well as your desire for who gets what and why. We do this with you as part of our Family Wealth Legacy process.
  1. Don’t play favorites, but do give thought to who you designate to receive what — these are the things your family will most remember.
  1. To pass along family history and your values, consider creating an ethical will or Family Wealth Legacy Interview. This can take any form – a letter, a book, a website – and is not legally binding, but instead helps you pass on the intangibles that make each family unique.

If you would like more information about passing on the things you love to the people you love, call our office today to schedule a time for us to sit down and talk.

 

7 Reasons to Consider a Trust for Your Family

Do you consider trusts to be instruments of the wealthy?  While it is true that many Americans of means have trusts to protect and pass their wealth, there are some reasons why trusts can also be useful for middle-class families.  Here are 7 of them:

  1. Control distribution of assets.

You would not hand over your car keys to a child who has had no proper preparation for driving, and chances are you would not want to hand over all your assets to a teenager either.  However, if both parents die at the same time, the children would inherit all the assets upon their 18th birthdays.  A trust allows you to specify how and when you want your children to inherit.

  1. Protect assets from creditors.

Placing an inheritance in a trust ensures that those assets are protected from your heir’s  — or their spouse’s – creditors. Consider a Lifetime Asset Protection or Wealth Creation Trust.

  1. Protect inheritance from spendthrift heirs.

Not everyone is good with money.  If your heirs fall into that category, you can use a trust to ensure the assets are not frittered away due to spend-thrift behavior.

  1. Protect inheritance for children of prior marriage.

You can use a trust to both provide for your current spouse and any children from a previous marriage.

  1. Provide for a special-needs heir.

Leaving assets outright to an heir with special needs could disqualify them from receiving important government benefits.  Leaving those assets in trust bypasses this potential risk.

  1. Avoid probate.

Assets can pass to heirs without going through probate by using a trust, saving beneficiaries the time and expense of the probate process. Probate is an expensive, public and unnecessary court process you can keep your family from having to deal with.

  1. Protect privacy.

Once a will is entered into probate, it becomes public; a trust is a private document that will protect your family’s privacy.

If you would like more information about protecting your loved ones, call our office today to schedule a time for us to sit down and talk.

7 Steps for Effectively Managing an Inheritance

Research shows that a majority of baby boomers will receive an inheritance at some time during the lives, with the average inheritance estimated at almost $65,000.  Should you be the recipient of family largesse, here are 7 steps you can take to be sure your inheritance is managed wisely:

  1. Re-examine your financial goals. This should provide you with the direction you need to determine how to invest your inheritance, either for short-term gain or long-term benefit.
  1. Review your estate plan. If you inherit a significant amount, you will need to review your estate plan to see what strategies can be put into place to protect your increased assets.  If you inherit a valuable collection of art or jewelry, you’ll need to look into ways to protect that, too.
  1. Get rid of debt. If your inheritance is significant enough to allow you to pay off debt – especially credit card debt or loans with high rates – be sure to consider paying it off.  You can evaluate whether or not this is a good idea by estimating what you currently pay in interest and then determine if investing your windfall will provide a better return.
  1. Have an emergency stash. If you do not have at least six months’ worth of living expenses in an emergency fund, it’s a good idea to park some inheritance money there.
  1. Take your time. Take the time to consider the best use of your inheritance before you may any major moves.  Inheritances are separate marital property, so if you are headed for divorce, it may be more prudent to just put the cash in an interest-bearing account until the dust settles.
  1. Consult a professional. A financial planner and an estate planner are good choices to help you navigate your new wealth.
  1. Give yourself a treat. Put a small amount by for a special “treat” but don’t go overboard.

A Personal Family Lawyer® can further advise you of all your options as part of a comprehensive estate plan.  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.