Divorcing? Here’s What You Should Know About How it May Affect Your Trust

Trusts vary in their structure, funding, and terms, so it’s hard to know how divorce will impact your trust without review. It’s safe to say, without question, your trust (and really your entire estate plan) should be reviewed during your divorce to prevent unforeseen negative outcomes.

The impact of a divorce on your trust can depend on:

The Trust’s Structure

Trusts frequently name the spouse as a trustee and beneficiary. In divorce, clarify your wishes in regards to these provisions. Even if you want to keep each other in your financial plans going forward, the trust should be amended appropriately after your divorce is complete, so your intention is clear.

Whether It’s Revocable or Irrevocable

If it’s revocable, changing the terms of the trust is easy, but you may have to wait until after your divorce is final to do it due to “orders” that go into effect when you file for divorce that prevent you from moving assets. If your trust is irrevocable, it might be necessary to petition the court to change the trustees, and the trust assets themselves may or may not be part of the divorce judgment.

Your State’s Laws on Community Property

Divorcing parties sometimes attempt to shield assets in trusts to keep them out of the pockets of the soon to be ex. When done surreptitiously, this could significantly complicate the divorce. Even when the assets in a trust are separate property, the income from the trust might still be considered for child support and alimony purposes.

Trusts can be affected by divorce, so you should take steps to protect your trust and your intentions. If you are ready to take that step, meet with us for guidance.

As your Estate Attorney we can help you navigate your divorce so your assets, including those held in trusts, remain under your direction and control.  Our Family Wealth & Legacy Planning Session guides you to protect and preserve what matters most. Before the session, we’ll send you a Family Wealth & Legacy Inventory and Assessment to complete that will get you thinking about what you own, what’s most important to you, and what you can do to ensure your family is taken care of.

This article is a service of Gratia P. Schoemakers, Estate and Business Attorney. 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 & Legacy 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 at 832.408.0505 to schedule a Family Wealth Planning Session and find out how to better protect your family.

Why You Should Never Buy Your Will From Living Social or Groupon

Of the handful of major life events that require your serious consideration, few are as emotionally charged as how to leave your assets for loved ones at the time of your death. This often complex process is accomplished via testamentary documents such as wills and trusts, which have recently become available for purchase online as standard forms.

The assets you have acquired during your life and the ways that you own them are often far more complex than a standard legal document or online service can anticipate.  When you make that all important decision to create a will or put your assets into a trust, you need an experienced estate planning attorney to guide you so that your wishes for life and death can be carried out without risk of your family getting stuck in court or conflict, when it’s too late.

Your incapacity or death will be an emotional time for your family. During this time, they need guidance, not a set of documents, which may not have even been kept up to date or adequately cover after-acquired assets.

In certain cases such as being married multiple times, having minor children, or owning a small business, legal assistance is especially necessary.

There may also be a variety different tax or asset protection implications for your inheritors. The right lawyer can advise you on the best way to handle the different assets you own such as real estate, investments, a small business, or personal property.

Is a trust right for your situation? Is there a way to transfer an asset before you pass, so that it will be protected from claims, creditors or taxation? Groupon can’t help you with that.

You may save money initially if you have a simple, small estate with few assets by just using a form that you find online. However, if you become incapacitated before death, your family could get stuck with a long drawn out court process, as they attempt to get control of your financial assets. And, if your document is unclear, contestable, or wholly or partially invalid, it’s your family who will be paying the price down the road.

Speak with a licensed Estate Attorney to create an estate plan that protects you and your loved ones.

This article is a service of Gratia P. Schoemakers, Estate and Business Attorney. 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 & Legacy 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 at 832.408.0505 to schedule a Family Wealth Planning Session and find out how to better 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.

Alert: If This Language Is In Your Trust, Your Spouse Could Be Screwed Over When You Die … Check Your Plan Today!

If you created an estate plan that includes a living trust, you must review it to determine if it contains language that could create unnecessary cost, effort and stress for your surviving spouse.

Back in the day, when the estate tax exemption was $675,000 to $1,000,000, most living trusts were drafted to provide for a mandatory split of trust assets upon the death of the first spouse.

This was done to ensure that the full estate tax exemption was used and unnecessary estate taxes were avoided.

A split of the trust assets is still appropriate in certain circumstances, but not for the same reasons, and currently, it would not be handled in the same way.

For example, if you are in a second marriage, with children from a prior marriage, you are likely to want a split of trust assets at the first death. This ensures that the surviving spouse can use the assets of the first spouse to die during his or her life, but that the remaining assets after the death of the surviving spouse return to the children of the deceased spouse and are not diverted to a new spouse or children from a new marriage.

However, if you are in a first marriage situation, all children are from the current marriage and no additional children are likely, splitting the assets at the death of the first spouse adds significant cost and unnecessary complexity.

So, what can you do to make sure your trust still meets your needs? Have it reviewed!

First and foremost, read through your trust document to see if it includes this language:

“A pecuniary amount equal to the maximum marital deduction allowable for determining the federal estate tax payable because of the death of the Deceased Spouse reduced by the final federal estate tax values of all property interests that qualify to satisfy the marital deduction and that pass or have passed to or in trust for the Surviving Spouse, other than property interests that pass by virtue of this provision.

If, after allowing for the unified credit which has not been claimed by the Deceased Spouse for transfers made during the life of the Deceased Spouse, the amount described above is more than is necessary to eliminate any federal estate tax with respect to the estate of the Deceased Spouse, then the above described amount will be reduced by the amount needed to increase the taxable estate of the Deceased Spouse to the largest amount which will result in no federal estate tax being imposed on the estate of the Deceased Spouse.

This amount shall vest immediately on the death of the Deceased Spouse and shall be satisfied by the Trustee in cash, or in kind, or partly in each, with assets of the Deceased Spouse contributed or added to the trust and eligible for the marital deduction. The assets allocated in kind shall be considered to satisfy this amount on the basis of their values at the date or dates of the allocation to the Survivor’s Trust.”

If it includes any language like this, call us. We can ensure your trust meets the needs of your family. Otherwise, you may have a plan in place that leaves your family worse off after you die or in the event that you become incapacitated.

Estate planning isn’t a set it and forget it practice. It’s a living process that supports you in making financial, legal and personal decisions that are right for you, throughout your lifetime. Quality of life is improved when you  face your death with honesty, knowing you will leave the world a better place.

If you’re ready to review your estate plan, we have a 50-point do-it-yourself review checklist available. We also invite you to come into our office for a full plan check-up. Simply call us and mention this article and we can discuss your options. You can reach us at 832.408.0505

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. You can begin by calling our office today to schedule a Family Wealth Planning Session.

Are You Leaving Your Retirement Account at Risk Due to Poor Planning?

You’ve spent your entire life building up your retirement account. It may even be the biggest asset you’ll leave behind for the people you love.

If that’s the case, you may want to consider creating a special trust designed specifically to receive your retirement account assets in the event of your death.

If you leave your retirement account to the people you love outright, simply by naming them as beneficiaries on your retirement account rather than through a special trust, here are the risks:

  1. Some studies indicate 80% of retirement account beneficiaries immediately liquidate the account and frivolously spend the assets (and on top of using the assets in ways you may not agree with, they also lose significant tax benefits for these assets you worked so hard to create);
  2. If your beneficiary is married and does not properly handle the retirement assets you leave behind, and then gets divorced, your hard-earned assets could end up in the hands of the future ex-spouse of your beneficiary;
  3. If you are in a second marriage situation with children from a prior marriage, you may be setting your spouse and children up for conflict after you are gone, due to the way you have planned (or not planned) for the passage of your retirement account.
  4. If your beneficiary is ever in a situation where he or she has creditors or may have to file bankruptcy, and you’ve left your retirement account to him or her without a special trust, your retirement account would go to satisfy those creditors first.

Here’s the good news, it’s not hard to protect your retirement account for your beneficiaries with the right planning. We use a variety of special trusts to ensure the retirement assets you’ve worked so hard to build up throughout your life are passed on to the people you love so they are totally protected from a future divorce, creditors, bankruptcy and so that they do not create conflict for your loved ones.

If you have a significant retirement account whose designated beneficiary  is your spouse or children, or even your regular revocable living trust, call us to have your planning reviewed immediately.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer,®  who develops trusting relationships with families for life.  If you’re ready to begin planning what you’d like to happen in case of unfortunate emergency, or even your death, schedule a Family Wealth Planning Session™ today. We can help you make plans for how you want to provide for your loved ones when you can’t be there. Contact us today to schedule an appointment to discuss your future and we’ll identify together how to best prepare for you and your family.

What to Do With a Cash Windfall

Many of us like to fantasize about winning the lottery. We muse with our friends about how we might spend the money, and we dream about never wanting for anything ever again.

The odds are against us, of course, at least as far as the lottery goes. But that doesn’t mean – at some point in our lives perhaps – we won’t actually come into a major amount of cash, usually in the form of an inheritance, or perhaps through the settlement of a legal claim.

Planning before receiving such a windfall is critical, if you want to keep it and have it provide for you for the rest of your life and for your loved one’s after you are gone.

Most people who receive a windfall lose it almost as quickly as they receive it.

If you see a windfall coming your way, make these plans:

  1. Consider putting any large windfall you receive into an asset protection trust, first and foremost. You may even want to consider appointing a co-trustee to govern the trust alongside you so you can honestly tell friends and family that you do not have unrestricted control to your assets when they come asking for handouts.
  1. Hire an advisor you trust to help you invest the assets you receive in a manner that is aligned with your values and will support you to use the windfall to support the long-term life you desire; if you need recommendations to a trusted investment advisor, contact us.
  1. Get all of your own estate planning documents updated, including your Will, Revocable Living Trust, Health Care Directives and Power of Attorney, plus establish a relationship with a personal lawyer so if and when anything happens to you, your family will be supported to stay out of court and out of conflict.

If you anticipate receiving a windfall and need legal assistance, or if you’d like to ensure your family stays out of court and out of conflict if and when something happens to you , schedule a Family Wealth Planning Session,™ during which we can review your wishes.

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 explain financial management techniques 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.

 

 

 

 

Talking with Your Family About Your Estate Plan

Is it time to have “the talk” with your kids?  We’re not talking about a “birds and bees” talk but one that is equally important, perhaps more so.

Everyone has concerns about what will happen when they die.  Some people worry about their homes, cars, or money.  Others worry about their children.  Rare, however, is the person who actually wants to talk about these things with their families.

Opening these conversations with your family will be difficult, but nowhere near as difficult as it would be on your family in the absence of advance planning. Fortunately, there are steps you can take before the conversation – and during the conversation – to help it go more smoothly.

Preparation Is Key

As with many things in life, preparation is a key to success in these conversations.  First, when you choose important decision makers, make sure you match the skills of the person to the job. For example, the executor of a will must be able to gather assets, prepare paperwork, handle finances, and deal with potential family disputes.  It would be unwise to select an executor who lacks these capabilities.

Too often, people choose executors, trustees, guardians, and powers of attorney based on emotions or arbitrary factors, such as who is the oldest child or who might be offended if not chosen.  These are difficult, demanding jobs, and you need to choose people who can handle them. It also helps to talk these issues through with an experienced attorney or confidant in advance of making your selections.

Next, prepare your paperwork before your family meeting.  Work with your lawyer to make the best decisions possible, and commit them to writing.  This will help reduce any misunderstandings about your wishes.

Before the meeting with your family, consider the questions that may arise.  For example, if you are concerned that one child will be upset because you named another child executor, be ready to answer questions about why you made that decision.  It may be that the person you chose is an accountant and would be well-suited for the job, or it may be that you’re concerned about overburdening the other child.  Whatever the case, be prepared to offer your reasoning.  Your explanation will go a long way toward reducing any hard feelings and potential disputes after you’re gone.

Come Prepared for Business

Once you have your family together, it is important that you not only let them know what your decisions are, but also that it is important to you that they support you and each other.  Have copies of your documents available so your family can ask questions about them.

You should be prepared to answer potential questions.  And remember, this may be an uncomfortable topic of discussion for your family members.  If someone just can’t get onboard, remember that you are dealing with your life and your assets.  The ultimate decisions as to how you handle them are yours, and you can even terminate the meeting if necessary. Also, make sure your family knows that your decisions may change as time goes on.

Finally, remember the goal for this discussion is to provide your family with more than just a set of legal documents outlining your wishes.  By talking to them about your intentions you are helping them gain understanding, comfort, and even buy-in with your plan.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer,® who believes in developing trusting relationships with families for life. That’s why I offer a Family Wealth Planning Session,™ where I can explain wills, trusts, and other alternatives to 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.

Pets in Your Will

For those of us who have pets that would be left behind after we die, there may be a desire to make arrangements for their well-being. Making provisions for pets in your will can only be done through the establishment of a trust. Pets are considered property and, as such, cannot be left money or property directly.

A trust is an entity that is established to receive and hold money and property for the benefit of designated beneficiaries which can be people, pets, organizations or other entities. There are two trust options for pet care.

Traditional Trust

With a traditional trust, you name a trustee to administer the money, and also appoint a caregiver for your pet. In your will, you designate money or property to be received by the trust. If life insurance proceeds are to be used, you would designate the trust as the beneficiary of the policy. Remember, you can divide up life insurance proceeds between multiple beneficiaries in the event you have other people or organizations you want to benefit.

Statutory Trust

A statutory trust can be specified within your will. It is a statement that indicates you are leaving money or property “in trust” to your pet. In this situation, however, the probate court is then responsible for appointing persons to serve as trustee and caregiver.

Another Option

A pet protection agreement is a less formal option for providing for your pet. This is a simple agreement with another person to care for your pet after your passing. This could also be used in cases of incapacitation, just as you would execute a power of attorney for other affairs. This option makes sense if, for example, your pet’s life expectancy was limited, and not much money is in consideration.

Additional Tips

Trusts for pets can be easy to establish, but there are some things to consider, such as the following:

  • They make the most sense for animals with longer life spans such as horses and birds;
  • There is usually no need to leave an excessive amount of money;
  • Name a successor beneficiary for funds left after your pet dies, preferably, not the caregiver;
  • Ensure the willingness of the trustee and caregiver to serve in those roles;
  • Name successors for the trustee and caregiver;
  • Do not make the trustee and caregiver the same person; and
  • Provide detailed instructions of your wishes for the care of your pet.

This article is a service of Gratia P. Schoemakers, Personal Family Lawyer®.  We believe in developing trusting relationships with families for life.   If you’d like to ensure your family stays out of Court and out of conflict if and when something happens to you , schedule a Family Wealth Planning Session,™ during which we can review your wishes. We can help you make plans for how you want to provide for your loved ones, including pets, when you can’t be there. Contact us today to schedule an appointment to discuss your future and we’ll identify together how to best prepare for you and your family.

 

What Is a Trust?

A trust is a legal creation set up to benefit someone or something. For example, some people set up trusts to benefit their children, their grandchildren, or even charities. It is easiest to understand if you think about three separate people being involved.

One person, called the grantor, funds the trust somehow, by placing money or other assets into it. Any type of asset may be used, such as money, bank accounts, cars, and even real estate.

The second person, who is known as the trustee, agrees to manage the assets. Once the assets are in this legally created trust, the trustee holds title to the assets. The third person, who is known as the beneficiary, receives the benefits of the trust. For example, the benefits might include interest paid on money in the trust, a monthly allowance, or even a place to live.

The use of trusts as a planning tool can provide many benefits, including the following:

  • Avoiding the formal probate process associated with transferring property using a will;
  • Protecting assets from creditors;
  • Caring for those who cannot care for themselves, such as minor children or those with special needs; and
  • Reducing tax liability.

Although it may seem confusing, a trust can even be set up to benefit the person who puts the assets into the trust. In other words, while there are three roles to be played, each role does not have to be played by separate and distinct people. One person can serve in more than one of the roles.

For instance, a person may place assets into a trust, select someone else to manage those assets, and then receive the benefits himself. To take that example one step further, the person who is both the grantor and the beneficiary could even be the trustee if the circumstances suited such a scenario.

How a trust is drafted and who plays each of these three roles depends on the goals of the person setting it up. Call our office today to schedule a Family Wealth Planning Session, where we can explain trusts further and help identify the best strategies for you and your family.

How to Divorce-Proof Your Business

Whether it is due to the high unemployment rates that hit several years ago or the entrepreneurial itch Baby Boomers are now scratching instead of retiring, many married people have started their own businesses. Moreover, these businesses could be put in jeopardy if the owners divorce.

If you own a business, it is probably your largest single financial asset.  If you divorce, your ex may be entitled to half of your business.  If you started the business during the marriage, it could be considered marital property that is fair game in a divorce.

Here are some ways you can divorce-proof your business:

Prenuptial agreement – One of the best ways to protect your business from divorce is to start before the marriage takes place.  In executing a prenuptial agreement, you and your soon-to-be-spouse should be represented by separate attorneys.  Then you both decide what property should be treated as separate, what property will qualify as marital property and how the marital property will be divided in case of divorce.

Buy-sell agreement – Married couples who jointly own a business can execute a buy-sell agreement that outlines what happens to the business should a divorce or death of one spouse occur.  A well-crafted buy-sell agreement will determine how ownership interests are to be transferred, a way to determine the price for the sale or ownership transfer and a way to pay for the purchase of an ex’s ownership interests (i.e., life insurance, cash, loan, etc.).

Trust – There are several trust instruments available to shield a company from the potential adverse effects of a divorce.  If you wish to protect your business interests from a potential divorce and pass those along to your children, you can have your business established right from the beginning in an irrevocable trust that shields your business assets from your divorce as well as your children’s potential future divorce.  Since the business assets are placed in a trust governed by a trustee, they are no longer considered yours — and therefore protected from an ex-spouse or any other creditor.

If you are interested in learning more about legal protection strategies for your business and how we work with you as a partner in protecting your company, call us today to schedule your LIFT™ (legal, insurance, financial and tax) Foundation Audit.