What Are the Biggest Estate Planning Questions I Need to Answer?

If you have a family, you can probably benefit from estate planning, regardless of your asset level. The Montrose Press published an article, “Estate plans can help you answer questions about the future,” that answers some of the big questions:

What will happen to my children? As part of your estate planning, you should name a guardian to take care of your children, if you pass away. You can also name a conservator–sometimes called a “guardian of the estate”–to manage the assets that your minor children inherit.

Will there be a battle over my assets? If you fail to put a solid estate plan in place, your assets could be subject to the time-consuming, expensive and public probate process. During probate, your relatives and creditors can get access to your records. They may even challenge your will. However, with proper planning, you can maintain your privacy.

Who will control my finances and my living situation, if I’m incapacitated? You can sign a durable power of attorney. This permits you to name someone to manage your financial affairs, if you’re incapacitated. A medical power of attorney lets the person you choose handle health care decisions for you, if you’re not able to do so yourself.

Will my family feel cheated if I leave significant assets to charities? As part of your estate plan, you have options. You could establish a charitable lead trust. This will provide financial support to your chosen charities for a set period. The remaining assets will then go to your family members. On the other hand, a charitable remainder trust will provide a stream of income for family members for the term of the trust. The remaining assets will then be transferred to one or more charitable organizations.

Careful estate planning with the help of an experienced estate planning attorney can answer many of the questions that may concern you.

Once you have your plans in place, you can face the future with greater clarity, peace of mind and confidence.

Call us (228) 460-5243 or email us at info@perklawgroup.com to find our how your estate planning attorney can help you.

Legal disclaimer: The information in this article is provided for information purposes only and should not be construed as legal advice. Your should not act or refrain from acting on the basis of any content included in this article or on our website (www.perklawgroup.com) without seeking legal or professional advice.

Reference: Montrose Press (July 7, 2019) “Estate plans can help you answer questions about the future”

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Not a Little Black Book, but a Big Blue Binder
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Not a Little Black Book, but a Big Blue Binder

Life happens, when we’re not prepared. A woman is recovering at home from minor surgery when her older sister dies unexpectedly, thousands of miles away. She can’t fly from her home to her sister’s home for weeks. What will happen, asks Considerable in the article “This is the most helpful thing you can do for the people who love you” ? If you’re not prepared, the result is a mess for those you love.

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When is it Time to Take Over Parent’s Finances?

Losing the independence that comes with being able to drive, is often followed by the realization that parents can no longer be entrusted with their own finances. This is a difficult issue, because the parents of Baby Boomer kids are the “Greatest Generation.” As a general rule, they were and are extremely private about finances. The steps to take are outlined in this article, “Here’s how to know when it’s time to take control of your parent’s finances,” from Considerable.

The tricky part is figuring out the timing. If it is done too early, you’ll be battling with your parents. Conversely, if it is done too late, major financial damage may be done.

Keep your eyes open for signs that your parents are not able to maintain their responsibilities. That includes changes in their behavior, misplacing things and not being able to locate them, or making too many trips to the bank for reasons that they can’t or won’t explain. Another clue: purchasing things they never bought before. You may notice paperwork piling up on a desk that used to be tidy and organized.

One woman didn’t realize that her mother was being scammed, until she had sent more than $100,000 to scammers. Elderly financial abuse is pervasive, and the Senate Special Committee on Aging estimates that elderly Americans lose some $3 billion annually to financial scammers.

One elderly woman suffering from dementia, forgot to pay her long-term care insurance premiums and lost the coverage. The company had sent five notices, but she was not able to manage her finances.

Even those who have close relationships with their parents and their daily events can have slip ups. Often, the children don’t step in, until the parent has a health crisis, and then it becomes clear that things have not been right for a while. If one parent is overwhelmed by taking care of their spouse, an otherwise organized person may become prone to making mistakes.

The earlier children can become involved, the better. Children should ideally become involved with their parents, while they are still healthy and able to communicate the necessary information about their financial lives. If the family waits until illness strikes or dementia becomes apparent, there may be significant and irreversible damage done to the parent’s finances, like the woman who lost her long-term health care coverage. There are some instances where the court need to become involved, if the parents are not able or willing to let the children help.

An elder law attorney will be able to help the family as they transition the parents away from being in charge of their own finances. It’s not always an easy process but becomes necessary.

Reference: Considerable (April 18, 2019) “Here’s how to know when it’s time to take control of your parent’s finances”

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Don’t Make These Estate Planning Basic Mistakes

Yes, death is the ultimate grim topic. However, it is an important one to discuss with your loved ones and your estate planning attorney. If you don’t have an estate plan in place, and one that is done correctly, you may doom your family to spending years and more money than you’d want on court proceedings and legal fees to settle your estate. You can prevent all this, by creating an estate plan with a qualified estate planning attorney. It is really that simple, says The San Diego Union-Tribune in the article “6 estate-planning mistakes to avoid.”

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How Do I Prepare my Parents for Alzheimer’s?

Can your mom just sell her house, despite her diagnosis of Alzheimer’s?

The (Bryan TX) Eagle reports in the recent article “MENTAL CLARITY: Shining a light on the capacity to sign Texas documents” that the concept of “mental capacity” is complicated. There’s considerable confusion about incapacity. The article explains that different legal documents have a different degree of required capacity. The bar for signing a Power of Attorney, a Warranty Deed, a Contract, a Divorce Decree, or a Settlement Agreement is a little lower than for signing a Will. The individual signing legal documents must be capable of understanding and appreciating what he or she is signing, as well as the effect of the document.

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Why Is It A Bad Idea to Take a Loan from My 401(k)?

Generally, it’s a really bad idea to take a loan from your 401(k).

Wealth Advisor’s recent article, “Why You Shouldn’t Take A 401(k) Loan,” lists some of the reasons why.

Many people who borrow from their 401(k)s wind up lowering or completely stopping their contributions, while they’re paying back the loans. This can mean the loss of 401(k) matching contributions, when their contribution rates fall below the maximum matched percentage.

Most people thinking about changing jobs don’t know that their outstanding 401(k) loan balance becomes due, when they leave their employer. Whether a job change is voluntary or involuntary, who among us has the financial resources available to pay back a 401(k) loan right away, if we leave our employer? As a result, many individual default.

However, the new tax law gives a little cushion, and you have until your tax return due date the next year. Plan balances that leave 401(k) plans due to loan defaults are rarely ever made up. That makes it less likely that loan defaulters will build sufficient retirement savings.

When you take a loan, it becomes one of your investments in your 401(k) plan account. If you were to take a $10,000 loan for five years at a 6% interest rate, that portion of your 401(k) balance will earn a 6% return for five years.

However, if your loan balance had been invested in one of the other investment options in your plan, you may have earned a lot more. Instead, look into taking a home equity loan first, because interest on those loans is tax-deductible.

Easy availability of a 401(k) loan can frequently make a bad financial situation worse. It can push you into bankruptcy and/or resulting in the loss of your home.

It is clear that 401(k) loans can significantly reduce your chances of achieving retirement preparedness.  It is also one of the worst investments you can make in your 401(k) account.

Reference: Wealth Advisor (February 4, 2019) “Why You Shouldn’t Take A 401(k) Loan”

 

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What Do I Need to Know About Estate Planning After a Divorce?

The recent changes in the tax laws created increased year-end activity for those trying to finalize their divorces by December 31—prior to the effective date of the new rules.

The new tax laws stipulate that alimony is no longer deductible by the payor, and it’s no longer taxable by the receiver—this creates a negative impact on both parties. The payor no longer receives a tax deduction, and the receiver will most likely wind up with less alimony because the payor has more taxes to pay.

Forbes’ recent article, “9 Things You Need To Know About Estate Planning After Divorce” suggests that if you were one of those whose divorce was finalized last year, it’s time to revise your estate plan. It’s also good idea for those people who divorced in prior years and never updated their estate plans. Let’s look at some of the issues about which you should be thinking.

See your estate planning attorney. Right off the bat, send your divorce agreement to your estate planning attorney, so he or she can see what obligations you have to your ex-spouse in the event of your death.

Health care proxy. This document lets you designate someone to make health care decisions for you, if you were incapacitated and not able to communicate.

Power of attorney. If you had an old POA that named your ex-spouse, it should be revoked, and you should execute a new POA naming a friend, relative, or trusted advisor to act as your agent regarding your finances and assets.

Your will and trust. Ask your attorney to remove the provisions for your ex-spouse and remove your ex-spouse as the executor and trustee.

Guardianship. If you have minor children, you can still name your ex-spouse as the guardian in your will. Even if you don’t, your ex-spouse will probably be appointed guardian if you pass away, unless he or she is determined by the judge to be unfit. While you can select another responsible person, be sure to leave enough cash in a joint bank account (with the trusted guardian you name) to fund the litigation that will be necessary to prove your ex-spouse is unfit.

A trust for your minor children. If you don’t have a trust set up for your minor children, and your ex-spouse is the children’s guardian, he or she will have control of the children’s finances until they turn 18. You may ask your estate planning attorney about a revocable trust that will name someone else you select as the trustee to access and control these funds for your children, if you pass away.

Life insurance. You may have an obligation to maintain life insurance under the divorce agreement. Review this with your estate planning attorney and with your divorce attorney.

Beneficiary designations. Be certain that your 401K and IRA beneficiary designations are consistent with the terms of your divorce agreement. Have the beneficiary designations updated. If you still want to name your ex-spouse as the beneficiary, execute a new beneficiary designation dated after the divorce. It’s also wise to leave a letter of intent with your attorney, so your intentions are clear.

Prenuptial agreement. If you’re thinking about getting remarried, be certain you have a prenuptial agreement.

It’s a great time to settle these outstanding issues from your divorce and get your estate plan in order.

Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”

 

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What Should I Think About Before the Baby Comes?

Prince William Living’s recent article, “Baby on the Way? Here’s How You Can Prepare Financially,” says that as you plan to welcome your child, consider these seven tips that can help you decide how to provide your family with the lifestyle you desire.

Examine your career. A new baby may cause you to think differently about your career goals—you may seek a promotion, a job with a higher salary or better benefits, or more education. Perhaps you or your spouse want to decrease your hours or become a stay-at-home parent. If you are thinking about changing your job status, examine the effect it may have on your take-home pay, retirement nest egg and benefits.

Lifestyle changes. Look at how your baby will affect your day-to-day activities. If your perfect lifestyle involves a new car or home, talk to a financial professional about whether to make the move now or in the future.

Childcare expenses. Nearly one-third of parents spend 20% or more of their income on childcare. In some states, the cost for a year of care can be more than one year of college!

Tuition. Private elementary or secondary school often costs money, and the price of a college education continues to rise at a pace faster than inflation. The 2017 tax reform expanded the use of 529 plans, so you can now withdraw up to $10,000 federal income tax-free per beneficiary, per year to pay for kindergarten through 12th grade tuition at a public, private or religious school.

Review your financial position. Unanticipated events can impact your finances at any time. Resolve to build or maintain an emergency fund that could cover three to six months of expenses.  You should also prioritize your retirement savings. After your baby arrives, update your estate plan and insurance coverage as needed.

Consider family values. Consider how you want to teach your child about financial responsibility. Being intentional early, can help create clear expectations and ensure that you and your spouse are on the same page.

The family bucket list. Look at what activities matter to you and add them into your financial plan. Taking an annual vacation or having a vacation home are common goals for many families.

Adding a new member to your family has a way of putting your priorities into perspective. Use these reminders to plan accordingly. Don’t forget that you’ll need an estate plan now that your family is growing. Your will should name a guardian in case something happens to you and your spouse. If there is no will, or no guardian named, the state will decide who will raise your child. Talk with an estate planning attorney to make sure that your planning for the future is complete.

Reference: Prince William Living (December 2018) “Baby on the Way? Here’s How You Can Prepare Financially”

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What Do I Need to Do To Get Financially Fit in My 30s?

Whether you’re 30 or 39, retirement will come up fast. Many people are surprised when they see how much they need to put away to keep their current standard of living in retirement.

Once you decide when you want to retire, you need to calculate how much money you’ll need and how you’ll get there. Of course, you should take advantage of company matching and various tax deductions, when saving for retirement. Don’t wait until your 40s or 50s to try to catch up. That will be painful, or worse, impossible.

Forbes’s recent article, “3 Steps To Financial Fitness In Your Thirties,” advises that when you start to accumulate wealth, be sure someone is watching your investments and that those investments are suitable for your time frames and financial goals.

Work with a financial advisor you think can help improve your situation. This should be someone you trust, and most important of all, who you feel has your best interests at heart.

If you are accumulating assets, make sure they’re protected. Be certain you and your family are covered by having the correct insurance policies. Of course, in a perfect world nothing would happen. For instance, most people on disability would much rather be healthy. They’d love to be able to joke and say that having that disability insurance was a “bad investment”. However, those who are disabled and aren’t covered with a disability insurance policy, most likely wish they’d made sure they had this income protection in place.

Another form of protection is an emergency fund. If you don’t have one, start by regularly putting some amount of money into a non-retirement account. Even if it’s a small amount, something is better than nothing. If you were to be laid off, chances are that your unemployment benefits would not be enough to pay the rent or make a mortgage payment.

If you’re single, you should protect yourself—even more so than someone who has a partner to rely on. Many life insurance policies have living benefits that can protect you, if an emergency happens.  You may also be able to use cash value life insurance to partially fund your retirement.

Finally, it’s critical that you think about estate planning. You should have an estate plan, including a will, Powers of Attorney, health care power of attorney and, if you have minor children, a guardian should be named in your will.

Let’s say you’re living with someone. If something happens to either of you, the living partner will most likely will be treated as a roommate—and have no legal rights to your property. An estate plan can be prepared to provide your partner with legal protection.

Reference: Forbes (December 17, 2018) “3 Steps To Financial Fitness In Your Thirties”

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