Here's why you need an Estate Plan - My Press Plus

October 19th-25th, 2020 is National Estate Planning Awareness Week, so if you’ve been thinking about creating an estate plan, but still haven’t checked it off your to-do list, now is the perfect time to get it done.

When it comes to putting off or refusing to create an estate plan, your mind can concoct all sorts of rationalizations: “I won’t care because I’ll be dead,” “I’m too young,” “That won’t happen to me,” or “My family will know what to do.”

But these thoughts all come from a mix of pride, denial, and above all, a lack of real education about estate planning and the consequences to your family of not planning. Once you understand exactly how planning is designed to work and what it protects against, you’ll realize there is no acceptable excuse for not having a plan.

Indeed, the first step in creating a proper plan is to thoroughly understand the potential consequences of going without one. In the event of your death or incapacity, not having a plan could be incredibly traumatic and costly for your family, who will be forced to deal with the mess you’ll have created by neglecting to plan.

While each situation and family are unique, in this multi-part series I’m going to discuss some of the things most likely to happen to your loved ones if you fail to create a plan. This is the first:

Your family will have to go to court
If you don’t have a plan, or if you only have a will (yes, even with a will), you’re forcing your family to go through probate upon your death. Probate is the legal process for settling your estate, and even if you have a will, it’s notoriously slow, costly, and public. But with no plan at all, probate can be a true nightmare for your loved ones.

Depending on the complexity of your estate, probate can take years, or even decades, to complete. And like most court proceedings, probate can be expensive. In fact, once all of your debts, taxes, and court fees have been paid, there might be little left for your loved ones to inherit. And for whatever is left, your family will have to pay hefty attorney’s fees and court costs in order to claim them.

Yet, the most burdensome part of probate is the frustration and anxiety it can cause your loved ones. In addition to grieving your death, planning your funeral, and contacting everyone you’re close with, your family will be stuck dealing with a crowded court system that can be challenging to navigate even in the best of circumstances. Plus, the entire affair is open to the public, which can make things all the more arduous for those you leave behind, especially if the wrong people take an interest in your family’s affairs.

That said, the expense and drama of the court system can be almost totally avoided with proper planning. Using a trust, for example, we can ensure that your assets pass directly to your family upon your death, without the need for any court intervention. As long as you have planned properly, just about everything can happen in the privacy of our office and on your family’s time.

No more excuses
Given the potentially dire consequences probate can cause for your family, you can’t afford to put off creating your estate plan any longer. Next week we’ll look at how the lack of an estate plan will cost you control of who inherits your assets as well as when and how the inheritance is received.  

 

Serving as a Trustee - What to Know

Being asked by a loved one to serve as trustee for their trust upon their death can be quite an honor, but it’s also a major responsibility—and the role is definitely not for everyone. Indeed, serving as a trustee entails a broad array of duties, and you are both ethically and legally required to properly execute those duties or face potential liability.

In the end, your responsibility as a trustee will vary greatly depending on the size of the estate, the type of assets covered by the trust, the type of trust, how many beneficiaries there are, and the document’s terms. In light of this, you should carefully review the specifics of the trust you would be managing before making your decision to serve.

And remember, you don’t have to take the job.

Yet, depending on who nominated you, declining to serve may not be an easy or practical option. On the other hand, you might actually enjoy the opportunity to serve, so long as you understand what’s expected of you.

To that end, this article offers a brief overview of what serving as a trustee typically entails. If you are asked to serve as trustee, feel free to contact us to support you in evaluating whether you can effectively carry out all the duties or if you should politely decline.

A trustee’s primary responsibilities
Although every trust is different, serving as trustee comes with a few core requirements. These duties primarily involve accounting for, managing, and distributing the trust’s assets to its named beneficiaries as a fiduciary.

As a fiduciary, you have the power to act on behalf of the trust’s creator and beneficiaries, always putting their interests above your own. Indeed, you have a legal obligation to act in a trustworthy and honest manner, while providing the highest standard of care in executing your duties.

This means that you are legally required to properly manage the trust and its assets in the best interest of all the named beneficiaries. And if you fail to abide by your duties as a fiduciary, you can face legal liability. For this reason, you should consult with us for a more in-depth explanation of the duties and responsibilities a specific trust will require of you before agreeing to serve.

Regardless of the type of trust or the assets it holds, some of your key responsibilities as trustee include:

  • Identifying and protecting the trust assets
  • Determining what the trust’s terms require in terms of management and distribution of the assets
  • Hiring and overseeing an accounting firm to file income and estate taxes for the trust
  • Communicating regularly with beneficiaries and meeting all required deadlines
  • Being scrupulously honest, highly organized, and keeping detailed records of all transactions
  • Closing the trust when the trust terms specify

No experience necessary
It’s important to point out that being a trustee does NOT require you to be an expert in law, finance, taxes, or any other field related to trust administration. In fact, trustees are not only allowed to seek outside support from professionals in these areas, they’re highly encouraged to do so, and the trust estate will pay for you to hire these professionals.

So even though serving as a trustee may seem like a daunting proposition, you won’t have to handle the job alone. And you are also often able to be paid to serve as trustee of a trust.

 

Get Ready for 2020 Taxes - Kienitz Tax Law

 

Although you may have just filed your 2019 income taxes in July, now is the time to start thinking about your 2020 return due next April. While it’s always a good idea to be proactive when it comes to tax planning, it’s particularly important this year.

In addition to annual updates for inflation, the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides individual taxpayers with several new tax breaks, most of which will only be available this year. The sooner you learn about the different forms of tax-savings available, the more time you will have to take advantage of them.

Here are 6 ways your 2020 return will differ from prior years:

1. Waived RMDs
You are typically required to take an annual required minimum distribution (RMD) from your IRA, 401(k), or other tax-deferred retirement account starting in the year when you turn 72, but the CARES Act temporarily waived the RMD requirement for 2020. The waiver also applies if you reached age 70½ in 2019, but waited to take your first RMD until 2020, as allowed under the SECURE Act.

RMDs generally count as taxable income, so taking this waiver means that you may have lower taxable income in 2020 and therefore owe less income taxes for 2020.

However, there are a number of factors to consider, including the state of the market and your living expenses, when deciding whether or not to waive your RMDs. Given this, consult with your tax professional before making your final decision.

2. Higher standard deduction

If you do not itemize deductions, you can use the standard deduction to reduce your taxable income. Trump’s tax reform legislation nearly doubled the standard deduction starting in 2018, and it has increased even more for inflation since then. For 2020, the new standard deduction amounts include the following:

  • $12,400 for single filers
  • $24,800 for those who are married filing jointly
  • $18,650 for people filing as a head of household

3. Higher contribution limits for certain retirement accounts Depending on the type of retirement account you are invested in, the maximum amount you can contribute may have increased this year. The contribution limit for a 401(k) or similar workplace-retirement plan has increased from $19,000 in 2019 to $19,500 in 2020. If you are 50 or older in 2020, the 401(k) catch-up contribution limit is $6,500, up from $6,000.

On the other hand, the amount you can contribute to a traditional IRA remains the same for 2020: $6,000, with a $1,000 catch-up limit if you’re 50 or older. However, if you made too much money to contribute to a Roth IRA last year, the maximum income limits for contributing to a Roth have increased, so you may be able to contribute in 2020.

In 2020, eligibility to contribute to a Roth IRA starts to phase out at $124,000 for single filers and $196,000 for married couples filing jointly. Those phase-out limits are up from 2019, which started at $122,000 for single individuals and $193,000 for married couples.

4. New charitable deduction
In most years, you are only able to deduct charitable donations on your income tax return when you itemize deductions. However, the CARES Act included a provision to allow everyone to claim up to a $300 “above-the-line” deduction for charitable contributions, if you take the standard deduction in 2020. This change was designed to encourage people to donate money to charity to help with COVID-19 relief efforts.

5. Adoption credit changes
If you adopted a child this year, you can claim a higher tax credit on your 2020 return to cover your adoption-related expenses such as adoption fees, court and attorney costs, and travel expenses. The maximum credit amount for 2020 is $14,300, which is an increase of $220 from last year.

6.New rules for early withdrawals from retirement accounts
If your finances were seriously impacted by the coronavirus, you may be in dire need of funds to cover your expenses. Thanks to new rules under the CARES Act, you now have more flexibility to make an emergency withdrawal from tax-deferred retirement accounts in 2020, without incurring the normal penalties.

Ordinarily, permanent withdrawals from traditional IRAs or 401(k) accounts are taxed at ordinary income rates in the year the funds were taken out. And pulling out money before age 59 1/2 would also typically cost you a 10% penalty.

But thanks to the CARES Act, you can avoid the 10% penalty (if under 59 1/2) on up to $100,000 in coronavirus-related distributions (CRDs) from your retirement account. You are also allowed to spread such distributions over three years to reduce the tax impact. Or better yet, you can opt to put this money back into your retirement account—also within three years—and avoid paying taxes on the money all together.

That said, emergency withdrawals are only available to those individuals with a valid COVID-19-related reason for early access to retirement funds.  These reasons include:

  • Being diagnosed with COVID-19
  • Having a spouse or dependent diagnosed with COVID-19
  • Experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19 or lack of childcare due to COVID-19
  • Have had a job offer rescinded or a job start date delayed due to COVID-19
  • Experiencing adverse financial consequences due to an individual or the individual’s spouse’s finances being affected due to COVID-19
  • Closing or reducing hours of a business owned or operated by an individual or their spouse due to COVID-19

Because early withdrawals can negatively impact your retirement savings down the road, if you are looking to take advantage of this provision, you should consult with your financial advisor first. Also note that employers are not required to participate in this provision of the CARES Act, so you’ll also need to check with your plan administrator to see if it’s available at your workplace.

Maximize tax-savings for 2020
While the deadline for filing your 2020 income taxes isn’t until April 15, 2021, with all of the new COVID-19 legislation, the earlier you start planning your taxes, the better. Let me know if you need support in clarifying how these new changes will affect your return and to implement strategies to maximize your tax savings for 2020 and beyond.

 

What Estate Planning Documents Do Your Young Adult Children Need?

While estate planning is probably one of the last things your teenage kids are thinking about, when they turn 18, it should be one of their (and your) number-one priorities. Here’s why: At 18, they become legal adults in the eyes of the law, so you no longer have the authority to make decisions regarding their healthcare, nor will you have access to their financial accounts if something happens to them.

With you no longer in charge, your young adult would be extremely vulnerable in the event they become incapacitated by COVID-19 or another malady and lose their ability to make decisions about their own medical care. Seeing that putting a plan in place could literally save their lives, if your kids are already 18 or about to hit that milestone, it’s crucial that you discuss and have them sign the following documents.

Medical Power of Attorney
A medical power of attorney is an advance directive that allows your child to grant you (or someone else) the legal authority to make healthcare decisions on their behalf in the event they become incapacitated and are unable to make decisions for themselves.

For example, a medical power of attorney would allow you to make decisions about your child’s medical treatment if he or she is in a car accident or is hospitalized with COVID-19.

Without a medical power of attorney in place, if your child has a serious illness or injury that requires hospitalization and you need access to their medical records to make decisions about their treatment, you’d have to petition the court to become their legal guardian. While a parent is typically the court’s first choice for guardian, the guardianship process can be both slow and expensive.

And due to HIPAA laws, once your child becomes 18, no one—even parents—is legally authorized to access his or her medical records without prior written permission. But a properly drafted medical power of attorney will include a signed HIPAA authorization, so you can immediately access their medical records to make informed decisions about their healthcare.

Living Will
While a medical power of attorney allows you to make healthcare decisions on your child’s behalf during their incapacity, a living will is an advance directive that provides specific guidance about how your child’s medical decisions should be made, particularly at the end of life.

For example, a living will allows your child to let you know if and when they want life support removed should they ever require it. In addition to documenting how your child wants their medical care managed, a living will can also include instructions about who should be able to visit them in the hospital and even what kind of food they should be fed.

Durable Financial Power of Attorney
Should your child become incapacitated, you may also need the ability to access and manage their finances, and this requires your child to grant you durable financial power of attorney.

Durable financial power of attorney gives you the authority to manage their financial and legal matters, such as paying their tuition, applying for student loans, managing their bank accounts, and collecting government benefits. Without this document, you will have to petition the court for such authority.

Peace of Mind
As parents, it is normal to experience anxiety as your child individuates and becomes an adult, and with the pandemic still raging, these fears have undoubtedly intensified. While you can’t totally prevent your child from an unforeseen illness or injury, you can at least rest assured that if your child ever does need your help, you’ll have the legal authority to provide it. Contact us if you have any questions.

 

Estate Planning Essentials for Same-Sex Couples - WillWritten Will Writing

 

A case on the Supreme Court’s docket for October could have a major impact on the parental rights of same-gender couples seeking to adopt or foster children. In February, the high court agreed to hear Fulton v. City of Philadelphia, which deals with whether taxpayer-funded, faith-based foster care and adoption agencies have a Constitutional right to refuse child placement with LGBTQ families.

In March 2018, the City of Philadelphia learned that Catholic Social Services (CSS), an agency it contracted with to provide foster care services was refusing to license same-gender couples as foster parents. This was despite the fact the agency consented to abide by a city law prohibiting anti-LGBTQ discrimination.

The city told CSS it would not renew their contract unless they abided by its nondiscrimination requirements, but CSS refused to comply, and the city cancelled its contract. CSS then sued the city, claiming it had a First Amendment right to refuse licensing same-gender couples, since those couples were in violation of their religious beliefs.

Both a federal judge and the 3rd Circuit Court of Appeals sided with the city, noting the city’s decision was based on a sincere commitment to nondiscrimination, not a targeted attack on religion. From there, CSS took the case to the Supreme Court.

Rampant discrimination at the state level
LGTBQ adoptions are particularly contentious right now at the state level. The Supreme Court has yet to rule on the issue of the parental rights of non-biological spouses in a same-gender marriage. Given this, many married same-gender couples looking to obtain full parental rights in every state turn to second-parent adoption, as the Supreme Court has previously ruled that the adoptive parental rights granted in one state must be respected in all states.

That said, 11 states currently permit state-licensed adoption agencies to refuse to grant an adoption, if doing so violates the agency’s religious beliefs. In other states, the law specifically forbids such discrimination, but as we’ve seen in the Fulton case, those laws are being challenged.

Estate planning offers another option

No matter how the Supreme Court rules, same-gender couples seeking parental rights have another option—estate planning. It may be surprising to hear, but it’s critically important for you to know that when used wisely, estate planning can provide a non-biological, same-gender parent with necessary and desired rights, even without formal adoption.

Starting with our Kids Protection Plan®, couples can name the non-biological parent as the child’s legal guardian, both for the short-term and the long-term, while confidentially excluding anyone the biological parent thinks may challenge their wishes. In this way, if the biological parent becomes incapacitated or dies, his or her wishes are clearly stated, so the court will keep the child in the non-biological parent’s care.

Beyond that, there are several other planning tools—living trusts, powers of attorney, and health care directives—we can use to grant the non-biological parent additional rights. We can also create “co-parenting agreements,” legally binding arrangements that stipulate exactly how the child will be raised, what responsibility each partner has toward the child, and what kind of rights would exist if the couple splits or gets divorced.

Secure parental rights—and your family’s future
Whether you are married, or in a domestic partnership, even with no children involved, it’s critically important you understand what will happen in the event one (or both) of you becomes incapacitated or when one (or both) of you dies. Proper planning can ensure your beloved is left with ease and grace, not a financial and legal nightmare that could have been avoided.

With proper guidance and support, you can ensure your partner or spouse will be protected and provided for in the event of your incapacity or when you die, while preventing your plan from being challenged in court by family members who might disagree with your relationship.

 

 

Where Not To Die In 2019

The 2020 Democratic National Convention just wrapped up and Vice-president Joe Biden was officially nominated as the Democratic candidate for president. The Republican National Convention will kick off next week with President Donald Trump slated to be nominated for a second term. With the major candidates set, It’s sure to be an exciting (if you’re a political junkie like me) campaign season until the final votes are cast on November 3.

Personally, I have never voted based on party. I always take a long hard look at the issues and who I think will best address them before casting my vote. While there are many, many issues to consider before voting, I’m going to focus on taxes for this article. And of course, there are many, many different tax issues, but I’m going to limit this discussion to inheritance and estate taxes, two issues I deal with on a professional level, every day.

Under current law, heirs receive a “stepped-up basis” in inherited assets. That means an heir’s basis (for tax purposes) is equal to the fair market value of the asset on the date the asset is inherited, not the original cost of the asset. This valuation scheme often saves heirs tens and even hundreds of thousands of dollars (sometimes even millions) in capital gains taxes on inherited assets.

Trump is likely to continue this system while Biden’s plan is to eliminate the step-up. It’s not clear whether Biden’s proposal would assess the full tax to the heir upon the sale of the asset or make the decedent’s estate pay the tax before the asset is passed to the heir. And while that distinction becomes important for the final amount of the tax, either way, the bottom line is that Biden’s plan will cost our heirs a lot—the current inheritance tax savings on an asset’s increased value equals 15 to 20 percent.

As for estate taxes, the law under Trump provides an exemption amount of $11.58 million per individual (indexed for inflation). That means, only those with a net worth above $11.58 million are subject to the current 40% estate tax. I can help clients above that net worth legally reduce or even avoid those taxes with advanced estate planning techniques, but that comes at the price of additional legal fees, both now and for their heirs.

Biden has yet to commit to all proposals, but the joint Biden-Sanders Unity Task Force recommends returning the estate tax to it’s historical norm which likely means rolling back the estate tax to the 2009 levels of a $3.5 million exemption and a 45% tax. That would mean the government would take 45% of any decedent’s net worth above $3.5 million before the decedent’s heirs got what was left. Again, with advanced estate planning techniques, my clients in that category would be able to reduce or eliminate those taxes, but their legal fees (and those of their heirs) would increase.

While I do believe tax policy is an important consideration when electing our government officials, in no way do I mean to suggest you should vote for or against any candidate based solely on his or her tax plan. My goal, as always, is to provide whatever education I can to help you make informed decisions for yourself and your family. And whether you ultimately favor Biden or Trump (or one of the third party candidates), I do encourage you to vote. Countless servicemen and servicewomen have sacrificed, bled, and died to ensure we have the right to determine the leaders who will tackle our important issues. In November I for one plan to honor all those who have sacrificed so much to give me that right. I hope you will join me.

 

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

 

 

 

Tiger King: Joe Exotic's former zoo handed to rival Carole Baskin ...

 

Anyone who has seen the hit Netflix documentary Tiger King: Murder, Mayhem, and Madness can attest that it’s one of the most outlandish stories to come out in a year full of outlandish stories. And while Tiger King’s sordid tale of big cats, murder-for-hire, polygamy, and a missing millionaire may seem too outrageous to have any relevance to your own life, the series actually sheds light on a number of critical estate planning issues that are pertinent for practically everyone.

Over seven episodes, Tiger King provides several shocking, real-life examples of how estate planning can go horribly wrong if it’s undertaken without trusted legal guidance. In this article, we’ll discuss some of the worst planning mistakes made by key people in the documentary, while offering lessons for how such disasters could have been avoided with proper planning.

The Feud

While the documentary’s dark, twisted plot is far too complicated to fully summarize, it focuses primarily on the bitter rivalry between Joe Exotic and Carole Baskin, who are both owners and breeders of big cats. Joe, the self-professed “Tiger King,” whose real name is Joseph Maldonado-Passage, runs a roadside zoo in Oklahoma filled with more than a hundred tigers, lions, and other assorted animals.

Carole is the owner of Big Cat Rescue, a Florida-based sanctuary for big cats rescued from captivity. As an avid animal rights activist, Carole goes on a public crusade against Joe, seeking to have his zoo shut down, claiming that he exploits, abuses, and kills the animals under his care.

The feud between Joe and Carole goes on for decades, and eventually peaks after Carole wins a million-dollar trademark infringement lawsuit against Joe and Joe is ultimately convicted of hiring a hitman to kill Carole and sentenced to 22 years in federal prison.

Although the clash between Joe and Carole takes center stage and exposes key estate planning concerns related to business ownership and asset protection (which we’ll have to cover in a separate article) the most egregious planning errors are made by Carol’s late husband Don Lewis.

Missing millionaire

Don, a fellow big-cat enthusiast who helped Baskin start Big Cat Rescue, mysteriously disappeared in 1997 and hasn’t been seen since. After having him declared legally dead in 2002, Carole produced a copy of Don’s will that left her nearly his entire estate—estimated to be worth $6 million—while leaving his daughters from a previous marriage with just 10% of his assets.

Carole was not only listed as Don’s executor in the will she presented, but she also produced a document in which Don granted her power of attorney. However, the planning documents Carole produced were deemed suspicious by multiple people who were close to Don for a number of reasons.

Don’s daughters and his first wife claim that Don and Carole were having serious marital problems before he disappeared, and that Don was planning to divorce Carole. As evidence of this, we learn that Don sought a restraining order against Carole just two months before he vanished, in which he alleges Carole threatened to kill him. A judge denied the restraining order, saying there was “no immediate threat of violence.”

Don’s daughters also claim that around the time the restraining order was filed, their father created a will that left the vast majority of his estate to them, and he did so in order to minimize any claims Carole might have to his property should he pass away. Additionally, Don’s administrative assistant, Anne McQueen, said that before he disappeared, Don gave her an envelope containing his new will and a power of attorney document, in which he named Anne as his executor and power of attorney agent, not Carole.

Anne said Don told her to take the envelope to the police if anything should happen to him. According to Anne, the envelope with Don’s planning documents was kept in a lock box in Don’s office, but she claims Carole broke into the office and took the documents 10 days after he disappeared. Anne believes Carole forged the will and power of attorney she ultimately presented to the court.

Carole vehemently denied all of these claims. She further alleged that Don sought to disinherit his children in his will, and it was only at Carole’s suggestion that Don left them anything at all.

Although law enforcement investigated Don’s disappearance from Tampa to Costa Rica, Hillsborough County Sheriff Chad Chronister said the investigation failed to uncover any physical evidence, only a conflicting series of stories and dead ends. In light of this, Don’s estate passed through probate in 2002, and his assets were distributed according to the terms of the will Carole presented, leaving Carole with the bulk of his $6-million estate, and leaving Don’s daughters with just a small fraction of his assets.

While there’s more to the story surrounding Don’s planning documents and Carole’s suspicious actions, let’s look at the planning mistakes Don made and how they could have been easily prevented.

The Big Lesson: Always work with an experienced estate planning lawyer when creating or updating your planning documents, especially if you have a blended family. If Don’s children and assistant are correct and Don created a will that left his daughters the bulk of his estate and disinherited Carole, it appears he did so without the assistance of an attorney. This was his first big mistake.

There are numerous do-it-yourself (DIY) estate planning websites that allow you to create various planning documents within a matter of minutes for relatively little expense. Yet, as we can see here, when you use DIY estate planning instead of the services of a trusted advisor guiding you and your family, the documents can easily disappear or be changed without anyone who can testify to what you really wanted. In the end—and when it’s too late—taking the DIY route can cost your family far more than not creating any plan at all.

Even if you think your particular planning situation is simple, that turns out to almost never be the case. There are a number of complications inherent to DIY estate plans that can cause them to be ruled invalid by a court, while also creating unnecessary conflict and expense for the very people you are trying to protect with your plan.

And while it’s always a good idea to have a lawyer help you create your planning documents; this is exponentially true when you have a blended family like Don’s. If you are in a second (or more) marriage, with children from a prior marriage, there’s an inherent risk of dispute because your children and spouse often have conflicting interests, particularly if there’s substantial wealth at stake. The risk for conflict is significantly increased if you are seeking to disinherit or favor one part of your family over another, as Don was claimed to have done with Carole.

Finally, as we saw with Don, if your loved ones can’t find your planning documents—whether because they were misplaced or stolen—it’s as if they never existed in the first place. Yet, if Don had enlisted the support of an experienced planning professional, his documents would have likely been safeguarded from being lost, stolen, or destroyed.

 

 

Prenup: Romance killer or wealth protector? - The Globe and Mail

 

 

Last week, I discussed some of the pros and cons of using prenuptial agreementshttps://www.calilaw.com/prenuptial-agreement-pros-and-cons/ . Here, we’ll look at different estate planning vehicles that could provide similar—or even better—protection than prenups.

 

Revocable living trust created by you: By setting up a revocable living trust and funding it with your separate assets before getting married, those assets would likely be considered non-marital property and not subject to division by the court upon divorce—as long as you never commingle any of those assets with your spouse after your marriage. To ensure your separate property assets stay separate, it’s vital that you create and fund the trust with your assets before the marriage and never add any assets acquired or created during the marriage.

 

If you commingle assets acquired during the marriage in a trust containing your separate non-marital assets, a court could declare all of those assets as marital property subject to claim as part of a divorce settlement. To this end, a revocable trust only protects your separate assets from divorce if they remain separate from marital property throughout the whole length of your marriage.

 

You can also use a revocable living trust to provide for your surviving spouse and children from a previous marriage in the event of your death or incapacity. Unlike a will, assets held by a trust are not subject to the court process known as probate, so those assets would be immediately available to your spouse and kids, sparing your family the time, expense, and potential conflict of probate.

 

Note that since a revocable trust is “revocable” by definition, there is no asset protection for assets in your revocable trust, meaning that a revocable living trust will not protect your assets from creditors during your lifetime. If you want to achieve protection from both a future divorce and future creditors, you may want to consider one of the irrevocable trusts below.

Irrevocable trust created by your family: You can protect your assets from divorce by having your parents (or another loved one) establish an irrevocable trust for you before your marriage. Then, the Investment Trustee of the irrevocable trust (who could be you) could purchase all of your existing assets in an arms-length transaction and manage those assets inside of the trust, where they are totally protected from a future divorce and any future creditors.

Note that this strategy does require special provisions to ensure you cannot make distributions to yourself from the trust without the approval of an “independent trustee.” This trustee could be a best friend or a professional trustee, but cannot be anyone related or subordinate to you.

Your parents or grandparents could also leave any future inheritance you are to receive to this irrevocable trust, ensuring that your inheritance would also be protected. If this irrevocable trust is properly established and the terms are well-drafted, all assets the trust owns—and any assets left to you in the future—will be fully protected from a future divorce, future creditors, and even from estate taxes and probate upon your death. Yes, I like these trusts a lot.

 

Irrevocable trust created by you: It’s also possible for you to establish an irrevocable trust for yourself and gift your assets into the trust to keep them safe from divorce. However, this strategy is not as airtight as having a parent or grandparents establish the trust for you.

When you gift assets to an irrevocable trust, there’s a risk that a spouse or future creditor can claim fraudulent conveyance, depending on how soon you gift those assets after creating the trust. That said, if you are looking for asset protection and an alternative to a prenuptial agreement, and do not have a parent or grandparent available, a self-settled irrevocable trust can be a great second-best alternative.

Start your marriage off right
If you are getting ready to tie the knot and would like to ensure that assets you bring into the marriage don’t end up being lost in a future divorce settlement or are protected for your kids from a prior marriage, it is important to take action now. Once you are married, many planning options are off the table.

 

And regardless of your concerns about divorce, you definitely need to create or update your estate plan to protect and provide for your soon-to-be-spouse and any children you have in the event of your death or incapacity.

 

 

The Pros and Cons of Prenups | Tim W. Smith, Attorney at Law

If you’re counting down the days to your wedding, divorce is probably the last thing you and your fiancé want to be thinking about, and yet you might be rightfully concerned about what would happen to your assets in the event of a divorce—or your death. You may also be worried that suggesting a prenuptial agreement could hurt your future spouse’s feelings by making him or her think you don’t trust them, thereby creating friction before the marriage even begins.

I do recommend talking with your future spouse about your assets, what would happen in the event of your death, and also making plans in advance so you can feel confident that any children from a prior marriage (or an expected inheritance) are well-planned for no matter what happens. But introducing the topic of a prenup during that conversation is a hugely personal decision. To help you make the best decision for you I have put together a list of prenup pros and cons.

Prenup Pros

Sets clear financial expectations: For many couples, not openly discussing money and the partnership’s financial expectations can lead to big problems down the road. In fact, money problems are one of the leading reasons that marriages end, right up there with infidelity. A well-counseled prenuptial agreement could be an opportunity to start your marriage with complete transparency and clearly establish the financial and property rights of each spouse should a divorce occur or in the event of the death of either spouse. 

Helps protect your separate assets: If you have any tangible or intangible assets you are bringing into the marriage that you don’t want to risk losing, a prenuptial agreement can help shield that property from divorce proceedings or from a future “elective share” of a spouse upon your death. This can be vital if you have significant assets like a business, real estate, intellectual property, vehicles, or family heirlooms. And, if you know you’ll want to ensure your assets go to children from a prior marriage, a prenuptial agreement can protect those assets for your children.

Helps prevent a lengthy, contentious, and expensive divorce: Divorce is never fun and can often be both emotionally and financially painful, but putting a prenuptial agreement in place could make it less so. Clearly establishing the financial and property rights of each spouse when the relationship is at its most loving—and putting those parameters in a legally-binding document—can greatly reduce the chances of you two duking it out in court later if your marriage doesn’t work out. A long, expensive court battle is the last thing you need when dealing with the painful emotions and often-hefty legal fees associated with a divorce.

Helps prevent disputes over debt: Not everyone is equal in their ability to manage their money. As I mentioned earlier, disagreements over finances are a frequent reason marriages fail. Therefore, it could be a good idea to use a prenup to identify who is responsible for taking care of specific debts and liabilities. You don’t want to be stuck paying for your ex-spouse’s credit card debt when you had nothing to do with racking it up.

Prenup Cons

It’s not exactly a romantic gesture: People often perceive creating a prenuptial agreement stems from an expectation the marriage will fail or that it indicates a lack of trust. Such concerns should be respected and addressed as tactfully as possible. But the reality is marriage involves lots of issues that aren’t romantic, and dealing with such delicate matters up front could bring the two of you closer (or expose hidden red flags), regardless of whether an agreement is actually created or not. Whatever you do, however, don’t wait to have the discussion until right before the ceremony. It’s not only extremely rude, but it could lead a court to invalidate an agreement put in place at the last minute as being created with undue pressure.

It might not be necessary: What a prenuptial agreement can cover depends on what kind of assets you have and where you live. Given this, existing divorce laws might already split your assets up in a way you think is fair. For example, in community-property states, the court will divide the property you and your spouse acquired during the marriage in an equal 50/50 split, while each spouse gets to keep his or her separate property.

It can’t resolve issues of child custody, support, or visitation: It’s important to note that prenups can’t address certain issues related to children and divorce. For example, though prenups can help ensure your children from a prior marriage are able to inherit assets you want to leave them, these agreements cannot be used to address child support, custody, or visitation rights. Those issues must be resolved by the court, so a prenup would be useless if that’s all you’re hoping to achieve.

It may require two lawyers to be valid: Prenuptial agreements may be invalidated if both parties are not represented by independent legal counsel. And depending on the lawyers you each work with, lawyers who are not well-experienced with counseling, care, and conflict resolution can inadvertently escalate or intensify conflicts, rather than supporting you and your future spouse to get on the same page.

Alternative options

If you plan ahead, certain estate planning vehicles can be used to protect your assets from divorce settlements and ensure that assets pass to your children from a prior marriage in the event of a divorce. There are different types of trusts, for instance, that can be set up to allow you to protect assets for yourself in the event of a divorce, and for your children in the event of your incapacity or death.

In fact, such planning vehicles may prove much more effective at protecting your assets and providing you with more control over how your assets are distributed than a prenup. Next week I’ll cover the various ways to use estate planning vehicles to proactively protect your assets as an alternative to having multiple attorneys draft  a prenup or risk losing assets to a new spouse in the event of divorce or death.

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

 

 

 

 

Five Wishes Archives - Minority Nurse

Last week I discussed the vital importance of having updated advance directives in place considering COVID-19. Here, we’ll look at several provisions you might want to consider adding to your directives to address potential contingencies related to the pandemic.

  1. Permission to undergo experimental medical treatments: Since there is currently no proven vaccine or other effective treatment for COVID-19, you may consider adding provisions to your directives authorizing your agent to consent to—or withhold consent for—any experimental treatments or procedures that may be developed. Seeing that it could be years before an effective vaccine or cure will be available on a widespread basis, such a provision could be particularly important if you contract the virus while such treatments are still in the trial phase.
  2. Express your wishes about intubation and ventilators: In severe COVID-19 cases, patients often require intubation, which involves putting you into a medically induced coma and inserting a tube into your windpipe, allowing oxygen to be pumped directly to your lungs using a ventilator. However, some directives specifically prohibit intubation, since such measures are often a last resort and used primarily for life-support purposes. Indeed, some people’s greatest fear is being hooked up to a machine just to keep them alive.

    That said, some coronavirus patients have successfully recovered after being on a ventilator, so you might not want a blanket prohibition of intubation in all cases. But you’ll also need to weigh the fact that even if you survive after being placed on a ventilator, you’re likely to require months, or even years, of rehabilitation and may never regain the full quality of life you previously enjoyed. And if you’re elderly or have an underlying condition, the prognosis for full recovery is especially slim.

    For these reasons, you should carefully review your directives’ provisions regarding intubation and ventilators to be certain your documents accurately reflect your wishes. There is no right or wrong answer here, so it’s critical your loved ones and medical professionals know what you would want.

    To help you make more informed decisions, read What You Should Know Before You Need a Ventilator, a doctor’s perspective about intubation’s potential health consequences for COVID-19 patients. Additionally, you can find a more comprehensive discussion of coronavirus treatment decisions at the non-profit Compassion & Choices resource page, COVID-19: Understanding Your Options.

  3. Consider a liability shield for doctors and hospitals: Due to fear of getting sued, some doctors and medical facilities are hesitant to honor living wills during the pandemic. To deal with this, you might want to consider including language in your directives that “indemnifies” medical providers, facilities, and your agent from any liability incurred because of following your directions. People and institutions will be much more likely to fully honor your wishes if they understand they likely won’t get hit with a lawsuit for doing so.

Pandemic planning

The tragic reality of the pandemic is that far too many Americans are at risk of becoming seriously ill and even dying from COVID-19. In light of this dire situation, it’s vital that you and your loved ones take all possible precautions to not only mitigate your chances of catching the virus, but also having the best possible chance of surviving if you should become infected.

In the event you become hospitalized with COVID-19, having updated advance directives in place can make the medical decision-making process for both your healthcare providers and family much safer and easier, while helping ensure your treatment is carried out based on your personal wishes and values. Given the overloaded state of our healthcare system right now, facilitating your medical care in this way could ultimately save your life.

Whether you have yet to create these documents or need yours updated, don’t wait. These documents only work if you have them in place before you become incapacitated.

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