Most parents love their children unconditionally and want to do whatever they can to smooth life’s rough road for them.  But that unconditional love doesn’t necessarily mean that unconditional trust exists when it comes to leaving children with a hefty inheritance. 

A recent Forbes article looked at smart ways that parents can pass the love along while still protecting the wealth they have spent their lifetimes working hard to accumulate:

Annual exclusion gift test.  A parent can gift up to $14,000 every year to each child without incurring gift taxes; both parents together can give a total of $28,000 to each child.  You can use this annual exclusion gift to test the waters on how your children will handle a financial windfall.  Do they pay off debt, save it or place it on the ponies?  Their actions can give you insight into how they might handle their inheritance.

Incentive trust.  Parents that have worked hard to accumulate their wealth often worry that a large inheritance may harm a child’s ambition to succeed on their own.  If that is a worry for you, an incentive trust allows you to set goals or milestones for your children to achieve before distributions are made.

Staged distributions.  Parents can create a trust with the distributions tied to different age stages or events (graduating college, starting a business) so the inheritance is doled out over time.

Leave a legacy.  Creating a personal foundation to support the causes you believe in, and involving your children early on in that foundation, will help them learn about the responsibilities that come with wealth and create empathy for a world outside their own.

Hold the cash.  Instead of giving cash directly to your children, consider alternative giving strategies, like paying down their college or home loan mortgage debt.  This will make a big difference to their financial future without tempting them with large amounts of cash.

Wealth creation trust.  One of the best ways your unconditional love can be expressed to a child or grandchild is through the establishment of a wealth creation trust to commemorate a birth or a milestone birthday or event, and then directing monetary gifts to the trust over time.

When your child gets to be an age specified in the Trust, he or she can step into the role of Co-Trustee of the Trust, learning how to operate the trust and best utilize the funds in the Trust.  He or she will be trained on the best types of investment for the Trust, learn the purpose of the Trust (to encourage the creation of wealth from one generation to the next, rather than the squandering or wasting of assets); how to protect it (keep the investments in the name of the Trust, regardless of how funds are used, so always title investments properly and sign on behalf of the Trust); and how to create more wealth in the future using the Trust assets.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation.  Call our office today to schedule a time for us to sit down and talk about a Family Wealth Planning Session, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security.

Did you know that the best-selling item at Walmart is bananas?  It’s true, and has been for several years.  So the next time you need a great price on your favorite yellow fruit, go ahead and head for Walmart.

But steer clear of the world’s largest retailer when you need a will or other estate planning documents.

While not available in the U.S. (yet), Walmart just started selling wills for $99 in several Canadian locations.  You can also get powers of attorney at the boutique law shop called Axess Law set up in Walmart.  And in our opinion, that’s not just bananas, it’s nuts too.

Creating an estate plan is something you do to leave a legacy of care and love for the people who matter to you the most.   Working with an attorney who understands your goals and wishes for your family, and can articulate those in a well-crafted estate plan, is a much better alternative than relying on a one-stop shopping experience, be it at Walmart or through online legal websites with standard forms that can’t begin to know what you truly want and deserve for your loved ones.

Having the caring and complete guidance of legal counsel will ensure that your estate plan takes advantage of the ever-changing state and federal laws as well as reduces the potential for family feuds.

If you’re the parent of minor children, your attorney will help you create a valid will as well as a comprehensive Kids Protection Plan that ensures the well-being and care of your children; without one, a judge will make that decision for you (or your kids could even be taken from your home temporarily). 

Even if you don’t have minor or dependent children, you have stuff that will have to be handled after you are gone and a $99 will is likely only going to make it worse for the people left to clean up the mess.

Estate laws vary by state, which is another good reason to have a local lawyer guide you.  The probate process can be lengthy and arduous; your attorney can help you and your family stay out of Court, saving time, money and stress.

Finally, many life circumstances – remarriage, divorce, new children – impact your estate plan, so be sure you review it annually and keep it updated when things change.  Having a legal counselor who knows you and your family makes it much easier to keep your plan on track, so it will always be just what your family needs, when they need it.

If you would like more information about creating or updating your estate plan, call our office today to schedule a time for us to sit down and talk.  I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today and mention this article.

Many people fail to create an estate plan because they don’t truly understand what is involved and therefore believe it is too complicated. But the real truth is that creating an estate plan during your lifetime is far less complicated than what your family will deal with after you are gone, if you don’t:

1.  Create a Trust.  When most people think of preparing for the end of life, they think of writing a Will, but having a Will without a Trust is fast track to put your family in the Courthouse after you are gone.  Instead, to keep your family out of Court, you’ll want to set up a Trust and title all of your assets to be owned by that Trust.  While it might feel like a lot of effort, it will save your family a LOT of trouble after you are gone. 

2.  Designate beneficiaries.  Designating beneficiaries for your retirement accounts and insurance policies is critical because these assets do not pass through your Will or Trust.  Filling out beneficiary designation forms for each of your accounts will ensure these assets pass to the people you want to have them and stay out of the Court system.  Be sure to review your beneficiary designations periodically to be sure they align with your current circumstances. Hot tip: never name minor children as beneficiaries of your retirement account or life insurance policies AND if you have more than $150,000 in a retirement account, you should strongly consider a Retirement Trust to ensure that your loved ones receive the most benefit from your remaining retirement funds.

3.  Avoid estate taxes.  Most of us will not have to worry about estate taxes since the federal estate and gift tax exemption is $5.34 million ($10.68 million for married couples) in 2014 and indexed every year for inflation.  However, if you are married and wish to take advantage of portability – where spouses are entitled to each other’s unused exemption – the surviving spouse must file the required paperwork to claim the exemption. 

Plus, 15 states and the District of Columbia have state estate taxes, so you could still owe even if your estate is too small to owe federal tax. The big key here is to not just leave a set of documents that your family will have to figure out after you are gone, but give them the gift of a trusted advisor to turn to; call us if you’d like to consider having us be that trusted advisor for your loved ones.

4.  Leave a letter of instruction.  Not everything you may wish to pass on to your heirs – like instructions for your funeral – should be put in your will or Trust.  Leaving a letter of instruction with your family or attorney can ensure your final wishes are respected.  

5.  Sign a durable power of attorney.  Estate planning is not just about death, but also ensuring your family can handle things in the event you become incapacitated.  Signing a durable power of attorney that designates someone to handle your financial affairs will save time, money and hassle for your family that, without it, will have to go to court to have a guardian or conservator appointed to manage your financial affairs. This could cost tens of thousands of dollars and is easily handled with one simple document and a trusted advisor for your family to turn to in a time of need.

6.  Create an Advance Healthcare Directive.  This document designates a decision maker of your choosing to make sure your wishes are followed when it comes to the medical care you want – or do not want – to receive when you are incapacitated or near death.  You will also need to sign a HIPAA release form so your medical records can be released to your health care agent and medical professionals can discuss your medical care with that person.

7.  Organize your paperwork and digital files.  Since many of us live our lives online these days, make sure your executor has access to all your digital information, including website addresses and the log-in information for those sites.  Put all your important paperwork – deeds, insurance policies, bank and brokerage statements, etc. – in one file and let your executor know where it is.

Bonus tip: If you have minor children at home (or adult children with special needs), don’t rely on naming guardians in your Will alone. Create a comprehensive Kids Protection Plan to ensure your children’s care is covered not just for the long-term, but for the immediate term as well and no one you don’t want raising your kids ever has a chance to take control.

Contact us about scheduling a Family Wealth Planning Session so we can sit down and talk about designing a plan that fits the needs of you and your family.  Surprisingly, sometimes the less you have, the more important it is to plan.