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Within the past year, a combination of new legislation and the recent change of leadership in the White House and Congress stands to dramatically increase the taxes your loved ones will have to pay on inherited retirement accounts as well as increasing the taxes you owe on your taxable investments. However, purchasing life insurance may offer you the opportunity to minimize the effect of these developments.

To this end, if you hold assets in a retirement account, you need to review your financial plan and estate plan as soon as possible to determine if investing in life insurance or some other strategy may offer tax-saving benefits for you and your family. To help you with this process, here we’ll discuss how these new developments might affect the taxes owed by you and your heirs, and how investing in life insurance may help offset the tax impact of these new changes.

 

The SECURE Act

At the start of 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and the new law effectively put an end to the so-called “stretch IRA.” Under prior law, beneficiaries of your retirement account could choose to stretch out distributions of an inherited retirement account over their own life expectancy to minimize the income taxes owed on those distributions.

Under the new law, however, most designated beneficiaries of inherited IRAs and similar tax-deferred qualified retirement accounts are now required to withdraw all of the assets from the inherited account—and pay income taxes on those withdrawals—within 10 years of the account owner’s death. Those who fail to withdraw funds within the 10-year window face a 50% tax penalty on the assets remaining in the account.

 

Democrats Take Control

The recent election of Joe Biden as President and subsequent Democratic takeover of the Senate will likely result in the passage of new tax legislation that could have a significant impact on your family’s financial and estate planning considerations.

Specifically, it’s likely that within the next two years Democrats will pass legislation aimed at eliminating many of the tax cuts enacted through the 2017 Tax Cuts and Jobs Act. As part of this legislation, we’re expected to see significantly lower federal estate tax exemptions, the elimination of the step-up in cost basis on inherited assets, as well as an increase in the top personal income and capital-gains tax rates.

One way you may be able to minimize the new taxes on both your tax-deferred retirement accounts and taxable investments is by investing in cash-value life insurance. Let’s break down exactly what this strategy might look like.

 

The New Role of Life Insurance in Your Estate and Financial Planning

Given the new distribution requirements for inherited IRAs, you should consider whether it makes sense to withdraw funds from your retirement account now, pay the tax, and invest the remainder in cash-value life insurance. From there, you can access the accumulated cash-surrender value of the life insurance policy income-tax free during your lifetime via tax-free withdrawals and/or loans. And upon your death, the payout of your life insurance policy would be income-tax free for your heirs.

By annually investing what you would otherwise put into tax-deferred retirement accounts into a cash-value life insurance contract, or by taking taxable withdrawals from your tax-deferred retirement accounts over time and reinvesting them in cash-value life insurance, you can effectively move these funds into a tax-free, rather than tax-deferred, investment vehicle.

This strategy could not only minimize the income taxes you pay over your lifetime, but it could also significantly reduce the tax bill imposed on your designated beneficiaries after your death, since life insurance proceeds are income-tax free.

Additionally, by investing a portion of your investable assets in cash-value life insurance, you can offset the effects of the proposed loss of income tax basis step-up upon your death, which we’re likely to see enacted through Democrat-backed legislation. What’s more, this strategy would also minimize your current income taxes on what otherwise would have been taxable income from your investments, as growth on investments inside a life insurance policy are not subject to income tax, including any capital gains.

Finally, if you stand to be affected by the proposed decrease of the federal estate-tax exemption, which is currently set at $11.7 million, by placing the life insurance policy inside an irrevocable life insurance trust, you can remove the death benefit paid out to your beneficiaries from your taxable estate. In doing so, you would still be able to access the cash value of the insurance policy during your lifetime, either via a so-called “spousal access trust,” if you are married, or via a traditional irrevocable life insurance trust, if you are not married.

 

Rethink Your Planning

Although the SECURE Act and the proposed new legislation stands to have an adverse effect on the tax consequences for your retirement and estate planning, investing in life insurance may offer you a valuable tax-saving opportunity. That said, you can only take advantage of this opportunity if you plan for it.

 

Image result for estate plan protecting intellectual property

 

If you own a business, you almost certainly have intellectual property. However, because your intellectual property is intangible, it can be invisible to you and those who aren’t familiar with the nature of intellectual property and its value, so it often gets overlooked, especially when it comes to estate planning. Yet, if you fail to properly document your intellectual property, your estate plan will likely not protect it—and this could cause your loved ones to miss out on what can be among your most valuable assets.

When we talk about intellectual property, we’re referring to creations of the mind, including inventions, literary and artistic works, designs, logos, brand names, and images, all of which are used in the course of a business.

 

Identifying, Valuing, and Protecting Your Intellectual Property

While you might think that identifying, protecting, and valuing your intellectual property is something that only applies to big companies, not small businesses, that’s definitely not the case. In fact, if you own a small business, your intellectual property can be of even greater value to your loved ones once you’re no longer around and able to financially provide for them.

For all of these reasons, it’s imperative that you take the proper steps to not only protect these intangible assets during your lifetime, but that you also use estate planning to ensure that your intellectual property is properly handled following your death, so your loved ones can continue to get the most value out of these most valuable assets.

 

Documentation and Registration
The first step to take in protecting your intellectual property is to formally document it in your business inventory of assets. When you create your business asset inventory, you are creating a record of its assets, including intangible assets like intellectual property.

The next step is to legally register trademarks, copyrights and patents with the U.S. Patent and Trademark Office, and ensure you have the proper legal agreements and contracts in place to ensure there’s no question about who owns these works. To this end, if you have not protected your intellectual property with copyrights, trademarks, patents, royalty and licensing agreements, non-competes for employees, and work-for-hire provisions in your existing agreements with independent contractors and vendors, now is the time to do so.

Don’t wait until your intellectual property gets stolen or you receive a cease-and-desist letter to put these protections in place. Registering a trademark or copyright might cost you time and money, but failing to register your brand can ultimately cost you far more than that in legal fees or the lost value of your assets, especially if you end up in court, trying to fight for what you thought you owned.

 

Address Your Intellectual Property in Your Estate Plan

After you have documented your intellectual property, review the operating agreement or bylaws of your business entity. And if you don’t have an operating agreement or bylaws, now is the time to put these essential legal agreements in place. Read through your governing documents to see what they say about what happens to your business and its intellectual property upon your death or incapacity.

If you think this all sounds overly complicated, imagine how much more difficult it will be for your loved ones to deal with it should something happen to you. In fact, it could prove impossible for your loved ones to handle these matters in your absence, which is why it’s so important for you and your legal team to take care of these issues now. That way, your family isn’t stuck trying to clean up a mess after your death.

Moving to a New State? Be Sure to Update Your Estate Plan

Although you likely won’t need to have an entirely new estate plan prepared for you, upon relocating to another state, you should definitely have your existing plan reviewed by an estate planning lawyer who is familiar with your new home state’s laws. Each state has its own laws governing estate planning, and those laws can differ significantly from one location to another.

Given this, you’ll want to make sure your planning documents all comply with the new state’s laws, and the terms of those documents still work as intended. Here, we’ll discuss how differing state laws can affect common planning documents and the steps you might want to take to ensure your documents are properly updated.

 

Last Will and Testament
The good news is, states will generally accept a will that was executed properly under another state’s laws. However, there could be differences in the new state’s laws that make certain provisions in your will invalid. Here are a few of the things you should pay the most attention to in your will when moving:

 

Your executor: Consider whether or not the executor or administrator you’ve chosen will be able to serve in that role in your new location. Every state will allow an out-of-state executor to serve, but some states have special requirements that those executors must meet, such as requiring them to post a bond before serving. Other states require non-resident executors to appoint an agent who lives within the state to accept legal documents on behalf of the estate.

 

Marital property: If you are married, give special consideration to how your new state treats marital property. While a common-law state might treat the property you own in your name alone as yours, community-property states treat all of your property as owned jointly with your spouse. If your new state treats marital property differently, you might need to draft a new will to ensure your wishes are honored.

 

Interested witnesses: Another important role under your will to consider when moving to a new state is an interested witness. An interested witness is someone who was a witness to your will who also receives a gift from your will. Some states allow interested witnesses to receive the gift, while other states do not allow such gifts. And still other states allow such gifts provided the witness is a family member.

 

Revocable Living Trust

A valid revocable living trust from one state should continue to be valid in your new state. However, you need to make certain that you transfer any new assets or property you acquire, such as your new home, to your trust, so that those assets can avoid the need to go through probate before being distributed to your heirs upon your death.

 

Power of Attorney
A valid power of attorney document, such as a durable power of attorney, medical power of attorney, or financial power of attorney, created in one state is likely to be valid in your new state. However, in some cases, banks, financial institutions, and healthcare facilities in your new state may not accept a power of attorney document if it’s unfamiliar to them. Also, simply as a practical matter, it may be a good idea to have your power of attorney agent live in the same state you do, so keep that in mind as well.

 

Beneficiary Designations
If you have accounts with beneficiary designations, such as 401(k)s, life insurance policies, and payable-on-death bank accounts, these should be valid no matter which state you live in. That said, you should still review these documents when you move to ensure that your address and other personal information is updated.

 

Keep Your Plan Current
As with other major life events, such as births, deaths, marriage and divorce, moving to a new state is the ideal time to have your plan reviewed by a professional.

Homeschooling Grandchildren (It Can Be Done) – Home Educator

While the quarantines, shutdowns, and social distancing measures related to the pandemic have been difficult for everyone, the elderly have been particularly hard hit. Since seniors face the most health risks from COVID-19, most of them have been careful to avoid close contact with their family members, and this has left many grandparents unable to visit with their grandchildren for close to a year now.

This loss of in-person connection for such an extended period of time can cause people to feel isolated and lonely, which can eventually lead to mental health issues like depression. At the same time, children who are unable to spend time with their grandparents may experience confusion and anxiety over their lost relationship.

 

With this in mind, here are a few tips for helping seniors maintain a connection with their grandchildren during the pandemic using web-based technology like FaceTime, email, and instant messaging (IM). And though video chats, texts, and IMs will never replace in-person visits, they offer one of the most effective ways of keeping those relationships—and everyone’s spirits—as strong as possible during these dark times.

 

  1. Reading Stories

One way for grandparents to feel more connected with their grandkids is to read stories over video chat or smartphone. Choose a favorite book at the grandchild’s reading level, and take turns reading pages. This can give the grandchild the added benefits of improving reading skills, building their vocabulary, and helping them develop their speaking abilities. By picking a regular time to call and read together each week, it can also give both of them something to look forward to.

 

  1. Playing Games

Even though in-person visits are too risky right now, family game night can still happen. Grandparents and grandkids have many options for online gaming, including even classic board games, such as Scrabble, Monopoly, and Clue. Like their traditional counterparts, online games also help children develop math and vocabulary skills while they are having fun.

 

  1. Emailing, Texting, and Instant Messaging

Texts, emails, and IMs sent to one another on a regular basis can help grandparents stay connected and up-to-date with the latest developments in their grandkids’ lives. To catch up with one another, seniors can talk about what is happening in their lives and ask the grandkids to discuss the latest events in their own lives. When grandchildren use texts and emails, it also helps them practice writing out their thoughts and work on their spelling and grammar.

 

  1. Mailing Letters or Postcards

These days, letter writing almost seems like lost art. But sending personal letters and postcards is a great way for grandparents and grandchildren to connect with one another. Handwritten letters and postcards can also be prized keepsakes that will help grandchildren remember their grandparents long after they are gone. When possible, children should be encouraged to hand-write letters and postcards instead of typing and printing them out. They can also decorate their letters or postcards with drawings and art.

 

  1. Group Video Chats and Phone Calls

Tech-savvy grandparents can use video chat apps like Skype, FaceTime, and Google Duo to visit with the grandkids in a group setting, where everyone can see and interact with one another. Even extremely young children like toddlers can participate in video chats, which can help them bond with their senior loved ones, even across vast distances. And if video chats aren’t something a senior feels comfortable with, a similar experience can be achieved simply by using a phone. Even short, 15 to 20-minute calls made on a regular basis can help grandparents and grandkids feel more connected and less isolated.

 

For the Love of Your Family

With coronavirus infections and deaths currently surging to record levels, it’s more critical than ever for parents and grandparents to ensure their estate planning is complete and up-to-date, including naming both short and long-term guardians for your minor children. If you’ve yet to name guardians for your kids, you should do so immediately.

 

In addition to ensuring your kids will be protected and provided for no matter what, the estate planning process itself can offer a unique opportunity to enhance your connection with your children and grandchildren. Communicating clearly about what you want to happen in the event of your death or incapacity (and talking with your kids about what they want) can foster a deep bond and sense of intimacy.

 

With people living longer than ever before, more and more seniors require long-term healthcare services in nursing homes and assisted living facilities. However, such care is extremely expensive, especially when it’s needed for extended periods of time.

Traditional healthcare insurance doesn’t cover such services, and though Medicare does pay for some long-term care, it’s quite limited, difficult to qualify for, and requires you to deplete nearly all of your assets before being eligible (though proactive estate planning can help shield your assets). To address this gap in coverage, long-term care insurance was created.

Intensive Care

First introduced as “nursing home insurance” in the 1980s, this type of insurance is designed to cover expenses associated with long-term skilled nursing services delivered in a nursing home, assisted living facility, or other senior care setting, though some of today’s policies cover care delivered in your own home as well.

Such intensive care is required when you are no longer able to care for yourself, often in the later stages of your life. These policies cover the cost of skilled nursing services that support you with basic self-care tasks, such as bathing, feeding, dressing, walking, and using the bathroom. These are known as activities of daily living (ADLs).

Before your coverage kicks in, most policies require that you demonstrate you have lost the ability to engage in at least two or three ADLs. Most policies also have a deductible, or elimination period, which is a set number of days that must elapse between the time you become disabled (eligible for benefits) and the time your coverage kicks in.

Many policies offer a 90-day elimination period, but others can be longer, shorter, or even have no elimination period at all. Of course, the shorter the elimination period, the more expensive the premium.

Additionally, long-term care policies typically come with a predetermined benefit period, which is the number of years of care it will pay for. A benefit period of three to five years, for example, is a quite common duration for such policies. Most policies also come with a cap on the dollar amount of coverage that will be paid for care on a daily basis, known as a daily benefit amount.

Getting Covered

Obviously, the younger and healthier you are when you buy the policy, the cheaper the premiums will be, so the sooner you invest in coverage, the better. In fact, most policies exclude certain pre-existing conditions, so if you wait until you become ill, it can be impossible to find coverage.

Increasing Premiums, Decreasing Benefits
With the elderly population booming, there has been a surge in demand for long-term care services, which has led to a marked increase in the cost of such policies. At the same time, many insurers have been cutting back on the benefits their policies offer.

If you are looking to purchase long-term care insurance, you should speak with multiple insurance providers and compare their benefits, care options, and premiums. Different companies may offer the same coverage and benefits, but they can vary dramatically in price. Always ask about the insurance company’s history of rate increases, including the amount of the most recent increase.

Choose Wisely

For the best chances of success when shopping for a policy, get help from a fee-only planner, who is not compensated based on your choice of coverage. When meeting with an insurance provider, you must get answers to following three questions about your policy:

  1. How long is the elimination period before the policy begins paying benefits?
  2. What capacities, or ADLs, must you lose before coverage kicks in?
  3. How many years of care are covered?

Buying long-term care insurance should be a family affair, because you are going to need your family members to advocate for you and file a claim for the policy when you need to use it. Given this, make sure your family knows what kind of policy you have, who your agent is, and how to make a claim.

What’s more, you should pre-authorize the right person to speak to the insurance company on your behalf, and not just rely on a power of attorney. That said, you should definitely have a well-drafted, updated, and regularly reviewed power of attorney on file as well.

Keep Your Policy Updated

Once you are in your 40s, your long-term care policy should be reviewed annually to evaluate new insurance products on the market and update your policy based on your changing needs. And whatever you do, once you have a policy in place, make sure you don’t miss a premium payment, because if you stop paying, even for a short period of time, you’ll lose all of the money you invested and will have no access to the benefits when you need them.

Californians Approve Prop. 19; Ending Major Property Tax Exemption –  Linkenheimer LLP CPAs & Advisors

Proposition 19 changes the way real estate may be passed down from parents to children in California. Here are 6 key things you should know about this new law:

  1. Prop 19 eliminates the ability for children to receive property from their parents without a property tax reassessment unless (adult) children use the property as their own primary residence andthe property has gained less than one million in value over the original assessed value.
  2. Previously, a parent could transfer their primary residence and up to one million of assessed value of other real estate (residential and commercial) to their children without reassessment. Please note that Prop 19 does notimpact capital gains taxes or eliminate the step up in basis for inherited properties – it only affects property tax reassessments.
  3. Prop 19 goes into effect on February 16, 2021 and will impact properties transferred after that date. Because of holidays, however, the transfers must be recorded by February 11, 2021 to meet the deadline.
  4. There is special Prop 19 planning available to avoid the consequences of Prop 19. This Special Prop 19 planning consists of transferring the property to an irrevocable trust before the deadline to preserve the lower property tax basis.
  5. This special Prop 19 planning is best suited for those (a) who own a property with a high current market value and a low property tax assessed value, and (b) who plan to gift that property to their children upon death, and (c) whose children intend to keep the property for a rental, vacation home, or commercial building.
  6. This special Prop 19 planning is not for everyone. There are many drawbacks and unknowns (the legislature has yet to write the details so there is much yet still to be determined) with this planning. For example, it would require you to give up all rights and use of your primary residence from now on, meaning your children could potentially kick you out of the home. For commercial properties, you would have to give up all rights to the rental income and principal now, meaning your children would receive it from this point forward. Also, please be aware, properties with a mortgage generally will not qualify for this special Prop 19 planning because lenders often legally prohibit these types of property transfers. Finally, if the transfer is allowed, there is added expense in creating the irrevocable trust now and administering it into the future.

If you would like to discuss whether Prop 19 planning is appropriate for you, please call CaliLaw at 626.355.4000 to schedule a phone call with a member of our team.

7 QUESTIONS TO ASK BEFORE HIRING A LAWYER – Metro Law and Mediation

Since you’ll be discussing topics like death, incapacity, and other frightening life events, hiring an estate planning lawyer may feel intimidating or even morbid. But it doesn’t have to be that way.
Instead, it can be the most empowering decision you ever make for yourself and your loved ones. The key to transforming the experience of hiring a lawyer from one that you dread into one that empowers you is to educate yourself first. This is the person who is going to be there for your family when you can’t be, so you want to really understand who the lawyer is as a human, not just an attorney. Of course, you’ll also want to find out the kind of services your potential lawyer offers and how they run their business.
To this end, here are five questions to ask to ensure you don’t end up paying for legal services that you don’t need, expect, or want. Once you know exactly what you should be looking for when choosing a planning professional, you’ll be much better positioned to hire an attorney who will provide the kind of love, attention, care, and trust your family deserves.

   1. How do you bill for your services?

There’s no reason you should be afraid to ask a lawyer how he or she bills for the work they do on your behalf. In fact, questions about billing and payment should be thoroughly discussed before you engage any lawyer to represent you. No one wants surprises, especially when it comes to legal fees.

Find an estate planning lawyer who bills for their services on a flat-fee, no surprises, basis—and not on an hourly basis—unless it’s required for limited purposes. And ideally, you want a lawyer who will guide you through a process of discovery in which they learn about your family dynamics, your assets, and they educate you about what would happen for your family and to your assets if and when something happens to you, and then support you in choosing the right plan for you that meets your budget and your desired outcomes.

  1. How will you respond to my needs on an ongoing basis?

One of the biggest complaints people have about working with lawyers is that they are notoriously unresponsive. Indeed, I’ve heard of cases in which clients went weeks without getting a call back from their lawyer. This is all too common, but totally unacceptable, especially when you’re paying them big bucks.

That said, in most cases, these lawyers aren’t blowing you off—they simply don’t have enough support or the systems in place to be able to be responsive. Far too many lawyers believe they can take care of everything themselves. From paperwork and client meetings to scheduling and returning phone calls to connecting their clients with other advisors, there are just too many responsibilities for one person to manage all on their own.

Ask them how quickly calls are typically returned in their office, ask them if there will be someone on-hand to answer quick questions, and ask them how they will support you to keep your plan up to date on an ongoing basis and be there for your loved one’s when you can’t be.

A great way to test this is to call your prospective lawyer’s office and ask for him or her. If you get put through right away—or even worse, your call gets sent to a full voicemail—think twice about hiring this lawyer. This means they don’t have effective systems in place for managing and responding to calls or answering quick questions.

Instead, what you want is for the person who answers the phone—or another team member—to offer to help you. And if that individual cannot help you, then he or she should schedule a call for you to talk with your lawyer at a future date and time. Ideally, all calls with your lawyer should be pre-scheduled with a clear agenda, so you both can be ready to focus on your specific needs.

Next week in part two, we’ll talk more about the ways in which your attorney should communicate with you and list the remaining three questions to ask before hiring your estate planning lawyer.

Don't Think of Remarrying Until You Read This - MM #108 - Marriage Missions International

Today, we’re seeing more and more people getting divorced in middle age and beyond. In fact, roughly one in four divorces involve those over 50, and divorce rates for this demographic have doubled in the past 30 years, according to the study Gray Divorce Revolution. For those over age 65, divorce rates have tripled.

With divorce coming so late in life, the financial fallout can be quite devastating. Indeed, Bloomberg.com found that the standard of living for women who divorce after age 50 drops by some 45%, while it falls roughly 21% for men. Given the significant decrease in income and the fact people are living longer than ever, it’s no surprise that many of these folks also choose to get remarried.

And those who do get remarried frequently bring one or more children from previous marriages into the new union, which gives rise to an increasing number of blended families. Regardless of age or marital status, all adults over age 18 should have some basic estate planning in place, but for those with blended families, estate planning is particularly vital.

Here, we’ll use three different hypothetical scenarios to discuss how a failure to update your estate plan after a midlife remarriage has the potential to accidently disinherit your closest family members, as well as deplete your assets down to virtually nothing. From there, we’ll look at how these negative outcomes can be easily avoided using a variety of different planning solutions.

Scenario #1: Accidentally disinheriting your children from a previous marriage

John has two adult children, David and Alexis, from a prior marriage. He marries Moira, who has one adult child, Patrick. The blended family gets along well, and because he trusts Moira will take care of his children in the event of his death, John’s estate plan leaves everything to Moira.

After just two years being married, John dies suddenly of a heart attack, and his nearly $1.4 million in assets go to Moira. Moira is extremely distraught following John’s death, and although she wants to update her plan to include David and Alexis, she never gets around to it, and dies just a year after John. Upon her death, all of the assets she brought into the marriage, along with all of John’s assets, pass to Moira’s son Patrick, while David and Alexis receive nothing.

There are several planning options John could’ve used to avoid this outcome. He could have created a revocable living trust that named an independent successor trustee to manage the distribution of his assets upon his death to ensure a more equitable division of his estate between his spouse and children. Or, he could have created two separate trusts, one for Moira and one for his children, in which John specified exactly what assets each individual received. He might have also taken advantage of tax-free gifts to his two children during his lifetime.

Scenario #2: Accidentally disinheriting your spouse

Mark was married to Gwen for 30 years, and they had three children together, all of whom are now adults. When their kids were young, Mark and Gwen both created wills, in which they named each other as their sole beneficiaries. When they were both in their 50s, and their kids had grown, Bob and Gwen divorced.

Several years later, at age 60, Bob married Veronica, a widow with no children of her own. Bob was very healthy, so he didn’t make updating his estate plan a priority. But within a year of his new marriage, Bob died in a car accident.

Bob’s estate plan, written several decades ago, leaves all of his assets to ex-wife Gwen, or, if she is not living at the time of his death, to his children. State law presumes that Gwen has predeceased Bob because they divorced after the will was enacted. Thus, all of Bob’s assets, including the house he and Veronica were living in, pass to his children. Veronica receives nothing, and is forced out of her home when Bob’s children sell it.

By failing to update his estate plan to reflect his current situation, Bob unintentionally disinherited Veronica and forced her into a precarious financial position just as she was entering retirement. If Bob had worked with an estate planning attorney to create a living trust, he could have arranged his assets so they would go to, and work for, exactly the people he wanted them to benefit.

Scenario #3: Allowing Assets to Become Depleted

Steve is a divorcee in his early 60s with two adult children when he marries Susan. Steve has an estate valued at around $850,000, and he has told his kids that after he passes away, he hopes they will use the money that’s left to fund college accounts for their own children. But he also wants to ensure Susan is cared for, so he establishes a living trust in which he leaves all his assets to Susan, and upon her death, the remainder to his two children.

Yet, soon after Steve dies, Susan suffers a debilitating stroke. She requires round-the-clock in-home care for several decades, which is paid for by Steve’s trust. When she does pass away, the trust has been almost totally depleted, and Steve’s children inherit virtually nothing.

An experienced estate planning attorney could have helped Steve avoid this unfortunate outcome. Steve could have stipulated in his living trust that a certain portion of his assets must go to his children upon his death, while the remainder passed to Susan.

Bringing families together
Along with other major life events like births, deaths, and divorce, entering into a second (or more) marriage requires you to review and rework your estate plan. And updating your plan is exponentially more important when there are children involved.

 

Writing a Will: Avoid these 8 mistakes while writing a will to ensure your assets are passed onto your heirs

 

A will is one of the most basic estate planning tools. While relying solely on a will is not a suitable option for most people, just about every estate plan includes this key document in one form or another.

A will is used to designate how you want your assets distributed to your surviving loved ones upon your death. If you die without a will, state law governs how your assets are distributed, which may or may not be in line with your wishes.

That said, not all assets can (or should) be included in your will. For this reason, it’s important to understand which assets you should put in your will and which assets you should include in other planning documents like trusts.

While you should always consult with an experienced planning professional when creating your will, here are a few of the different types of assets that should not be included in your will.

      1. Assets with a right of survivorship: A will only covers assets solely owned in your name. Therefore, property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship, bypass your will. These types of assets                 automatically pass to the surviving co-owner(s) when you die, so leaving your share to someone else in your will would have no effect. If you want someone other than your co-owner to receive your share of the asset upon your death, you will need to change             title to the asset as part of your estate planning process.

  1. Assets held in a trust: Assets held by a trust automatically pass to the named beneficiary upon your death or incapacity and cannot be passed through your will. This includes assets held by both revocable “living” trusts and irrevocable trusts.In contrast, assets included in a will must first pass through the court process known as probate before they can be transferred to the intended beneficiaries. To avoid the time, expense, and potential conflict associated with probate, trusts are typically a more effective way to pass assets to your loved ones compared to wills.

However, because it can be difficult to transfer all of your assets into a trust before your death, even if your plan includes a trust, you’ll still need to create what’s known as a “pour-over” will. With a pour-over will in place, all assets not held by the trust upon your death are transferred, or “poured,” into your trust through the probate process.

 

  1. Assets with a designated beneficiary: Several different types of assets allow you to name a beneficiary to inherit the asset upon your death. In these cases, when you die, the asset passes directly to the individual, organization, or institution you designated as beneficiary, without the need for any additional planning.The following are some of the most common assets with beneficiary designations, and therefore, such assets should not be included in your will:
  • Retirement accounts, IRAs, 401(k)s, and pensions
  • Life insurance or annuity proceeds
  • Payable-on-death bank accounts
  • Transfer-on-death property, such as bonds, stocks, vehicles, and real estate
  1. Certain types of digital assets: Given the unique nature of digital assets, you’ll need to make special plans for your digital assets outside of your will. Indeed, a will may not be the best option for passing certain digital assets to your heirs. And in some cases—including Kindle e-books and iTunes music files—it may not even be legally possible to transfer the asset via a will, because you never actually owned the asset in the first place—you merely owned a license to use it.What’s more, some types of social media, such as Facebook and Instagram, have special functions that allow you to grant certain individuals access and/or control of your account upon your death, so a will wouldn’t be of any use. Always check the terms of service for the company’s specific guidelines for managing your account upon your death.

Regardless of the type of digital asset involved, NEVER include the account numbers, logins, or passwords in your will, which becomes public record upon your death and can be easily read by others. Instead, keep this information in a separate, secure location, and provide your fiduciary with instructions about how to access it.

       5. Your pet and money for its care: Because animals are considered personal property under the law, you cannot name a pet as a beneficiary in your will. If you do, whatever money you leave it would go to your residuary beneficiary (the individual who                   gets everything not specifically left to your other named beneficiaries), who would have no obligation to care for your pet.

It’s also not a good idea to use your will to leave your pet and money for its care to a future caregiver. That’s because the person you name as beneficiary would have no legal obligation to use the funds to care for your pet. In fact, your pet’s new owner could legally keep all of the money and drop off your furry friend at the local shelter.

The best way to ensure your pet gets the love and attention it deserves following your death or incapacity is by creating a pet trust. A good estate planning attorney can help you set up, fund, and maintain such a trust, so your furry family member will be properly cared for when you’re gone.

  1. Money for the care of a person with special needs: There are a number of unique considerations that must be taken into account when planning for the care of an individual with special needs. In fact, you can easily disqualify someone with special needs for much-needed government benefits if you don’t use the proper planning strategies. To this end, a will is not a suitable way to pass on money for the care of a person with special needs.If you want to provide for the care of your child or another loved one with special needs, you must create a special needs trust. Given these are extremely technical, you should always work with an experienced planning lawyer to create a special needs trust.

Don’t take any chances
Although creating a will may seem fairly simple, it’s always best to consult with an experienced planning professional to ensure the document is properly created, executed, and maintained. And as we’ve seen here, there are also many scenarios in which a will won’t be the right planning option, nor would a will keep your family and assets out of court

 

How 'Gray Divorce' Complicates Estate Planning | ThinkAdvisor

Last week in part one [https://www.calilaw.com/getting-divorced-dont-overlook-these-4-updates-to-your-estate-plan-part-1/], we discussed the first two changes you should make to your plan if you’re getting divorced: updating your beneficiary designations and power of attorney documents. Here in part two, we’ll cover the final updates to consider.

  1. Create a new will
    Creating a new will is not something that can wait until after your divorce. In fact, you should create a new will as soon as you decide to get divorced, since once divorce papers are filed, you may not be able to change your will. And because most married couples name each other as their executor and the beneficiary of their estate, it’s important to name a new person to fill these roles as well.

    When creating a new will, rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. Keep in mind that California has community-property laws that entitle your surviving spouse to a certain percentage of the marital estate upon your death, no matter what your will dictates. So if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will.

Yet, it’s almost certain you wouldn’t want him or her to get everything. With this in mind, you should create your new will as soon as possible once divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.

  1. Amend your existing trust or create a new one

If you have a revocable living trust, you’ll want to review and update it, too. In addition to reconsidering what assets your soon-to-be-ex spouse should receive through the trust, you’ll probably want to replace him or her as successor trustee, if they are so designated.

And if you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide a wide range of powers and benefits unavailable through a will, and they’re particularly well-suited for blended families. Given the possibility that both you and your spouse will eventually get remarried—and perhaps have more children—trusts are an invaluable way to protect and manage the assets you want your children to inherit.

By using a trust, for example, should you die or become incapacitated while your kids are minors, you can name someone of your choosing to serve as successor trustee to manage their money until they reach adulthood, making it impossible for your ex to meddle with their inheritance.

Beyond this key benefit, trusts afford you several other levels of enhanced protection and control not possible with a will. For this reason, you should at least discuss creating a trust with an experienced lawyer before ruling out the option entirely.

Post-divorce planning

During the divorce process, your primary estate planning goal is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. In light of this, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401k, or add to your plan in any other way while the divorce is ongoing are often just temporary.

Once your divorce is final and your marital property has been divided up, you should revisit all of your planning documents and update them based on your new asset profile and living situation. From there, your plan should continuously evolve as your life changes, especially following major life events, such as getting remarried, having additional children, and when close family members pass away.