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If You Own a Home, You Need a Trust!

The largest asset most people own is their family home.  It is not only the center of their family life, but security for the surviving spouse and children. It is often the major source of wealth providing an inheritance to one’s survivors.

A trust is legal arrangement or contract into which you can place your home, bank and investment accounts as well as other assets so that they can be used by you or your future heirs.

Trusts typically offer much greater control than a will over who will receive your assets and how and when the beneficiaries will receive their share of your estate.

Trusts are not just for the rich or for older adults.  In fact, it could be argued that those with modest means have the greatest need to preserve what they do have!

One of the principal reasons people put their house in a trust is because assets in a trust do not go through probate when you die. Using a will to distribute your property after you die guarantees that everything will go through probate. Probate is a public court process.  It allows anyone to see everything that was in your estate when you died, how much it was worth, and who received all your things.

One of major disadvantages of probate is that it is expensive.  18 States have fees that are directly based on the size of the estate.  Most others use the “reasonable compensation” standard.  Reasonable compensation however is in the eye of the beholder, meaning the probate judge.  Here in Hawaii reasonable compensation typically runs between 3%-7% of the “gross estate value.”  When calculating the “gross estate value” the mortgage on real estate is not considered.  In September of 2021 the median sales price of a single-family home on Oahu was $1,287,867.  3% – 7% of that amount is $38,636 – $90,151.  The required publication cost in the local newspaper of the notice of opening of a probate estate is over $1,000 just to start.

Another major disadvantage of probate is the significant time involved.  It is not unusual for it to take 7-15 months to complete the process during which time the heirs do not have access to their inheritance.  In complicated or contested cases, the time can run into decades and require huge legal fees and court costs.

Some say that trusts are complicated and expensive.  That use to be true, but with today’s technology and internet access, those excuses are no longer valid.  My company, Interactive Estate Document Systems, www.ieds.online makes comprehensive law-firm quality estate planning document packages, including trusts available quickly and affordably, for less than the cost to publish the opening of a probate estate.

There are many other reasons for establishing a trust for your assets including creditor protection for your heirs, placing conditions on passing property to your heirs, blended families and many others that we will explore in later articles.

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It’s Estate Planning Awareness Week

October 18 through October 24th is IEDS.online’s favorite week of the year! Why…? Because it’s National Estate Planning Awareness Week and we are so happy that Estate Planning is getting the recognition it deserves.

At Interactive Estate Document Systems, it’s Estate Planning Awareness Week every week, and that’s because we’re passionate about helping individuals build their legacies. But for the general population, this week is a great time to gain better insights on why Estate Planning is so important, and why it’s crucial to set up an Estate Plan sooner than later.

Estate Planning is a crucial aspect of financial wellness, yet it is so often disregarded. In fact,  56 percent of Americans don’t have an updated Estate Plan in place according to the National Association of Estate Planners & Councils. That’s more than half of us! So in honor of Estate Planning awareness week, we’re going to:

  • Debunk common Estate Planning myths
  • Provide expert Estate Planning tips

Debunking Common Estate Planning Myths

So why do the remaining 44 percent of Americans not have an Estate Plan in place? It turns out that there are many misconceptions surrounding Estate Planning. In this article, we’ll share some of the most common statements and questions we hear, and debunk each of them. If you are in the large group of individuals who haven’t set up an Estate Plan yet, we hope this information will help you reconsider.

“I don’t really know what Estate Planning is.”

Estate Planning is the process through which a legal plan is put into place, in case anything were to ever happen to you. You can think of an Estate Plan as a written game-plan for your loved ones. In it, you can designate your beneficiaries, how your assets will be divided, and who will be responsible for handling various aspects of your legacy. Not only will your Estate Plan help ensure your loved ones are cared for long-term, it will help alleviate the stress that comes with dealing with logistics. This will help your loved ones have the proper space to grieve.

“Isn’t Estate Planning just for older people?”

Somehow, Estate Planning has become associated with older generations. Perhaps it’s because we seldom see examples of young people planning their estates in mainstream media. The harsh reality is that accidents and tragedies happen even to the young. Are you a young person and have people that you love and want to protect? Then, you need an Estate Plan. Almost everyone over the age of 18 should plan for the unexpected.

“I thought Estate Planning was only worthwhile for the wealthy.”

Another common misconception is that Estate Planning is only for the wealthy. To the contrary, Estate Planning is a process that isn’t limited to just wealth or assets. For example, your Will could designate the division of sentimental possessions amongst your family members. If anything were to happen, it would be clear who would receive particular items, which will help cut down on confusion and unnecessary conflict. In another example, you could take out a life insurance policy as a part of your Estate Plan and name a beneficiary. This way, you could ensure that your partner or child would be cared for in the case of your absence.

“It’s too complicated and expensive – I’ll get around to it eventually.”

The point of Estate Plans is to protect your legacy in the case that something unexpected were to happen. Many individuals are tempted to delay the process of Estate Planning because they are under the impression that it would be costly, complicated, or time consuming. Companies like Interactive Estate Document Systems have revolutionized the industry in a way that makes Estate Planning accessible to everyone. IEDS.online offers an online service that is quick, easy and affordable, allowing you to set up your Estate Plan in minutes. You can do all of this from the comfort of your own home and can get started with very little information.

“I don’t need a Will because all my assets are co-owned with my partner.”

If you have a partner, then you have all the more reason to get the proper documents in place. Your partner will have the right of survivorship for any co-owned assets, but both of you still need to have proper documents. You have no ability to predict which spouse will survive the other. In addition, there are sometimes tragic incidents when something unexpected happens to both partners simultaneously. By having an Estate Plan, you can both ensure that everything ultimately goes to the surviving spouse, or another beneficiary of your choice in case something were to happen to both of you.

“Well I already did my will When I first married. Why would I look at it again?”

Your personal circumstances change with every passing life event. You may be surprised by how often your assets, your wishes, desired beneficiaries, and designations will change over the years. Any additions or changes to your family are especially important times to review your Estate Plan to ensure it stays up-to-date. We suggest setting a reminder for yourself to review your  Estate Plan every three to five years.

10 Estate Planning Tips from the Pros

In the spirit of Estate Planning Awareness Week, we also wanted to share some top Estate Planning tips to help you get started. These are brought to you by our Founder and Head of Legal, Dan Plaskett:

  1. Take an inventory of your tangible and intangible belongings. People often think Estate Planning is all about liquid assets, which are included. But also make sure you take stock of your physical belongings and sentimental valuables.
  2. Think about what is needed to take care of your family’s needs. Create a list of all of your family’s needs, including financial, healthcare, education, and childcare needs. When putting your Estate Planning Documents into place, be sure to designate how these needs will be covered.
  3. Review your beneficiaries on a regular basis. With every life event, your beneficiaries can change. Common events that will cause beneficiary changes or additions include births, deaths, marriage, and divorce. It’s important to update your beneficiaries as soon as possible to ensure that everyone you care for will be covered by your plan.
  4. Look up the estate tax laws in your state. Estate tax is the taxation on the property being transferred from you to a beneficiary as a part of your Estate Plan. Although you can’t necessarily avoid estate tax, there are ways in which it could be reduced. Be sure to consult your tax professional.
  5. Set a calendar reminder to update your Estate Plan. In addition to updating your beneficiaries, there are many aspects of your Estate Plan that will change and shift as life goes on. This includes your inventory of assets and even your desire of how to divide up your assets. Family needs are also another major area that changes often. It’s helpful to set up a regular calendar notification to remind you to review and update your Estate Plan.
  6. Consider a plan for long-term care. An Estate Plan is also important in the case that you require long-term health care and are not able to make your own decisions. You can make arrangements to ensure that your long-term health care costs are covered, as well as provide any special instructions to your caregivers. This will help relieve some burden from your loved ones. [Ready to set up your health care documents so that your end-of-life wishes are clarified? IEDS.online has you covered]
  7. Discuss probate laws with your attorney. Probate laws are different in every state and county, and it’s important to be aware. Probate is the process through which a Will is vetted or “proved” in a court of law. Once the Will is proved, then your executor can start taking actions as instructed in your Estate Plan. Note that setting up a Trust is a great way to avoid the probate process all together.
  8. Include plans for funeral expenses and final arrangement wishes. When a family is grieving the loss of a loved one, it can be painstaking to arrange for a funeral and carry out final wishes. Although this is necessary, you can really show your love for your family and dear ones by including specific plans to cover funeral expenses and how you’d like your final wishes carried out. This will provide your loved ones with a game plan which can help them avoid any complicated guesswork or paying for expenses.
  9. If you own your own business, then you should also include instructions for how your business will be handed over. In other words, this is your succession plan. Designate who will be the executor of your business, and who will have control over business decisions and assets.
  10. Keep your documents organized. Along with your Estate Plan will come many associated documents and statements that are meant to assist your executors in carrying out your wishes. You’ll want to keep your documents in a safe, secure place, and you’ll want to keep them neatly organized. That way, your loved ones will be able to easily locate information as necessary.

No one really wants to spend time thinking about life after they are gone. Perhaps that is the primary reason why many of us procrastinate on setting up an Estate Plan. However, it can be incredibly powerful to shift your mindset surrounding Trusts and Wills. They’re not just for the elderly; they’re not just for the wealthy. They are the ultimate way you can convey your love and care to those closest to you. It will also give you a sense of control and the feeling of peace of mind.

If anything were to ever happen to you, your loved ones will be so relieved to find out that you had a plan put into place to protect them. Instead of being stuck in a logistical nightmare, they’ll have the sacred space to celebrate your life and carry out your legacy.

In the spirit of Estate Planning Awareness Week, are you ready to take control of your future and set up an Estate Plan? It’s easy, secure, and can all be done online from the comfort of your home. Create your Comprehensive Estate Planning Document Package, today!

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Preparing for Coronavirus: The #1 Legal Document Every Adult Needs to Have

As the coronavirus continues to disrupt daily life and leave Americans uncertain of the future, you don’t have to feel helpless during this pandemic. In fact, now is a great time to be proactive and plan ahead should you or a loved one fall ill. One of the most important and relatively easy things you can do (and should do) is to select a medical agent and set up your advance healthcare directive.

What Is a Medical Agent?

A medical agent (also called a healthcare agent, healthcare surrogate, a healthcare proxy, or a medical proxy) is a person you authorize in a medical power of attorney to make decisions about your medical care if you are too ill to make them yourself or are otherwise unable to communicate your wishes.

Why is it important to choose a medical agent now?

As of April 26, there are 2,987,601 total cases of coronavirus. Of those, 206,712 have died and 57,503 are in critical condition (combined about 8.8%). So even if you get sick, you’ll likely have mild symptoms and recover quickly. However, since no one knows exactly how they will be affected by the virus, it’s best to plan for the worst and hope for the best. Part of that planning is making sure someone can make healthcare decisions for you if you fall ill and are unable to make those decisions for yourself.

Factors to Consider in Choosing Your Medical Agent

A medical agent is an important role, and the person you choose will have the power to make critical healthcare decisions—like consenting to a treatment plan, whether to accept or refuse medical treatment, and which healthcare providers or hospitals to use for your care. As a result, it is crucial to think carefully about who you choose to fill this role. Many people simply assume that their spouse or their oldest child should take on this role, but they are not always the best suited. Here are some factors to consider when selecting an agent:

1) Emotional maturity. People handle stress differently, and not everyone is able to set aside their emotions and make level-headed decisions when someone they love is suffering. In addition, some people are simply not assertive enough to act as a strong advocate in the face of differing opinions of other family members–or even health care providers–who suggest a treatment plan you have informed your medical agent you do not want. You should choose someone who is able to think rationally in emotionally difficult circumstances, even if that means you must look outside of your family to find the best person for the job.

2) Location. The person you choose to act as your medical agent should be someone who lives close by and is able to act on your behalf very quickly in the event of a medical emergency or if you need your advocate to serve in that role for an extended time period. In current times, many people might be under a mandatory or recommended stay-at-home order, or may not be available or willing to travel to another city or state.  Consider naming several alternate agents to account for someone’s potential unavailability.

3) Is willing/able to serve. Acting as a medical agent can be a time-consuming and emotionally draining job. Make sure that the person you choose is willing and able to set aside the time necessary to serve as your patient advocate. Don’t just assume the person you want to be your medical agent is willing: Be proactive and ask if he or she is willing to take on that role. Keep in mind that if you are elderly, you may want to avoid naming a friend or family member who also is older, as there is a greater chance that they will experience mental or physical decline at the same time as you, which could impede their ability to serve as your advocate when the time comes.

4) Will honor your wishes no matter what. Your medical agent has a duty to make decisions on your behalf that you would have made to the extent that he or she is aware of your wishes. This is the case even if your medical agent disagrees with your choices. As a result, your medical agent needs to be someone who is willing to set aside his or her own opinions and wishes to carry out yours. It may be prudent to appoint someone who has values and religious beliefs that are similar to yours to reduce the instances in which your agent’s opinions differ significantly from yours. Do not choose anyone that you do not trust to carry out your wishes.

 

People You Should Not Choose

Many states have laws prohibiting certain people from acting as your medical agent, even if they are otherwise well-qualified to act in that role:

1) Minors. Many states have laws expressly prohibiting a minor from being a patient advocate. The age of majority could be 18, 19, or 21 years of age, depending upon the state. Some states have exceptions to this prohibition for married or emancipated minors.

2) Your health care providers. Some states not only prohibit your health care providers from acting as your medical agent, but also preclude the owner, operator, or any employee of any facility in which you are a patient or resident from acting in that role. Some states that have adopted this prohibition make an exception for individuals who are related to you. A few states, such as Kansas, Missouri, and Kentucky, also have an exception if that person is an active member of the same religious organization as you.

Need help?

Medical directives may be among the most important legal documents you prepare – especially in light of COVID-19. Picking a medical agent can be tricky and we can provide information to help you think through your choice. We can also help with any other estate planning needs you may have—whether that’s setting up a financial power of attorney, last will and testament, or a trust. Please visit us online at https://ieds.online to see how we can help you and your family be prepared should you fall ill from the coronavirus.

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Estate Planning Awareness Week: The Importance to You and Your Family of Having an Estate Plan

In 2008, Congress recognized the need for the public to understand the importance and benefits of estate planning by passing House Resolution 1499, which designated the third week of October as National Estate Planning Awareness Week. Nevertheless, according to a 2019 survey carried out by Caring.com, 57% of adults in the United States have not prepared any estate planning documents such as a will or trust despite the fact that 76% viewed them as important. Many of the respondents said this was due to procrastination, but many others mistakenly believed that it was not necessary because they did not have many assets.

Why should you have an estate plan?

An estate plan can provide significant peace of mind by ensuring your assets are protected, plans are in place in the event you become ill, and your property is passed down according to your wishes.

What key topics should you consider?

  • Do you have a last will and testament and/or a trust? If you do not have these important documents, state law will determine who will inherit your property—and thus it may not occur in the way you would have chosen. In addition, someone appointed by the court, instead of a trusted person of your choosing, will be in charge of caring for any children or pets. Spelling out your wishes in a will or trust will also prevent unnecessary confusion, anxiety, and expense for other family members when you are gone.
  • Have the proper powers of attorney been prepared? A financial power of attorney will allow you to designate an individual to make financial and property decisions for you should you become unable to handle your own affairs. A medical power of attorney enables you to designate a person you trust to make medical decisions for you when you are otherwise unable to speak for yourself.
  • Make sure that you have an advanced directive, also called a living will, which memorializes your wishes concerning your end of life care, such as whether you would like to receive life support if you are in a vegative state or terminal condition.
  • Do you have insurance? If you become incapacitated or die, it is important for your family or loved ones to have information about your insurance (such as life, health, disability, longterm care, etc.) so that claims can be filed.
  • Compile a list of all of your accounts and other important information, including bank and investment accounts, titles to vehicles and homes, credit card accounts or loans, digital accounts (such as Facebook, LinkedIn, and Twitter) and passwords, Social Security cards, passports and birth certificates, which may be needed to manage your property when you are incapacitated or settle your estate once you are gone. This information should be kept in a safe place and shared only with trusted family members or loved ones.
  • A list of legal, financial, and medical professionals who have performed services for you is also important. The list should include their contact information so your family can easily reach them in the event their help is needed if you become disabled or die. If desired, you should also ensure HIPAA authorizations are in place with medical professionals to ensure your family members are able to obtain needed information.

How should you encourage your family members to create an estate plan?

Estate Planning Awareness Week is a great opportunity not only to take steps to make sure your own estate plan is in place, but also to talk to your family members, especially elderly parents, about creating an estate plan. Estate planning is often a difficult topic to broach, as it brings the unpleasant topics of aging and death to the forefront of our minds. Here are a few tips to help you start the conversation.

  • Be sensitive to your family members’ feelings. Put yourself in their shoes, and keep in mind that few people are eager to dwell on the subject of their own death. One way to begin the conversation is to talk first about the need to plan for an illness and to provide instructions in the event they become too ill to communicate with doctors or handle financial matters for themselves. The conversation can then naturally progress to the importance of having an estate plan that will enable their assets to be transferred in the way that they wish, provide for the care of any dependents or pets, and minimize any taxes, court costs, and legal fees. Communicate that you are not trying to control their decisions, but only want to ensure that their own wishes regarding their medical care and their property are known—and that all their instructions are in writing to guarantee they are carried out.
  • Involve other family members in the conversation. If you are planning to speak to your parents about the need for an estate plan, it is important to try to include any siblings in the discussion to avoid giving the impression that you are trying to influence or control your parents’ choices. You and your siblings should emphasize to your parents that none of you are asking about what you will inherit, but just want to make sure that their wishes are carried out if they become ill or pass away.

Consult an estate planning professional. An experienced estate planning professional can help you and your family members create an estate plan tailored to meet each of your unique needs and carry out your wishes—or help you update a pre-existing estate plan. We can provide each family member with guidance and information about the options available to them. We can help each of you put a plan in place that will prevent unnecessary stress, legal expenses and taxes, uneven inheritances, disputes between family members, and delays in passing life savings on to loved ones. In addition, it will provide you and your family members with the peace of mind that comes with knowing there are plans in place for your care if any of you become ill and that your wishes will be honored once you pass away.

Visit us at https://ieds.online to get started today.

Shared by permission from Wealth Counsel

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How to Transfer Real Estate to Your Trust

Transferring Your Residence to Your Trust

Your home is likely one of the largest assets in your estate and one you will probably want to transfer to your trust.  A deed is the document that must be prepared and signed to transfer ownership of your home or any real estate (also called real property) into trust. A quitclaim deed is one of the simplest ways to do this and one that you can likely do yourself.

Warranty Deed vs Quitclaim Deed

There are two primary types of deeds used to transfer ownership.  A Warranty Deed provides assurances or guarantees to the transferee from the transferor, for example that the property is owned by the transferor and they can transfer clear title to the property. It is probable that you received a Warranty Deed when you purchased your home. A Quitclaim Deed contains no guarantees of any kind. They are common when property is placed in a trust or when an interest in real estate is received as part of a divorce settlement.

Deed Preparation

If you are using IEDS.online, preparation of the transfer deed is included at no extra charge in the package of documents which can be selected for creation.  If you are not using IEDS for preparation of your estate planning documents and other necessary forms, you will need to get a state specific deed form.  You should be able to find one online.  You may also find one at a local law library by checking books on real property that have forms that you can photocopy.

Most deeds require the same basic information:

  • Current Owner’s Name – If you are the sole owner or are transferring only your separate share of the property to trust use only your name. If joint owners are transferring the property use both parties’ names.  You should use the same form of your name as was used on the deed when you received your interest in the property.
  • New Owner’s Name – Enter your name(s) as trustee(s) exactly as it appears in the title of your trust agreement U/T/A (which stands for Under Trust Agreement) and the date you signed your trust.
  • Legal Description of the Property – Copy the legal description exactly as it appeared on the previous deed.

If you co-own the property with someone else and are only transferring your share, you need to state, along with the legal description that you are only transferring that share (a one-third interest, for example) or that you are transferring “all your interest” in the property.

Once completed, sign and date the deed in the presence of a notary public for the state where the property is located.  Be sure that everyone who is a current owner of the property transferring their interest signs the deed.

Recording the Deed

Once the deed form is prepared, it must be filed (recorded) with the county registrar where the property is located, and you will typically need to pay a filing fee.  Take the original signed, notarized deed and copies to the registrar’s office (may be called land registry or bureau of conveyances or similar name). The registrar will stamp and return the original with a reference number to indicate where the deed can be found in the public records.

Caution: Bad legal descriptions, improper execution formalities, and misstatements of the manner is which title is to be held are just a few examples of how a simple quitclaim deed can result in costly errors. There may also be special titling requirements to take advantage of protections afforded by specific state laws.  For example, in Hawaii the law allows married couples to transfer real estate into trust without losing the creditor protections afforded by titling property as tenants-by-the entirety. But specific requirements for the trust name, provisions and deed of conveyance must be met in order to receive those protections, HI Rev Stat § 509-2.  Bottom line here is that even if you decide to do the transfer yourself, you may save time, money and trouble in the future by having your deed reviewed by a knowledgeable local attorney.

Mortgage Due-on-Sale Clauses

Transferring your real estate to your trust should not affect your mortgage.  In most cases, lenders are forbidden by federal law from invoking a “due-on-sale” clause when property is transferred to a living trust.  The borrower must be a beneficiary of the trust and the transfer must not relate to a transfer of rights of occupancy in the property, 12 U.S. Code § 1701j-3(d)(8).

Insurance

Be sure to check on your title insurance (if you have any) though. It may be possible to simply transfer it to the trust, or your title insurance company may require that the trust buy a new policy. Once the property is transferred, you may need to change your homeowner’s insurance to designate the trust as owner of the property. If you receive a real estate tax or homestead exemption, you’ll want to make sure it is properly applied by providing documentation of the trust to the taxing authority, such as a certificate of trust (which is one of the documents created with each document package from IEDS.online).

This article on How to Transfer Real Estate to Your Trust is provided by Interactive Estate Document Systems – The web’s leading resource for Do It Yourself Estate Planning Documents. Find out more about IEDS.online.

This article contains general legal information and does not contain legal advice. IEDS.online is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please consult a lawyer licensed to practice in your specific jurisdiction.

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10 Things Estate Planning Lawyers Don’t Want You to Know

  1. You don’t need an attorney to do your own Last Will & Testament.

We’ve all seen the fear mongering articles usually written by estate planning lawyers or their friends in the mainstream money rags magazines that equate doing your own estate planning documents with doing your own oral surgery or disarming a ticking time bomb.  And to be fair, sometimes they do make a good point because most of the time when you first undertake any project you’ve never done before, You Don’t Know What You Don’t Know.  If you are unwilling or unable to invest some of your own time and money in acquiring the information and tools necessary to do the job right, you should hire a professional.  Remember, what you are doing is substituting your time for the attorney’s and his staff. There are hundreds of web sites containing a wealth of information you could consult about documents needed to create everything from a basic to a comprehensive estate plan.  A list of everything included in each of our estate planning document packages can be found here. https://ieds.online/contents-of-every-ieds-estate-plan/

Continue reading 10 Things Estate Planning Lawyers Don’t Want You to Know

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New Year’s Resolution – Make an Estate Plan – Protect Your Family in 2019

Well, 2018 is almost over and we get to start fresh in 2019  a few days from now. Each year many of us make New Year’s resolutions. We think about weight loss, eating better, reducing stress in our lives or maybe getting back to that one thing we put off last year. May I suggest you start by protecting your most valuable asset, your family!

Interactive Estate Document Systems (IEDS.online) understands why people put off estate planning. It can be daunting when facing it alone. It comes with complex paperwork and a confusing language all its own. Please watch our 3-minute introductory video here to learn about estate planning and the IEDS.online cost-effective solution.

Many people put off estate planning until it is too late. You already know that a life-changing crisis can happen at any time, leaving your family vulnerable to losing the benefit of your life’s work.  You always have a choice between leaving a legacy of peace or one of chaos.

All states have a legal system in place to handle your estate should that you die without your affairs in order. That system, called probate is costly, public, and rarely matches your wishes. You’ve probably heard from friends, family, or worse yet been involved in, a probate horror story.  Avoiding probate is a very good thing and easily achieved by taking some simple steps.

What is Estate Planning?

Estate planning is the process of creating a plan detailing how your assets will be managed during your lifetime, who will receive your property when you die, when they will receive it, and under what terms. You may think that you do not have enough to plan for, but regardless of the dollar value of your estate, every adult over 18 needs a comprehensive estate plan.

What is a Comprehensive Estate Plan?

  1. Revocable Living Trust:  This is the foundational document of your estate plan.  It provides for assets owned by the trust to avoid probate and contains directions for who receives your property and the terms and conditions under which they receive it after your death.  The Revocable Living Trust can provide lifetime asset protection for your spouse and loved ones so that the legacy you provide cannot be touched by their creditors or by a future ex-spouse. Protection is provided should your spouse remarry or if a child gets divorced or from a bankruptcy court if a surviving spouse or a child files for bankruptcy.
  2. Pour-Over Last Will and Testament: If this was your only estate planning document, it would be where you name the people or charities that would inherit your assets after your death.  In a Revocable Living Trust based plan, the Pour-Over Will typically directs that any property you did not retitle into your Trust during your lifetime is directed to the Trust after going through probate.  If you have minor children, you also need a Will because you nominate people in the Will who you want to be the guardian(s) of your minor children should something happen to you.
  3. Durable Financial Power of Attorney:  If you are in a coma, incapacitated or suffer mental impairment, advanced Alzheimer’s disease or dementia who will handle your financial affairs?  This document sanctions one or more people you select to handle your finances if you become incapacitated.  If you have not signed a Financial Power of Attorney your family may spend thousands of dollars to get a court order that appoints someone as your conservator with the legal right and power to act on your behalf.  Without this document no one will be able to write checks on your bank account and pay your mortgage or other bills.
  4. Healthcare Power of Attorney:  This document is critical because it appoints people who you choose to make decisions about your medical care if you can’t.  If you require medical treatment, but cannot communicate with the doctor, who will decide on your treatment?  If there is a disagreement on treatment between family members on proceeding with risky surgery or other medical procedures the doctor or hospital may require the family to go to court and spend significant dollars and waste precious time to get a court order that says operate or do not operate. With a Healthcare Power of Attorney your doctor will follow the instructions of the individual you name in the document.
  5. Advance Health Care Directive or Living Will and Organ Donation:  You have the right to give instructions about your own health care and especially “end of life” decisions. You also have the right to name someone else to make health care decisions for you. This document lets you do either or both of those things. It also allows you to choose whether to donate your body or organs upon death and the purposes for which those donations may be used.
  6. HIPAA Authorization:  This is a document that authorizes your healthcare providers to give information about your health and medical condition and treatment to the people you name as your healthcare decision makers in your Healthcare Power of Attorney and others you choose to name.
  7. Digital Assets Inventory: More and more of our lives revolve around our online presence.  How to deal with the disposition of our digital assets and persona is an ever-changing area of the law but one thing is clear, it is critical that we provide our survivors a starting point which details our digital footprint.  This document provides a place to record URLs, passwords and other login information that might otherwise be lost upon your death.
  8. Document Locator:  Use this document to tell your family about the existence and location of your important documents, including life insurance information.
  9. Final Disposition and Authorization Instructions:  Designates the person who is authorized to make decisions regarding the final disposition of your body. Also used to make your wishes known and to indicate any “pre-need arrangements” you may have made.
  10. Last Wishes:  This is a document that you can use to plan your funeral or memorial  service and tell your family how you want to be remembered.

Stop Procrastinating – Protect Your Family Before It is Too Late

If you have procrastinated up to now, and do not have an estate plan you have likely left your family at risk.  If you do not take the next step right now to design your own estate plan, the sad reality is that you will most likely continue to procrastinate for many years to come and probably will die without protecting your family. That’s OK if you want your State to decide who inherits your property and if you don’t care about the problems and expense your family may suffer if you die without a comprehensive estate plan in place.

Isn’t your family your most valuable asset? Don’t you want your family to have the protection that a comprehensive estate plan can provide? If the cost is preventing you from making an appointment, compare the cost of an estate plan against money you have spent on things for yourself such as a giant screen TV, furniture, swimming pool, computer system, surround sound system, new car or SUV, boat, country club membership, jewelry, art and other “toys” or expensive items. Don’t spend more on “stuff and things ” than you do to protect your family when something eventually happens to you. IEDS.online has made it very easy and affordable to do the right thing in 2019. Click here to get started.

 

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Why Your Trust Should Always be the Beneficiary of Your Life Insurance

If you’ve ever contemplated establishing a Revocable Living Trust as part of your Comprehensive Estate Plan you probably considered avoiding probate as one of the principal benefits. While it is true that, properly structured and funded, living trusts do indeed avoid probate there are many more important reasons to make it the centerpiece of your dispositive plan.

In fact, avoidance of probate, especially with life insurance, seems like a belt and suspenders approach at best and a completely unnecessary complication. Anyway, we’ve all been taught that assets that pass by beneficiary designation don’t go through probate, right? Well, more about that later. For now, let’s focus on the top reasons your Trust should always be the beneficiary of your life insurance.

1. Protecting the Inheritance for Certain Beneficiaries
One of the most important yet least discussed reasons for making the Trust the beneficiary of life insurance, is that in many cases the intended beneficiaries are simply unable to handle the inheritance. When most of us think about planning our estate we intend to give our property to our husband or wife and our children.

Surviving Spouse as Beneficiary:
Naming a spouse is a common practice. However, if your spouse is or becomes unable to handle financial matters, or you and your spouse divorce, then you will need to review your beneficiary designation to make sure that it is still appropriate. More about whether this is ever the best idea later.

Minor Children as Beneficiary:
While you may name your minor children as your designated beneficiary, we will be unable to pay the life insurance proceeds to your children until the earlier of:

• The date that your children reach the age of majority (usually age 18 or 21, depending on applicable state law).

• The date that a legal guardian of the minors’ estate has been appointed by a court. This appointment process can be costly, and state laws may limit who may be named a guardian of an estate. Generally, a guardian of the minors’ estate will hold the money for their’ benefit until they reach the age of majority, usually age 18 or 21, depending on state law.

We all cringe when we hear stories about the 18-year-old that receives a large sum of money, immediately heads out to buy a new expensive car and goes on a two-month party binge with a dozen of his closest friends.

But it’s not just the newly minted adults that lack the skills to properly handle large sums of money. Some may just be spendthrifts that have never been financially responsible. Others may be in a less than rock solid marriage or going through bankruptcy at the time the insured departs this mortal plane.

Unfortunately, the grieving widow is often prayed upon by less than honorable suitors leaving her and the insured’s children high and dry after the money’s all been spent. Then there are those who have special needs or are currently receiving some form of government benefits that would be disqualified by receipt of an outright inheritance.

Perhaps an example here would provide some clarity.

Let’s imagine a scenario where a husband and wife are in a car accident in which the husband is killed and the driver of the other car is seriously injured. Further assume that the wife was at fault and the other driver sues and receives an award of $500,000 in excess of the auto insurance policy liability limits of the husband and wife. If the couple had a $500,000 life insurance policy on the husband to provide for his wife’s and their children’s living expenses with the wife as the primary beneficiary, all those funds would be immediately available to satisfy the wife’s judgment creditor potentially leaving the family penniless.

Or consider this fact pattern. Let’s assume you have an only child, a 19-year-old daughter who is a sophomore in college. Both husband and wife die. If you are like the vast majority, you’ll want your daughter to receive all your property. But the question is, is it wise to reduce all the assets to cash and write her a check for let’s say $750,000. Wouldn’t it be prudent to create a trust for her benefit, properly structured to ensure that her educational expenses would be taken care of along with her general living expenses and any other items that you specify in the Trust. The Trustee which could be a trusted friend, family member, attorney, CPA, local bank, financial advisor or some combination, who would manage and invest the trust. The Trustee would hold the funds for your daughter’s benefit until she reached a more mature age say 25 at which time all or a portion of the inheritance would be made available for withdrawal. It may be your desire to permit a series of withdrawals available at various ages, for example 1/3 at age 25, 1/3 at age 30 and the remainder at age 35.

Dependent upon your personal financial philosophy you may even determine that it is best to keep the property in trust for her lifetime while providing the flexibility for the trustee to purchase property to be used by her as a family home, and living expenses or even investing in a business, providing for lifetime asset protection for your daughter against future creditors or the claims of a divorcing spouse.

Trusts have been used to protect property this way for hundreds of years. Asset Protection is arguably the primary reason to establish and utilize one today.

2. Stuff Happens
Unfortunately, life doesn’t typically bend itself to your planning. People don’t always die in the order that we expect and when that happens the typical primary beneficiary, contingent beneficiary designations that many advisors recommend simply don’t work.

For an example consider the following fact pattern. John Doe has a $1,000,000 life policy with his wife, Mary Doe as the primary beneficiary and his 3 children as contingent beneficiaries who are to receive 1/3 each. The oldest son Matt, age 25, is killed in an automobile accident along with his mother Mary Doe. He leaves a wife and two children ages 2 years and 9 months and is survived by his younger brother Tim and sister Ruth ages 21 and 17 respectively.

John dies 1 year later but never thought to change the beneficiary designations on his life insurance. What happens? Stuff happens! and it is probably stuff that John, had he thought about it, wouldn’t have wanted.

Tim receives a check for $500,000 immediately.

Ruth’s $500,000 is held in a guardianship account for a year until she reaches age 18 at which time she receives a check for $500,000 plus earnings outright.

Matt’s widow receives nothing!

3. Blended Families
“Modern Family” is a TV show that is typical of many blended families today. Jay has two grown children and four grandchildren. Jay and his second wife Gloria have a son together and Gloria has a son from a previous marriage. Oh, and did I mention that his new wife is close in age to his children.
Once you have been through a divorce you understand that “till death do us part” may not be how the story ends. You want to take care of your spouse, children, and grandkids but leaving it to them to work it out or counting on your spouse to be fair, is both unfair to the surviving spouse and potentially a recipe for disaster.

The biggest issue for blended families is that your spouse may, over the years, decide not to leave anything to your children from a previous marriage. Additionally, in the case with a much younger new spouse, it’s quite possible that he/she could live for as long or longer than their age contemporary step-children. Life insurance proceeds left in a well thought out trust can avoid the very real conflict that could easily, and probably will, ensue with a simple beneficiary designation dispositive plan.

4. Probate
The Estate as Beneficiary
If life insurance proceeds are payable to the decedent’s estate, the beneficiaries of the estate won’t receive the proceeds until a legal process called “probate” is completed. By naming a beneficiary other than the estate, the life insurance proceeds can be paid to a designated beneficiary almost immediately after a claim for life insurance benefits has been filed and without having to go through the probate process.
In addition, naming the estate as the beneficiary of life insurance proceeds may subject them to the claims of the decedent’s “creditors” (i.e. people and institutions to whom they owe money). This means there may be less money to distribute to the heirs under the Will.
Life insurance proceeds payable to a designated beneficiary other than the decedent’s estate will generally not be subject to the claims of his/her creditors.

Estate Planning 101 teaches us about the various ways property passes upon death. Probate is typically not necessary if property is passed by operation of law, i.e. joint ownership of property with rights of survivorship. Probate is also not required if property is passed by beneficiary designation. Life insurance, qualified plan proceeds, annuities, Pay on Death or Transfer on Death accounts are a few examples. These are all typically seen and often used in implementing a dispositive plan for a decedent.
However, all these methods of property transfer on death have one thing in common – they are all unrestricted outright transfers. At the moment of death, all rights in the property are vested in the beneficiary or the joint tenant and likewise subject to the recipient’s creditor’s claims or to the whims of a spendthrift beneficiary.

They are also potentially subject to probate! Unless the recipient of the life insurance proceeds take affirmative steps to do their own planning the proceeds will be subject to probate on their subsequent death. While there are certainly actions that can be taken to avoid the subsequent probate, payment of the life insurance proceeds into a trust would have made those actions unnecessary.

5. Estate Taxes
Federal estate taxes must be paid if the net value of an estate at death is more than the amount exempt at that time. Currently the federal exemption is $11,180,000, adjusted annually for inflation. Some states also have their own estate or inheritance tax, so it is possible that the estate could be exempt from federal tax but have to pay a state tax.
If the estate will not have to pay estate taxes, naming a living revocable trust as beneficiary of the policies will give the trustee control over the proceeds. It also ensures that the court will not be able to control the proceeds if a beneficiary is a minor, incapacitated or no longer living when the insured dies.
If the estate will be subject to estate taxes, it would be better to set up an irrevocable life insurance trust and have the trust own the policies. This will exclude the value of the insurance from the decedent’s estate, resulting in reducing the size of the estate and any estate taxes owed so more can be left to the beneficiaries.

Consider the restrictions on transferring existing policies to an irrevocable life insurance trust. Should the owner die within three years of the transfer date, the IRS will treat the transfer as one made in contemplation of death and the value of the insurance will be included in the estate for purposes of calculating the estate tax. There may also be a gift tax. These restrictions, however, do not apply to new policies purchased by the trustee of this trust.

6. Inheritance Taxes
As the saying goes: The exception makes the rule. At this writing (2018) there are still six states the impose an inheritance tax.
Iowa
Kentucky
Maryland
Nebraska
New Jersey
Pennsylvania
It is possible that life insurance proceeds paid to a trust may not qualify for the inheritance tax exemption provided by some states for insurance payable to a named beneficiary. Check with your tax advisor, run the numbers and then weigh the many advantages of naming the Trust as beneficiary of the life insurance policy against the potential tax hit.

7. What About Community Property States
If you live in a community property state – (Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington or Wisconsin) your spouse may have a legal claim for a portion of the life insurance benefit under state law. If you name someone other than your spouse as beneficiary, payment of the life insurance benefit may be delayed until your spouse’s claim is resolved. If you make the beneficiary someone other than your spouse, including your revocable living trusts, it may be a good idea to get a signed statement from your spouse waiving his or her rights to any community property interest in the benefit.

8. But I Don’t Have A Trust
One of the chief reasons that people don’t name their Trust the beneficiary of their life insurance is they don’t have a Trust. A valid, legal trust must exist at the time of your death to be the beneficiary. Life insurance proceeds which are distributed to a living trust will avoid probate. Testamentary trusts are drafted as part of a will and take effect after the death of the grantor. Proceeds distributed through a testamentary trust pass through the “probate” process after the grantor’s death because the trust is included in the will.
That leads us to the next logical question of “why no trust?” It is estimated that 64% of Americans don’t even have a simple will and 90% do not have an up to date comprehensive estate plan.
When asked why they haven’t put a plan in place 27% said there wasn’t an urgent need and 15% said they didn’t need one at all. Most said they just hadn’t gotten around to it yet but that isn’t all. Most people don’t like to think about death and quite a few believe that by planning their estate they may be hastening their own demise. Think about the saying, “I’m so far behind I’ll never die.” A significant number falsely believe that estate planning is only for the rich with a multimillion-dollar net worth.

For those that acknowledge the benefits of planning, cost and complexity top the list of reasons for not having their essential documents in place. And when you consider that sitting down with an estate planning attorney for hours discussing their personal finances, intimate personal relationships, health concerns and their own ultimate demise, knowing that they will probably end up spending thousands of dollars for a pile of documents they don’t really understand, can you blame them.
Interactive Estate Document Systems (ieds.online) was created to address those concerns. The goal was to provide the highest quality estate planning documents and client education to enable our clients to fully understand the options available to them as they move through the estate planning document formulation and creation process.

While the entire IEDS process is simplistic, easy and intuitive, the questionnaire is dynamic, state specific and attorney drafted to ensure the completed assembled document set is accurate and fully legal. It utilizes highly intuitive, context sensitive, question and answer dialogs for the preparation of quality customized documents.
This is the same document assembly software that I utilize in my private law practice and is constantly kept up to date with changes to state and federal law.
Pricing is straightforward and reasonable with a Couple Revocable Living Trust Package available for $750 and a Single Revocable Living Trust Package available for $500.
What’s included?
A Custom Law Firm Quality Probate Avoidance Living Trust
Declaration of Trust
Certification of Trust
Assignment of Personal Property Instructions for the Distribution of Personal Property
Durable Power of Attorney Advance Health Care Directive, (which includes a Living Will)
Last Will and Testament (including guardian nomination if needed)
HIPPA Authorization and Waiver Final Disposition Instructions (i.e., “Burial Instructions”)
Instructions for Transferring Assets to the Trust
The Completed Transfer Document Templates
One Year of DocuBank Online Document Storage with 24/7 access to Advance Health Directives
Unlimited Revisions for the First Year (with an optional maintenance plan for $9.00/mo)

9. WII-FM
During my years as a financial planner I had a trainer that constantly reminded us that everyone favorite radio station was WII-FM also known as What’s In It For Me. Let’s talk about that for just a moment.
Why are you in your profession? Is it just to make a paycheck? If you are like most insurance agents and financial advisors that I’ve had the privilege of working with for the past 3+ decades, it’s not just about the money. Sure, you work and get paid. We all do that. But to make it in this business and stay in this business, it takes a special type of person, someone with a passion for helping others reach their goals and protect their future, for them, and those they care about.

You probably enjoy having person to person contact in this social-media-driven world that requires that you have honest conversations with your clients and prospects that requires you to engage on a person to person level. The more active relationships and the deeper those relationships you develop become the more you will be able to take advantage of passive contacts, expanding your business through recommendations and referrals by your clients to friends and family or colleagues looking for a trusted advisor.

Comprehensive financial and estate planning involves much more than selling someone a product, even if that is the best product ever made. Without the proper estate planning documents, without the proper asset titling and beneficiary designations, without the caring guidance of a trusted advisor urging the client to take timely action all could be lost. Your advice is a big part of what keeps them all moving toward their financial goals, and the value of that can’t be overstated.

At the end of the day, insurance agents and financial advisors are a lot like teachers in the best possible way: you’re helping people learn and grow in an area they don’t know a lot about to ensure that they’ve got the best chance at having the future they dream of. It’s a calling that takes a special kind of person to do, and you might feel a little like a hero, going out there every day and helping people protect and achieve their futures.

During your training you were probably taught to explain to your prospect the concept of the multidisciplinary team approach and your goal was to be the quarterback, the go to guy who would coordinate and interface with the other allied professionals. Who are those guys? The accountant or CPA and attorney are two of the usual suspects. Other players may be a trust officer, investment manager, financial planner, charitable giving planner, and of course the insurance agent. In many cases multiple roles are filled by the same person, in others many players may be involved.

Two things may happen at this point assuming the client does not already have estate planning documents.

1. The client doesn’t have an attorney. In this case you may have developed a good working relationship with an estate planning attorney to whom you can refer the client to have the comprehensive estate documents prepared. You are pretty sure that the legal costs are going to run anywhere between $3,500-$10,000. You are convinced that the client would benefit from the work but suspect that the cost objection will rear its ugly head. This puts your advisory relationship at risk. Though nothing is ever overtly stated, the client for some mysterious reason simply stops moving forward, not only with the estate planning documents but also with the insurance recommendations.

2. The client has an attorney but he’s not an estate planning attorney. He may or may not support your insurance recommendations. You don’t know. You do know that the client doesn’t have estate planning documents in place because you’ve asked. Why doesn’t he have them? Again, cost or complexity. He needs them. You know it and so does he. Regardless of his financial condition he’s still reluctant to spend big money on estate planning documents. Furthermore, every dollar he spends on his documents reduces the dollars available to fund the life insurance or other products that he needs.

Why not take this opportunity to provide your client with real value? While there are certainly cases where the need for the input and counsel of an estate planning attorney are not only prudent but essential, in most cases today, use of a sophisticated document drafting system is the better course. In much the same way that TurboTax® revolutionized the way individuals handle their tax return preparation, today’s dynamic-response interview-based drafting guides and document assembly software enable the creation of truly personalized comprehensive estate planning document packages at a fraction of the cost of using an estate planning attorney.

Another reason for getting more deeply involved in your client’s estate planning implementation is the simple fact that during the typical implementation process an additional 5-8 individuals are identified as potential prospects. Guardians and their alternates, Trustees and their successors, beneficiaries and other trusted friends and advisors are all named and close to your client. Odds are that just as you are providing valuable assistance to your client, many of these individuals are in the exact same situation, needing the products, advice and assistance you offer.

Do well by doing good. Help your client get the comprehensive estate planning documents they need and make sure the beneficiary designation is to their Revocable Living Trust that has been drafted in specific accord with their dispositive wishes. Everyone benefits.

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Why Your Trust Should Always be the Beneficiary of Your Life Insurance

If you’ve ever contemplated establishing a Revocable Living Trust as part of your Comprehensive Estate Plan you probably considered avoiding probate as one of the principal benefits. While it is true that, properly structured and funded, living trusts do indeed avoid probate there are many more important reasons to make it the centerpiece of your dispositive plan.

In fact, avoidance of probate, especially with life insurance, seems like a belt and suspenders approach at best and a completely unnecessary complication. Anyway, we’ve all been taught that assets that pass by beneficiary designation don’t go through probate, right? Well, more about that later. For now, let’s focus on the top reasons your Trust should always be the beneficiary of your life insurance.

1. Protecting the Inheritance for Certain Beneficiaries
One of the most important yet least discussed reasons for making the Trust the beneficiary of life insurance, is that in many cases the intended beneficiaries are simply unable to handle the inheritance. When most of us think about planning our estate we intend to give our property to our husband or wife and our children.

Surviving Spouse as Beneficiary:
Naming a spouse is a common practice. However, if your spouse is or becomes unable to handle financial matters, or you and your spouse divorce, then you will need to review your beneficiary designation to make sure that it is still appropriate. More about whether this is ever a good idea later.

Minor Children as Beneficiary:
While you may name your minor children as your designated beneficiary, we will be unable to pay the life insurance proceeds to your children until the earlier of:

• The date that your children reach the age of majority (usually age 18 or 21, depending on applicable state law).

• The date that a legal guardian of the minors’ estate has been appointed by a court. This appointment process can be costly, and state laws may limit who may be named a guardian of an estate. Generally, a guardian of the minors’ estate will hold the money for their’ benefit until they reach the age of majority, usually age 18 or 21, depending on state law.

We all cringe when we hear stories about the 18-year-old that receives a large sum of money, immediately heads out to buy a new expensive car and goes on a two-month party binge with a dozen of his closest friends.

But it’s not just the newly minted adults that lack the skills to properly handle large sums of money. Some may just be spendthrifts that have never been financially responsible. Others may be in a less than rock solid marriage or going through bankruptcy at the time the insured departs this mortal plane. Unfortunately, the grieving widow is often prayed upon by less than honorable suitors leaving her and the insured’s children high and dry after the money’s all been spent. Then there are those who have special needs or are currently receiving some form of government benefits that would be disqualified by receipt of an outright inheritance.

Perhaps an example here would provide some clarity.

Let’s imagine a scenario where a husband and wife are in a car accident in which the husband is killed and the driver of the other car is seriously injured. Further assume that the wife was at fault and the other driver sues and receives an award of $500,000 in excess of the auto insurance policy liability limits of the husband and wife. If the couple had a $500,000 life insurance policy on the husband to provide for his wife’s and their children’s living expenses with the wife as the primary beneficiary, all those funds would be immediately available to satisfy the wife’s judgment creditor potentially leaving the family penniless.

Or consider this fact pattern. Let’s assume you have an only child, a 19-year-old daughter who is a sophomore in college. Both husband and wife die. If you are like the vast majority, you’ll want your daughter to receive all your property. But the question is, is it wise to sell everything and write her a check for let’s say $750,000.

Wouldn’t it be prudent to create a trust for her benefit, properly structured to ensure that her educational expenses would be taken care of along with her general living expenses and any other items that you specify in the Trust. The Trustee which could be a trusted friend, family member, attorney, CPA, local bank, financial adviser or some combination, who would manage and invest the trust.

The Trustee would hold the funds for your daughter’s benefit until she reached a more mature age say 25 at which time all or a portion of the inheritance would be made available for withdrawal. It may be your desire to permit a series of withdrawals available at various ages, for example 1/3 at age 25, 1/3 at age 30 and the remainder at age 35.

Dependent upon your personal financial philosophy you may even determine that it is best to keep the property in trust for her lifetime while providing the flexibility for the trustee to purchase property to be used by her as a family home, and living expenses or even investing in a business, providing for lifetime asset protection for your daughter against future creditors or the claims of a divorcing spouse.

Trusts have been used to protect property this way for hundreds of years. Asset Protection is arguably the primary reason to establish and utilize one today.

2. Stuff Happens
Unfortunately, life doesn’t typically bend itself to your planning. People don’t always die in the order that we expect and when that happens the typical primary beneficiary, contingent beneficiary designations that many advisors recommend simply don’t work.

For an example consider the following fact pattern. John Doe has a $1,000,000 life policy with his wife, Mary Doe as the primary beneficiary and his 3 children as contingent beneficiaries who are to receive 1/3 each. The oldest son Matt, age 25, is killed in an automobile accident along with his mother Mary Doe. He leaves a wife and two children ages 2 years and 9 months and is survived by his younger brother Tim and sister Ruth ages 21 and 17 respectively.

John dies 1 year later but never thought to change the beneficiary designations on his life insurance. What happens? Stuff happens! and it is probably stuff that John, had he thought about it, wouldn’t have wanted.

Tim receives a check for $500,000 immediately.

Ruth’s $500,000 is held in a guardianship account for a year until she reaches age 18 at which time she receives a check for $500,000 plus earnings outright.

Matt’s widow receives nothing!

3. Blended Families
“Modern Family” is a TV show that is typical of many blended families today. Jay has two grown children and four grandchildren. Jay and his second wife Gloria have a son together and Gloria has a son from a previous marriage. Oh, and did I mention that his new wife is close in age to his children.

Once you have been through a divorce you understand that “till death do us part” may not be how the story ends. You want to take care of your spouse, children, and grand-kids but leaving it to them to work it out or counting on your spouse to be fair, is both unfair to the surviving spouse and potentially a recipe for disaster.

The biggest issue for blended families is that your spouse may, over the years, decide not to leave anything to your children from a previous marriage.

Additionally, in the case with a much younger new spouse, it’s quite possible that he/she could live for as long or longer than their age contemporary step-children. Life insurance proceeds left in a well thought out trust can avoid the very real conflict that could easily, and probably will, ensue with a simple beneficiary designation dispositive plan.

4. Probate

The Estate as Beneficiary
If life insurance proceeds are payable to the decedent’s estate, the beneficiaries of the estate won’t receive the proceeds until a legal process called “probate” is completed. By naming a beneficiary other than the estate, the life insurance proceeds can be paid to a designated beneficiary almost immediately after a claim for life insurance benefits has been filed and without having to go through the probate process.

In addition, naming the estate as the beneficiary of life insurance proceeds may subject them to the claims of the decedent’s “creditors” (i.e. people and institutions to whom they owe money). This means there may be less money to distribute to the heirs under the Will.

Life insurance proceeds payable to a designated beneficiary other than the decedent’s estate will generally not be subject to the claims of his/her creditors.

Estate Planning 101 teaches us about the various ways property passes upon death. Probate is typically not necessary if property is passed by operation of law, i.e. joint ownership of property with rights of survivorship. Probate is also not required if property is passed by beneficiary designation. Life insurance, qualified plan proceeds, annuities, Pay on Death or Transfer on Death accounts are a few examples. These are all typically seen and often used in implementing a dispositive plan for a decedent.

However, all these methods of property transfer on death have one thing in common – they are all unrestricted outright transfers. At the moment of death, all rights in the property are vested in the beneficiary or the joint tenant and likewise subject to the recipient’s creditor’s claims or to the whims of a spendthrift beneficiary.

They are also potentially subject to probate! Unless the recipient of the life insurance proceeds take affirmative steps to do their own planning the proceeds will be subject to probate on their subsequent death. While there are certainly actions that can be taken to avoid the subsequent probate, payment of the life insurance proceeds into a trust would have made those actions unnecessary.

5. Estate Taxes
Federal estate taxes must be paid if the net value of an estate at death is more than the amount exempt at that time. Currently the federal exemption is $11,180,000, adjusted annually for inflation. Some states also have their own estate or inheritance tax, so it is possible that the estate could be exempt from federal tax but have to pay a state tax.

If the estate will not have to pay estate taxes, naming a living revocable trust as beneficiary of the policies will give the trustee control over the proceeds. It also ensures that the court will not be able to control the proceeds if a beneficiary is a minor, incapacitated or no longer living when the insured dies.

If the estate will be subject to estate taxes, it would be better to set up an irrevocable life insurance trust and have the trust own the policies. This will exclude the value of the insurance from the decedent’s estate, resulting in reducing the size of the estate and any estate taxes owed so more can be left to the beneficiaries.

Consider the restrictions on transferring existing policies to an irrevocable life insurance trust. Should the owner die within three years of the transfer date, the IRS will treat the transfer as one made in contemplation of death and the value of the insurance will be included in the estate for purposes of calculating the estate tax. There may also be a gift tax. These restrictions, however, do not apply to new policies purchased by the trustee of this trust.

6. Inheritance Taxes
As the saying goes: The exception makes the rule. At this writing (2018) there are still six states the impose an inheritance tax.
Iowa
Kentucky
Maryland
Nebraska
New Jersey
Pennsylvania

It is possible that life insurance proceeds paid to a trust may not qualify for the inheritance tax exemption provided by some states for insurance payable to a named beneficiary. Check with your tax adviser, run the numbers and then weigh the many advantages of naming the Trust as beneficiary of the life insurance policy against the potential tax hit.

7. What About Community Property States
If you live in a community property state – (Arizona, California, Idaho, Nevada, New Mexico, Texas, Washington or Wisconsin) your spouse may have a legal claim for a portion of the life insurance benefit under state law. If you name someone other than your spouse as beneficiary, payment of the life insurance benefit may be delayed until your spouse’s claim is resolved. If you make the beneficiary someone other than your spouse, including your revocable living trusts, it may be a good idea to get a signed statement from your spouse waiving his or her rights to any community property interest in the benefit.

8. But I Don’t Have A Trust
One of the chief reasons that people don’t name their Trust the beneficiary of their life insurance is they don’t have a Trust. A valid, legal trust must exist at the time of your death to be the beneficiary. Life insurance proceeds which are distributed to a living trust will avoid probate. Testamentary trusts are drafted as part of a will and take effect after the death of the grantor. Proceeds distributed through a testamentary trust pass through the “probate” process after the grantor’s death because the trust is included in the will.

That leads us to the next logical question of “why no trust?” It is estimated that 64% of Americans don’t even have a simple will and 90% do not have an up to date comprehensive estate plan.

When asked why they haven’t put a plan in place 27% said there wasn’t an urgent need and 15% said they didn’t need one at all. Most said they just hadn’t gotten around to it yet but that isn’t all. Most people don’t like to think about death and quite a few believe that by planning their estate they may be hastening their own demise. Think about the saying, “I’m so far behind I’ll never die.” A significant number falsely believe that estate planning is only for the rich with a multi-million-dollar net worth.

For those that acknowledge the benefits of planning, cost and complexity top the list of reasons for not having their essential documents in place. And when you consider that sitting down with an estate planning attorney for hours discussing their personal finances, intimate personal relationships, health concerns and their own ultimate demise, knowing that they will probably end up spending thousands of dollars for a pile of documents they don’t really understand, can you blame them.

Interactive Estate Document Systems (ieds.online) was created to address those concerns. The goal was to provide the highest quality estate planning documents and client education to enable our clients to fully understand the options available to them as they move through the estate planning document formulation and creation process.

While the entire IEDS process is simplistic, easy and intuitive, the questionnaire is dynamic, state specific and attorney drafted to ensure the completed assembled document set is accurate and fully legal. It utilizes highly intuitive, context sensitive, question and answer dialogs for the preparation of quality customized documents.

This is the same document assembly software that I utilize in my private law practice and is constantly kept up to date with changes to state and federal law.

Pricing is straightforward and reasonable with a Couple Revocable Living Trust Package available for $750 and a Single Revocable Living Trust Package available for $495.

What’s included?
A Custom Law Firm Quality Probate Avoidance Living Trust
Declaration of Trust
Certification of Trust
Assignment of Personal Property Instructions for the Distribution of Personal Property
Durable Power of Attorney Advance Health Care Directive, (which includes a Living Will)
Last Will and Testament (including guardian nomination if needed)
HIPPA Authorization and Waiver Final Disposition Instructions (i.e., “Burial Instructions”)
Instructions for Transferring Assets to the Trust
The Completed Transfer Document Templates
One Year of DocuBank Online Document Storage with 24/7 access to Advance Health Directives
Unlimited Revisions for the First Year (with an optional maintenance plan for $9.00/mo)

Making your Trust the beneficiary of your life insurance provides tremendous advantages in structuring your estate plan and should always be considered as the preferred choice when naming your life insurance beneficiary. If you are in need of a Comprehensive Estate Planning Document package, we’d love to help. Click here for more information.

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Critical Estate Planning Tasks After Baby Arrives

Congratulations! You’re having a new baby. What an exciting time for new parents. The many months of anticipation are now over, and you’ve arrived home with your new and precious cargo. Recognize and acknowledge that you have been entrusted with a wonderful but sometimes daunting responsibility and that this can be a stressful time for parents.

As baseball great, Yogi Berra, once said “it is difficult to make predictions, especially about the future.” Yet, that is the essence of estate planning – making predictions about the future. While your dreams and aspirations for a bright and wonderful future should be your primary focus, as new parents you also have the responsibility of planning for the unlikely possibility of your premature death or incapacity.

While the thought of leaving a child without a parent can be depressing, it’s still your responsibility to make sure your child is well provided for, even in the event something unforeseen happens to you. As a newly minted parent, now is the time to review your Estate Plan to ensure everything is in place to provide for your new child and your family.

The first area to address is that of your child’s Guardian.

A guardianship is a legal order that gives someone other than you as the child’s parent the right to make child care decisions and take care of the child. The laws governing guardianship differ between states, but only a court can grant someone guardianship rights for a child. Who is your choice to take care of your new baby should something happen to you? While that is a simple question, answering it can be difficult. If you don’t nominate a guardian, the Court will be flying blind when they appoint someone to care for your child personally and financially and it may not be who you’d want. Think about who is best suited for caring for your child and ask yourself if that person is up to the task. Remember, while you get to state your recommendation for your choice for Guardian of your child the Court makes the ultimate decision so don’t choose someone the court would not approve such as someone with a history of alcohol or drug abuse or a criminal record.

There are two types of Guardians.
1. Guardians of the estate
2. Guardians of the person

The Guardian of the Person is the individual(s) who become the substitute parent(s) for your child if both you and your spouse become incapacitated or die. They are charged with the responsibility of determining where the child will live, their education, and medical care. They are also responsible for the child’s overall environment, including their lifestyle, religious beliefs, values and parenting style. Depending on state law it may be necessary to get Court approval to move the child out of your resident state. Appointment of the Guardian of the Person is made by the Court by its determination of what is in the best interests of the child, but your recommendation will carry great weight with the Court.

The Guardian of the Estate manages the money or assets held by a child on the child’s behalf and in the child’s best interests. The Primary duty is to treat the child’s assets with care and manage them honestly and responsibility. The Guardian of the Estate pays the debts and expenses of the child including general care and provision, medical care and education. The Guardian of the Estate is answerable to the Court and required to make an inventory of estate assets including their values and locations. They are also required to file annual or more frequent reports showing the value of the estate, the way the assets are invested and the income and expenses of the estate. Management of the estate is to be handled in a reasonable and conservative manner so no risky investments are allowed.

While the Guardian of the Person and the Guardian of the estate can be the same individual(s) they need not be. If you choose different people for those roles they will have to work together. This will require good communication skills, the ability to collaborate and a willingness to work together in the best interest of your child. You may wish to consider:

• Do the individuals have an existing relationship or will their relationship be limited to serving as the child’s guardians?
• If they have a current relationship, how do they get along? Do they share values? Do they have a shared vision for the child?
• If they don’t have a current relationship, do you think they would work well together?
• Would they each be able to understand both the authority and the limitations of his or her role, and respect the other’s role?

When deciding whether to name separate Guardians of the Person and the Estate of your child consider the skill sets of your potential choices. For example, your CPA sister-in-law may be a great pick as the Guardian of the Estate, but her single lifestyle and frequent travel may make her a poor choice for the Guardian of the Person.

If this is a second or third child, you may wish to revisit the topic with your potential guardians and ensure that they are prepared to now care for multiple children. If not, you need to revisit and revise existing guardianship nominations.

Should I discuss all of this with the potential guardians?
It is typically a good idea to discuss your selection with the person(s) you are considering serving as guardian. There may be reasons unknown to you why they would be unwilling or unable to serve and it is better to find out early while you can still make another choice. It may also be advisable to name one or more alternates.

Your Last Will and Testament is the legal document used to nominate your child’s guardian so even if you have decided to use a Revocable Living Trust you still need a Will.

Create or Update a Revocable Living Trust

A Revocable Living Trust is one of the best tools for parents to control the inheritance for your child avoiding the expensive, time-consuming and public probate process. Your Revocable Living Trust document states who gets the property when the trust creator dies, the ages at which principal distribution are permitted, and what type of expenditures the Trustee can make on behalf of your younger beneficiaries. You and your spouse are usually the initial Trustees and upon death, the successor trustee or trustees that you choose take over. Revocable Living Trusts can be amended or altered in response to life’s changes, which makes it a flexible and versatile tool for providing for your child’s future.

Estate Planning Documents Create or Update.

When you have a new baby, it’s time to review all your estate planning documents to confirm they’re up-to-date. If you haven’t done any estate planning, now is the time to put your affairs in order! With the new baby here, it’s time to create or update:

Wills
Revocable Living Trusts
Financial Powers of Attorney
Health Care Powers of Attorney
Advance Health Care Directives/Living Wills
Digital Asset Inventory

and other important legal documents. Safeguard your family’s security by implementing a comprehensive estate plan. See how IEDS.online can help.

Buy or Increase Your Life Insurance Policies

Life insurance is a great idea when you’re married, and it’s indispensable when you have a child. Life insurance gives you the ability to provide your family with essential financial resources should anything unforeseen should happen to you and/or your spouse. Review your life insurance coverage amounts with your new baby in consideration. While it might be tempting to have a specific dollar amount of insurance in mind, you may find it helpful to tie your coverage amount to a specific goal like paying off a mortgage, paying for college or providing a replacement income in the event you die unexpectedly. For a young family just starting out, Term Insurance can provide significant coverage for a small premium.

Consider insuring both parents even if only one works outside the home. The costs of replacing the service of the stay at home parent can be considerable. If both parents work and contribute to household expenses and child care, the loss of that second income could be financially devastating. Now may be the perfect time to buy more and make sure that your Revocable Living Trust is listed as the beneficiary.

Designate Beneficiaries for Retirement Accounts

Many people neglect to name beneficiaries for retirement accounts, or to update beneficiaries when life changes occur. Revisit your retirement accounts, and make sure your spouse, a trust, or possibly even your children are listed as a beneficiary of your retirement account. Consider using an Qualified Retirement Asset Trust to provide distribution instructions to protect a tax-deferred or tax-free account.

Consider Trustees for Minor Children

Leaving financial resources and property to minor children is typically handled through a Revocable Living Trust. To administer the Trust, though, you must appoint a succession of individuals who you know to be honest, responsible, and good with spending decisions who you trust to administer a trust for your minor child. Talk with this person or persons before nominating them, and make sure they understand your wishes and plans in establishing the trust.

Use a §529 Plan or Other Investment Accounts to Fund Your Child’s Education

The birth of the child is the perfect time to start making contributions to §529 plans or other investment accounts. College costs keep rising; annual tuition today averages anywhere from $20,000 for in-state colleges to $70,000 for private universities, and those numbers have been climbing at a stunning rate. Now is the time to start making contributions to accounts and investment plans to assure your child gets the education he or she desires. There are many choices available, although some of the “easier” choices may have some significant disadvantages. Discussing options with an experienced financial professional before you invest can assist greatly.

Planning for your new baby’s future gives you the peace of mind of knowing that he or she will be well provided for no matter what happens to you. Take time to confirm your legal affairs are in order and to guarantee that your child will have both the financial resources and personal support and guidance he or she needs to get a great start in life.