Should You Disinherit a Child?

Most parents choose to leave their estates equally to their children. But sometimes, parents intentionally choose to not leave anything to a child. There may be what the parents consider to be a legitimate reason: one child has been more financially successful than the others; not wanting a special needs child to lose government benefits; or not wanting to leave an inheritance to an irresponsible or drug-dependent child. Sometimes a parent wants to disinherit a child who is estranged from the family, or to use disinheritance as a way to get even and have the last word.

Regardless of the reason, disinheriting a child is hurtful, permanent, and will affect that child’s relationship with his or her siblings. The courts are full of siblings who sue each other over inheritances but even if they don’t sue, it is highly unlikely they will be having family dinners together. Money aside, there is symbolic meaning to receiving something from a parent’s estate. 

Disinheriting a child may be short-sighted and even completely unnecessary. For example:

• A child who appears to be more successful financially may have trouble behind the scenes. The inheritance may be needed now or in the future: finances can change, marriages can collapse, and people can become ill. And unless specific provision is made for them, grandchildren from this child will also be disinherited.
• A spouse, child, sibling, parent or other loved one who is physically, mentally or developmentally disabled—from birth, illness, injury or even substance abuse—may be entitled to government benefits now or in the future. Most of these benefits are available only to those with very minimal assets and income. But you do not have to disinherit this person. A special needs trust can be carefully designed to supplement and not jeopardize benefits provided by local, state, federal or private agencies.
• A child who is irresponsible with money or is under the influence of drugs or alcohol may not be the ideal candidate to receive an inheritance of any size. But this child may need financial help now or in the future, and may even become a responsible adult. Instead of disinheriting the child, establish a trust and give the trustee discretion in providing or withholding financial assistance; you can stipulate any requirements you want the child to meet.

How we choose to include our children in our estate plans says a good deal about our values and faith. Not disinheriting a child who has caused grief and heartache can convey a message of love and forgiveness, while disinheriting a child, even for what seems to be good cause, can convey a lack of love, anger and resentment.

If you have previously disinherited a child and you have since reconciled, update your plan immediately. If your decision to disinherit a child is final, your attorney will know the best way to handle it. Consider telling your child that you are disinheriting him or her so it doesn’t come as a complete surprise. Explaining your reasons will allow for honest discussion, may help deter the child from blaming siblings later and may prevent a costly court battle.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Is a Revocable Living Trust Right for You?

Revocable Living Trusts have become the basic building block of estate plans for people of all ages, personal backgrounds, and financial situations. But for some, a Revocable Living Trust may not be necessary to achieve their estate planning goals or may even be detrimental to achieving those goals.

What Are the Advantages of a Revocable Living Trust Over a Will?

Revocable Living Trusts have become popular because when compared with a Last Will and Testament, a Revocable Living Trust offers the following advantages:

1. A Revocable Living Trust protects your privacy by keeping your final wishes a private family matter, since only your beneficiaries and Trustees are entitled to read the trust agreement after your death.  On the other hand, a Last Will and Testament that is filed with the probate court becomes a public court record which is available for the whole world to read.
2. A Revocable Living Trust provides instructions for your care and the management of your property if you become mentally incapacitated.  Since a Last Will and Testament only goes into effect after you die, it cannot be used for incapacity planning.
3. If you fund all of your assets into a Revocable Living Trust prior to your death, then those assets will avoid probate.  On the other hand, property that passes under the terms of a Last Will and Testament usually has to be probated. A probate could add thousands of dollars of costs at your death.

Why Shouldn’t You Use a Revocable Living Trust?

Although Revocable Living Trusts offer privacy protection, incapacity planning, and probate avoidance, they are not for everyone.

For example, if your main concern is avoiding probate of your assets after you die, then you may be able to accomplish this goal without the use a Revocable Living Trust by using joint ownership, life estates, and payable on death or transfer on death accounts and deeds.  However, those strategies aren't a perfect fit for everyone.

In addition, if you are concerned about protecting your assets in case you need nursing home care, then an Irrevocable Living Trust, instead of a Revocable Living Trust, may be the best option for preserving your estate for the benefit of your family. The rules governing Irrevocable Living Trusts can be very complex, and you should only create an Irrevocable Living Trust after a thorough discussion with a qualified trust attorney.

Do You Still Need a Revocable Living Trust?

While some estate planning attorneys advise their clients against using a Revocable Living Trust under any circumstance, others advise their clients to use one under every circumstance.  Either approach fails to take into consideration the fact that Revocable Living Trusts are definitely not “one size fits all.”  Instead, your family and financial situations must be carefully evaluated on an individual basis and the advantages and disadvantages of using a Revocable Living Trust must be weighed against your personal concerns and estate planning goals.  In addition, these factors must be re-evaluated every few years since your family and financial situations, concerns, and goals will change over time.

If you have a Revocable Living Trust and it has been a few years since it has been reviewed, then we can help you determine if a Revocable Living Trust is still the right choice for you and your family.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

How to Easily Integrate Asset Protection Trusts into Your Estate Plan

Asset protection has become a common goal of estate planning.  Asset protection trusts come in many different forms and can be used to protect property for your use and benefit as well as for the use and benefit of your family.  

What is An Asset Protection Trust?

An asset protection trust is a special type of irrevocable trust in which the trust funds are held and invested by the Trustee and are only distributed on a discretionary basis.  The purpose of an asset protection trust is to keep the trust funds safe and secure for the benefit of the beneficiaries instead of having the funds be an available resource to pay a beneficiary’s debts.  

Asset Protection Trusts Equal Inheritance Protection

Leaving an inheritance outright to your child or grandchild without any strings attached is risky in this day and age of high divorce rates, lawsuits, and bankruptcies.  Aside from this, your beneficiaries may not have developed the financial skills necessary to manage their inheritance over the long run.  There is also the very real risk that an outright inheritance left to your spouse will end up in the hands of a new spouse instead of in the hands of your children or grandchildren.  Finally, a beneficiary may be born with a disability or develop one later in life that will end up rapidly depleting their inheritance to pay for medical and other bills. 

There are a number of different types of asset protection trusts that you can establish to insure your hard earned money is used only for the benefit of your family:

• Trusts for minor beneficiaries – Minor beneficiaries cannot legally accept an inheritance, so a discretionary trust for a minor is a necessity.
• Trusts for adult beneficiaries – Adult beneficiaries who are not good with managing money, are in a lawsuit-prone profession, have an overreaching spouse, or have an addiction problem will benefit from a lifetime discretionary trust.  
• Trusts for surviving spouses – If you are worried that your spouse will not be able to manage their inheritance, will remarry, or will need nursing home care, you can require your spouse’s inheritance to be held in a lifetime discretionary trust. 
• Trusts for disabled beneficiaries – Disabled beneficiaries who receive an inheritance outright run the risk of losing government benefits and will need to spend down the funds to requalify, but an inheritance left to a special needs trust can be used to supplement, not replace, government assistance.

Drafting an Asset Protection Trust Your Way

Asset protection trusts designed for inheritance protection can be as rigid or as flexible as you choose.  For example, a beneficiary can be added as a co-trustee at a certain age or after the beneficiary reaches a specific goal such as graduating from college.  Another option is to name a corporate trustee, such a bank or trust company, but give the beneficiary the right to remove and replace the corporate trustee with another one.  

You can also make trust distributions as limited or as broad as you choose.  For example, you can state that the funds can only be used to pay medical bills or for education, or the Trustee can be given broad discretion to make distributions in the best interests of the beneficiary.  You may also want to require the Trustee to take into consideration the beneficiary’s income and other assets before making distributions.  Alternatively, the Trustee can be given the authority to deplete the trust for one of the beneficiaries to the detriment of the remainder beneficiaries.  If there are multiple beneficiaries, such as a trust for the benefit of your spouse and your children, the Trustee can be directed to give preferential treatment to one or more beneficiaries over the others. 

The Bottom Line on Asset Protection Trusts

Asset protection trusts offer a great deal of planning opportunities for people of even modest means.  We are available to answer your questions about asset protection trusts and help you integrate this type of planning into your estate plan. 

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Blended Families and the Need for Estate Planning

Anyone with children or modest assets should seriously consider some minimal estate planning, but the increasing number of blended families underscores the need for proper estate planning.

Blended families can involve children from a prior marriage as well as joint children, sometimes joking referred to as “his, hers and theirs.”  And blended families involve both younger and older couples, and nearly everyone in between.

When the new spouse is significantly younger, this sometimes means that the older spouse’s children are close in age to the younger.  These relationships can cause more than friction between the step-parent and step-children.

Most parents want to ensure that their assets will pass to their children, not their stepchildren.  However, absent good estate planning, there is no guarantee that their children will inherit their assets.  In fact, if the couple creates common “I love you” wills such that their assets pass to the survivor of them, there is a significant likelihood their children will be totally disinherited.

This is because all of their assets will pass to the surviving spouse to do with as he or she pleases. More often than not this means excluding the stepchildren, who then receive nothing. 

The fact that Americans are living longer, and sometimes remarrying much later in life, means that blended family issues come into play there too. A recent USA Today article, titled With more blended families, estate planning gets ugly, highlights some of these issues.  The full article is available online.

As this article states, “[a]dd the gaping generational divide between Depression-era parents, who valued frugality above all else, and their Baby Boomer children, who relish self-reward, and the dynamics can be explosive.”

Thus, baby boomer children expecting an inheritance may have to wait much longer than expected. But perhaps more difficult, who should pay for the cost of the surviving spouse’s care? Should the stepchildren be forced to use their inheritance to pay for an aging step-parent’s care, particularly after only a short-term marriage?  Or should this burden fall on the children?

There is no one right answer here, but these questions epitomize the many questions that arise with blended families. These questions should be answered with the help of counsel and proper planning.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.  

Does Your Estate Plan Protect Your Adult Beneficiaries?

If you think you only need to create discretionary lifetime trusts for young beneficiaries, problem
beneficiaries, or financially inexperienced beneficiaries, then think again.  In this day and age of frivolous lawsuits and high divorce rates, discretionary lifetime trusts should be considered for all of your beneficiaries, minors and adults alike.

What is a Discretionary Lifetime Trust?

A discretionary lifetime trust is a type of irrevocable trust that you can create while you are alive – in which case you will gift your assets into the trust for the benefit of your beneficiaries – or after you die – in which case your assets will be transferred into the trust for the benefit of your beneficiaries after death.  

The trust is discretionary because you dictate the limited circumstances when the trustee can reach in and take trust assets out for the use and benefit of the beneficiaries. For example, you can permit the trustee to use trust funds to pay for education expenses, health care costs, a wedding, buying a home, or starting a business.  If the trust is funded with sufficient assets that are invested prudently and you choose the right trustee to carry out your wishes, the trust funds could last for the beneficiary’s entire lifetime.  

How Does a Discretionary Lifetime Trust Protect an Inheritance?

With a discretionary lifetime trust each of your beneficiaries will have a fighting chance against lawsuits and divorcing spouses because their inheritance will be segregated inside of their trust and away from their own personal assets.  By creating this type of “box” around the inherited property, it shows the world that the inheritance is not the beneficiary’s property to do with as they please.  Instead, only the trustee can reach inside the box and, based on your specific instructions, pull funds out for the benefit of the beneficiary.  Creditors, predators, and divorcing spouses are generally blocked from reaching inside the box and taking property out.  

When the beneficiary dies, what is left inside their box will pass to the heirs you choose. You could decide, for example, to have the assets pass to your grandchildren inside their own separate boxes and on down the line, thereby creating a cascading series of discretionary lifetime trusts that will protect the inherited property and keep it in your family for decades to come. 

What Should You Do?

Does all of this sound too good to be true?  It’s not.  Our firm is available to discuss how you can incorporate discretionary lifetime trusts into your estate plan.  Your family will certainly be glad you did.

Contact Bobby Sawyer at (704) 944.3275 or bobby@csjlawonline.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

It’s Not Just About Death and Taxes: The Essential Legal Documents You Need for Incapacity Planning

Comprehensive estate planning is about more than your legacy after death, avoiding probate, and saving on taxes. It must also be about having a plan in place to manage your affairs if you become mentally incapacitated during your life.  

What Happens Without an Incapacity Plan?

Without a comprehensive incapacity plan in place, a judge can appoint a guardian or conservator to take control of your assets and health care decisions.  This guardian or conservator will make all personal and medical decisions on your behalf as part of a court-supervised guardianship or conservatorship.  Until you regain capacity or die, you and your loved ones will be faced with an expensive and time-consuming guardianship or conservatorship proceeding. 

What Happens to Your Finances During Incapacity?

If you are legally incapacitated, you are legally unable to make financial, investment, or tax decisions for yourself. Of course, bills still need to be paid, tax returns still need to be filed, and an investment strategy still needs to be managed. 

So, you must have these two essential legal documents for managing finances in place prior to becoming incapacitated:

1. Financial Power of Attorney.  This legal document gives your agent the authority to pay bills, make financial decisions, manage investments, file tax returns, mortgage and sell real estate, and address other financial matters that are described in the document.   

Financial Powers of Attorney come in two forms:  “Durable” and “Springing.”  A Durable Power of Attorney goes into effect as soon as it is signed, while a Springing Power of Attorney only goes into effect after you have been declared mentally incapacitated.

2. Revocable Living Trust.  This legal document has three parties to it:  The person who creates the trust (you might see this written as “Trustmaker” or “Grantor” or “Settlor” – they all mean the same thing); the person who manages the assets transferred into the trust (the “Trustee”); and the person who benefits from the assets transferred into the trust (the “Beneficiary”).  In the typical situation you will be the Trustmaker, the Trustee, and the Beneficiary of your own revocable living trust, but if you ever become incapacitated, then your designated Successor Trustee will step in to manage the trust assets for your benefit.

Health Care Decisions Must Be Made Too

If you become legally incapacitated, you won’t be able to make health care decisions for yourself. Because of patient privacy laws, your loved ones may even be denied access to medical information during a crisis situation and end up in court fighting over what medical treatment you should, or should not, receive (like Terri Schiavo’s husband and parents did, for 15 years).  

So, you should have these three essential legal documents for making health care decisions in place prior to becoming incapacitated:

1. Medical Power of Attorney.  This legal document, also called an Advance Directive or Medical or Health Care Proxy, gives your agent the authority to make health care decisions if you become incapacitated.

2. Living Will.  This legal document gives your agent the authority to make life sustaining or life ending decisions if you become incapacitated.

3. HIPAA Authorization.  Federal and state laws dictate who can receive medical information without the written consent of the patient.  This legal document gives your doctor authority to disclose medical information to an agent selected by you.

Is Your Incapacity Plan Up to Date?

Once you get all of these legal documents for your incapacity plan in place, you cannot simply stick them in a drawer and forget about them.  Instead, your incapacity plan must be reviewed and updated periodically and if certain life events occur - such as moving to a new state or going through a divorce. If you keep your incapacity plan up to date, it should work the way you expect it to if it’s ever needed.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Organize Information for Your Family

Think for a few moments about what would happen if you suddenly became incapacitated or died. Would your spouse or family know what to do? Would they know where to find important records, assets and insurance documents? Would they be able to access (or even know about) online accounts or files on your computer? Would they know whom to ask if they need help?  Putting the effort in now to establish a formal document inventory can alleviate unnecessary anxiety and turmoil in the future.

The Key Takeaways

• If you should suddenly become incapacitated or die, your family would need to know where to find the information they would need.
• Let your key relationships know where to find your document inventory.
• Do not assume your process will be readily understood by others; have a trial run to make sure they can find and understand your records.
• Keep your inventory current with an annual review.

What Information Would They Need?

There is a large volume of documents and information that your family would need during a calamitous event such as incapacitation (even temporary) or death. This basic list will help you start thinking of the critical information you would want your family to have.

• legal documents (will, living trust, health care documents);
• list of medications you are taking;
• list of your advisors (attorney, CPA, banker, insurance agent, financial advisor, physicians);
• insurance policies (health and life);
• year-end bank and investment account statements;
• storage facility location, access method, and inventory;
• list of other assets, including location, account numbers, date purchased and purchase price;
• safe deposit box location, list of contents and location of key;
• list of people to whom you owe money (mortgage, credit cards, etc.);
• list of people who owe you money;
• death or disability benefits from organizations;
• past tax returns.

Also, many of your records are probably on a computer or stored online. If you scan documents or receive financial statements electronically, someone else may not even know they exist. If you use a computer accounting program such as Quicken, QuickBooks or Mint, those records would be on your computer. Family photos may be stored digitally or online. Much of this information is password protected.

What You Need to Know

Your document inventory requires a methodical listing of both hard copy and digital forms.  While the effort will be more challenging at the start, the maintenance of the inventory is much simpler.  Be mindful that your digital footprint will likely grow much faster in the future than it has in the past. 

Actions to Consider

• Give current copies of your health care documents to your physicians and designated agent(s). 
• Keep your original documents in one safe place, like a fireproof safe or safe deposit box. Make copies for the notebook described next.
• Buy one or two three-ring binders to organize your personal and financial information. You can enter it by hand or create spreadsheets on your computer, but having it all in one or two binders will make it easy for your family to find and use. (If you leave it on your computer, they may never find it.) Include locations, contact information, account numbers and amounts.
• Include a list of online accounts and how to access them (including passwords).
• Clean up your computer desktop and put important files in an easy-to-find desktop folder.
• Have a trial run. Ask your spouse or other family member (or your successor trustee or executor) to pretend that he or she needs to access needed information.
• At least once a year, review and update your notebook, computer desktop files and passwords for online accounts.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Incorporating Faith and Values in Estate Planning

For many, passing along religious beliefs and values to the next generation is just as important as passing along financial wealth and tangible assets. Estate planning creates many opportunities to do this, including:

End-of-Life Care 

A health care power of attorney (Advance Directive in some states) lets you name someone to make medical decisions for you in the event you cannot make them yourself. This can be someone who shares your faith and values about end-of-life issues or someone who will honor your wishes. In either case, it is a good idea to provide written instructions about things like organ donation, pain medication (some may want to remain conscious at the end of life), hospice arrangements, even avoiding care in a specific facility. A visit by a priest, rabbi or other member of clergy may be desired. Pregnant women may want to include their preference on medical decisions that would impact the mother and her unborn child.

Funeral and Burial Arrangements  

Faith can influence views on burial, cremation, autopsy, even embalming. Faith may also influence certain details in a funeral or memorial service. Some people pre-plan their services and include a list of people to notify (which can be helpful for a grieving family). Some even pre-pay for the funeral and burial plots to prevent their loved ones from overspending out of grief and/or guilt.

Charitable Giving

Giving to others who are less fortunate is common among people of all faiths. Making final distributions to a church or synagogue, university, hospital and other favorite causes will convey the value of charitable giving to family members.

Distributions to Children and Grandchildren

Taking the time to plan how assets are left to family members lets them know how much they are loved, and is another way to convey faith values. For example, providing for the religious education of children and/or grandchildren speaks volumes. Parents of young children can select someone who shares their religious views to manage the inheritance. A letter of instruction to the guardian can include views on the care and upbringing of young children, which are often influenced by faith.

If the children are older and a son- or daughter-in-law is not fully trusted, an attorney can assist with providing for a son or daughter in a way that will prevent an inheritance from falling into the wrong hands. However, making an inheritance conditional or disinheriting a child or grandchild who marries outside the faith or doesn’t share their parent’s faith can backfire. We cannot really force someone to believe as we do, and trying to do so by withholding an inheritance will only create discord in the family and may not be recognized. The emotional scars on the family, especially if a bitter legal fight results, are probably not what parents want for their family.

Transferring faith and values to family members is best done over time, by letting them see your faith at work in your life, taking them to religious services, and letting them see you being charitable. But it’s never too late. Talk to your family while you can. Explain what your faith means to you and how it has helped you through difficult moments in your life. You can also write personal letters or make a video that they can keep and review long after you are gone.

Contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for addressing this topic.

Learning from Your Mistakes Can Become Your Teaching Moment

Everyone makes financial mistakes. The key is to learn from them, try not to repeat them and then pass on this hard-earned wisdom to your loved ones as an element of your financial legacy.

The Key Takeaways

• We can learn not only from our own mistakes but also from those of others. 
• Sharing the wisdom gained from these errors can help others avoid them—and the pain and regret that usually accompany them.

One part of advancing ourselves is learning from our own mistakes; another part is learning from the mistakes of others. The latter is decidedly less painful to us than the former! As Eleanor Roosevelt said, “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”

Even the savviest investors make mistakes or have regrets. Learning from others’ mistakes can help us to gain wisdom without the pain of having to go through the experience ourselves.

In many ways the key to long-term investing is learning our lessons well. For your loved ones, identify the top mistakes you’ve made in your financial life and explain why the lessons you’ve learned are important to pass along.

What You Need to Know

Imparting the wisdom you have gained over the years is part of your financial and family legacy. Being candid about your mistakes and regrets also can provide your loved ones a glimpse of the person you once were and have become because of these experiences. 

Actions to Consider

• Think about the things you've learned over the years related to money. Create a list of your lessons, principles and practices. Don’t worry about the wording or order at this point.
• Next, consider the items on the list based on the impact they had on you. Impact is not just financial loss but also anxiety, strife and confusion. One way to judge impact is to read the item and see what thoughts flood your mind or how much your stomach churns; you can be certain that these impact you measurably.
• Now, group your list by greatest impact to least impact.
• Set a schedule, say, each month or quarter, to write out your lessons and how you've applied them, and share this with your loved ones.

Feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com with any questions or issues, or if you would like to discuss some strategies for preserving your legacy.

So, What is a Trust Anyway?

A more "legal-sounding" definition is below, but I find this analogy does a better job of putting the definition in plain English.

Think of a trust as a red wagon.  Without a trust, as you walk through life, you carry everything in your arms, figuratively speaking: your house, IRAs, life insurance, bank accounts, etc.  If you trip (i.e., become incapacitated or pass away), all you stuff ends up on the sidewalk and for everyone else to see.  Your family and loved ones are left to pick everything up and figure out what to do.  

Now imagine that your stuff was in a red wagon instead of your arms.  When you trip, your stuff stays in the wagon, and all that happens is you drop the handle.  Your stuff remains safe, and there are written instructions on what is supposed to happen to your stuff.  Perhaps best of all, not everyone can see what is in your wagon - only the people you want to see.

A Revocable Living Trust is created while you are alive. Your property and assets are transferred into and owned by the Trust, over which you retain full ownership and control.  When properly drafted and executed, your Trust allows your assets to be efficiently distributed upon your death according to your instructions, while avoiding the costly and time-consuming probate process and the mandatory attorney fees associated with probate.

A Trust also contains your instructions for your own care and the care of your loved ones should you become disabled.  And, it keeps your instructions and your financial affairs private, unlike a will.  However, it can only accomplish these objectives if you properly draft, execute, and fund your Trust.

Below are 10 advantages of creating a Revocable Living Trust:

1. Provides one planning document with complete, comprehensive instructions for your care and the care of your loved ones.
2. Provides continuity in the handling of your affairs by efficiently transferring your property to your loved ones.
3. Avoids probate on your disability or death with respect to its assets if your trust is funded properly.
4. Easily moves with you from state to state.
5. Creates protective trusts for your loved ones that are free from the supervision of the probate court.
6. Can be easily changed, should you desire to do so.
7. Enables you to rely on your Trustees, should you wish to travel or otherwise delegate the day-to-day management of your financial affairs.
8. Is difficult for disgruntled heirs to attack.
9. Ensures your family’s privacy following your disability or death.
10. Achieves your death tax objectives.

If  you would like more information on how a Family Legacy Plan uses a trust, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.

7 Questions to Ask Your Parents about Estate Planning

Asking your parents about their estate plan can be a touchy subject for many reasons.  It's difficult to bring up the subject without sounding like you're already coming up with ways to spend their money.  Regardless of where someone is in their life, it's important to have a plan to make sure assets are used in the way intended.

Here are 7 questions that will lead to a productive discussion about estate planning.

1.  Do you have an estate plan?

The majority of Americans have not developed a formal estate plan, or if they do have a plan, it's from a website and likely won't work in the way intended at the right time.  If they have done a formal estate plan, then it should be updated at an absolute minimum every 5 years.  Ideally, the plan should be reviewed with an attorney once a year to account for changes in life.

2.  Am I (or one of my brothers/sisters) a fiduciary in the plan?

If you're named as the executor of a will, successor trustee or a similar position in an estate plan, you'll have a legal obligation to follow your parents wishes and act in the best interests of the beneficiaries.  This can easily run contrary to what you think is best for you or your family.  It can also lead to nasty family fight over assets.  

Here are two alternatives to alleviate the risk of a family feud:

a. Name a professional fiduciary instead of a family member

b. Meet with everyone who stands to receive something under the plan, explain the plan, and then memorialize the meeting, ideally with an attorney.

3. Are the inheritances properly protected?

If you receive something outright - proceeds from a retirement account, property, etc., it can be attacked by a creditor.  In other words, if you end up in a bankruptcy, you could end up losing your inheritance.  If your minor children stand to receive something outright under the plan, then they'll receive it when they're 18.  This could be a problem if that "something" is a large sum of money.

Ideally, any inheritance should come in the form of a trust to protect from creditors and the potential misjudgments of youth.

4.  Are your healthcare documents up to date and HIPAA compliant?

Laws surrounding healthcare are like tax laws - they change often, and the changes can be quite substantial.  If your parents documents are not up to date, their end of life wishes may not be followed.

5.  Do you have a trust?  Has it been properly funded?

A revocable living trust and other trust options are great for an estate plan, but to make them work, they have to be properly funded.  It's also extremely important to make sure that certain things are owned by the trust while others name the trust as beneficiary.  This has significant tax implications.

6.  Do you know what your estate plan tax liability is?

To trigger federal estate taxes in 2014, the estate has to have a value of at least $5.34 million.  In 2015, the taxes start at $5.43 million.  As the law stands right now, the increases in estate taxes at the federal level are tied to inflation.  Of course, this is all subject to change depending on the will of Congress...

The value of the estate is a complicated formula, so it's important to review this regularly and make sure the estate plan takes advantage of tall tax strategies out there.  

7.  Have you considered long term care needs?

The cost of an assisted living facility can quickly eat through retirement savings, and without proper planning, people can find themselves ineligible for Medicare and Medicaid due to "look-back" provisions for qualification purposes.  In addition to planning for these contingencies, people in or near retirement should consider long-term care insurance.  

If you have questions on how to get any of these accomplished, or you would like more information on how a Family Legacy Plan can take care of most of this list, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.

Debt is The Only Thing My Kids Will Inherit

Wrong.  

There are some situations where your kids can "inherit" debt, but there are specific requirements, and most people do not find themselves in those situations.  In fact, in those situations they're not inheriting it at all, but instead fulfilling their obligations as a guarantor on the debt.  I know - two sides of the same coin.

The good news is that there are ways to make sure that assets like retirement accounts, life insurance and other investments go to the benefit of your children and loved ones instead of paying off debt when you are relieved of your mortal coil.

First, let's make sure we understand exactly what happens to debt when one dies.  Well, it depends on what kind of debt it is.  Federally guaranteed student loans are forgiven upon the death of the borrower.  Without a well designed estate plan, most everything else is going to go through probate.  This is oversimplified, but you'll get the idea - probate is a lawsuit filed by you after you die, using your own money, for the benefit of your creditors.  

Of course there are exceptions like life insurance benefits and retirement accounts, but to make sure those funds aren't used to pay other debts, you need a plan.

A will is a good place to start, but it's important to remember that a will must go through probate in order to work.  So we're right back at the same problem.  Additionally, the probate process is completely public.  Anyone can go to a courthouse and find out what someone left to their heirs.  

For some the privacy issue may not be that big of a concern, but think about this: "anyone" includes creditors.  Debt collectors can be a tad bit aggressive, and some of them will have absolutely no problem calling up your loved ones after your gone and telling them that their share of your 401(k) has to be handed over to satisfy credit card debt.  It can and does happen.

If you have questions on what does and does not go through probate, or you would like more information on how a Family Legacy Plan can help protect your estate from creditors, contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.

Tips for the Family CFO

Stress and concerns over the family budget are perhaps the most common instigator for marriage fights.  Often, the lack of money itself is not the problem, rather an underlying issue.  These tips may not solve the root cause, but they should help ease the stress of the never-ending struggle to make ends meet.

It's Not a One Person Job.  I'm having trouble coming up with a part of marriage and raising a family that is a one-person job.  Sure, one person may actually do the work like mowing the lawn, folding laundry or cooking dinner; but, the other partner is watching the kids or taking care of something else that has to be done.  When it comes to finances, both partners should be familiar enough with the ins and outs that if something happens to one, the other can function so that the electricity stays on and there aren't any overdraft fees.

Your Financial Planner Should be a Fiduciary.  A fiduciary is someone who is required to act in your best interest.  There are plenty of investing coaches and mutual fund managers who are more interested in the commission from selling you a particular stock or fund.  A registered investment adviser is a different breed, and he / she is obligated to tell you what is best for you, not for his / her commission.  One of the best ways to ensure your financial adviser's interests are aligned with yours is to pay based on your portfolio's performance.  If you do well, so does the financial adviser and, more importantly, vice versa.

Manage Credit Cards.  Credit card companies make their money off people not paying the balances off.  Credit cards can be a useful tool, and the rewards can be utilized in very creative ways.  However, if you're carrying large credit card debt and paying interest on it, you're on the losing end of that equation.  It's like Vegas - play long enough, and the house always wins.  I recommend paying off the bill each month and tracking credit card spending as if it were cash.  This isn't easy, especially with 3 credit card offers showing up in the mail every day.

Make a Plan.  At a minimum, there should be a budget.  Quicken has an outstanding program for tracking and managing personal finances, and it is compatible with most banks' online features.  You can download your transactions and then review and categorize them to get a very detailed picture on where your money goes each month.  Next, get an estate plan so that all those dollars you saved by following your budget aren't wasted paying unnecessary fees and taxes.

Have a System for Important Documents.  Keep it old school with a filing cabinet and hanging folders, or scan all your important documents and save them as PDF's on your computer.  If you opt for the PDF route, make sure you have a regular backup service like Carbonite so that when your computer crashes, you don't lose every important document along with the hard drive.

If you have questions on how to get any of these accomplished, or you would like more information on how a Family Legacy Plan can help with the CFO duties, feel free to contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.

Can My Family Benefit from Family Legacy Planning?

Yes.

A few questions for you to consider:

1. Do you own a house and/or land?
2. Do you have minor children?
3. Do you have a life insurance policy?
4. Do you have any type of retirement or investment account? For example, 401(k), IRA, 529 plan.

If the answer is yes to any one of these questions, then you and your loved ones can benefit from a family legacy plan.  If you have minor children and a house, then you absolutely need a Family Legacy Plan to help ensure your assets are preserved for your children and loved ones in the most efficient way possible. 

A Family Legacy Plan gives you the piece of mind of knowing who will take care of your children if something were to happen to you, that there are plenty of resources to care for your children, and the plan allows you to determine who supervises your estate's assets for the benefit of your children and loved ones.

A Family Legacy Plan provides you the opportunity to not only plan for our children, but it gives you the ability to designate assets for the benefit of future generations.  With a detailed Family Legacy Plan, you could start building wealth for grandchildren and beyond, and this wealth can be protected from creditors, divorce, and even your loved ones not-so-wise decisions. 

If you are interested in learning what else a Family Legacy Plan can do for you, then contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com. 

What is Family Legacy Planning?

It is a comprehensive approach to ensuring that your loved ones are taken care of, that your assets are protected, and it is a way to create wealth and a legacy that can last generations.

Creating a Family Legacy Plan is much more than just answering a few questions on a form.  It involves careful and detailed assessment of what you have, what is best for your children and loved ones, and how you want your legacy to last well after you pass on.  This cannot be accomplished with a website and a simple will.  It takes counseling, planning, and periodic review to make sure your plan design remains consistent with changes in your life, the law and taxes.

A Family Legacy Plan provides peace of mind.  Sure, a will is part of it, but a Family Legacy Plan includes a Comprehensive Child Guardianship Plan, detailed instructions on how you want your children raised, how you want your assets used, and it works if you become incapacitated - something a simple will cannot do.  A Family Legacy Plan can start working if you are alive, but unable to make decisions for yourself.

If you are interested in learning what else a Family Legacy Plan can do for you, then contact Bobby Sawyer at (704) 266.0727 or rsawyer@sawyer-law.com.