Revocable Living Trust | Your Estate Plan Can Protect You in Many Ways

November 6, 2020 is “National Love Your Lawyer Day,” which started in 2001 as a way to celebrate lawyers for their positive contributions and encourage the public to view lawyers in a more favorable light. As your Personal Family Lawyer®, we’re dedicated to improving the public’s perception of lawyers by offering family-centered legal services specifically tailored to provide our clients with the kind of love, attention, and trust we’d want for our own loved ones. With that in mind, this post gives some insight into how this vision for a new law business model first came about.
If you’re like most people, you likely think estate planning is just one more task to check off of your life’s endless “to-do” list.

You may shop around and find a lawyer to create planning documents for you, or you might try creating your own DIY plan using online documents. Then, you’ll put those documents into a drawer, mentally check estate planning off your to-do list, and forget about them.

The problem is, estate planning is not a one-and-done type of deal.

In fact, if it’s not regularly updated when your assets, family situation, and the laws change, your plan will likely be worthless when it’s needed most. What’s more, failing to update your plan can create its own set of problems that can leave your family worse off than if you’d never created a plan at all.

The following true story illustrates the consequences of not updating your plan, and it happened to a friend of mine who also happens to be an estate planning lawyer.

A game-changing realization

When my friend was in law school, her father-in-law died. He’d done his estate planning—or at least thought he had. He paid a law firm roughly $3000 to prepare an estate plan for him, so his family wouldn’t be stuck dealing with the hassles and expense of probate court or drawn into needless conflict with his ex-wife.

And yet, after his death, that’s exactly what did happen. His family was forced to go to court in order to claim assets that were supposed to pass directly to them. And on top of that, they had to deal with his ex-wife and her attorneys in the process.

As my friend tells it, she was totally perplexed. If her father-in-law paid $3,000 for an estate plan, why were his loved ones dealing with the court and his ex-wife? It turned out that not only had his planning documents not been updated, but his assets were never properly titled.

Her father-in-law created a trust, so that when he died, his assets would pass directly to his family, and they wouldn’t have to endure probate. But some of his assets had never been transferred into the name of his trust from the beginning. And since there was no updated inventory of his assets, there was no way for his family to even confirm everything he had when he died. To this day the family doesn’t know if they uncovered all of his assets.

Will your plan work when your family needs it?

We hear similar stories from our clients all the time. In fact, outside of not creating any plan at all, one of the most common planning mistakes we encounter is when we get called by the loved ones of someone who has become incapacitated or died with a plan that no longer works. Yet by that point, it’s too late, and the loved ones are forced to deal with the mess left behind.

We recommend you review your plan at least every three years to make sure it’s up to date, and immediately amend your plan following events like divorce, deaths, births, and inheritances. This is so important, we’ve created proprietary systems designed to ensure these updates are made for all of our clients, so you don’t need to worry about whether you’ve overlooked anything as your family, the law, and your assets change over time.

 

6 Reasons Why You Should Have An Estate Plan

 

 

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. Last week I wrote about the first big reason you might want to get your planning in place (sparing your family from a lengthy and costly court proceeding). Read on for the second big reason you should consider not putting off your planning any longer:

  1. You have no control over who inherits your assets
    If you die without a plan, the court will decide who inherits your assets, and this can lead to all sorts of problems. Who is entitled to your property is determined by California’s intestate succession laws, which hinge largely upon whether you are married and if you have children.

Spouses and children are given top priority, followed by your other closest living family members. If you’re single with no children, your assets typically go to your parents and siblings, and then more distant relatives if you have no living parents or siblings. If no living relatives can be located, your assets go to the state.

But you can change all of this with a plan and ensure your assets pass the way you want.

It’s important to note that state intestacy laws only apply to blood relatives, so unmarried partners and/or close friends would get nothing. If you want someone outside of your family to inherit your property, having a plan is an absolute must.

If you’re married with children and die with no plan, it might seem like things would go fairly smoothly, but that’s not always the case. If you’re married but have children from a previous relationship, for example, the court could give everything to your spouse and leave your children out. In another instance, you might be estranged from your kids or not trust them with money, but without a plan, state law controls who gets your assets, not you.

Moreover, dying without a plan could also cause your surviving family members to get into an ugly court battle over who has the most right to your property. Or if you become incapacitated, your loved ones could even get into conflict over your medical care. You may think this would never happen to your loved ones, but we see families torn apart by it all the time, even when there’s little financial wealth involved.

You should create a plan that handles your assets and your care in the exact manner you wish, taking into account all of your family dynamics, so your death or incapacity won’t be any more painful or expensive for your family than it needs to be.

 

 

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.

A last will and testament can ensure your wishes are respected when you die. But if your will isn’t legally valid, those wishes might not actually be carried out, and instead the laws of “intestate succession” would apply, meaning that the state decides who gets your stuff, and it’s very likely not to be who you would choose.

If you’ve created a will online, we congratulate you for doing SOMETHING, but I strongly recommend that you have it reviewed and make sure it does what you want and is actually legally valid. I’ve seen it far too many times: someone THINKS they’ve created a will, because they did something, but the SOMETHING was the WRONG THING, and their family is left to deal with the fallout, confusion and complications that result.

The validity of a will depends on where you live when you die, as last will and testament laws vary from state to state. California requires wills to meet the following criteria in order to be legally binding:

The Essential Requirements
You must be at least 18 years old or an emancipated minor to create a legally valid will.

  • You must be of sound mind and capable of understanding your intentions for your estate, who you want to be a beneficiary, and your relationship with those people when you create your will.
  • You must sign your will or direct someone else to sign it if you are physically incapable of doing so.
  • There must be at least two witnesses—who are not beneficiaries— present at the signing.

Handwritten Wills
You may write a holographic will, which means a will that is written completely in your own hand, with no other printed material on the page. In that case, there are no witnesses required, and, in fact, having a witness would make the will invalid because there must be no other writing other than your hand on the page for a holographic will to be valid.

When a Will Isn’t Valid
If your will does not adhere to the legal requirements, the court will declare it invalid. In this case, your estate would pass under California’s intestacy laws, which means your assets would go to your closest living relatives, as determined by the law. And that may or may not be who you would want to receive your assets.

Is a Will All You Need?
A will is a baseline foundation for any estate plan, but it might not be enough to protect your family. A will does not keep your assets out of court, and it does not operate in the event of your incapacity. It also does not ensure your minor children will only ever be cared for by whom you choose. And a will alone cannot ensure your loved ones receive your assets protected from unnecessary conflict or creditors.

The best way to ensure your will is legally valid is by consulting with an experienced estate planning attorney to confirm your will follows California’s laws and to evaluate your estate plan to ensure it will protect your wishes and provide for your family according to those wishes in the event of your incapacity, or when you die.

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

People Discussion Meeting Give Help Donate Charity Concept

 

 

If you have highly appreciated assets like stock and real estate you want to sell, it may make sense to use a charitable remainder trust (CRT) to avoid income and estate taxes—all while creating a lifetime income stream for yourself or your family AND supporting your favorite charity.

A CRT is a “split-interest” trust, meaning it provides financial benefits to both the charity and a non-charitable beneficiary. With CRTs, the non-charitable beneficiary—you, your child, spouse, or another heir—receives annual income from the trust, and whatever assets “remain” at the end of the donor’s lifetime (or a fixed period up to 20 years), pass to the named charity(ties).

How a CRT works
You work with us to set up a CRT by naming a trustee, an income beneficiary, and a charitable beneficiary. The trustee will manage the trust’s assets to produce income that’s paid to you or another beneficiary.

The trustee can be yourself, a charity, another person, or a third-party entity. However, the trustee is not only responsible for seeing that your wishes are carried out properly, but also for staying compliant with complex state and federal laws, so be sure the trustee is well familiar with trust administration.

With the CRT set up, you transfer your appreciated assets into the trust, and the trustee sells it. Normally, this would generate capital gains taxes, but instead, you get a charitable deduction for the donation and face no capital gains when the assets are sold.

Once the appreciated assets are sold, the proceeds (which haven’t been taxed) are invested to produce income. As long as it remains in the trust, the income isn’t subject to taxes, so you’re earning even more on pre-tax dollars.

Income options
You have two options for how the trust income is paid out. You can receive an annual fixed payment using a “charitable remainder annuity trust (CRAT).” With this option, your income will not change, regardless of the trust’s investment performance.

Or you can be paid a fixed percentage of the trust’s assets using a “charitable remainder unitrust (CRUT),” whereby the payouts fluctuate depending on the trust’s investment performance and value.

 Tax benefits

Right off the bat, as mentioned above, you can take an income tax deduction within the year the trust was created for the value of your donation—limited to 30% of adjusted gross income. You can carry over any excess into subsequent tax returns for up to five years.

And again, profits from appreciated assets sold by the trustee aren’t subject to capital gains taxes while they’re in the trust. Plus, when the trust assets finally pass to the charity, that donation won’t be subject to estate taxes.

You will pay income tax on income from the CRT at the time it’s distributed. Whether that tax is capital gains or ordinary income depends on where the income came from—distributions of principal are tax free.

 If you have highly appreciated assets you’d like to sell while minimizing tax impact, maximizing income, and benefiting charity, give us a call, so we can find the best planning options for you.

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

Marc Signature Blogs

PARENT-CHILD-CUSTODY-91024Your children are your pride and joy. It is no surprise that at some point or another, every parent likely becomes concerned about who will care for a minor child or children if one or both parents die or are incapacitated. From a financial perspective, many parents turn to life insurance in an effort to take care of their family in the event of death. While it is true that life insurance is a particularly helpful financial tool to protect your loved ones, it is just as important to consider how to leave the proceeds to your minor children. Beyond this, you should also consider how to incorporate your retirement money (IRAs and 401(k)s) into your overall estate plan.

Once you decide to purchase life insurance you will name a beneficiary of the death benefits.  You also name a beneficiary on your retirement accounts.  But, if you fail to have a system in place and your children are minors at the time they inherit these assets, the court will appoint a conservator to “watch over” a minor person’s money. This process requires attorneys’ fees, court proceedings, supervision from the court, and will generally limit investment options — all costs and delays that will not help your children, but rather cost them a significant percentage of their inheritance. Another downside? Whatever’s left when the child turns 18 will be handed over, without any guidance or boundaries. This can impact college financial aid opportunities as well as open a ready opportunity for irresponsible spending that most parents would never intend.

How To Leave Assets?

There are several ways in which you can structure your life insurance policies, retirement accounts, and overall estate plan to benefit your minor children in the most streamlined way possible.

First, instead of naming minor children as beneficiaries, use a children’s trust to manage and use the money for the benefit of your children. This lets you designate someone you think will manage the money well, rather than leaving it to the whims of the court.

Second, select and name a guardian to handle the day-to-day care for your children. This person can be different than the person managing in the money, which can sometimes work well depending on the amounts involved and the different skill sets needed to manage money versus raise children.

Third, if you have a living trust, make sure you have properly funded the trust and aligned your retirement assets with the plan. If you do not yet have a trust, consider the benefits of one over will-based planning.  Both types of plans will allow you to designate how much and when your children will receive the money, but a trust-based plan will allow you to do so without court involvement.

Benefits of a Trust

Generally, parents list a minor child as the secondary or contingent beneficiary on life insurance and retirement accounts after first naming the surviving spouse as a primary beneficiary. This may work, as long as everyone dies in the “right” order and at the “right” time. But, it’s a gamble, and providing structure through a trust for these inheritances is a vastly superior option. Unlike guardianship or custodian accounts, where the proceeds must be handed over once the minor(s) turns a certain age, you can specify at which age your child receives the proceeds. This allows you to specifically designate how the money is to be used, so it will be available for important life events, while protecting your children from reckless spending. Ultimately you have more control with a trust, and your customized plan will provide the best protection for your family.

If you have any questions about how to leave assets to your minor children — whether it is a life insurance policy, a retirement account, or any other asset — contact us today so we can help you explore the options available to your family, determine what tax implications will result, and advise you on the best structure that will protect your family’s needs.

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

Marc Garlett 91024

inheritance and gifting 91024If you’re thinking about giving your children their inheritance early, you’re not alone. Studies suggest that these days, nearly two-thirds of people over the age of 50 would rather pass their assets to the children early than make them wait until the will is read. It can be especially satisfying to fund our children’s dreams while we’re alive to enjoy them, and there’s no real financial penalty for doing so if you structure the arrangement correctly. Here are four important factors to consider when planning to give an early inheritance.

  1. Keep the tax codes in mind.

The IRS doesn’t really care whether you give away your money now or later—the lifetime estate tax exemption is expected to be $11.18 million per individual in 2018, regardless of when the funds are transferred. So, whether you give up to $11.18 million away now or wait until you die with that amount, your estate will not owe any federal estate tax (although remember, the law is always subject to change). You can even give up to $15,000 per person (child, grandchild, or anyone else) per year without any gift tax issues at all. You might hear these $15,000 gifts referred to as “annual exclusion” gifts. There are also ways to make tax-free gifts for educational expenses or medical care, but special rules apply to these gifts. Your trusted advisor can help you successfully navigate the maze of tax issues to ensure you and your children receive the greatest benefit from your giving.

  1. Gifts that keep on giving.

One way to make your children’s inheritance go even farther is to give it as an appreciable asset. For example, helping one of your children buy a home could increase the value of your gift considerably as the home appreciates in value. Likewise, if you have stock in a company that is likely to prosper, gifting some of the stock to your children could result in greater wealth for them in the future.

  1. One size does not fit all.

Don’t feel pressured to follow the exact same path for all your children in the name of equal treatment. One of your children might actually prefer to wait to receive her inheritance, for example, while another might need the money now to start a business. Give yourself the latitude to do what is best for each child individually; just be willing to communicate your reasoning to the family to reduce the possibility of misunderstanding or resentment.

  1. Don’t touch your own retirement.

If the immediate need is great for one or more of your children, resist the urge to tap into your retirement accounts to help them out. Make sure your own future is secure before investing in theirs. It may sound selfish in the short term, but it’s better than possibly having to lean on your kids for financial help later when your retirement is depleted.

Giving your kids an early inheritance is not only feasible, but it also can be highly fulfilling and rewarding for all involved. That said, it’s best to involve a trusted financial advisor and an experienced estate planning attorney to help you navigate tax issues and come up with the best strategy for transferring your assets. Give us a call today to discuss your options.

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

Marc Garlett 91024

family loan 91024More and more, children and grandchildren are skipping the traditional bank and obtaining loans from parents or grandparents. Unfortunately, we have all heard stories of families torn apart because of disagreements over money. So, what can you do to make sure your intra-family loans help — rather than hurt — your family?

As far as estate planning is concerned, money you lend to others is legally an asset. If you have lent money to a family member, the presence of these assets in your estate can be problematic for your surviving family members. This is because your executor and successor trustee are under a legal requirement, known as fiduciary care, to collect the outstanding obligation, even if the other party is a family member.

If the amount of money that you have lent out is significant — and “significant” can be relative — it is important to document it as you plan your estate. For example, if you wish to forgive the debt there are special terms that must be included in your trust or will for this to happen. On the other hand, you may want the debt to be paid out of the inheritance the borrower is otherwise receiving. In that case, the payment of the debt from the inheritance must be addressed in your estate planning documents.

A Brief Loan Primer
A loan is a legal and financial arrangement where money is borrowed and is expected to be paid back with interest. Generally, a loan involves a promissory note, which is a signed document by the borrower containing a written promise to repay a stated sum of money to the lender in accordance with a schedule, at a specified date, or on demand. In some cases collateral, like real estate or other property, is used to secure the loan. Collateral is something pledged as security for repayment of the loan. If the borrower quits making payments, then the collateral can be taken by the lender.

Lending as an Estate Planning Tool
When properly structured and well documented, loans can be a smart estate planning tool for many families. This is because lenders (usually grandparents or parents) can essentially give access to an inheritance without any immediate gift or estate tax problems, generate a better return on their cash than they could with bank deposits, and borrowers (usually children or grandchildren) can take out loans at interest rates lower than commercial rates and with better terms. In fact, the Internal Revenue Service allows borrowers who are related to one another to pay very low rates on intra-family loans. Furthermore, the total interest paid on these types of transactions over the life of the loan stays within the family. If structured and documented properly, intra-family loans may effectively transfer money within the family, for the purchase of a home, the financing of a business, or any other purpose.

Sometimes loans can be used in sophisticated estate tax planning strategies as a way to shift assets into special estate-tax saving trusts. One variant of this technique is sometimes called an installment sale to a grantor trust. Although this sophisticated strategy and others like it are usually only appropriate for those with a net worth of at least several million dollars, other types of intra-family loans, perhaps for home improvement, an automobile purchase, or a business, can help families across the wealth spectrum.

There are a few important points to keep in mind regarding these types of loans: the loan must be well-documented, lenders should usually ask for collateral, the lender should make sure the borrower can repay the loan, and the income and estate tax implications should be examined thoroughly.

Deciding What You Want
While you were kind enough to help a member of your family by lending him or her money, do not let this become a legal dilemma in the event of your incapacity or after your death. Instead, use your estate plan to specifically express what you want to have happen regarding these assets. Before lending money, it is important to carefully consider how the loan should be structured, documented, and repaid. If you or someone you know has lent money and has questions about how this affects your estate plan, let us know and we’ll help you find the answers.

Dedicated to empowering your family, building your wealth and defining your legacy,
Marc Garlett 91024

gift giving 91024Although it’s the season of giving, no one wants to share with the IRS. Luckily, the law provides you many opportunities to give gifts to family, friends, and charities tax-free.  Some are straightforward, while others may require the help of a professional.

Your Yearly Coupons

Each year on January 1st, everyone receives what can be thought of as yearly coupons for tax-free gifts. There are several different ways you can redeem these coupons:

  • Annual exclusion gifts. These gifts are transfers of money or property that do not exceed the annual gift tax exclusion. These gifts can be given on one or more than one occasion throughout the year, the key is that you add up the gifts throughout the year. In 2017, you can give up to $14,000 ($28,000 for married couples) per recipient without owing any gift tax or filing a gift tax return. These gifts can be cash or property but they must be of a “present” interest. Without giving a “present” interest – for example, if you plan on using a trust or an LLC to make your gift, it’s best to work with a professional.
  • Pay medical bills. The IRS also allows you to pay an unlimited amount of someone’s medical bills, without worrying about the gift tax. However, the payment must be made directly to the doctor, hospital, or other medical provider in order to qualify.
  • Pay tuition. Additionally, you are able to pay an unlimited amount of tuition bills for the benefit of someone else, as long as the tuition is paid directly to a qualified educational institution. One big issue here is that the gift must be only for tuition – books, fees, living expenses, travel, and other costs of education do not qualify.
  • Give to charity. For those of you who are philanthropically minded, you can give as much money or property to a qualified charity as you want without worrying about the gift tax. As an added benefit, unlike the gifts above, you may also be entitled to an income tax deduction for the charitable gift.

Your Once-In-A-Lifetime Coupon

In addition to our annual coupons, we all have a once-in-a-lifetime coupon for taxable gifts, those that exceed or do not qualify for the annual exclusion, called the unified credit.  It’s called a unified credit because it unifies the gift tax with the estate tax into a coordinated tax system.  Unlike the annual coupons you read about above, once you spend the value of the unified credit coupon for a taxable gift, it’s gone.

Many people assume that because it says taxable gifts, they’ll have to pay the gift tax. Luckily because of the unified credit coupon, most people will never have to actually pay any gift tax. You only have to pay gift tax if your lifetime gifts exceed the unified credit coupon.  Under current law, the amount of the unified credit increases each year, but it never resets (unlike the yearly coupons you read about earlier).  In 2017, the unified credit amount is $5.49 million and is scheduled to increase to $5.6 million in 2018.  However, If you make a taxable gift, you are required to file a gift tax return with your income taxes.  Although the unified credit is currently applicable for gift and estate tax, it is worth noting that the gift tax continues on in the tax proposals being considered by Congress, even as an estate tax repeal is on the agenda.

When should I talk to an estate planner?

If you plan on making a gift in excess of $14,000 in 2017 ($15,000 in 2018), then you should talk with a trusted professional first. Sometimes the best way of making a gift is to just write a check, but other times giving in a trust, through an LLC, or with an undivided interest in property can make more sense and offer your recipient greater benefits (like privacy or asset protection).

While we don’t suggest you give away anything that you might need, if you do have some surplus, gifting programs are a fun way to see your loved ones enjoy your generosity – as long as you do it without drawing the attention of the IRS!

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

Marc Garlett 91024

legacy 91024One of the most important aspects of your estate plan is – or at least should be – protecting and passing on your legacy. And this coming holiday season is a great opportunity to reminisce about your family’s stories, values, and history because you’ll probably have your loved ones nearby.

While having those conversations is important, did you know you can also use a personal property memorandum in your estate plan to pass along special memories and stories about specific items that are meaningful to you and connect your family with the past?

What Is a Personal Property Memorandum?

California state law allows you to include a “personal property memorandum” in your estate plan. This supplemental document, specifically referenced in your will or living trust, lets you describe which personal property items you wish to leave to heirs, without having to call your lawyer and arrange for a meeting. You can handwrite or type this document, but it must be signed and dated to be valid. In conjunction with a will or living trust, a personal property memorandum can provide a roadmap for your executor regarding the distribution of specified items to your beneficiaries.

One important feature of a personal property memorandum is that you can change or update it whenever you like without the assistance of an attorney or notary. This freedom can be beneficial to you, because although you can also change your will as often as you like (and you absolutely should update it periodically to make sure it still reflects your wishes!), updating your will or living trust does require a visit to the estate planner’s office.

Another great reason to have a personal property memorandum in addition to your will and living trust is that your personal possessions likely change more frequently than other assets. For example, you probably add items to your closet more often than you add vehicles to your driveway.

What Can Be Included in a Personal Property Memorandum?

Not every asset can be distributed using a personal property memorandum! However, here are a few examples of assets that we commonly see people list in their personal property memorandum:

  • Furniture
  • Jewelry
  • Clothes
  • Books
  • Photographs and portraits
  • Important certificates (birth, marriage, death, citizenship/naturalization)
  • Collections (coins, stamps, dolls, figurines, etc.)
  • Other family heirlooms

Taking Your Personal Property Memorandum to the Next Level

We include a personal property memorandum as part of each client’s trust plan, but more importantly, I always suggest being a little creative with the process. Instead of just using the legal documents to pass on valuable heirlooms, I encourage each client to take a picture of every item of importance and write two paragraphs on the back of each picture.

The first paragraph is the story of why that item is meaningful. How, why, and when was it acquired? What is the item’s history? Why is the item so important to you? The second paragraph is the story of why you chose that particular person to receive the item. Why is continuing that item’s story on through them so important to you?

The picture makes it clear which items you’re talking about so there’s no confusion. The two paragraphs transform the gift from the realm estate planning documents and legalese into that of heart and soul, making the gift that much more meaningful to the recipient, and continuing the story of the item for future generations just as you ensure the story of your connection to the item lives on.

Giving It Away Now Versus Waiting Until Later

One option you always have is to give personal items to your loved ones while you’re still alive. You can share with them the accompanying stories as you’re making the gift. Indeed, this in-person exchange is often the surest way to know your wishes will be followed. If you do choose to give away possessions during your lifetime, you must be aware of any potential gift tax consequences that could arise for items of a larger value. But, generally any gift or series of gifts, within the calendar year, valued at less than $14,000 (up to $15,000 starting in 2018) can be given without concern.

Remember, verbal wishes alone are insufficient to gift personal property after you’ve passed away. So whether you decide to hand down your prized possessions now or later, know that one of the best gifts you can give your loved ones is the story behind a personal possession that connects it with you and your family forever. A good estate plan not only protects your family financially, it also protects and passes on the stories and heirlooms of your life’s legacy.

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

Marc Garlett 91024