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New Baby? Time to Create Your Estate Plan

New Baby? Time to Create Your Estate Plan

Estate planning is often one item that gets pushed back on nearly everyone’s to-do list. The reasons you might be delaying vary: lack of time, not thinking you have enough assets, not knowing how to start, or fear of contemplating death. Whatever the reason for not putting an estate plan together, it is important to understand that if you just had a baby or have minor children – now is the time to meet with me to implement an estate plan.

In general terms, an estate plan is a set of legal documents that outline your wishes on how your assets should be distributed and who is responsible for your dependents, in the event of your death or legal incapacity. An estate plan should be developed with a qualified estate planning attorney to ensure that it will work as intended and fully protect your family. Here’s how an estate plan can you protect the newest addition to your family.

Protect Your Children

Perhaps to top reason to put together an estate plan is to dictate who will care for your children in the event you and your spouse die early or become legally incapacitated and therefore unable to care for your kids. Your estate plan can designate someone you trust and who shares your values as a guardian of your minor children.  This is the person who will essentially be a surrogate parent and raise the children through adulthood. When selecting a guardian, it is important to choose people who will be willing participants in your estate plan, who share your values and parenting philosophy, and who you trust to raise your children.

Distribute Your Things

While some assets have purely financial value, others have deep emotional attachments. Not only will a properly funded trust-based estate will eliminate probate, it will promote family harmony and save time and money. As you may already know, probate is the court-supervised process of wrapping up a deceased person’s affairs. This consists of multiple steps, including presenting a deceased’s last will and testament (if they had one – otherwise the probate court uses the government’s default plan known as intestacy), gathering assets, paying off debts, and distributing what’s left over to the deceased’s heirs.  Essentially, a probate proceeding is a lawsuit against the estate for the benefit of the creditors.  Using a trust to provide specific instructions on distribution of assets can help ward off fights among surviving relatives and will keep your affairs private.  Additionally, special features in your trust, sometimes called lifetime trusts, also allow you provide long-term financial stability and support for your children. These lifetime trusts can prevent a financially immature young child from using up their inheritance.

Provide for Your Loved Ones

Beyond your children, creating an estate plan will inform your loved ones what final health care decisions should be made on your behalf in the event you become incapacitated and are unable to make decisions. Serving as healthcare proxy is an enormous responsibility for the person you name, but you can help lessen the burden by communicating your wishes about medical decisions. One significant advantage of properly planning is that your intentions can be clearly stated so that your surviving family members do not have to guess what your desires are.

Complete your Estate Planning

If you have experienced a recent life-event – such as a new baby, a work promotion, purchasing a home, moving to a new state, or any other milestone – you should discuss your situation with me, your Family Business Lawyer. If you already have a will or trust in place, it may make sense to update it to ensure it provides for your family and loved ones and ensure that your Trust is properly and fully funded, which is the legal term for transferring assets into you Trust.  To learn how estate planning can protect you, your newborn, and the rest of your family, contact me today.

This article is a service of Tara Cheever, Personal Family Lawyer®. I don’t just draft documents; I ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why I offer a Family Wealth Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling my office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

 

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How A Living Trust Helps Your Family

How A Living Trust Helps Your Family

There are several parts to an estate plan, one of them being a living trust. Common factors that prompt someone to create a trust include privacy, tax benefits, avoiding probate, and caring for family members with special needs. Estate planning also lets you dictate how your assets will pass on to future generations after your death.

Avoiding Probate

One of the primary reasons for creating an estate plan is to avoid probate. Unlike a will, a fully funded living trust will avoid probate, typically a lengthy and costly court-supervised process. Probate includes locating and determining the value of the deceased’s assets, paying off any outstanding bills and taxes, and then distributing the remaining value of the estate to the deceased’s rightful beneficiaries or heirs. Avoiding probate is often a top reason for estate planning, and there is no surprise as to why. First, probate can be a costly way to transfer your assets upon death. Second, it is very time-consuming for your family. It can take at least nine months (or even longer) to complete the probate process. Complications, such as a contested will or an inability to find clear records of all of the deceased’s assets and debts, can extend this timeline. Finally, probate proceedings are a matter of public record so when your estate goes through this process, there is no privacy.

Reducing Taxes

While a living trust can help you avoid probate, it can also provide you with tax savings, especially if your estate is subject to death taxes (also known as estate and gift taxes). Of course, there are many types of trusts. One way to think about the variety is to consider a toolbox. For example, there are numerous kinds of screwdrivers, hammers, power tools, and so on. Each tool has an intended use. Trusts are no different. When you work with me, I’ll make sure to align the type of trust with the tax-saving needs and other goals of your family.

Seek Professional Help

It is important to understand that a trust only controls assets that are in the trust. In other words, you must place these assets in the trust – commonly referred to as “funding” the trust. Moreover, because our lives are always changing (marriage, childbirth, home purchase, etc.) and so are tax laws, it is essential to continually update and monitor the funding of your trust over your lifetime. For these reasons, you will want to work closely with me, your Family Business Lawyer® to make sure your assets are properly aligned with your trust. This will not only help you get organized, but it will also make things easier for your heirs when you pass away. You don’t have to go it alone. I am here to help you and your family.

This blog is a service of Tara Cheever, Family Business Lawyer®. I don’t just draft documents, I ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why I offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling my office today to schedule a Family Wealth Planning Session and mention this blog to find out how to get this $750 session at no charge.

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The Perils of Joint Property

The Perils of Joint Property

People often set up bank accounts or real estate so that they own it jointly with a spouse or other family member. The appeal of joint tenancy is that when one owner dies, the other will automatically inherit the property without it having to go through probate. Joint property is all perceived to be easy to setup since it can be done at the bank when opening an account or title company when buying real estate.

That’s all well and good, but joint ownership can also cause unintended consequences and complications. And it’s worth considering some of these, before deciding that joint ownership is the best way to pass on assets to your heirs.

So let’s explore some of the common problems that can arise.

The other owner’s debts become your problem.

Any debt or obligation incurred by the other owner could affect you. If the joint owner files bankruptcy, has a tax lien, or has a judgment against them, it could cause you to end up with a new co-owner – your old co-owner’s creditors! For example, if you add your adult child to the deed on your home, and he has debt you don’t know about, your property could be seized to collect that debt. Although “your” equity of the property won’t necessarily be taken, that’s little relief when the house you live in is put up on the auction block!

Your property could end up belonging to someone you don’t intend.

Some of the most difficult situations come from blended families. If you own your property jointly with your spouse and you die, your spouse gets the property. On the surface, that may seem like what you intended, but what if your surviving spouse remarries? Your home could become shared between your spouse and her second spouse. And this gets especially complicated if there are children involved: Your property could conceivably go to children of the second marriage, rather than to your own.

You could accidentally disinherit family members.

If you designate someone as a joint owner and you die, you can’t control what she does with your property after your death. Perhaps you and an adult child co-owned a business. You may state in your will that the business should be equally shared with your spouse or divided between all of your kids; however, ownership goes to the survivor – regardless of what you put in your will.

You could have difficulty selling or refinancing your home.

All joint owners must sign off on a property sale. Depending on whether the other joint owners agree, you could end up at a standstill from the sales perspective. That is unless you’re willing to take the joint owner to court to force a sale of the property. (No one wants to sue their family members, not to mention the cost of the lawsuit.)

And what if your co-owner somehow becomes incapacitated, through accident or illness? In that case, you may have to petition a court to appoint a guardian or conservator to represent the co-owner’s interest in the sale. While you and your co-owner always worked together, an appointed guardian may see his responsibility as protecting the other owner’s interest–which might mean going against you.

You might trigger unnecessary capital gains taxes.

When you sell a home for more than you paid for it, you usually pay capital gains taxes–based on the increase in value. Therefore, if you make an adult child a co-owner of your property, and you sell the property, you’re both responsible for the taxes. Your adult child may not be able to afford a tax bill based on decades of appreciation.

On the other hand, heirs only pay capital gains taxes based on the increase in value from when they inherited the asset, not from the day you first acquired it. So often, while people worry about estate taxes, in this case–inheriting a property (rather than jointly owning it) could save your heirs a fortune in income tax. And with today’s generous $5.49 million estate tax exemption, most of us don’t have to worry about the estate tax (but the income tax and capital gains tax hits almost everyone).

You could cause your unmarried partner to have to pay a gift tax.

If you buy property and place it in joint tenancy with an unmarried partner, the IRS will consider that to be a taxable gift to your partner. This can create needless paperwork and taxes.

So what can you do? These decisions are too important and complex to be left to chance.  Contact me, a Family Business Lawyer like myself who specializes in estate planning.  I will help you decide the best way to manage your property to meet your needs and goals.

I can assist you in planning to reduce estate taxes, avoid potential legal pitfalls, and set up a trust to protect your loved ones. I understand not only the legal issues but the complex layers of relationships involved in estate planning. I’ll listen to your concerns and help you develop a plan that gives you peace of mind while achieving all of your goals you have for your family. Contact me and mention this blog article and I can share with you how to obtain a Life & Legacy Planning Session valued at $750 free of charge.

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