What is the Best Way to Leave an Inheritance to a Grandchild?

Leaving money or real estate to a child under the age of 18 requires careful handling, usually under the guidance of an estate planning attorney. The same is true for money awarded by a court, when a child has received property for other reasons, like a settlement for a personal injury matter.

According to the article “Gifts from Grandma, and other problems with children owning property” from the Cherokee-Tribune & Ledger News, if a child under age 18 receives money as an inheritance through a trust, or if the trust states that the asset will be “held in trust” until the child reaches age 18, then the trustee named in the will or trust is responsible for managing the money.

Until the child reaches age 18, the trustee is to use the money only for the child’s benefit. The terms of the trust will detail what the trustee can or cannot do with the money. In any situation, the trustee may not benefit from the money in any way.

The child does not have free access to the money. Children may not legally hold assets in their own names. However, what happens if there is no will, and no trust?

A child could be entitled to receive property under the laws of intestacy, which defines what happens to a person’s assets, if there is no will. Another way a child might receive assets, would be from the proceeds of a life insurance policy, or another asset where the child has been named a beneficiary and the asset is not part of the probate estate. However, children may not legally own assets. What happens next?

The answer depends upon the value of the asset. State laws vary but generally speaking, if the assets are below a certain threshold, the child’s parents may receive and hold the funds in a custodial account. The custodian has a duty to manage the child’s money, but there isn’t any court oversight.

In Georgia, the threshold is $15,000. Check with a local estate planning attorney to determine your state’s limitations.

If the asset is valued at more than $15,000, or whatever the threshold is for the state, the probate court will exercise its oversight. If no trust has been set up, then an adult will need to become a conservator, a person responsible for managing a child’s property. This person needs to apply to the court to be named conservator, and while it is frequently the child’s parent, this is not always the case.

The conservator is required to report to the probate court on the child’s assets and how they are being used. If monies are used improperly, then the conservator will be liable for repayment. The same situation occurs, if the child receives money through a court settlement.

Making parents go through a conservatorship appointment and report to the probate court is a bit of a burden for most people. A properly created estate plan can avoid this issue and prepare a trust, if necessary, and name a trustee to be in charge of the asset.

Another point to consider: turning 18 and receiving a large amount of money is rarely a good thing for any young adult, no matter how mature they are. An estate planning attorney can discuss how the inheritance can be structured, so the assets are used for college expenses or other important expenses for a young person. The goal is to not distribute the funds all at once to a young person, who may not be prepared to manage a large inheritance.

Reference: Cherokee-Tribune & Ledger News (March 1, 2019) “Gifts from Grandma, and other problems with children owning property”

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Where There’s A Will, There’s a Better Future for Family

The plain truth is, everyone needs a will. The value of someone’s personal property has very little to do with the need for a will or estate plan. Without one, the process of settling an estate and having heirs receive their inheritance could be delayed for many months, or even years, says the article “Where there’s a will, there is a plan in place” from The Advertiser. For wills to be legally acceptable, there are certain things that need to be included:

Identification of the person making the will, also known as the testator. The will must contain the person’s name, address, state their intention to create a distribution process for assets and the statement that this will is intended to be their last will and testament and all other wills are revoked. The will must also be dated to be sure to know hold old it is, with regard to other wills.

Outstanding debt payment. The will needs to explain how any outstanding bills will be paid, including funeral costs, medical costs, taxes owed, and any other expenses that a person may have at the time of their death. This may vary by state, so speak with a local estate planning attorney to find out what your state’s laws are.

Name any heirs and what they are being given. You may give your property to whomever you want, or to a charity. The bequest needs to be carefully written, so it is very specific and there are no misunderstandings. Since it may be hard to know what will be left after final expenses are paid, it may be wise to give percentages of assets, rather than specific figures. An estate planning attorney will know how to best handle this aspect of a will.

Chose an executor and name them in the will. The executor is responsible for carrying out the wishes of the testator and is in charge of paying debts, taxes, distributing assets and any tasks assigned in the will. Choosing the right person for this task is very important. They need to be able to handle the responsibility and be able to execute your wishes, without being bullied by family members or friends. Always name a secondary executor, in case the first predeceases you, or if the person is unable or unwilling to serve.

Name a guardian for minor children. This is why parents of young children must have a will. If there is no will, the court will determine who should raise the children, following the laws of kinship of your state. You may not agree with the court’s decision. Select a person (or couple) you believe will raise the children, as close as possible to how you would raise the children.

Plan for your funeral. This is a kindness to your loved ones. If you don’t plan in advance, your loved ones may spend more than you would wish on an elaborate funeral. The opposite may also happen. A simple paragraph may do the job, or you could visit the local funeral home and prepay, selecting everything so that it will be done according to your own wishes.

In addition to a will, you’ll want a power of attorney and health care power of attorney in place to protect you, in case of incapacity. This way, someone will be able to take care of your finances and someone else will be able to make health care decisions, if you can’t.

An estate planning attorney can work with you to make sure that all these documents are properly prepared according to your state’s laws.  They have worked with many others, know what kind of issues crop up and how to prepare for them. This is especially important with blended families or families where there are complicated histories. Think of the estate plan as a gift to your heirs, a chance to express your wishes and a way to create a legacy for your loved ones.

Reference: The Advertiser (March 10, 2019) “Where there’s a will, there is a plan in place” 

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If You’re Single with No Kids and Approaching Retirement, You Still Need an Estate Plan

You may have been busy building your career, socking away money and enjoying your time off with weekends away and exotic vacations.

Forbes’ recent article, “5 Estate Planning Strategies For Singles,” says that, as you move closer to retirement, you should seriously think about your estate plan. Here are some important components:

Power of attorney and a health care proxy. These are used while you’re still alive. They let you choose who will make important financial and medical decisions for you, if you can’t make them for yourself. A single person must be sure that she’s named someone she trusts to make these decisions. When you die, the power of attorney and health care proxy are no longer valid, so you also need to create a will and trust.

Will. You need to designate an executor of your estate. This individual will take care of your affairs after you die, probate your will if necessary and pay any income and estate taxes. The beneficiary of your will can also be a revocable trust that you create during your lifetime.

Revocable trust. While you are alive, you should be named the primary beneficiary. You may also want to provide benefits for your significant other, especially if you live together and you’re the primary breadwinner. Name the beneficiaries who’ll receive the assets at your death. You also need to name a successor trustee to manage the trust assets, in the event you are unable to manage them yourself. The successor trustee will play an important role, if you’re incapacitated. As a single person, naming someone to manage the assets for you is an important part of your planning. If you fund the trust during your lifetime and are later incapacitated, the successor trustee can use the funds for your care.

Estate taxes. Many singles don’t mind if their beneficiaries receive less, and the government receives more. However, if you do care, there are many planning options to consider, such as charitable giving as a way to reduce taxes and give back to those charitable institutions that have played an important role in your life. You can also make lifetime gifts to family and friends.

If you’re that single person without an estate plan, don’t wait until the last minute. Otherwise, it will be too late.

Reference: Forbes (March 15, 2019) “5 Estate Planning Strategies For Singles”

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Should Pets Be Part of Your Estate Plan?

Most of us don’t have the luxury (or the need) to leave our pets $12 million, but to make sure that our pets are cared for, having a legally enforceable trust for a pet, which is allowed in New York State, can provide peace of mind. That is part of the answer to the question posed by the Times Herald-Record in the article “Who’ll care for your pets when you’re gone?”

A will is a document used in a court proceeding called probate, if you die with assets that are only in your name. When the will goes through probate, it becomes a public document. A trust, on the other hand, is a document that does not become part of the public record, unless it was created under a will. Some people use trusts for their beloved pets, to pay for their care and maintain their lifestyle. Some pets lead fancier lives than others!

Most people leave the care of pets in the hands of friends or relatives and hope for the best. Visit any animal shelter and you’ll see the animals whose owners could not take care of them, or whose friends or family members intended to take care of them, but for whatever reasons, could not care for them. Putting a pet trust into your estate plan, is a better way to care for pets, if you outlive them.

The pet trust has several steps, and an estate planning attorney will be able to set it up for you. First, you need to appoint a trustee of the trust funds. This person is in charge of the financial aspect of the trust, from paying vet bills, making sure pet health insurance premiums are paid, to providing money for the caretaker to buy supplies. It’s a good idea to have a secondary trustee, just in case.

Next, you name a caretaker of the pet. This person can be the same as the trustee, although it may be better to name a different person, to create some checks and balances on the funds. You can, if you like, give the trustee the right to appoint a caregiver or a back-up caregiver. Make sure you discuss all of these details with the trustee and the caregiver and their back-ups to be sure that everyone understands their roles, and all are willing to take on these responsibilities. Some pets can live a long time, and you want to have everyone understand what they are undertaking.

Third, you’ll need to designate the amount of money to be held in trust for the pets for medical care, daily living costs and support until the pet dies. Don’t forget to include the cost of burial or cremation.

Finally, name the persons or organizations you wish to receive any remaining funds.

An informal letter of instruction to both the trustee and the caregiver would be very helpful. Provide details on the pet’s personality, quirky behavior, preferences for food, treats, play and any information that will help all the parties get along well. You should also provide information on your pet’s vet, any registration numbers for microchips, medical and dental records, medications, etc.

Reference: Times Herald-Record (March 9, 2019) “Who’ll care for your pets when you’re gone?”

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How to Spend Your Savings During Retirement

One of the best ways to make sure you have enough money to last you through retirement is to be savvy about how you spend your savings. Everyone’s situation is different, so there is no single formula that will apply to everyone, but it can be helpful to have some general guidelines on how to spend your savings during retirement.

Sometimes You Have to Spend Money

When you are facing 20 or 30 years or more ahead of you and the uncertainty of medical expenses and other financial crises during that time, it can be tempting never to want to spend a cent. For the vast majority of people, however, it is necessary to spend money to pay ordinary living expenses. Therefore, when you do have to put a crowbar to your wallet, there are ways to do so and minimize the pain.

Keep Your Investments Balanced

If you have created an investment portfolio with a particular balance of stocks and bonds, for example, half of your investments are stocks and half are bonds, try to maintain these proportions, when you withdraw assets to sell. Let’s say you want to pull $20,000 out of your brokerage account. Rather than removing the entire $20,000 out of stocks, consider selling equal dollar value amounts of stocks and bonds, so you do not have a lopsided portfolio after the transaction.

Experts also suggest that you should rebalance, if gains or losses from the market change the ratios to either your stocks or bonds by five percent or more. In other words, if you had 50 percent stocks and 50 percent bonds, and a strong market took your stock value up to 55 percent, leaving your bonds at 45 percent, you should consider selling some of the overweight investments to restore the 50-50 balance.

Pulling Money Out of Your 401(k) or IRA

Your withdrawals from these tax-deferred accounts will be taxed as ordinary income, since you did not have to pay taxes on them when they went into your accounts. As a result, the tax issues on tax-deferred mutual funds comprised of stocks, bonds, or cash balances are a simple matter. Since the amount you withdraw will get the same tax treatment, you can distribute the withdrawals among the different type of investments in your tax-deferred account in a manner that preserves your desired proportions of investments.

How to Handle Withdrawals of Taxable Accounts

Let’s say you have a brokerage account that is not tax-deferred. It is not a 401(k) or an IRA. You have stocks, bonds or mutual funds in this taxable account. If you need to withdraw money, first take out the income the account earned, such as interest, dividends, realized capital gains and mutual fund distributions.

This strategy allows you to maintain as much of the principal as possible. If you do need to sell off some of the investments in your taxable account, consider selling investments that you do not expect to do well down the road.

Always Have a Cash Cushion

You do not want to be in a position in which you have to sell off investments in a down market cycle, getting far less than these investments are usually worth. To avoid this distressing situation, make sure you maintain a savings account with a year or two of living expenses. Keep the savings account outside of the stock market. This cash cushion will allow you to skip or reduce your annual withdrawal from your investment accounts, when the market is doing poorly.


AARP. “How to Tap into Your Retirement Savings.” (accessed March 7, 2019) https://www.aarp.org/retirement/retirement-savings/info-2018/tap-into-savings.html

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Have You Maximized Your Life Insurance Benefits?

Life insurance is a key to many people’s financial plans. However, there are nuances that sometimes get overlooked. WTOP’s recent article, “4 questions to ask to maximize your life insurance benefits” focuses on key questions that need to be asked about life insurance.

Changed Circumstances. The amount of life insurance you need, is unique to each person’s financial and family circumstances. Remember that life insurance death benefits are used for more than just replacing immediate income from the family breadwinners. They can also pay off the mortgage and other debts, cover college tuition, create a retirement nest egg for a surviving spouse, fund a business transfer, or be an important estate planning tool. With life insurance, you can protect your family against a premature death with a solid safety net. In the event of divorce with future child and spousal support obligations due to you, you’d want your divorce settlement agreement to say that your ex-spouse, as payor, maintains a sufficient life insurance policy naming you, as the recipient-beneficiary, to cover all future commitments. You also need to be notified by the insurance company of any policy changes or lapses, because you may be depending on this money in the future, should something happen to your ex-spouse. Stay-at-home spouses and caregivers also need life insurance, because replacing their duties could incur many unexpected costs for the survivor.

Up-To-Date Beneficiaries. Here are some do’s and don’ts, when naming a beneficiary:

  • DO designate named individual(s) or a trust to avoid probate and allow death benefits to pass directly to beneficiaries, income tax-free;
  • DO know the difference between per stirpes (i.e., family lineage) and per capita (i.e., by head);
  • DON’T designate your estate, because this will lead to proceeds becoming involved in probate and allow creditors to place claims against the estate;
  • DON’T designate minors as beneficiaries, because assets will be paid outright to them as soon as they reach the age of majority in their state; and
  • DON’T designate a special-needs adult or child directly, because this may disqualify them from government benefits.

Trusts. Designating a trust as beneficiary for minor children, special-needs individuals, or a person with no financial sensibility lets you provide more control. Work with an estate attorney to establish the appropriate trust for your intended purpose. Remember, if you’re the trust owner and the insured, the death benefit will be included in your gross estate for tax purposes. Having life insurance owned by an irrevocable life insurance trust (ILIT) removes the death benefit proceeds from the insured’s estate (unless the three-year-look-back rule applies).

Policy Exclusions. Read the fine print to see if some of these universal exclusions are included, that may prevent your beneficiaries from receiving their intended death benefit:

  • The contestability period is a predetermined time period, usually two years from the date of issuance, where an insurance company can contest any information you submitted, and cancel coverage or deny a claim, if there were misstatements or omissions made on the life insurance application. If you die during the contestability period and it’s shown that you made misrepresentations on your application, your claim can be denied—even if the cause of death had nothing to do with the actual misrepresentation.
  • Material misrepresentation is intentionally withholding material information or providing false information to the insurance company, that would’ve resulted in them not insuring you. It extends during the entire policy term, since life insurance claims can be denied after the contestability period ends, if fraud was committed to obtain the policy.
  • A suicide clause is included in nearly all life insurance contracts. The company won’t pay the death benefit and return premiums, if the insured commits suicide within the first two years of the policy.

Some exclusions that aren’t universal but may be in the fine print of your life insurance policy include: illegal activity/committing a crime; dangerous activities, like sky diving or car racing; alcohol and drug use; and an aviation exclusion for private plane travel.

Life insurance can protect your loved ones. Don’t forget to review your life insurance needs and update beneficiaries, based on your current situation.

Reference: WTOP (March 6, 2019) “4 questions to ask to maximize your life insurance benefits”

Beneficiary Designations, Life Insurance, Irrevocable Life Insurance Trust (ILIT), Probate, Per Stirpes, Per Capita,

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Why Would a Guy Like Me Need a Will?

Wills don’t have to be complicated, but it’s best to work with a seasoned estate planning attorney. Wills must be dated, signed, witnessed and notarized. If you don’t have a will, it delays the process considerably and may delay payment of the deceased’s assets to his or her heirs. To eliminate some of the mystery from the will creation process, here are several items that all wills need to have to be legally binding. The Daily Advertiser’s recent article, “Where there is a will, there is a plan in place“ provides some definitions for key concepts and reminders for the estate planning process.

Testator. The creator of the will must provide his name, address and intention to create a distribution process for his assets. He must also state that the will being made is his last will and testament, revoking any other prior wills. Revocation of prior wills is important to show that the decisions made in the current will are final and the recent date on the will evidences how current the will is and to know which will (if there are others) supersedes all others.

Debts. The will must explain how any outstanding bills will be paid. These include the funeral costs, medical costs, taxes, court costs for settling the estate, and any other expenses the deceased may have at his death.

Heirs. A will should detail who gets what. Specific bequests should state a full description of the physical asset or, if money is to be distributed, then a percentage of the estate’s value or specific amount should be listed. Most testators don’t know the effect that death taxes or final expenses will have on an estate. Therefore, percentages work better, because it’s a percentage of what is available to be distributed.

Executor. This is the person who will take the will through the probate process, account for the decedent’s personal property, pay taxes and debts, and distribute the assets to the heirs, according to the will. Choosing an executor is an important decision. He or she should be trustworthy and knowledgeable about financial matters.

Guardian. A guardian needs to be named to care for minor children. This person should mirror the parents’ values and ideas as to the care and raising of the minor children. A relative or parent shouldn’t be selected just based on kinship. If a guardian isn’t selected, the court will choose one, and that person may not be capable of handling young children over the long-term.

Funeral Arrangements. You may not want a big expensive funeral, but without specific instructions, your funeral arrangements might be overly grand and out of character with your personality. Just add a paragraph detailing your wishes.

Reference: Daily Advertiser (March 10, 2019) “Where there is a will, there is a plan in place“

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The Reality of Older Americans and Financial Security

As they approach retirement age, many Americans worry about whether they will have enough money, after they stop working. You might remember the experience of those “lean years” of your youth, when it was difficult to make a paycheck last until the next payday. You do not want to go back there, after a lifetime of working hard. When you were in your 20s, tough financial times were easier to face, because you had plenty of youthful energy and the job market liked hiring people your age.

As we get up in years and find ourselves saying, “I’m getting too old to deal with that,” the prospect of working 12-hour days to keep a roof over our heads is unappealing. With age discrimination rampant throughout the workplace, it can also be increasingly difficult for seniors to get jobs that pay well. With these things in mind, let’s explore the reality of older Americans and financial security.

The Good News About Seniors and Financial Security

In general, older Americans are more financially secure than younger adults. The Consumer Financial Protection Bureau conducted a survey that assessed people between the ages of 18 and 75 on issues involving monetary well-being. The study explored how people handle unexpected expenses, day-to-day bills, monthly bills and financial choices about the quality of their lives.

People aged 62 and older scored significantly better on the survey overall than adults between the ages of 18 and 61. About one-fifth of older adults had very high scores, indicating a high level of economic security. Americans tend to hit their peak financial security at about age 75.

The Not-So-Good News About the Financial Security of Older Americans

Nearly one-fourth of seniors have scores close to the overall level of people between the ages of 18 and 61. The survey scores reveal that the average American between the ages of 18 and 61 has an elevated risk of having to struggle to pay for basic needs, get a loan or other credit approval and address a sudden, unexpected expense of $2,000 or more.

Factors Associated with High Scores

Older adults at the upper end of the scale often share several characteristics. These people tend to be homeowners who are healthy and live with a spouse or partner. Members of this group often have two sources of retirement income (not including Social Security), like a 401(k) and a pension.

Things That Correlate with Lower Financial Security

People with less economic well-being tend to share these factors:

  • Only one retirement account or no retirement account
  • Poor health
  • Are renters, not homeowners
  • Support their older children
  • Have credit card or education debt
  • Retire earlier than they had planned

The federal agency that ran the survey, warns that some current trends could change the conclusion of older Americans having better financial security than younger adults. More seniors age 60 and above now have very little or no retirement savings. A larger proportion of older Americans are also still paying a mortgage and other debt than in previous years.


AARP. “Financial Well-Being Rises with Age, Peaking at 75.” (accessed March 7, 2019) https://www.aarp.org/money/budgeting-saving/info-2018/financial-wellbeing-aging.html

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The Big Eight: Don’t Risk Your Retirement with These Mistakes

During our working lives, we have a cash flow called a “paycheck” that we rely on. A similar cash flow occurs when we retire and start the process of “deaccumulation” or creating income streams from sources that include our retirement funds. However, generating enough income to enjoy a comfortable retirement requires managing that cash flow successfully, says CNBC.com in the article “Here are 8 costly retirement mistakes to avoid.”

Preparing for the risk of a bear market. If markets take a nosedive the year you retire and you stick with your plan to withdraw four percent from your portfolio, your plan is no longer sustainable. Better: have an emergency fund in place, so you don’t have to tap investment accounts until the market recovers.

Investing with inflation in mind. We have been in such a low inflation environment for so long, that many have forgotten how devastating this can be to retirement portfolios. You may want to have some of your money in the market, so you can continue to get rates above any inflation. If inflation runs about 3.5% annually, a moderate portfolio returning 6% or 7% keeps up with inflation, even after withdrawals.

Be ready for longevity. Worries about outliving retirement savings are due to a longer overall life expectancy. There’s a good chance that many people alive today, will make it to 95. One strong tactic is to delay taking Social Security benefits until age 70, to maximize the monthly benefit.

What about interest rates and inadequate returns on safer investments? This is a tricky one, requiring a balance between each person’s comfort zone and the need to grow investments. Current fixed-income returns lag behind historical performance. Some experts recommend that their clients look into high-dividend stocks, as an alternative to bond yields.

Prepare NOT to dump stocks in a temporary downturn. Without strong stomachs and wise counsel, individual investors have a long history of dumping stocks when markets turn down, amplifying losses. We are emotional about our money, which is the worst way to invest. Try working with a financial advisor to remove the emotion from your investments.

Don’t withdraw too much too soon. It looks like a lot of money, doesn’t it? However, even 4% may be too much to take out from your investments and retirement accounts. It all depends upon what other sources of income you have and how markets perform. Be careful, unless going back to work in your seventies is on your bucket list.

Prepare for cognitive decline. This is way harder to conceive of than inflationary risks, but it becomes a real risk as we age. Even a modest level of age-related cognitive impairment, can make managing investments a challenge. Have a discussion with family members, your estate planning attorney and a financial advisor about deciding who will manage your investments, when you are no longer able.

Are you ready for health care costs? If at all possible, wait until 65 to retire, so you will be eligible for Medicare. Even when you have this coverage in place, there may still be considerable expenses that are not covered by Medicare. If you don’t have long-term care insurance, get it as soon as possible.

Reference: CNBC.com (March 5, 2019) “Here are 8 costly retirement mistakes to avoid.”

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