Estate Planning Myths
Multigenerational Planning: Important Conversations to Have about Money
False. While how much you divulge is up to you, being open and honest with your loved ones can help alleviate misunderstandings that could arise after your passing. Sharing this information is especially helpful in three instances:
1. You have chosen to treat individuals in the same generation differently.
2. You have placed additional requirements or restrictions on how your money and property are to be used.
3. You have skipped an entire generation or group or individual that would typically inherit from you (spouse, children, or grandchildren).
Also, if you want your estate plan to benefit multiple generations (some of whom may not even be born yet), it can be helpful to have your loved ones understand what money and property they will have access to and your intentions regarding access for future generations. With a clear understanding of your wishes, your loved ones can take the lead in carrying out these wishes after your passing and make the right decisions about the family wealth that will continue your legacy.
Planning After Landing Your New Job
This is false. When you are asked to complete a beneficiary designation form, you need to fill it out as soon as possible. If you were to die without completing the beneficiary designation, the proceeds would either be distributed to your estate (requiring your loved ones to go through the costly, public, and time-consuming process known as probate) or directly to your closest living relative as determined by the terms of the life insurance policy. The specific rules of the life insurance policy determine which option would apply, but the ultimate outcome is the same: someone else would be choosing who gets the money, not you. You are given the opportunity through the use of a beneficiary designation form to determine who will receive the proceeds of your life insurance policy. Do not let someone take that choice from you.
Additionally, whoever is determined to be the rightful owner will receive a check for the full amount, unless the beneficiary is a minor, in which case the court will choose someone to hold on to the money for the minor until the minor reaches the age of majority (eighteen or twenty-one depending on your state). This leaves the money open to many vulnerabilities, like being spent on frivolous luxury items, taken in a divorce, or seized by creditors through a lawsuit or a bankruptcy.
False. When you add a child or anyone else to your bank account, you are making that person a co-owner of the account. Your child can pay bills using the money in your bank account, but your child can also use the money for any other purpose. This is because your child now co-owns the account.
In addition, because the bank account would be deemed owned by your child, it would be susceptible to division in a divorce, seizure in a lawsuit, and theft by a predator.
Working with Clients Who Are Pursuing Assisted Reproductive Technology
While there are many different do-it-yourself options available when it comes to planning for your incapacity (i.e., the inability to manage your own affairs) or death, it is only by working with an experienced estate planning attorney that you can have peace of mind that your unique situation is being addressed.
If you are using assisted reproductive technology (ART) to conceive a child, there are certain instances in which standardized or boilerplate language will not work. In many circumstances, such as surrogacy or when genetic material from a third party is used to conceive your child, the definitions for child, parent, or descendant will need to be modified to encompass your circumstances and the relationship you have with the intended recipient of your money and property.
For example, when referring to someone as a "parent," does this term mean the genetic parent, gestational parent, adoptive parent, or a spouse of the parent at the time of the child's birth? You may identify yourself as the child's parent, but your attorney needs to ensure that the estate planning documents accurately describe your relationship and are clear about what your child is to receive.
While the definition of "child" seems fairly straightforward, when drafting a proper estate plan, it is crucial that language is included to ensure that a child, whether they are the biological child, adopted child, or stepchild, is provided for in the way you want. The definition of child is also important if you are considering conceiving a child after your partner has passed away. Will this child be considered the child of your deceased partner even though they will not be living at the time of birth? What rights does your child have to inherit from your deceased partner? The answer to these questions are state-specific so it is important that you work with an experienced attorney in your area.
If you rely on someone else's definition, you may accidentally disinherit someone you intended to provide for. An experienced attorney can carefully draft documents so that you are providing for the right people.
Actually, there are several types of parents. There is a biological or genetic parent who contributes their genetic material for the conception of the child. This person may or may not be the person who is going to raise the child.
Then there is an adoptive parent. This person, although not biologically related to the child, has been granted the legal right to be the child's parent through the adoption process.
There is also an intended parent. This is the person who will be raising the child once a surrogate has given birth to the child. This person may or may not be biologically related to the child.
Lastly, there is a gestational parent. This is the individual who has carried the child for nine months and will or has given birth to the child. They may or may not share a biological connection with the child and may or may not raise the child.
Planning with a Right of Occupancy Trust
How you leave real property to a beneficiary determines whether they get to decide who receives the property after their death. If you give real property to them outright, meaning that it becomes solely theirs, then it is true that they will be able to determine who gets the property when they die.
If you leave the property to two or more people as joint tenants with right of survivorship, the last living owner will get to decide what happens to the property. When the first owner dies, their interest will automatically transfer to the remaining joint owner(s).
If you leave the property to two or more people as tenants in common, then each owner will be able to dictate what will happen to their share of the property when they die.
If you use a right of occupancy trust to give a person a right of occupancy, they will be able to use and enjoy the property during their lifetime (or a shorter time period if you choose), but you decide who will receive the property when they die by including those instructions in your last will and testament or trust agreement.
Standalone Retirement Trusts
Planning for Unmarried Partners
Preparing a Successor Trustee
Estate Planning for the Self-Employed
According to the Social Security Administration, "Social Security will replace about 40% of your annual pre-retirement earnings." Thus, you need to have a plan if you wish to maintain your lifestyle once you are no longer working.
As a self-employed individual, you are responsible for finding the right retirement plan since you do not have an employer that has selected one for you. Working with an experienced planning team means that you can find the right investment tools for your future and ensure that they are properly funded and protected regardless of what your life may look like.
Additionally, it is important that you have a plan for what happens if there are any funds left in your retirement or investment accounts. What you leave behind for your loved ones needs to be properly protected. An experienced planning team can ensure that your loved ones are provided for in the most beneficial way.
Estate Planning for LGBTQ Clients
It is true that, absent proper estate planning, the law will distribute most (if not all) of your money and property to your spouse. However, this may not be the best way to pass on your money and property. If everything passes to your spouse outright, there is no protection for the property or money your spouse receives. Even if you want your spouse to be free to spend their inheritance from you as they please upon your death, your money and property would become 100% your spouse’s, and they could do whatever they want with it–including lose it to creditors or to an anticipated lawsuit. By creating a trust, the money and property can be available for your spouse’s use, but you can provide protections to ensure that creditors, or a second spouse, do not have access to what you have worked so hard to earn.
Additionally, without estate planning, including the creation of a trust, your money and property may have to be distributed through the probate process. Probate is a court-supervised process where an appointed individual gathers your money and property, pays all of your outstanding bills, and then distributes the remainder to the appropriate individuals. Depending upon the situation, the level of court involvement can vary, but no matter what, the details of this process can be found out by anyone because probate is a very public process.
Estate Planning for Singles
False. While it is a remote possibility that the state may be the ultimate recipient of your money and property, that would only occur if you had no other living blood relative to inherit your money and property. Although the law varies by state, generally speaking, your money and property would first go to a surviving spouse if you are married, then to your descendants (children or grandchildren), parents, siblings, and your siblings' children, in that order. Some state statutes may even look beyond that to your aunts and uncles or cousins. Depending on the size of your family, there could be a lot of people who would have to predecease you before your money and property would be turned over to the state.
Although the likelihood of the state receiving your hard-earned money and property is slim, this should not be used as an excuse not to plan. You have the ability to choose exactly whom you want to receive your money and property as well as when and how. Do not let the state take that choice away from you.
Estate Planning for Single Parents
Estate planning is not just about what happens to your money and property at your death. An estate plan also provides a way for you to name the people you want to care for your minor children if you are unable to, whether that is because you are out of town, unable to make your own decisions, or have passed away.
An estate plan also allows you to create a plan for what happens to you if you are unable to make your own decisions. You will still be alive, but because you cannot make your own decisions, someone will need to do so for you. This is your opportunity to name the people you trust and provide them with specific instructions about your financial and healthcare decisions.
Estate Planning for Single Parents
Estate Planning for Military Families
Estate Planning for First Responders
Tragedy can strike at any time. Putting your life on the line as a first responder means that you are more likely than most to be injured or killed in the line of duty. If you wait until something bad happens, it might be too late.
If you are injured and unable to make decisions for yourself, your loved ones will have to go to court to have someone appointed to make financial and medical decisions for you. This is a time-consuming, expensive, and public process that will add stress to an already stressful situation. You can help alleviate this burden by having a proper estate plan prepared.
In addition, if you do not intentionally plan, the state's rules (also known as the intestacy statute) will determine who gets your hard-earned money and property at your death. Depending on your unique family situation, this may not be how you would have chosen to hand out your money and property. Also, the money and property will be given to those court-chosen individuals outright, making it vulnerable to creditors, lawsuits, and divorcing spouses.
Maxing out the amount available through your employer-provided life insurance is a great first step. However, have you considered whether this is enough? Your employer or the life insurance company established a maximum for everyone based on a standardized factor such as your annual compensation, not your personal circumstances. Based on your unique situation, you need to consult with a financial professional to make sure that you have provided your loved ones with enough to carry out your wishes for them.
In addition to ensuring that you have enough life insurance, it is important to review the beneficiary designation form for each policy. This form instructs the life insurance company to pay the death benefit to the named individual or entity. However, it does nothing to protect the death benefit once in the hands of that named beneficiary. If you name an individual as the beneficiary of your life insurance policy, the death benefit will be paid directly to that individual in one lump sum. This can put the death benefit at risk of being spent frivolously, seized to satisfy a creditor, or used to pay a judgment against the beneficiary. Additionally, if the beneficiary you name is a minor, a court-appointed guardian will manage the money until the individual reaches the age of majority (eighteen or twenty-one depending on state law). At that point, the money will be given to the beneficiary in one lump sum. These are some of the reasons why we recommend naming a trust as the beneficiary of the life insurance policy, especially when there is a large sum of money at stake.
Estate Planning for Blended Families
Divorce and Estate Planning
This may be true or it may not. It really depends on state law and the terms of your power of attorney documents. Additionally, there's always a risk that an unscrupulous ex-spouse may conveniently omit that the divorce has nullified a power of attorney and attempt to use the document anyway.
The better practice is to revoke your old power of attorney documents and create new ones to avoid any ambiguity. Then, let your hospital, physicians' offices, banks, or anyone else who may have a copy of your old powers of attorney on file know that you revoked the old one naming your now ex-spouse. If necessary, provide them with a new copy naming your new agents.
Estate Planning for Newlyweds
We understand that privacy is important. After witnessing the financial crash in 2008, it makes sense that a decentralized digital medium of exchange such as cryptocurrency would be popular since many have lost faith in the conventional banking system. However, do not let your desire for privacy create additional hardships for your loved ones.
If you pass away owning cryptocurrency that your loved ones can find and that you have not transferred to a trust, the cryptocurrency may be subject to probate. Probate is the court-supervised process of winding up a deceased person's affairs. The trusted person who is selected by a judge or named in the will to wind up a deceased person's affairs will have to prepare an inventory of everything the deceased person owned and file it with the court. Anyone may view this document if they have a few dollars and some free time to search for it. Therefore, not planning for your cryptocurrency could result in your affairs being public after your death. Probate can also be time consuming and costly.
In addition, if you choose to keep your ownership of cryptocurrency a secret from your loved ones, then no one will be able to access your keys or benefit from what you have invested in; it will essentially be lost. Your desire to keep matters private could deprive your loved ones of the benefits of your investment efforts.
False. Although all travel requires planning and can involve risk and complications, international travel requires taking extra steps and addressing additional considerations. First, you will need a passport prior to your travels. If you already have a passport, you need to make sure that it is current. A passport is valid for ten years for adults. If you do not already have one, you will need to complete an application and submit a photo to the State Department. It may take seven to ten weeks to get your passport, or four to six weeks if you pay a fee to expedite the process. Because of the long processing time, you must obtain or renew your passport well in advance of your trip.
Second, an international destination is most likely farther away than a domestic location. Because of the distance, it may be more difficult to handle emergencies that occur back home while you are away. Having a proper estate plan can ensure that your trusted decision makers will act on your behalf while you are away so that emergencies can be addressed as quickly as possible even if you cannot immediately return home.
Third, because of the complexities that can arise with international travel, it may be more prudent to purchase travel insurance. You may have more connecting flights that could result in delayed travel, visit places with risky weather, or have a packed itinerary that could easily be interrupted if something should come up. Insurance will not prevent issues from occurring, but it may be able to compensate you should you suffer a financial loss due to an unexpected issue.
Planning for the Recently Retired
Because your paycheck from your job typically pays your bills, the lack of a paycheck will impact how much money and property you have during your retirement, unless you have inherited a large sum of money. Because you will live on the money from your retirement accounts and investments, there may be less left over to take care of your loved ones when you pass away than you have right now. This could put a damper on your wishes.
In addition, although you cannot take your money and property with you when you die, you can choose what happens to it at your death. Without a plan, your state’s law will determine what happens to your money and property. It will most likely go to your spouse (if you are married), your children, grandchildren, parents, siblings, or others—in that order—depending on who has survived you. The amount each person receives will also be determined by state law.