Estate Planning Weekly: Recent Episodes
Donald Rolfe
Estate Planning Weekly is the plain english explanation of all things Estate Planning. Hosted by Donald Rolfe, owner of Northwest Legal Planning, LLC, Estate Planning Weekly answers the most common Estate Planning questions.
Most of us never saw the Covid-19 coming. We didn't anticipate schools, business, and government being shuttered.
It just goes to show that the unexpected can and does happen.
Personally, I'll be much better prepared in the event something like this happens in the future. Preparation for a pandemic is one thing, but being prepared for a closer to home problem is important too.
That is what estate planning is all about...being prepared for the unexpected and the inevitable.
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Not doing any estate planning.
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Only planning for end of life.
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Leaving decisions for splitting assets to someone else.
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With the run on TP, I got to thinking about how unprepared most people were for a lockdown.
Having the essentials on hand is very important...from TP to your Estate Plan.
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Longtime couples that aren't married need to take into account different estate planning strategies than married couples.
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Creating an estate plan on your own is an option. However, creating an estate plan in the wrong way can cause major problems.
This week I spoke to a man that feels (and is probably right) that his sister stole his parent's estate.
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When making a recommendation for a Trust-based over a Will-based estate plan...there are some facts that make a Trust a better fit.
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When you pass without an estate plan, it can make the probate process more difficult. On top of that you won't be the one deciding who get what.
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Story time about my first experience with a Revocable Living Trust and my client's mistaken belief that her trust made her judgment proof.
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We explored what a Power of Appointment is before - Check out Estate Planning Weekly Episode 26.
This bonus episode explores how to give a Power of Appointment to your beneficiaries.
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One of the most common statements I hear is "I only need a simple Will."
Here is why I don't do Simple Wills and why they are not your best option for an estate plan.
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Estate Plans are made up from many documents...each of those documents has a different requirement for being updated.
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- To one person and expecting them to split it up.
- One piece of real property to more than one person.
- To beneficiaries that it will harm.
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Don is the owner and founder of Northwest Legal Planning, LLC, an Estate Planning, Probate, and Trust Administration law firm located in West Linn, Oregon.
Meet Don and get answers to your Estate Planning Questions by scheduling a complimentary Estate Planning Strategy Session - https://www.nwlplanning.com/schedule-consulatation
Website - https://www.nwlplaning.com
Estate Planning Blog - https://www.nwlplanning.com/blog
Facebook - https://www.facebook.com/nwlplanning
Twitter - https://twitter.com/nwlplanning
We all know that Estate Planning is important...but is it urgent to get it done? Well, Estate Planning isn't urgent until it is.
Once it is urgent it may be too late.
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Take an inventory of you assets and family.
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Have a discussion and know what your goals are for your estate plan.
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Write things down - your inventory, your questions, your goals, etc.
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Great question from a YouTube comment.
There really aren't any disadvantages to putting assets into a Revocable Trust. Throughout your life you are free to move assets in and out of a Revocable Trust. Plus, whenever you want, you can revoke your trust and put everything back the way it was before.
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Really there are two Number 1 Estate Planning Mistakes
1 - For people without an Estate Plan - Not having an Estate Plan, which can lead to many unintended consequences.
2 - For people with an Estate Plan - Getting your Estate Plan in place and never looking at it again. Your life will change after your Estate Plan is in place and your Estate Plan should change with it.
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Failure to properly fund your trust is the biggest mistake you can make with a trust. Without proper funding your trust will not work the way that it should during your incapacity and after your death.
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We don't know exactly how much we will have in assets when we pass away. That fact leads some people to wonder how they can state in their estate plans how much each of their beneficiaries will get.
We solve this problem by using percentages or fractions for the assets in the estate to each of the beneficiaries.
So while we won't know exactly how much every beneficiary will get, we will know that all the assets will be distributed down to the last penny.
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We never know what tomorrow is going to bring. Being prepared for the unexpected is a must, and a comprehensive estate plan is part of that preparation.
I've been off-air for due to an unexpected illness. Please don't wait for things to go wrong before you put a plan in place.
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How you will pass on your business is a very important part of Estate Planning. You have worked hard to build your business, and you deserve to make sure that value is passed on to your loved ones.
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Which is right for you and your family?
Joint Revocable Trust
For married couples only; generally fist time marriages; longterm marriages; lots of joint property; and a common distribution plan.
Individual Revocable Trust
Unmarried individuals, 2nd, 3rd, or 4th marriages; his, mine and ours children; lots of separate property; and vastly different distribution plans.
Book An Estate Planning Strategy Session - https://www.myestateplanmeeting.com
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If you don't have a comprehensive Estate Plan, an unfunded trust can be a really big problem. That comprehensive Estate Plan should include a Pour-Over Will just in case an asset isn't moved into your trust before you die. https://www.myestateplanmeeting.com
Both a Will and a Trust can be the cornerstone of your Estate Plan. However, they each operate at different times and in different ways.
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We use the word Spendthrift to describe Trusts and Beneficiaries. Essentially describing how we protect some beneficiaries from themselves.
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Moving to s new state can affect how your Estate Plan will work. Just like with having children and changes to your finances...when moving to a new state you need to review your Estate Plan.
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Technically an Estate Plan is good as long as it isn't revoked. However, changes to the law and your circumstances may mean that your Estate Plan won't work as well as it should.
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If you are relying on a Power of Attorney for incapacity planning you need to watch this.
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You - During your life.
Your Loved Ones - After you are gone.
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It's nobody's business what's in your Trust. This is how it stays private.
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Disinheriting someone is a difficult choice to make, but a simple thing to make happen.
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Experience with probate is often the driving force in choosing a Will or a Trust.
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Yes and no. You and your family are better served with a comprehensive Estate Plan.
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Temporary/Emergency Guardians
Short Term/Intermediate Guardians
Permanent Guardians
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Keeping your documents safe and accessible is very important.
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Taking over as Trustee usually comes at a difficult time, but you need to take steps to make sure your doing your job.
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Don't wait to get your Estate Plan in place, someday it will be too late.
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Yes, but your first line of defense is having the proper insurance.
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Here are 3 things to consider when deciding how to leave an inheritance to your children.
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Three things to think about:
- Do you have a Will or Trust based Estate Plan?
- Is your Power of Attorney durable or not?
- Have you given a copy of your Power of Attorney to the 3rd parties that may need them?
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You can protect your own assets, but at a pretty high cost. It's easier, and very worthwhile, to protect the assets you leave behind.
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Just writing a Will or Trust is not enough. There are certain things you must do to make what is written work.
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Without a proper plan, your property may not end up going to your heirs.
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From Zero documents to over 20 documents...what's in an estate plan? Find out what should be in your estate plan by booking your complimentary Strategy Session.
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Answering your questions about Estate Planning.
- What is the benefit of someone in their thirties starting an estate plan?
- What steps would you recommend for a young family to take regarding their estate plan when they do not have many assets?
- When it comes to estate planning, is being married an asset or liability in Oregon?
- Why do you think so many people put off estate planning?
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First you need to determine who you want things simple for. From there you have many options.
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One benefit of leaving inheritances in trust is asset protection. Make sure your estate plan doesn't defeat that asset protection.
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Making a gift, intentionally or by accident, can make you liable for additional taxes. www.myestateplanmeeting.com
Young couples with Estate Plans can reduce conflict with in-laws in the event of a tragedy.
Moving to a new state is a life change that should trigger a review of your estate plan.
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The arrival of a first child often gets people thinking about estate planning. You don't have to wait for your baby to arrive before putting your plan in place.
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Estate Planning is not all about the documents. It's also about knowing that you have a plan in place when it's needed.
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It can be a difficult discussion, but there are some basics your kids should know.
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Life Insurance, Retirement Accounts, etc. - Completing your beneficiary designations is a must.
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Trusts offer many, many benefits...and those benefits are not only for the wealthy.
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If you are leaving an inheritance in trust, or you're the beneficiary of a trust, you need to know what a Power of Appointment is.
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Owning real property in multiple states can lead to additional costs and fees if you have a Will based estate plan. In this scenario a Trust based plan may serve you better.
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There are trusts that can protect your assets, but a revocable trust is not one of them.
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Great question that was recently asked by a potential client. She got bad advice...always double check any advice you get.
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While you are alive 'n kicking your revocable trust remains that way. After certain events, that revocable trust becomes irrevocable.
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Death and Taxes...the only certainties. However, we can control how much of an assets value is subject to tax.
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Putting your child on your bank account can spell disaster. Find out how this seemingly innocent act can cost you a fortune.
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- Incapacity.
- Late State for Medicaid Planning.
- After You Pass Away.
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If you've ever been through probate you know the answer to this question. People want to avoid probate because it can be a difficult and costly process.
When splitting assets amongst your heirs, you don't have to make the values equal for things to be fair.
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There are generally two types of Powers of Attorney. It is important that you know the difference and know which one you do, or should, have.
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Depending upon when and how your Will was drafted, you may have accidentally disinherited your youngest child.
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Hiring an Estate Planning Attorney should be a good experience. These are three considerations to keep in mind to help make sure that you have a good experience.
Compatibility You and the estate planning attorney that you hire should be compatible with each other. I want to work with clients that I get along with and you should want to work with an attorney that you get along with.
Many people think of attorneys as adversarial...and they aren't wrong, they can be. However, the attorney-client relationship shouldn't be adversarial.
When I meet with a potential client an we don't click, there are no hard feelings. I'm not the attorney for everyone and not everyone is the client for me.
If we don't click I am happy to refer any potential client to an estate planning colleague.
Practice Areas I am not a jack of all trades. I practice Estate Planning, Estate Administration, Probate; three related practice areas.
I limit myself to these practice areas to make sure I know what I am doing for my clients.
Ask any attorney that you meet with how much of their practice is focused on Estate Planning. Hiring an attorney that does everything, may mean that they don't do any one thing really well.
Attorney's Fees All of my Estate Planning work is done on a Flat Fee Basis. Before I start work for an estate planning client they know exactly what my fee is.
I do not bill by the hour for estate planning work. I am able to do this because estate planning is all that I do. I know that it take to get the work done. I don't have to rely on billing my clients by the hour.
If you like to find out if I'm the right Estate Planning Attorney for you, or if you have any estate planning questions, please schedule a complimentary Estate Planning Strategy Session.
Qualified retirement accounts are generally protected from creditors and bankruptcy. However, that protection usually only applies to you and your spouse.
When you leave a retirement account to a non-spouse, the protection from creditors and bankruptcy generally disappears. Some states do extend these protections to inherited retirement accounts...Oregon is not one of them. There is a simple solution to this issue.
Retirement Plan Trust This a special trust designed to serve as a firewall between creditors and inherited retirement accounts. Using a trust like with will allow an independent trustee to stop creditors from getting to the retirement accounts.
You can learn more about planning with retirement accounts here.
Revocable Living Trust You can do the same type of planning for retirement accounts using your revocable living trust. This requires that we setup separate trusts inside of your revocable living trust for each of the people you want to name as beneficiaries of your retirement plans. It also requires the addition of "conduit provision" for the payment of required minimum distributions.
If you have any questions about protecting retirement accounts, or any other estate planning questions, please schedule your Complimentary Estate Planning Strategy Session.
Worried about leaving money to an heir that couldn't handle it? Someone with drug, alcohol, or gambling problems? Here are two ways to deal with those heirs in your Estate Plan.
Disinherit The Heir Some of my clients decide that their heir is beyond help, and they simply don't leave them anything. This is the most extreme option. However, depending upon the circumstances it is sometime the best solution.
This options saves other heirs or family members from having to manage an inheritance for the problem heir.
Leave Their Inheritance In A Spendthrift Trust A Spendthrift Trust is a trust that gives the problem heir ZERO control over their inheritance. They are still the beneficiary of the trust, just without any control.
Instead, another person is made trustee and given complete authority and control over how the inheritance is distributed.
Creating a Spendthrift Trust for a problem heir makes sure that their inheritance is there to help them, but not there to support their additions.
For a Spendthrift Trust to work, you must have a reliable, and willing, trustee.
These are just two options available. Depending upon the circumstance one of these options might work great, or one of several other options might be better.
If you'd like to learn more about leaving an inheritance to a problem heir or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
You've heard that adding a Joint Owner or Pay On Death designation to your bank account is much easier than creating an Estate Plan. Right...and wrong. There are several reasons that "planning" this way can cause trouble. Here are a few ways issues can arise.
Nothing Left To Pay Your Final Expenses Your estate is responsible for payment of your final expenses. This can include medical bills, funeral expenses, burial / cremation costs, etc.
With Joint Ownership or Pay On Death ("POD") accounts, your assets with transfer immediately as the time of your death by operation of law. If all of your assets are then out of your estate, nothing is left to pay your final expenses.
Your Joint Owner May No Follow Your Wishes You think that you have found a trust person to add as a joint owner of your accounts. You've made an agreement with them that when you pass they will split everything up between your children.
This is a twofold issue:
- That trusted person might decide to keep everything for themselves. Or maybe not everything, but they may decide they are owed a "finders fee."
- That trusted person, even if they wanted to, may not be able to disburse everything that you have left. If the amount they need to give to your children is more than the annual gift exclusion amount they would either have to do the gifting over more than one year, or would have to deal with gift tax issues.
Adding Joint Owners Could Cause Gift Tax Issues For You Adding anyone as a joint owner of an account or other property could trigger gift taxes for you.
For instance, if you added your child as a joint owner of your $500,000.00, that could be considered a $250,000.00 gift. A $250,000.00 gift is a taxable event that you would have to address.
If you'd like to learn more about Joint Ownership and POD's or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
Unlike the Showtime Rotisserie, Estate Plans are not "Set It & Forget It." These are 4 times when you need to consider updating your Estate Plan.
ONE - Changes To Your Family Did you have your first child or grandchild? Did you get married or divorced?
You get the idea; anytime there are additions or subtractions from your family could mean it's time for an Estate Plan Update.
As your family changes, so should your Estate Plan. Sometimes this can happen in interesting ways.
I recently worked with a client that had disinherited a daughter in her old Estate Plan. That old plan also disinherited her daughter's children which hadn't been born yet. My client was happy to find out that we could update her Estate Plan to include her daughter's children as heirs while still disinheriting the daughter.
TWO - Changes To Your Wealth What may have work when you didn't have much in the way of assets might not work now.
You've worked hard and accumulated some assets. Now it's time to make sure that your old estate plan isn't going to cause unnecessary tax consequences.
It surprising how fast you can reach the Oregon threshold for estate taxes if you own a home.
THREE - Passage Of Time I recommend that everyone have their Estate Plan reviewed every three years. If your plan was put together on a typewriter or printed on a dot matrix printer, it's time for a review.
Even if you haven't had changes in your family or wealth, the laws are always changing. What worked under the laws when you made your Estate Plan may not work as well under new laws.
FOUR - You Want To Make Changes To Your Estate Plan I've seen it, my colleagues have seen it, and the court have seen it. Handwritten changes are not the way to go. Most likely any handwritten change to your Estate Plan will not be honored.
DON'T MAKE HANDWRITTEN CHANGES TO YOUR ESTATE PLAN. If you want to make changes to how your assets are distributed, or other changes, meet with a professional and get it done right.
If you'd like to learn more or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
Leaving your final wishes to someone else can be a daunting prospect. Your Personal Representative or Successor Trustee could steal it all, but it is very unlikely if you plan correctly.
Technically...They Could Take It All
Just a likely they could rob a bank. In reality is Personal Representative and Successor Trustees don't steal from estates. Most often your estate is protected because you picked a trustworthy person.
In Oregon, the Probate Court will keep an eye on your estate.
Beneficiaries will also keep a close eye on the Personal Representative or Successor Trustee. If they smell anything fishy, they have options for correcting the situation.
The Powers They Do Have
Personal Representatives and Successor Trustees have lots of power. Their power comes from your Will or Trust and the State Laws.
Generally, they can do most anything that achieves your wishes and desires. However, they can't do anything illegal.
Personal Representatives and Successor Trustees Have Similar Duties
There are really four main duties for both Personal Representative and Successor Trustees.
- Gather all of your assets.
- Pay creditors.
- Disburse your assets pursuant to your wishes, or the State Laws if you don't have an Estate Plan.
- Close your Estate.
If you'd like to learn more or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session - https://www.nwlplanning.com/schedule-consulatation/
There are many reasons that everyone needs an Estate Plan. These are the first three reasons that come to the top of my mind because they seem to really resonate with my clients.
Put Your Worries To Bed Having an Estate Plan can get you more sleep and night and reduce those stress wrinkles.
Knowing that you've:
- Named the right guardians for your children.
- Appointed someone to care for your financial affairs.
- Expressed your wishes related to healthcare decisions and appointed a trusted agent to carry them out.
These along with many other decisions made in your Estate Plan will keep you from worry.
Make Your Own Decisions Without an Estate Plan, you leave decisions to the legislature and the courts.
Naming the right people to fill the roles of Successor Trustee, Healthcare Agent and Guardians for your children is something you should do. However, if you don't, these decision are left to a court to decide. In the case of Guardians for you children, this can lead to fighting among family member and the appointment of a guardian you would never want.
Division of your assets is left to the State Statutes. This could lead to those you never intended to provide for inheriting the bulk of your assets.
Incapacity & Healthcare If you become mentally or physically impaired, you'll need someone to manage your day-to-day affairs. If you're injured and can't make your on medical decisions, you'll need someone to make those decisions for you.
With a comprehensive Estate Plan you'll appoint those people and give them the direction and guidance to make the deicsions you would want.
If you'd like to learn more or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
In an ideal world we would always agree with our spouse...that is not the world that we live in. When it comes to the very important decision of choosing guardians for your children - you are not alone if you and your spouse don't agree. I don't have a magic formula for making the correct decision, but here are three strategies that should make the decision easier.
Separate The Roles Instead of thinking that you are naming a guardian that will handle everything, think of it as naming people to two positions.
The first is the role of physical custodian. These are the people that your children will live with, learn from, and love. Here you need to think about who shares your values and is capable of instilling them in your children.
The second role is the financial role. These people will manage the money and assets you leave for your children. While it's important that they have your children's best interest at heart, they are not the people that will raise your children.
Don't Only Think Of Couples My clients often have it set in their minds that they must name a couple as guardians. That is not completely necessary. You should consider single people as well.
Further, even if you do name a couple, there is no guarantee that they will always be a couple. Things happen. People get divorced and people die.
Consider The Relationship Your Children Have With Potential Guardians It is important that you like the people you name as guardians for you children. It is even more important that your children like the people you names a guardians.
The guardians you name must be people that your children know, like, and trust. Keep the relationships your children have with potential guardians in the forefront of your mind when making your decision.
If you'd like to learn more about Naming Guardians for Your Minor Children or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
It's that time of year and you can smell taxes in the air. I am seeing and hearing all sorts of news right now about how everyone is getting smaller tax refunds. This isn't necessarily a bad thing. While taxes are on everyone's mind, I'd like to explore how taxes affect estate plans.
Small Tax Refunds Are A Good Thing Is your tax refund smaller this year? Don't use that as a measure of good or bad.
You need to need to look at your actual tax liability...how much did you actually pay in taxes. If you paid less this year, congratulations. I can hear everyone right now, "but my refund is smaller."
That is great - your refund is a return of a no-interest loan that you made to the government. Loaning out money for free is no fun. Plus, that means you had more money in your pocket with every paycheck in 2018.
Federal Estate Tax The good news is that 99% of everyone reading this will never have to pay the Federal Estate Tax as it is currently structured. The current Federal Estate Tax Exemption is $11.4 million. That means not one dollar is taxed until your estate is over $11.4 million.
Further, if you are married, when you die your unused exemption can be ported over to your spouse. This allows them to use their exemption and your leftover exemption when they die.
Oregon Estate Tax Oregon is a totally different animal. The Oregon Estate Tax Exemption amount is only $1 million. That means anything in your estate over $1 million (that you don't leave to your spouse) will incur Oregon Estate Tax.
Further, the Oregon Estate Tax Exemption is not portable. Rather, it is a use it or lose it exemption.
How To Pay Less In Estate Tax Buy creating an Estate Plan that takes the Estate Tax into account, you can substantially reduce your Estate Tax burden. You may not be able to reduce it to zero, but you can make sure that you don't pay more than your fair share.
If you'd like to learn more about Taxes & Estate Planning or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
Considering your healthcare decisions in advance is an important part of creating an Estate Plan. The three healthcare documents that most people are concerned with are the POLST, Advanced Directive, and Healthcare Power of Attorney.
POLST The POLST, or Provider Orders for Life-Sustaining Treatment) is a medical order not a legal documents. Not everyone needs a POLST. This document is prepared with a physician, and sets forth whether you would want extraordinary measures taken to save you life. These measures include CPR.
Physicians will often start a POLST dialog with patients that are in declining health...this is not an order for everyone.
Advance Directive An Advance Directive gives instructions for care for serious conditions when you are unable to make decisions on your own. Every adult should have an Advance Directive. In Oregon, Advance Directives take a form set forth in the Oregon Statutes.
Effective January 1, 2019, Oregon has a new Advance Directive form. If you already have an Advance Directive it will still work, just know that if you fill out a new one it will look a little different.
This document appoints your healthcare agents and gives them instructions related to feeding tubes and other artificial life-support measures. It allows you to refuse those artificial measures, state that you want them, or that you only want them on the advice of your physician.
Healthcare Power of Attorney Like the Advance Directive, this document also appoints your healthcare agent. However, the Healthcare Power of Attorney gives your agent many more powers related to your healthcare decisions.
Some additional powers are: management of pain medications, coordinating in-home care, and coordinating your general medical treatment. The Healthcare Power of Attorney shines when you are not in an end of life situation, but are unable to make decisions for yourself.
The Estate Plans that I prepare include an Advance Directive and Healthcare Power of Attorney (I call it an Advance Directive Addendum). These are important choices that every adult needs to make.
If you'd like to learn more about Healthcare & Estate Planning or have any other Estate Planning questions, please schedule a complimentary Estate Planning Strategy Session.
Not everyone is ready to handle inheriting a lump sum of money. This is especially true of young people that don't have the life experience to appreciate the value of money and haven't acquired the skills to manage money. Many inheritances disappear in the matter of a couple of years or even in a matter of months.
It Can Happen to Anyone Anyone inheriting money can look up a year later and realize that the money is gone and they don't know where it went. This is especially true for younger people. I knew a young man that received over $250,000.00 on his eighteenth birthday. Within 18 months it was all gone and he had nothing to show for it. The money went to a car that was totaled, to computers that were old tech within a year, to parties, to trips, etc. In the end all he had to show was some debt.
You Can Protect the Inheritance You Leave Even if you are leaving a small inheritance you can make sure that when it is used there is recognition of where it came from. We call this an "I Love You Trust." Basically, it is a trust that allow the beneficiary complete access to the money. However, when they spend money from the trust they know where it came from. So even if the beneficiary is very well off, when the use the trust money for a family vacation they know that mom and dad did that for them. Much better than mixing it in with their checking account and not knowing what it was used for.
On the other extreme, if there is a beneficiary that could never handle and inheritance on there own, a trust can be put on lockdown. This type of trust would only give the beneficiary access if an independent trustee agreed.
Between those two extremes are lots and lots of options for allow different levels of access to the trust assets.
Wasting / Wasted Inheritance After you have read this post, go to your favorite search engine and search "wasting inheritance" or "wasted inheritance." You will see scores personal stories from people that wasted their inheritances. You don't even have to click on the links, the search result summary should be enough to paint the picture for you.
If you'd like to learn more about protecting the inheritance you leave, let's talk about it, just schedule a complimentary Strategy Session with me.
Whether you know it or not...whether you want it or not...you have an estate plan even if you've never signed one. In Oregon, (really in every state) our legislature created and the governor signed an "estate plan for all." Unless you do something to change it, that estate plan created by the State will decide who gets your stuff when you are gone.
Dying Intestate When you die without an estate plan, you are said to die intestate. In that case (which happens all the time), the laws of the state kick in and dictate who will get your assets. You can read the Oregon Law by clicking here. Basically the State has set up a hierarchy of who will get your assets. It doesn't matter if you never had a relationship with the person, if they are the correct relative they will inherit from your estate.
Guardians For Minor Children Without and estate plan, a judge will decide who will raise your minor children. You have no say in the matter after you are dead. Often times more than one family member will petition the court for custody of children. I have been involved in those cases and they can get very ugly.
Often times there can't even be an agreement on temporary custody while the court is deciding. In those cases the children often end up in foster care while the court case is open.
Make Your Own Decisions (Don't Leave It To A Court) There is no need to leave these decisions to the State. Creating a estate plan is not that hard, and doing so will ensure that your wishes are cared out...that your children are raised by the people you choose...and that the likelihood of a fight in your family is very low.
If you'd like to learn more about why you should have your own estate plan, please schedule a complimentary Strategy Session with me.
As they say..."there is more than one way to skin..." The same is true with leaving assets to your children. There are good ways, traditional ways, ugly ways and everything in between. Here are four of the most common ways to leave assets to your children.
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Outright Distribution Leaving money to your children outright is the most basic way possible. You have cash, the cash is handed to your children. You have a house, the house is retitled in the child's name. However, if your children are minors they cannot inherit outright and a conservator will need to be appointed by a court. Stay tuned for a future episode explaining the magical vanishing 18 year olds inheritance.
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In Trust - Full Withdrawal Rights. With this method, the assets are left to your children in a trust, but they are give full right to withdraw those assets for any reason. This method, much like outright distribution above, does not provide any way to make sure your child's inheritance with last.
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In Trust - Stated Ages / Distribution Trustee / Income This method is also left in trust, but with varying degrees of protection from waste. You can set it up so the child will get the income from the trust every year. You could give them access to the principal of the trust, but only with the approval of an independent distribution Trustee. There is also the method of allowing your children to withdraw a certain percentage of the trust assets at they reach certain ages - such as 25% at 30 years old, 50 at 40 years old and 100% at 50 years old.
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Unitrust This allows your children to with draw on an annual basis a stated amount or percentage of the trust assets. Something like 5% or $5,000.00
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Bonus Method Any combination of the four methods above. How you leave your assets to your children is very flexible. Often blending these methods together is the only way to reach your desired goal - this is one of the benefits of working with an estate planning attorney.
If you'd like to learn more about leaving assets to your children, please schedule a complimentary Strategy Session with me.
Retirement accounts are often very misunderstood. Dealing with how to incorporate them in your estate plan can seem very difficult. Here is some basics, but you really need to speak to a professional about your particular circumstances.
Don't Title Them Into Your Trust You have your Trust and now you are working on funding it. Your attorney (or online service) told you to put all of your accounts in the name of your Trust. Hold on, don't do that with your retirement accounts. Retirement accounts are treated differently when it comes to taxes; they are also exempt for most collection actions. If you change the ownership of your retirement accounts that will trigger a tax and you'll loose that collection exemption. If someone tells you to change the name on your retirement accounts...get a second opinion before you do anything.
Primary Beneficiary If you're married, 9 times out of 10 your should name your spouse as the primary beneficiary. Inheritance of a retirement by a spouse retains the exemption as if they were the original owner of the account. Of course you might be that 1 out of 10...seek professional advice before you make a final decision.
If you are single, see the contingent beneficary section below.
Contingent Beneficiary When a non-spouse inherits a retirement account it looses the exemption protections unless you live in a handful of states (Oregon is not one of them). The general best practices it to leave make sure you name each person or organization you want to get part of your retirement account separately - don't name only one person and expect them to share. If you are interested in protecting your retirement accounts from creditors, then there are ways to name a trust to do just that. However, you must name the trust in a specific way and should get the advice of a professional.
If you'd like to learn more about incorporating your retirement accounts into your estate plan, please schedule a complimentary Strategy Session with me.
Most people think of Estate Planning solely as an end of life tool. That is an essential part of Estate Planning, but there are more. I like to think of the end of life portion as the pinnacle of a pyramid. At the base there is getting an understanding of your estate; things and people. As we move up the pyramid there is healthcare, incapacity, and how your life is maintained.
Taking An Inventory Every client I work with completes an Estate Planning Inventory and Assessment. This includes who you are, who your beneficiaries are, who your decision makers are, what your have (your assets), and your wishes. Completing this Inventory and Assessment gives you a complete picture of the current status of your Estate.
Incapacity Whether medical, physical, or mental incapacity, an Estate Plan provides for how you and your things are managed when you can't manage them. This includes appointment of healthcare decision makers, financial decision makers, and instructions to those decision makers.
End Of Life Setting forth the explicit directions on who will get what. Also, how taxes should be paid, the process by which your estate is administered (Private or Public), guardians for minor, etc.
If you'd like to learn more about estate planning, please schedule a complimentary Strategy Session with me.
As parents we all worry in the back of our heads about our children being cared for after we are gone. Hopefully we all get to see our children grow into adulthood and never have to worry about guardians and leaving money to minor children. As the saying goes, "hope for the best, plan for the worst."
Minors Cannot Directly Inherit Money & Assets In most states a person under the age of 18 cannot directly inherit money & property and be in control of it. Rather, the laws require that a third party be appointed to manage and care for the minor's assets.
This third party can be a custodian or a trustee depending on the type of Estate Plan involved.
In the event you have a Will based Estate Plan, or no Estate Plan at all, the third party will mostly likely be referred to as a custodian. You can name a custodian in your Will. If you have no Will a judge will appoint a custodian. In either case, the custodian must be approved and appointed by a judge.
In the event that you have a Trust based Estate Plan, you can leave your children's inheritance to them in a Trust and select the Trustee for that Trust. Absent some unforeseen turn of events, there is no need for a judge to get involved.
Also, the people you choose as guardians for your children can, and often should, be different than the person you name as Trustee or Custodian. That way your children can have the best of both world after losing everything; the right people raising them and the right people looking after their inheritance.
If you'd like to learn more about leaving money and property to minors, please schedule a complimentary Strategy Session with me.
A couple that I worked with this year was surprised to learn that they need a Will to go along with their Trust based Estate Plan.
This couple came to me with a Will based Estate Plan that they had for years. These was nothing wrong with their plan when it was setup. However, as time passes, circumstances change as to your Estate Planning needs.
After learning about their current circumstances, we all agreed that a Trust based Estate Plan was right for them.
When they came in for their signing cermony, we reviewed their Trust and other documents. The couple was surprised that switching form a Will based to Trust based Estate Plan would require them to still have Will.
There Are Two Main Reasons You Need a Will With Your Trust REASON #1 - You pass away before your Trust is fully funded.
This can happed if you pass away before you have time to fund your Trust, or if there is a mistake/oversight and an asset is properly funded into your Trust.
In this case, your Pour-Over Will directs that you are leaving your probate assets (those not funded into your Trust) to your Trust. Once the Probate is complete, all of your assets are then handled pursuant to the terms of your Trust.
REASON #2 - Your Trust is invalid for some reason.
It doesn't happen often, but there is always a change that your Trust can be found to be invalid.
It could be an error in executing your Trust, or due to an heir challenging your Trust in Court.
No matter the reason, if your Trust is invalid that you assets will need to go through Probate. In this case, your Pour-Over Will directs your Personal Representative to setup a new Trust with the same goals, heirs and wishes as your invalid Trust. Then all of your assets are left to the new Trust and your assets will go where you wanted them to go in the first place.
Hopefully Your Pour-Over Will Never Gets Used. As you've heard me say in the past, a goal of having a Trust is to avoid Probate. That means that our goal is to never use your Pour-Over Will.
Despite our goal, we never want to put all of our eggs in one basket and having the Pour-Over Will is an insurance policy for your Estate Plan.
If you have any questions, or want to learn more about Estate Planning, please schedule a complimentary Estate Planning Strategy Session.
Just last week I met with a client with three children. They wanted to leave the home they had built to all three of their children.
This can, and often is a bad idea. When you leave a single piece of real property to more than one person, conflicts can often arises. Most likely they will take ownership as tenants in common...meaning that each of them owns a undivided interest in the whole property.
The conflict comes in determining how the real property will be used. Who gets to live there? Who pays the property taxes? How much is reasonable to pay the owner managing the property.
I often advise my clients to choose one person to inherit the each piece of real property and offset the value of the real property with other assets to other beneficiaries.
If it is a must that the property must stay in the family, there are solutions to set down rules for the use and enjoyment of real property. Those solutions are often expensive. If its important that to you that you leave real property to more than one person, then the expense is well worth it.
If you have any questions about leaving real property to your heirs, or any other estate planning questions, schedule a complimentary estate planning strategy session.
"How do I avoid probate?" "Why should I avoid probate?"
I get asked questions like this all the time. Many people have heard that avoiding probate is a good thing, but they aren't sure how and why.
The how is relatively easy...create a Trust based estate plan. By having a properly funded trust, your estate will not require a probate.
The why varies from person to person. Some the most common and compelling reasons are:
- A trust keeps everything private. If your estate requires a probate, everything filed with the court is a public record.
- There is rarely need for court involvement during the administration of a trust. This simplifies the process by not having to make court filings and making sure that you are meeting all of the court's requirements.
- Cost. While not exorbitant, there are filing fees to open and close a probate. Further, due to the number of notice and filing required a probate usually requires more attorney hours.
So now that you know the why and how of avoiding probate the next step is to get your estate plan started.
If you'd like to find out what plan is right for you, or you have any estate plan related questions, schedule a complimentary estate plan Strategy Session.
One of the most common questions I get about estate planning is "What's the difference between a Trust and a Will?"
Trusts and Wills are documents that you create during your life that direct who your assets go to after you pass away. The main difference is that a Trust works during you life and a Will only works after you've passed away, its submitted to probate, and the probate court accepts it.
Trusts have the advantage of allowing your successor trustee to step in and manage your affairs if you become incapacitated. A properly drafted, executed, and funded Trust allows a seamless transition without the involvement of a court or the need for other documents.
Another advantage of Trusts is that they are private. Wills on the other hand become public once they are filed with the court.
In Oregon, the main advantage of a Will is the ability to name guardians for your minor children. You can also accomplish this with a Trust based estate plan by also having a Will that names those guardians and leaves the distribution of your assets to the Trust.
Most people I work with go the Trust route. However, it depends on your specific circumstance whether a Trust or Will estate plan is right for you.
If you'd like to find out what plan is right for you, or you have any estate plan related questions, schedule a complimentary estate plan Strategy Session.