HOW OFTEN SHOULD YOU REVIEW YOUR ESTATE PLAN?
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An estate plan isn’t a one-time thing, written just to be set aside to collect dust. Life changes. Laws and regulations change. And it is important for you to understand when those changes could affect your estate planning documents.
Reviewing your estate plan regularly and during major life events, regardless of the last update, will help make sure your affairs are in order.
Here’s everything you need to know about when you should review your estate plan, or at least reach out to your estate planning attorney to find out whether you should revise your plan.
Conduct Maintenance Reviews of Your Estate Plan Every 3 to 5 Years
Everyone with an estate plan should regularly sit down with their attorney to review their documents, but the frequency depends on each individual plan, as well as what is going on in your life and the life of your family.
For example, one person might request to go over their plan every year. Others might do a bi-annual review. Many wait five or more years between reviews. However, the general expert recommendation is to check in on your estate plan at least every three to five years.
Pick a time frame you and your attorney think is best, but understand that because laws change, regular estate plan reviews really should be done no fewer than every five years so that you can keep pace with updated regulations and laws. This doesn't mean you have to re-write your estate plan every three to five years- what it does mean is that you should check in with your estate planning lawyer to (i) find out if there have been any changes in the tax or inheritance laws that might affect you; and (ii) let him or her know about any significant changes in your life and family circumstances and ask whether any of those changes affect your current plan.
Review Your Estate Plan When There Are Financial Changes
If major financial changes occur in your life, you should update your estate plan. But what qualifies as a major financial change? They include updates in the following areas:
Your estate plan should also be reviewed if you purchase large asset like a home, or if you borrow a large sum of money.
You also may wish to review your plan or make changes if the financial situation of your heirs changes.
Review Your Estate Plan if Family Changes Occur
Other life events include major family changes, usually relating primarily to children or changes in your marital status. For example, the birth or adoption of a child or grandchild often requires an update to your estate plan. Not only can you create an inheritance for them, but you can name guardians or set up trusts, too.
Aside from the birth of a child, when else should you review your estate?
Your estate planning needs will also naturally change as time passes, and your children get older. The careful plans you made for the care of your children when they were toddlers may not be what you need or want when they graduate from college, or start their own families. You may also need to review your life insurance policies and plans for assets after you are done paying for college and other large expenses.
If Marital Circumstances Change, Review Your Estate Plan
Finally, you should review your estate plan if anything regarding your marital state changes.
Usually, this is necessary if you get married or divorced or if illness, disability or death of your spouse occurs. In the case of a divorce, it is likely that your original estate planning documents included your spouse as the first-line personal representative, health care proxy, and power of attorney. Though it is certainly your choice to leave these designations in place, it is usually not what people want after a divorce. In the case of marriage, especially re-marriage after a death or divorce, you will want to make sure you are providing not only for your new spouse, but for any children you may already have from a prior marriage.
What Kind of Changes Might You Make to Your Estate Plan?
Ideally, your original estate plan was written in a way that provides generically for your children and descendants, so that if you have another child, or if you have a new grandchild, you do not necessarily need to make changes. This works when your plan is to divide everything evenly among your children or their children- if you have made specific allocations in your original documents, you will need to amend the documents when new children and grandchildren come on the scene.
In the case of divorce or death of a spouse, there are likely a number of documents where you have named that individual, such as your designation of a personal representative in your will, your health care proxy, and your durable power of attorney.
You do not necessarily have to re-write your entire estate plan. Many changes can be made through the use of a codicil, a document you attach to your original will that specifies the changes you wish to make.
It’s imperative to have your attorney’s help when you review your estate plan. If you are experiencing a life event or are ready for a regular review and you’re looking for a trusted, experienced team to stand by your side, contact the SLNLaw team today!
Blog Reader Special: We are offering all blog readers a 10% discount on our estate planning rates. Best of all, the first step — a consultation to assess your needs — is absolutely free!
WHAT TO DO IF YOUR EMPLOYER DOESN’T PAY YOU ON TIME
The facts are simple: it is illegal for your employer to not pay you on time. Under the Department of Labor’s Fair Labor Standards Act and the Massachusetts Wage Act, an employer must pay an employee when payment is due — whether that’s once a month, every two weeks, or in some cases, as frequently as every day, depending on what state you live in and your profession. Violation of these laws is sometimes referred to as "wage theft" because, by failing to pay you what you are supposed to be paid for your work, the employer is in effect stealing your wages.
In Massachusetts, employees must be paid weekly or biweekly (note: regulations are different for union workers, who can be paid less frequently depending on union negotiations). Massachusetts law also requires employers to provide earned sick time for their employees; this includes part-time and temporary employees.
In Massachusetts, employees must be paid within six days of the end of the payroll period, in order for payment to be timely under the Wage Act. If you are fired or laid off, you must also be paid your final paycheck- including payment for any accrued but unused vacation time- on the day of termination. If you resign or quit, you still need to be paid these amounts, but your employer can make that payment in the next regularly scheduled payroll instead of the day of resignation.
It is illegal for your employer to retaliate against you for asking to be paid appropriately under the law, or even for filing a complaint in court or with the Attorney General.
If an employer withholds your wages, it’s a serious offense that not only breaks the law but causes stress and anxiety for you, the employee. There is a reason the laws are so strict, and impose such severe penalties on employers- we recognize that all workers depend on their wages to live their own lives, pay their bills, and take care of their families, and that it is not right or fair that the employer who controls the payroll can get the benefit of your time without paying you fairly.
Here’s what wage theft looks like, and what you can do about it if it happens to you.
Some Common Examples of Problems with Unpaid Wages
Most employers try to do the right thing in terms of their workers, and make every effort to comply with the wage and hour laws. Sometimes, however, either a lack of information, misunderstanding of the rules, or cash flow pressures on a business lead to violations of those laws. Here are some examples of common errors that we see in paying wages:
Request to See the Employer’s Policy
If you’re not paid on time, or think you should have been paid for sick time and were not, request to see the employer’s policy, which includes information about sick leave, vacation, personal leave, holidays and work hours. The policy will help determine whether there has been a violation of terms of employment or not.
Make Sure It’s Not a Technical Issue
Before you file a formal complaint, do one more thing: Make sure a technical error hasn’t caused the issue by contacting your manager and payroll department. Payroll could have made a technical mistake and the whole ordeal could be an unfortunate, embarrassing accident.
While an accident is unprofessional and still doesn’t make the withheld pay justified, technical errors can often be cleared up quickly in-house with little fuss. And, even though you are absolutely protected from retaliation for pursuing a wage claim, if you can get the situation resolved without putting strain on the employment relationship, it is worth trying to do so.
File a Complaint with the Attorney General
If all signs lead to withheld pay which you haven’t been able to sort out with your employer, file a formal complaint with the Massachusetts Attorney General’s Office. They will either investigate your complaint or issue you a “right to sue” letter, which gives you the right to bring a private action to recover your wages and attorneys’ fees. It is important to know that, if your employer does not make it right and pay you what you are owed, you cannot bring a civil lawsuit to collect your wages unless you have first filed this form with the Attorney General's Office. If you make it clear in your complaint that you are seeking a "right to sue" letter, you should get that letter in the mail within a few weeks.
You can fill out this form without the help of a lawyer, but it is a good idea to contact an attorney as soon as you think you have a problem with unpaid wages. Understand that if your employer fails to pay you, and you get a court ruling awarding you your unpaid wages, your employer will also have to reimburse you for anything you have paid to an attorney to recover your wages. They will also be required to pay you three times the wages you were owed, unless they pay you before you file a complaint.
Usually, these situations are resolved after a lawsuit is filed. Because of the possibility of triple damages and attorneys' fees, most employers are willing to make you whole for your missed wages once they realize the potential liability.
Being a victim of withheld pay is demeaning and stressful. If your employer hasn’t paid you on time — or has withheld funds, intentionally or unintentionally — and the situation hasn’t been quickly and amicably resolved, it’s time for the experts to step in and fight for you. We have helped hundreds of people get paid after wages, commissions, or vacation time was wrongfully withheld from them. Call the loyal team at SLN Law today!
HOW DO ANNUAL FAMILY GIFTS REDUCE ESTATE TAXES?
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Annual family gifts reduce estate taxes for individuals who have funds that they want to turn into tax-exempt gifts. You may be nowhere near the exemption limit for federal estate taxes (currently $11.4 million). But the Massachusetts limit is much lower- $1 million per person- and includes assets you may not consider part of your estate, like life insurance proceeds, the equity in your home, and retirement accounts. As a result, many middle class families are affected by the Massachusetts estate tax, and could face a heavy tax burden without careful planning.
Shrinking your estate taxes is about making sure your hard-earned and meticulously-saved money will be used for purposes important to you — like paying for your grandchildren’s college educations — not going into government pockets. There are many tools available to an estate planning lawyer to shelter assets without giving them away, but sometimes you simply have to reduce the overall size of your estate in order to minimize tax liability.
By starting to give your wealth away now, you minimize and avoid estate taxes that otherwise could eat up your wealth.
If that sounds confusing, don’t worry. Here’s everything you need to know about how annual family gifts reduce estate taxes — plus some important financial changes this year.
How Annual Family Gifts Work
One way to reduce estate taxes is to cut the value of your estate by giving annual gifts. An annual family gift, often called an exclusion gift, is simple: It’s a gift that qualifies for annual exclusion from federal gift taxes. This means you won’t have to pay taxes on that specific amount. Under the federal tax laws, you can give away a certain amount of money to any given person each year without having to pay a gift tax. Once that money is given away, it is no longer part of your estate and therefore will also not count for estate tax purposes.
Annual giving usually includes gifts of:
For example, if you are a parent or grandparent, you would be given an annual exclusion amount to gift, which you can give to an unlimited number of people like grandchildren, children, nieces, nephews, etc., during that year. If your children are married, you can gift $15,000 to your child and another $15,000 to their spouse, to increase the amount you can move out of our estate in a single year. If your child has three children, you can gift $15,000 for each child into a trust or college savings account established for those children. Gifts aren’t restricted to family — non-family members can receive gifts, too.
How Much Can You Gift to Reduce Tax?
The amount is set each year by the IRS through a revenue procedure and is usually published in early November for the following year.
The annual gift exclusion amount is $15,000 for this year. And married couples can combine their giving power to collectively gift $30,000 to one recipient.
Currently, and through the remainder of 2018, the 2017 Tax Cuts and Job Acts increased the lifetime estate and gift tax exemption to $11.180 million per person. That means that you don’t pay any federal taxes on your estate until you’ve exceeded this limit.
Also, you should know that annual gifts made during your lifetime don’t count towards this limit, unless you give more than the annual limit. For example, if you gift someone $20,000, the excess $5,000 will reduce your lifetime estate and gift tax exemption by that much – and you’ll owe taxes on it as well.
If you have an ownership interest in a small business as part of your estate, you can also give away interests in that business as part of your annual gifting strategy. If the business is "closely held," meaning it is not a publicly traded company (most family businesses are closely held), the IRS allows you to discount the valuation of the business for purposes of determining the value of a gift of shares. You are also allowed to discount the value of the ownership interest if what you are giving away is not a majority or controlling interest. This is often the first place people should look for a gifting strategy, because it allows you to move more real value out of your estate within the gift tax limits than if you were to give away liquid assets like cash or publicly traded stocks.
There are various other ways to make sure you reduce estate taxes. One of our best suggestions?
Work with an estate lawyer to create trusts for you and your spouse that effectively double your exemption, and, if you are still at risk for owing estate tax, consider moving some assets into an irrevocable trust that takes them out of your estate.
Want to give gifts to reduce your estate taxes this year? There’s still time to figure it out with an SLN Law consultation!
WHAT’S THE DIFFERENCE BETWEEN ASSET PROTECTION AND ESTATE PLANNING?
Knowing the difference between asset protection and estate planning is the first step when it comes to protecting your property for yourself and future generations.
The logistics can feel overwhelming and confusing at first, but don’t worry. Here’s a breakdown of the differences:
Asset protection is fairly self-explanatory. It aims to find ways to proactively protect assets. Financial planning and estate planning result in asset protection. Once you have integrated your financial goals with your estate planning goals and positioned or repositioned your assets to be protected from creditors, you will have a comprehensive asset protection plan in place.
Estate planning determines how assets are cared for and protected when an individual can no longer manage them or they pass away. Here’s everything you need to know about how estate planning is a vital component of asset protection.
Why Estate Planning Matters
Estate planning covers a range of topics relating to plans for the end of a person’s life and after.
The most commonly known part of an estate plan is a person’s last will and testament. This document makes your final wishes clear about how you want property distributed or managed after death, ensures any remaining debts are properly cleared, can be used to create a trust, names who will care for minor children, and more.
However, estate planning is much more than just a will, and by using the full spectrum of estate planning tools available to you, you can ensure that your loved ones are well cared for and your property is well managed and protected from depletion by unnecessary fees and costs.
Estate Planning Provides Protection During Your Lifetime
It’s important to recognize that estate planning isn’t designed solely for after someone is deceased. A well-drafted estate plan provides for a person’s inability to manage their affairs during their life, whether temporarily or more long-term.
This is accomplished by including a power of attorney, giving a chosen person- probably a loved one or intimate friend – the right to act, as your Attorney in Fact, on your behalf when it comes to financial decisions. A power of attorney protects you from having a court-appointed conservator, reduces administrative fees, unnecessary delay, and needless litigation.
Your Power of Attorney can be as specific or broad as the you want. For example: The role can begin immediately or designate a specific time or period, depending on the individual’s desire.
A second necessary document in a well-drafted estate plan is a Health Care Proxy. A Health Care Proxy names the person of your choosing, who will make health care decisions on your behalf, should you be unable to do so. Having a document that clearly designates a Health Care Agent, prevents unnecessary delays in your care, ensures that your health care wishes are followed, and removes the requirement of a court-appointed guardian.
When Trusts Are Incorporated Into Estate Planning
Trusts, are containers which hold your assets for your benefit and/or for others that you name as beneficiaries, according to detailed instructions dictated by you, the person who created the trust. Here are the most common types of trusts:
Trusts provide detailed asset management during your life and after. They can protect assets from being dissipated by careless beneficiaries, lost through divorce, and ensure that your assets that you grew over your lifetime, benefit your children and even their children for years to come.
The Benefits of Asset Protection
Asset protection is not just about protecting your assets from creditors or relegated only to the wealthy. Asset protection, in its simplest form, is any method used to protect your hard-earned wealth from loss and dissipation due to life’s many uncertainties. Asset protection is for everyone.
So why is asset protection so important? After all, what belongs to you will always belong to you, right? Well, in some cases, it’s a little more complicated than that.
Asset protection strategies help keep assets from being absorbed or taken by others by protecting yourself and loved ones from creditors or financial complications due to divorce. Asset protection plans can help protect homes, business interests, funds and more. It’s a way to give stability in an often-unstable world. With a solid estate plan in place, you and your family will be able to handle the unexpected with ease, decorum, in a timely manner, and according to your wishes.
For example, in the unfortunate case a divorce happens to one of your children down the road, a well-drafted trust can prevent your child’s inheritance from being given to an unfaithful former spouse. Or, if you own your own business and suddenly fall ill, with the right documents, your business can be properly managed and protected in your absence while you recover.
Protect your property now – and later – with asset protection and estate planning strategies. Contact the experts at SLN Law today to get started!
3 UNINTENDED CONSEQUENCES OF DYING WITHOUT A WILL
Dying without a will happens more often than you might think. Aretha Franklin. Prince. Howard Hughes. Celebrity or not, if you neglect taking the time to compile a legal document that outlines your full and complete wishes for your assets and the minors in your care, there can be life-changing consequences for the people left behind.
These are the top three negative unintended consequences of dying without a will:
1. Your Heirs Must Spend Time and Money to Locate and Distribute Your Assets
As soon as the asset distribution process begins and your surviving loved ones realize you have no will, it’s going to cost them. With no personal representative (formerly known as an executor) appointed, a judge will have to determine who should locate and catalog all of your assets.
The individual chosen will be required to comb through bank statements, tax returns, email folders, file cabinets and more to get the details on policies, accounts and plans you own. This will take both time and money, and can be an exhausting process for a family member who is grieving. Not to mention, the person the judge appoints to administer your estate may not be who you would have preferred managing your private financial affairs.
Once all the assets are located, the probate court will have to determine how they are distributed. Even if there is no disagreement about what to do with the assets, the process itself can eat away at the value of your estate. It is estimated that the cost of the probate process can eat up 3% to 8% of the assets available leave to your loved ones. That means if your estate is worth $500,000, it could cost between $15,000 and $40,000 to get it through probate and to the point where your assets can be distributed. Compare this to the cost of a comprehensive estate plan, which is usually between $1500 and $3000 and you will see the value.
2. Intestate Succession Could Leave Your Assets to the Wrong Parties
When you die “intestate,” meaning “without a will,” your assets pass to your survivors according to intestate succession laws.
However, there are many assets that are not governed by intestate succession laws, including:
These assets will pass to the beneficiary named on the account or the other joint owner will assume full property rights after you die.
But all other assets, such as savings accounts, checking accounts, property owned by you solely, etc. will follow intestate succession laws:
These strict succession rules do not account for many individuals’ specific wishes, and that’s why a will is so vital. For example, stepchildren and foster children are not included in intestate succession unless you have legally adopted them. In addition, because the law assumes your spouse will provide for your children, the children will not receive anything directly. If your surviving spouse remarries down the road, and/or has other children, your children may not be fully protected with respect to the legacy you wanted to leave for them.
What if your first spouse dies and you remarry late in life? You may wish to leave the majority of your estate to the children from your first marriage. If you don’t devise a will to state just that, your second spouse will receive half of your assets. When they die, their assets (which now include 50 percent of yours) will pass to their children – not yours.
The bottom line is this: the intestate succession rules represent the state's best guess as to what most people would want. By definition this does not take into account your specific situation, family make-up, or wishes.
3. You Lose Control Over the Guardianship Choice of Minor Children
Dying without a will is most complex when there are children involved, especially when the children don’t have another living parent. If you don’t have a will that includes a named guardian you wish to care for the minor children, the court will appoint a person for this role. This person may or may not be suitable or ideal for this responsibility, and it may result in litigation between this individual and other relatives who are both vying for custody of the children.
Talk about an ugly situation. It’s avoidable when you leave behind a will with specific guardianship provisions in place to guarantee your children end up in the best scenario possible.
And, even in the best case scenario where a suitable guardian steps forward and there is no disagreement about that person, the simple fact that a court has to make the ultimate decision can prolong the process and delay your children's sense of permanence and security at an already difficult time.
Creating a will doesn’t have to be a painful, painstaking process. Work with slnlaw and see how we’re different. We know our clients are real people with real needs, and we believe a thoughtful, precise estate plan is sure to take a weight off your shoulders.
ESTATE PLANNING TIPS FOR EMPTY NESTERS
No more school buses. No more huge grocery lists. The last bird has left, and now the nest is empty!
You may feel sad or you may be overjoyed. You may not truly feel like an “empty nester” if you are still paying college tuition or loans for college tuition. You may just be trying to remember what life is like without your kids in the house. Either way, one thing you may overlook is the importance of taking a step back and taking a look at your estate as a whole.
When was the last time you revised your estate plan?
If you’re like many busy parents of toddlers then teenagers, the answer is “decades ago.” Perhaps you put a will in place when your children were born, to ensure they were taken care of in the event of your untimely passing, but it’s probably gone largely unchanged since then. You may have acquired more property or assets. You may have had more children. You may have divorced and remarried.
At any time of change in your life (and becoming an empty nester qualifies), it’s smart to assess the validity and accuracy of your estate plan, ensuring it lines up with your current wishes.
Here are five quick tips on why and how to update your estate plan:
Tip #1: Revisit Powers of Attorney
One of the primary functions of a will is to name the individuals you’d wish to care for your finances if you become incapacitated or die, as well as the individual you’d like to make healthcare decisions for you. Have these people remained the same?
You may have previously named spouses, siblings or parents, but over the course of 18+ years, family members may have aged or passed, and you may have divorced. If your children are older and trusted, it may be time to pass this responsibility to them, as they are more likely to outlive you.
Also, you can get your adult children started on their own planning by getting them each a health care proxy and a durable power of attorney. Now that they are legal adults, you will not automatically be able to step into this role for them. Not only can this help protect them if they get sick or injured, but you can help get them thinking about taking responsibility for their planning in the process.
Tip #2: Determine How You Will Pass on Your Inheritance to Grown Children
If you created an estate plan when your children were very young, you may have left all of your assets to your spouse to distribute amongst your children, or you and your spouse may have created a trust to hold your collective assets until your children reached a certain age.
If your children are now adults, you may wish to revisit trust provisions put in place to care for minor children that are now outdated, and revise your trust to reflect the adults they’ve become. Have your children added grandchildren to the family? You will likely desire to revise your will to reflect any gifts to your grandchildren. You may also be at the point where you no longer feel you need to have assets held in trust for your children, and want to revise your documents to provide for a more immediate inheritance.
Tip #3: Address Life Insurance Needs (or Lack Thereof)
Your previous estate plan likely included life insurance policies for you and/or your spouse. The amount of insurance you carried was probably based on an amount that would have provided for raising your children, paying for their education, and keeping your family in the home.
But now that you have probably acquired more assets over the course of the last decade or two and your children are now self-sufficient, you may not need to maintain the same level of life insurance coverage you did previously. It’s the right time to look at what’s needed for your family members above and beyond your estate, and only pay for coverage for the gap.
Tip #4: Start Considering Long-Term Care Insurance
One critical part of your estate plan is who will care for you if you are disabled. Now that your children are grown, it might be clearer to you which should be primarily responsible for your well-being and day-to-day living.
On the other hand, maybe you see clearly that you will need to supplement your retirement funds to provide for your own welfare. In this case, long-term care insurance is a great option. You can rest assured that you’ll be able to afford assisted living or a place at a long-term rehabilitation facility and avoid putting the burden on your children. You may be interested in purchasing a policy for a disabled child, to provide for them after you pass on.
Tip #5: Begin Planning for Retirement
If you own and run a family business, you will inevitably come to a point in your life when you are ready to pass the torch to the next generation. Even if that time feels far away, it’s critical to begin putting a plan in place to pass on your interests to a child who has shown interest in running the business. If you don’t have a clear line of succession, that’s even more of a reason to start exploring your options.
Our team at slnlaw specializes in making estate planning realistic and simple. It’s okay if you don’t know all the answers. Let’s work on finding them together.
WHEN YOU’RE EXPECTING AN INHERITANCE
The “great wealth transfer” is underway. Over the next few decades, Baby Boomers will pass on $30 trillion in assets to Generation X and Y. If you’ve talked to your older loved ones about estate planning, you may have an idea of the scope of the assets that will wind up in your hands eventually. Have you calculated how this will affect your own estate planning?
Many members of Generation X are in their mid to late forties and fifties and are beginning to make estate planning a priority. You may have already drawn up a will and named your personal representative. But you likely only documented how you’d like your currently owned assets handled. What if there is a future windfall that completely changes your financial picture? How will this affect your estate plan and what should you do?
1. Understand the Rules, Especially About Estate Tax
The major way in which an inheritance is likely to change your estate planning needs is that it will bring you closer to- if not over- the $1 million threshold for Massachusetts estate taxes. If you made your will when you first started your family, you likely had limited equity in your home and had not accumulated a lot of value in your retirement savings. Now, you may have several hundreds of thousands of dollars in equity, a growing stock portfolio in your retirement account, and life insurance as well. Add a substantial inheritance, and you may well have crossed the $1 million mark. It is important that you work with someone to minimize the estate tax burden on your heirs, which could cost your estate $36,000 or more if you do nothing.
2. Assemble Your Team
There are three professionals that you can rely on for assistance: an estate planning attorney, a financial advisor and an accountant.
A financial advisor can help you look at the big picture – how will your inheritance help you accelerate towards your previously determined goals? Next, an estate planning attorney applies their knowledge of tax and inheritance laws, providing specific strategies to save you money and ensure your assets are handled according to your wishes. Finally, an accountant can help you make sure all of your present filings are in order so you’re not surprised with a major tax bill.
At slnlaw, we like to think we’re more than just estate planning attorneys. We help you look at your assets and finances from a 10,000 foot view, but we also provide the up-close expertise needed to preserve your resources. We have your best interests in mind. If you don't already have a financial advisor or an accountant, we are happy to make an introduction to one of our trusted referral partners who can work with us to make sure you have what you need to protect your assets and your family.
3. Ask the Right Questions
Once you’re in front of the right professional, it’s time to make decisions. In order to make sure these decisions are ones you won’t regret, ask yourself the following important questions:
How much of this inheritance do you need right now?
The answer will vary based on your age, income and net worth. You may want to use it to fund a child’s college education or retire earlier. Consider how the inheritance can help your current situation.
What is the actual value of all of your assets?
First, figure out how you’re going to meet the goals you’ve set with your current assets, then calculate how the inheritance can help you get there. One of the reasons why seven out of 10 people will spend their entire windfall is because they use the inheritance as leverage for a lifestyle inflation, such as using the money as a down payment on a property with a mortgage they can’t afford.
Are you on track with your retirement savings?
Before you move assets out of reach for estate planning purposes, make sure you are on track with your retirement savings.
Where are your children in life and what major expenses are still ahead of you?
How you manage a new influx of assets will depend on what is still in front of you. If you are done paying for your children's education and other big ticket items like weddings, and you are relatively secure in your retirement, it may be time to start thinking about putting some assets out of reach to protect them from both taxes and the costs of long term or nursing home care in the future for you or your spouse.
4. Plan Your Own Legacy
The inheritance you receive represents someone else's legacy that they worked hard to accumulate and preserve, then made plans to pass on to you. It is your turn to do the same for the ones you love. The inheritance you receive may include something important to your family that you want to protect for your children- a family business, a family home or vacation property, or some other asset that has been preserved through multiple generations. Now is a good time to consider how to safeguard that asset, which could include putting it in a trust. If there is something in your legacy that matters to your family, you also want to make sure your heirs are not put in a position of selling or liquidating assets just to pay estate tax. Remember that If your inheritance adds significantly to your net worth, it may push you over the estate tax exemption. By setting up a trust to bequeath funds to family or charity, you will protect your estate from tax penalties and ensure your beneficiaries are in the best position possible after your passing.
Finally, when you or your spouse receive an inheritance from your parents, it is frequently a great learning opportunity for you and your children. Talking with your family about your parents' legacy and what it means to you is also an opportunity to educate your children (assuming they are old enough for this conversation) about what you are planning.
In all of the above, consider slnlaw LLC your trusted partner when navigating estate planning after an inheritance. Contact us today to set up a free consultation with our team.
WHAT WILL HAPPEN TO YOUR DIGITAL ASSETS WHEN YOU PASS AWAY?
Much attention is given to how to handle your personal property after death, in the physical world. What about the digital footprint you have left behind? From cryptocurrency to domain names to online stores to your Twitter feed – do you have a plan in place for each of these digital assets and who will assume ownership or responsibility for termination?
While laws are continually proposed to help manage and make digital estate planning more viable and easier for those left behind, it is still on you to ensure your beneficiaries are aware and prepared to take charge of your digital assets in the event of your death.
Why Should You Care?
For the most part, these digital assets don't have a monetary value (though they could, especially if they are assets you have amassed as part of a business venture). But they do represent a great deal of information about you and your family that you may not want lost, and may not want still circulating freely in the world after you are gone.
Then there is the ever-present nature and vulnerability of social media. We all know someone whose facebook account has been hacked, and whose hundreds of facebook friends have received new "friend" requests allegedly from them. You may not want to leave your account out there with nobody monitoring it, so that your friends and loved ones are not subject to the macabre experience of receiving fake friend requests from you after you are gone.
Take Inventory of Your Digital Assets
The first step: take stock of the digital assets in your name. What is considered a digital asset may surprise you.
Not only does this term include all email and social media accounts, but it could also include your Amazon, Netflix, Hulu or other audiobook account. It includes cloud storage where your photos, videos and texts are backed up. It includes all digital music files you have purchased. It includes e-commerce websites and domain names you own.
Work on compiling an in-depth inventory of every site where you have an account – it’s critical to make sure each account is handled appropriately in the event of your death to prevent identity theft and future challenges for your beneficiaries.
Appoint a Digital Trustee
The individual you would like to handle your digital assets may very well differ from who you’d like to inherit your vehicle or home, and that’s okay. Perhaps you would like to have a trusted friend manage the deletion of social media profiles and email accounts. There may also be different people you want to put in charge of different accounts or assets. For example, if you have a body of creative work stored in the cloud you may want someone who understands your work to be the one who decides what gets preserved and what gets deleted, while it may be a completely different person who is entrusted with making decisions about your social media accounts. If this is what you prefer, it must be clearly stated in your will.
Set Up Access
Under no circumstances should you list username and password information in your will, since after your death this document will become public. There are multiple ways to store online account login information. Something as basic as a password-protected Excel sheet (with the sheet’s password communicated through your lawyer), or something as secure as a digital lockbox could be a good solution. You can also use old fashioned pen and paper, and while the information should not be contained within your will, that piece of paper can be stored in the same place as your will and other estate planning documents so that it is easy for your family to find.
Provide Instructions for Each Asset
After you’ve made a comprehensive list of all digital assets, decide how you would like each account handled.
Any online payment accounts that contain a balance of cash, credits or points may be transferable, but it depends on each platform’s specific user agreement. Some organizations may cancel all benefits upon death, while others operate more like bank accounts, with beneficiaries able to transfer assets to their name.
For social media, the policy varies from site to site. Facebook allows you to input a legacy contact before death and upon your passing, this individual is able to moderate your memorialized profile. They cannot receive or respond to messages. Alternatively, you could choose to have your account completely deactivated upon death.
LinkedIn requires proof of death. Pinterest requires a copy of the death certificate and proof of the petitioner’s relationship with the deceased. Google requires the name of legal counsel as well as full documentation of the individual’s death.
Make sure you are clear in your instructions on who you want to handle these processes, and what you’d like done. While some photos you have stored in the cloud you may want to pass to a loved one, you may rather have personal documents erased.
The Bottom Line
In today’s digital world, estate planning doesn’t only encompass your bank accounts. You need to consider how to handle the digital assets that are your personal property and incorporate a thoughtful approach on dealing with each into your larger estate plan. The team at slnlaw is happy to answer your questions and share effective strategies you may find useful – contact us to set up your free consultation.
HOW ESTATE PLANNING CHANGES AFTER YOUR CHILDREN GRADUATE
Young children in the family offer a powerful motivation for parents to put an estate plan in place. It’s imperative to ensure growing young ones will be taken care of by the desired guardian in the event of a parent’s premature passing, and it’s important that the guardian have access to the funds to “launch” the child in place of the deceased parent.
How you and your spouse structure an estate plan when your children are young will be much different from how you’d like your estate handled when they are grown. By the time they’ve earned their college diploma, it’s time to take another look at how you’d like your assets handled. You now have adult children, and your estate plan should reflect these changed circumstances.
Is Your Adult Child Ready for a Full Inheritance?
Your son or daughter is no longer two years old, but just because they’re 22 doesn’t mean they are ready to accept a full inheritance, no holds barred. Even if they are much more responsible than their peers, or maybe than they were when they were 16 just a few years ago, as their parent, it’s still your responsibility to look out for their best interests. If you bequeath them a large inheritance before they have learned how to manage money and plan for the future, will it do for them what you want? If they receive a large inheritance in the middle of an ugly divorce, will half go to their departing spouse? If you’re worried about a dependency on substances or a gambling problem, should you appoint another party guardian of the funds? What if your child is simply prone to spending, and you’re wary of imparting your estate fully before they’ve worked to earn their own assets?
On the other hand, post-college, your adult children could be about to enter the phase of their lives when an inheritance could be the most helpful to them- putting a down payment on their first house, paying for graduate school, starting a family...
These questions, and how to approach the various balances you will need to strike, are best asked and answered with the assistance of a lawyer who has experience setting up sensible, tailored estate plans based on estate size, parental concerns and best interests of their children, no matter their age.
Have Your Needs Changed After College is Finished?
For many families, the ability to ensure that their children's education is paid for is a key goal in their planning process. Once they have graduated, you may be in a position to rethink your goals. This includes perhaps reducing the amount of life insurance you carry and pay for. It may also mean that you are ready to place some assets out of your reach, to protect those assets for your children and against the costs of nursing home care. You also may be rethinking your durable power of attorney or health care proxy, if you think your children are ready to assume those roles for you and your spouse.
For many people, this is the age when they start to consider Medicaid planning- isolating some assets in an irrevocable trust so that if you or your spouse ever needs nursing home care you will not need to spend those assets in order to be eligible for Medicaid assistance with that care.
It is also a time when many people begin to implement annual family gift strategies to start moving assets out of their estates to avoid or minimize estate tax liability. If your children are young adults, this is also a way to start introducing themselves to managing money, by transferring up to $15,000 a year to them from your assets.
Who Is Your Personal Representative?
A young parent may have appointed their adult brother or sister as their personal representative, but once their children reach adulthood, they may want to make a switch, especially if their siblings are no longer in the best of health. Adult children are also often appointed power of attorney or health care proxy, given the parental trust that the child will know their wishes and act accordingly. You also now know your children's strengths and weaknesses, and are in a position to make a good decision about who could most comfortably manage each of these roles- personal representative, power of attorney, and health care proxy.
Is it Time to Rethink Who Gets What Assets?
Just because you have multiple children does not mean you want them all to split your assets equally, or that each get the same percentage of each specific asset. As a parent, you are allowed to allocate your assets however you wish. If one child moves out of state and has no desire to come back, maybe you want to leave the family home to the child who loves living in their hometown, but gift more liquid assets to the other. You may also consider the financial standing of each child. Maybe one has grown a successful company, but the other has less financial security. This is particularly complex if you or your spouse have your own business. Now that your children have become adults, can you foresee one or all of them playing a role in that business, or should you instead make plans to have your estate cash out of the business so that they can receive the money instead? Either approach requires careful planning, either to groom one or more of your children to take over the business or to make sure the business is set up so that it can be sold for maximum value when the time comes.
What About Grandchildren?
Back when you formed an estate plan when your children were young, grandchildren might have seemed like a distant prospect. Now that your children are older, you can’t wait for it to become a reality! Your new graduate may be a long way away from thinking about starting their own family, but that doesn't mean you can't think about it as part of your estate planning. While you work on a current estate plan, ask your lawyer about whether your plan is set up to account for grandchildren, or if there is something you can do now to plan for a growing family.
Your Estate Planning as Part of Your Adult Child's Financial Education
As your child enters the world of "adulting," he or she is no doubt taking the first steps toward budgeting and financial planning. Conversations you have about these issues are a great opener for some education about how you are planning your legacy for them, which in turn can help open their eyes about the idea of saving, managing and protecting assets, and thinking about the long term.
It’s not enough to just create a general estate plan. You need an estate plan customized to your family – your life, even as your needs change over the years Set up a consultation with slnlaw today and let’s get started.
WHAT WOMEN NEED TO CONSIDER DURING THE ESTATE PLANNING PROCESS
Estate planning is critical for every person, but women in particular face challenges that make preparation essential to avoid hardship in later years. At slnlaw, we are fully conscious that estate planning is an issue affects both men and women, but we also know that the statistics emphasize the importance for women specifically to exercise this task.
Women Are Likely to Outlive Male Spouses
The average life expectancy for women in the U.S. is 80.1 years. For men, it’s 73.4 years. Also, women are more likely to marry older spouses, only increasing the chances that they will be the surviving spouse. This means both retirement and estate planning is more likely to have a direct effect on a woman’s later years.
It’s important to plan in advance, well before retirement. Here’s an example of why: if the woman’s spouse has a pension, they may be able to choose if they should take the higher payments or allow the pension to continue for their wife after they die. The couple should decide together which option to choose so both parties can understand how it will affect both their retirement income and the surviving spouse’s benefits after the pensioner dies.
Also, paying attention to estate planning while both spouses are alive can be a lifeline to the surviving spouse (again, most often the woman) in terms of avoiding a large estate tax hit in the aftermath of a spouse's demise. Specifically, due to allowances like the unlimited marital deduction, there are tax saving strategies women can utilize to reduce estate taxes on their spouse’s assets after they pass on by essentially pooling both spouse's $1 million exemption. This can mean the difference between liquidating hard assets to pay the state and maintaining a home and financial security in the transition. Though it can be a sensitive issue to discuss while both spouses are alive, every scenario should be considered in an estate planning session with an attorney.
Women Do Not Earn as Much
Over the course of a lifetime, women do not earn as much as men. According to research conducted by the National Women’s Law Center, women in the U.S. lose $403,440 over the course of a 40-year career, and this figure is not adjusted for inflation. The effect accumulates over a lifetime, and can substantially reduce a woman’s ability to take care of herself through retirement, particularly coupled with the loss of income if the woman outlives her spouse. There are state and federal equal pay laws that try to mitigate these issues, but in planning for the future it is important to remember that the wage gap does exist, and can seriously affect a woman's financial security if she outlives her husband by many years.
There are additional statistics that contribute to a woman’s critical responsibility to plan for herself and her loved ones. For example, five out of six women gain sole custody of children in a divorce. Child support notwithstanding, both divorce itself and the primary responsibility for children can add additional strain to the financial picture.
While laws continue to be enacted to remove the wage gap, the fact remains: retirement and estate planning is an essential action to take for women who plan to independently rely on themselves for income in their later years.
Why an Estate Plan Is Essential
A woman’s estate plan plays an important role in her well-being. In addition to the very real issues surrounding income and protecting family assets from estate taxes, if she is widowed, there are other considerations as well. For example, she may not automatically have a healthcare proxy or a durable power of attorney, so creating or updating these documents after a spouse dies can relieve confusion and indecision amongst family members.
If a woman outlives their spouse, she is also the one solely responsible for how assets are distributed in the family- mostly likely the deceased spouse will have left all or most of their assets to the wife, who then has to be the final say in how those assets are distributed when she is gone. She is also the one solely responsible for planning for the possibility of her own serious illness or incapacity, without a spouse to take care of the home and other affairs if she needs nursing home or long term care.
An estate planning session with an expert in the field can reveal ways to avoid taxes and ensure the recipients receive the maximum benefit after their death. It can also help you understand how to strike a balance between the assets you need to keep liquid in order to support yourself and strategies like irrevocable trusts to preserve assets for your children should you need to enter a nursing home in the future, or need to move assets out of your own estate for tax planning purposes.
What You Need
No matter what, estate planning is different for everyone because no one situation is the same. What matters it that your specific needs are met with a comprehensive, tailored approach, and that’s what we offer here at slnlaw. Contact us today to set up a free consultation and let’s examine your current estate plan together, or let’s build one that puts your wishes and your loved ones first.