(858) 432-3923 tara@cheeverlaw.com
Should your child’s guardian and trustee be the same person?

Should your child’s guardian and trustee be the same person?

If you have overheard any discussion about estate planning, you have likely heard the words “guardian” or “trustee” tossed around in the conversation. When it comes to estate planning, who will be ultimately in charge of your minor child is an important decision that requires consideration of many factors. Although there is no substitute for you as a parent, a guardian is essentially someone who steps in as a parent, assuming the parental role and raising the child through adulthood. A trustee, on the other hand, is in charge of managing the financial legacy that has been left behind for the minor. As a parent, you need to take into account the characteristics needed for each role.

Who Makes a Good Guardian?

When choosing a guardian, the top factor to consider is who is the best person that will love and raise your child in a manner that you would. This would include religious beliefs, parenting style, interest in extracurricular activities, energy level, and whether or not he or she has children already. Keep in mind that a guardian will provide day-to-day love, care, and support for your child. While the guardian you choose may be great with your children, he or she may not be great with money. For this reason, it may make sense to place the financial management of your minor child’s funds in the hands of someone else.

Who Makes a Good Trustee?

Not surprisingly, when choosing a trustee the most important characteristic is that he or she is great with finances. Specifically, the trustee must be able to manage the funds in accordance with your intent and instructions that are left in your trust. Consider whether he or she will honor your wishes. Likewise, should you choose to grant your successor trustee discretion in making financial decisions regarding the management of funds left behind you should ensure the individual’s decisions will be aligned with your intent. In short, you want to choose a successor trustee who will act in your minor child’s best interest within the limits you have set forth in your estate plan documents. If you choose two different people for the role of guardian and trustee, make sure to consider how the two get along as they will likely have to work together throughout your minor’s childhood and possibly into adulthood.

Seek Help to Make Your Decision

While estate planning can be daunting, it does not have to be. Contact me, a knowledgeable estate planning attorney, to help guide you through this process. I can explain your options and advise you on the best plan that will follow your wishes while at the same time meeting your family’s needs.

This article is a service of Tara Cheever,  Estate Planning and Business Planning Attorney. 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.

Sign up for the Cheever Law Newsletter

The Ins and Outs of Collecting Life Insurance Policy Proceeds

The Ins and Outs of Collecting Life Insurance Policy Proceeds

Unlike many estate assets, if you’re looking to collect the proceeds of a life insurance policy, the process is fairly simple provided you’re named as the beneficiary. That said, following a loved one’s death, the whole world can feel like it’s falling apart, and it’s helpful to know exactly what steps need to be taken to access the insurance funds as quickly and easily as possible during this trying time.

Additionally, if you have been dependent on the person who died for regular financial support and/or are responsible for paying funeral expenses, the need to access insurance proceeds can sometimes be downright urgent.

Here, I’ve outlined the typical procedure for claiming and collecting life insurance proceeds, along with discussing how beneficiaries can deal with common hiccups in the process. However, because all life insurance policies are different and some involve more complexities than others, it’s always a good idea to consult with a qualified Estate Planning attorney, such as myself, if you need extra help or guidance.

Filing a Claim
To start the life insurance claims process, you first need to identify who the beneficiary of the life insurance policy is—are you the beneficiary, or is a trust set up to handle the claim for you?

I often recommend that life insurance proceeds be paid to a trust, not outright to a beneficiary. This way, the life insurance proceeds can be used by the beneficiary, but the funds are protected from lawsuits and/or creditors that the beneficiary may be involved with—even a future divorce.

In the event that a trust is the beneficiary, contact me so that I can create a certificate of trust that you (or the trustee, if the trustee is someone other than you) can send to the life insurance company, along with a death certificate when one is available.

In any case, you (or the trustee) will notify the insurance company of the policyholder’s death, either by contacting a local agent or by following the instructions on the company’s website. If the policy was provided through an employer, you may need to contact their workplace first, and someone there will put you in touch with the appropriate representative.

Many insurance companies allow you to report the death over the phone or by sending in a simple form and not require the actual death certificate at this stage. Depending on the cause of death, it can sometimes take weeks for the death certificate to be available, so this simplified reporting speeds up the process.

From there, the insurance company typically sends the beneficiary (or the trustee of the trust named as beneficiary) more in-depth forms to fill out, along with further instructions about how to proceed. Some of the information you’re likely to be asked to provide during the claims process include the deceased’s date of birth, date and place of death, their Social Security number, marital status, address, as well as other personal data.

Your state’s vital records office creates the death certificate, and it will either send the certificate directly to you or route it through your funeral/mortuary provider. Once you’ve received a certified copy of the death certificate, you’ll send it to the insurance company, along with the other completed forms requested.

Multiple beneficiaries
If more than one adult beneficiary was named, each person should provide his or her own signed and notarized claim form. If any of the primary beneficiaries died before the policyholder, an alternate/contingent beneficiary can claim the proceeds, but he or she will need to send in the death certificates of both the policyholder and the primary beneficiary.

Minors
While policyholders are free to name anyone as a beneficiary, when minor children are named, it creates serious complications, as most insurance companies will not allow a minor child to receive life insurance benefits directly until they reach the age of majority. And the age of majority varies between states—with some it’s 18, and others it’s 21.

If a child is named as a beneficiary and has yet to reach the age of majority, the claim proceeds will be paid to the child’s legal guardian, who will be responsible for managing those funds until the child comes of age. Given this, in the event a minor is named you’ll need to go to court to be appointed as legal guardian, even if you’re the child’s parent. This is why I recommend never naming a minor child as a life insurance beneficiary, even as a backup to the primary beneficiary.

Rather than naming a minor child as a life insurance beneficiary, it’s often better to set up a trust to receive the proceeds. By doing that, the proceeds would be paid into the trust, and whomever is named as trustee will follow the steps above to collect the insurance benefits, put them in the trust, and manage the funds for the child’s benefit.  Whatever you decide, you should consult with me, a qualified Estate Planning Attorney to determine the best options for passing along your life insurance benefits and other assets to minor children.

Insurance claim payment
Provided you fill out the forms properly and include a certified copy of the death certificate, insurance companies typically pay out life insurance claims quickly. In fact, some claims are paid within one-to-two weeks of the start of the process, and rarely do claims take more than 60 days to be paid. Most insurance companies will offer you the option to collect the proceeds via a mailed check or transfer the funds electronically directly to your account.

Sometimes an insurance company will request you to send in a completed W-9 form (Request for Taxpayer Identification Number and Certification) from the IRS in order to process a claim. Most of the time, a W-9 is requested only if there is some question or issue with the records, such as having an address provided in a claim form that doesn’t match the one on file.

A W-9 is simply a way for the insurance company to verify information to prevent fraudulent activity. To this end, don’t be alarmed if you’re asked for a W-9. It’s a common verification practice, and it doesn’t automatically mean the company suspects you of fraud or plans to deny your claim.

While collecting life insurance proceeds is a fairly simple process, it’s always a good idea to consult with me as a qualified Estate Planning Attorney if you have any questions or need help to ensure the process goes as smoothly as possible during the often-chaotic period following a loved one’s death.


This article is a service of Tara Cheever,  Estate Planning and Business Planning Attorney. 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.

Sign up for the Cheever Law Newsletter

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 2

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 2

Last week, I shared the first part of this series explaining the powers and duties that come with serving as trustee. Here in part two, I discuss the rest of a trustee’s core responsibilities. 

Being asked to serve as trustee can be a huge honor—but it’s also a major responsibility. Indeed, the job entails a wide array of complex duties, and trustees are both ethically and legally required to effectively execute those functions or face significant liability.

To this end, you should thoroughly understand exactly what your role as trustee requires before agreeing to accept the position. Last week, I highlighted three of a trustee’s primary functions, and here I continue with that list, starting with one of the most labor-intensive of all duties—managing and accounting for a trust’s assets.

Manage and account for trust assets

Before a trustee can sell, invest, or make distributions to beneficiaries, he or she must take control of, inventory, and value all trust assets. Ideally, this happens as soon as possible after the death of the grantor in the privacy of a lawyer’s office. As long as assets are titled in the name of the trust, there’s no need for court involvement—unless a beneficiary or creditor forces it with a claim against the trust.

In the best case, the person who created the trust and was the original trustee—usually the grantor—will have maintained an up-to-date inventory of all trust assets. And if the estate is extensive, gathering those assets can be a major undertaking, so contact me as your Personal Family Lawyer® to help review the trust and determine the best course of action.

The value of some assets, like financial accounts, securities, and insurance, will be easy to determine. But with other property—real estate, vehicles, businesses, artwork, furniture, and jewelry—a trustee may need to hire a professional appraiser to determine those values. With the assets secured and valued, the trustee must then identify and pay the grantor’s creditors and other debts.

Be careful about ensuring regularly scheduled payments, such as mortgages, property taxes, and insurance, are promptly paid, or trustees risk personal liability for late payments and/or other penalties. Trustees are also required to prepare and file the grantor’s income and estate tax returns. This includes the final income tax return for the year of the decedent’s death and any prior years’ returns on extension, along with filing an annual return during each subsequent year the trust remains open.

For high-value estates, trustees may have to file a federal estate tax return or possibly a state estate tax return. However, Trump’s new tax law of 2017 (Tax Cuts and Jobs Act) doubled the estate tax exemption to $11.2 million, so very few estates will be impacted. But keep in mind, this new exemption is only valid through 2025, when it will return to $5.6 million.

During this entire process, it’s vital that trustees keep strict accounting of every transaction (bills paid and income received) made using the trust’s assets, no matter how small. In fact, if a trustee fails to fully pay the trust’s debts, taxes, and expenses before distributing assets to beneficiaries, he or she can be held personally liable if there are insufficient assets to pay for outstanding estate expenses.

Given this, it’s crucial to work with a Personal Family Lawyer® and a qualified accountant to properly account for and pay all trust-related expenses and debts as well as ensure all tax returns are filed on behalf of the trust.

Personally administer the trust

While trustees are nearly always permitted to hire outside advisers like lawyers, accountants, and even professional trust administration services, trustees must personally communicate with those advisors and be the one to make all final decisions on trust matters. After all, the grantor chose you as trustee because they value your judgment.

So even though trustees can delegate much of the underlying legwork, they’re still required to serve as the lead decision maker. What’s more, trustees are ultimately responsible if any mistakes are made. In the end, a trustee’s full range of powers, duties, and discretion will depend on the terms of the trust, so always refer to the trust for specific instructions when delegating tasks and/or making tough decisions. And if you need help understanding what the trust says, don’t hesitate to reach out to me for support.

Clear communication with beneficiaries

To keep them informed and updated as to the status of the trust, trustees are required to provide beneficiaries with regular information and reports related to trust matters. Typically, trustees provide such information on an annual basis, but again, the level of communication depends on the trust’s terms.

In general, trustees should provide annual status reports with complete and accurate accounting of the trust’s assets. Moreover, trustees must permit beneficiaries to personally inspect trust property, accounts, and any related documents if requested. Additionally, trustees must provide an annual tax return statement (Schedule K-1) to each beneficiary who’s taxed on income earned by the trust.

Entitled to reasonable fees for services rendered

Given such extensive duties and responsibilities, trustees are entitled to receive reasonable fees for their services. Oftentimes, family members and close friends named as trustee choose not to accept any payment beyond what’s required to cover trust expenses, but this all depends on the trustee’s particular situation and relationship with the grantor and/or beneficiaries.

What’s more, determining what’s “reasonable,” can itself be challenging. Entities like accounting firms, lawyers, banks, and trust administration companies typically charge a percentage of the funds under their management or a set fee for their time. In the end, what’s reasonable is based on the amount of work involved, the level of funds in the trust, the trust’s other expenses, and whether or not the trustee was chosen for their professional experience. Consult with me if you need guidance about what would be considered reasonable in your specific circumstance.

Since the trustee’s duties are comprehensive, complex, and foreign to most people, if you’ve been asked to serve as trustee, it’s critical you have a professional advisor who can give you a clear and accurate assessment of what’s required of you before you accept the position. And if you do choose to serve as trustee, it’s even more important that you have someone who can guide you step-by-step throughout the entire process.

In either case, you can rely on me as your Personal Family Lawyer® to offer the most accurate advice, guidance, and assistance with all trustee duties and functions. I can ensure that you’ll effectively fulfill all of the grantor’s final wishes—and do so in the most efficient and risk-free manner possible. Contact me today at (858) 432-3923 to learn more.

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.

Sign up for the Cheever Law Newsletter

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 1

Before Agreeing to Serve as Trustee, Carefully Consider the Duties and Obligations Involved—Part 1

If a friend or family member has asked you to serve as trustee for their trust upon their death, you should feel honored—this means they consider you among the most honest, reliable, and responsible people they know.

However, being a trustee is not only a great honor, it’s also a major responsibility. The job can entail a wide array of complex duties, and you’re both ethically and legally required to effectively execute those functions or face significant liability. Given this, agreeing to serve as trustee is a decision that shouldn’t be made lightly, and you should thoroughly understand exactly what the role requires before giving your answer.

Of course, a trustee’s responsibility can vary enormously depending on the size of the estate, the type of trust involved, and the trust’s specific terms and instructions. But every trust comes with a few core requirements, and here I’ll highlight some of the key responsibilities.

That said, one of the first things to note about serving as trustee is that the job does NOT require you to be an expert in law, finance, taxes, or any other field related to trust administration. In fact, trustees are not just allowed to seek outside assistance from professionals in these fields, they’re highly encouraged to, and funding to pay for such services will be set aside for this in the trust.

To this end, don’t let the complicated nature of a trustee’s role scare you off. Indeed, there are numerous professionals and entities that specialize in trust administration, and people with no experience with these tasks successfully handle the role all of the time. And besides, depending on who nominated you, declining to serve may not be a realistic or practical option.

Adhere to the trust’s terms
Every trust is unique, and a trustee’s obligations and powers depend largely on what the trust creator, or grantor, allows for, so you should first carefully review the trust’s terms. The trust document outlines all the specific duties you’ll be required to fulfill as well as the appropriate timelines and discretion you’ll have for fulfilling these tasks.

Depending on the size of the estate and the types of assets held by the trust, your responsibilities as trustee can vary greatly. Some trusts are relatively straightforward, with few assets and beneficiaries, so the entire job can be completed within a few weeks or months. Others, especially those containing numerous assets and minor-aged beneficiaries, can take decades to completely fulfill. To ensure you understand exactly what a particular trust’s terms require of you as trustee, consult with me as a qualified estate planning attorney.

Act in the best interests of the beneficiaries
Trustees have a fiduciary duty to act in the best interest of the named beneficiaries at all times, and they must not use the position for personal gain. Moreover, they cannot commingle their own funds and assets with those of the trust, nor may they profit from the position beyond the fees set aside to pay for the trusteeship.

If the trust involves multiple beneficiaries, the trustee must balance any competing interests between the various beneficiaries in an impartial and objective manner for the benefit of them all. In some cases, grantors try to prevent conflicts between beneficiaries by including very specific instructions about how and when assets should be distributed, and if so, you must follow these directions exactly as spelled out.

However, some trusts leave asset distribution decisions up to the trustee’s discretion. If so, when deciding how to make distributions, the trustee must carefully evaluate each beneficiary’s current needs, future needs, other sources of income, as well as the potential impact the distribution might have on the other beneficiaries. Such duties should be taken very seriously, as beneficiaries can take legal action against trustees if they can prove he or she violated their fiduciary duties and/or mismanaged the trust.

Invest trust assets prudently
Many trusts contain interest-bearing securities and other investment vehicles. If so, the trustee is responsible not only for protecting and managing these assets, they’re also obligated to make them productive—which typically means selling and/or investing assets to generate income.

In doing so, the trustee must exercise reasonable care, skill, and caution when investing trust assets, otherwise known as the “prudent investor” rule. The trustee should always consider the specific purposes, terms, distribution requirements, and other aspects of the trust when meeting this standard.

Trustees must invest prudently and diversify investments appropriately to ensure they’re in the best interests of all beneficiaries. Given this, trustees are forbidden from investing trust assets in overly speculative or high-risk stocks and/or other investment vehicles. Unless specifically spelled out in the trust terms, it will be up to the trustee’s discretion to determine the investment strategies that are best suited for the trust’s goals and beneficiaries. If so, you should hire a financial advisor familiar with trusts to help guide you.

Given the unpredictable nature of the economy, it’s important to point out that poor performance of trust investments alone isn’t enough to prove a trustee breached his or her duties to invest prudently. Provided the trustee can show the underlying investment strategies were sound and reasonable, the mere fact that the investments lost money doesn’t make them legally liable.

Next week, I’ll continue with part two in this series explaining the scope of powers and duties that come with serving as trustee. 

This article is a service of Tara Cheever, Estate Planning and Business Attorney. 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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Why Not Just Go on NoloⓇ and Create Your Own Estate Planning Documents Cheaply?

Why Not Just Go on NoloⓇ and Create Your Own Estate Planning Documents Cheaply?

There are many software programs, as well as websites, that sell do-it-yourself estate planning documents. These websites and form tools seem to offer a convenient and cost-effective alternative to consulting with an estate planning attorney. But do they really meet your needs and protect your family? Is online, do-it-yourself estate planning worth the perceived upfront savings?

Penny Wise and Pound Foolish

In almost every scenario do-it-yourself estate planning is risky and can become a costly substitute for comprehensive in-person planning with a professional legal advisor. Typically, these online programs and services have significant limitations when it comes to gathering information needed to properly craft an estate plan. This can result in crucial defects that, sadly, won’t become apparent until the situation becomes a legal and financial nightmare for your loved ones.

Creating your own estate plan without professional advice can also have unintended consequences. Bad or thoughtless documents can be invalid and/or useless when they are needed. For example, you can create a plan that has no instructions for when a beneficiary passes away or when a specific asset left to a loved one no longer exists. You may create a trust on your own but fail to fund it, resulting in your assets being tied up in probate courts, potentially for years. Worse yet, what you leave behind may then pass to those you did not intend.

Your family situation and assets are unique. Plus, each state has its own laws governing what happens when someone becomes incapacitated or dies. These nuances may not be adequately addressed in an off-the-shelf document. In addition, non-traditional families, or those with a complicated family arrangement, require more thorough estate planning. The options available in a do-it-yourself system may not provide the solutions that are necessary. A computer program or website cannot replicate the intricate knowledge a qualified local estate planning attorney will have and use to apply to your particular circumstances.

If you’re a person of wealth, then concerns about income and estate taxes enter the picture too. An online estate planning website or program that prepares basic Wills without taking into account the size of the estate can result in hundreds of thousands of dollars in increased (and usually completely avoidable) tax liability and future probate fees. A qualified estate planning attorney will know how to structure your legal affairs to properly address these issues.

One important aspect of estate planning is protecting adult children from the negative financial consequences of divorce, bankruptcy, lawsuits, or illness. An online planning tool will not take these additional steps into account when putting together what is usually a basic estate plan. Similarly, parents who have children or adult loved ones with special needs must take extra caution when planning. There are complicated rules regarding government benefits that these loved ones may receive that must be considered, so that valuable benefits are not lost due to an inheritance.

Consult an Estate Planning Attorney

No matter how good a do-it-yourself estate planning document may seem, it is no substitute for personalized advice. Estate planning is more than just document production. In many cases, the right legal solution to your situation may not be addressed by these do-it-yourself products – affecting not just you, but generations to come. To make sure you are fully protecting your family, contact me, a Personal Family Lawyer®, today.

As a Personal Family Lawyer®, I offer expert advice on Wills, Trusts, and numerous other estate planning vehicles. Using proprietary systems, such as my Family Wealth Inventory and Assessment™ and Family Wealth Planning Session™, I’ll carefully analyze your assets—both tangible and intangible—to help you come up with an estate planning solution that offers maximum protection for your family’s particular situation and budget. Contact me today to get started.

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.

Sign up for the Cheever Law Newsletter

The Key Differences Between Wills and Trusts

The Key Differences Between Wills and Trusts

When discussing estate planning, a Will is what most people think of first. Indeed, Wills have been the most popular method for passing on assets to heirs for hundreds of years. But Wills aren’t your only option. And if you rely on a Will alone (without a Trust) to pass on what matters, you’re guaranteeing your family has to go to court when you die.

In contrast, other estate planning vehicles, such as a Trust-based plan, which used to be available only to the uber wealthy, are now being used by those of all income levels and asset values to keep their loved ones out of the court process.

But determining whether a Will alone or a Trust-based plan (Trust and Pour-Over Will) is best for you depends entirely on your personal circumstances. And the fact that estate planning has changed so much makes choosing the right tool for the job even more complex.

The best way for you to determine the truly right solution for your family is to meet with me as your Personal Family Lawyer® for a Family Wealth Planning Session™. During that process, I’ll take you through an analysis of your personal assets, what’s most important to you, and what will happen for your loved ones when you become incapacitated or die. From there, you can make the right choice for the people you love.

In the meantime, here are some key distinctions between Wills and Trusts you should be aware of.

When they take effect
A Will only goes into effect when you die, while a Trust takes effect as soon as it’s signed and your assets are transferred into the name of the Trust. To this end, a Will directs who will receive your property at your death, and a Trust specifies how your property will be distributed before your death, at your death, or at a specified time after death.  The Trust is what keeps your family out of court in the event of your incapacity or death.

Because a Will only goes into effect when you die, it offers no protection if you become incapacitated and are no longer able to make decisions about your financial and healthcare needs. If you do become incapacitated, your family will have to petition the court to appoint a conservator or guardian to handle your affairs, which can be costly, time consuming, and stressful.

With a Trust-based plan, which includes a Pour-over Will, Durable Power of Attorney and health care documentation, you can include provisions that appoint someone of your choosing—not the court’s—to handle your medical and financial decisions if you’re unable to. This keeps your family out of court, which can be particularly vital during emergencies, when decisions need to be made quickly.

The property they cover

A Will covers any property solely owned in your name. A Will does not cover property co-owned by you with others listed as Joint Tenants, nor does your will cover assets that pass directly to a beneficiary by contract, such as life insurance.

Trusts, on the other hand, cover property that has been transferred, or “funded,” to the Trust or where the Trust is the named beneficiary of an account or policy. That said, if an asset hasn’t been properly funded to the Trust, it won’t be covered, so it’s critical to work with me as your Personal Family Lawyer® to ensure the trust is properly funded.

Unfortunately, many lawyers and law firms set up Trusts, but don’t emphasize the important of ensuring your assets are properly re-titled or beneficiary designated, and the Trust doesn’t work when your family needs it. I have systems in place to ensure that transferring assets to your Trust and making sure they are properly owned at the time of your incapacity or death happens with ease and convenience.

How they’re administered

In order for assets through a Will to be transferred to a beneficiary, the will must pass through the court process called Probate. The court oversees the Will’s administration in Probate, ensuring your property is distributed according to your wishes, with automatic supervision to handle any disputes.

Since Probate is a public proceeding, your Will becomes part of the public record upon your death, allowing everyone to see the contents of your estate, who your beneficiaries are, and what they’ll receive.

Unlike Wills, Trusts don’t require your family to go through Probate, which can save both time and money. And since the Trust doesn’t pass through court, all of its contents remain private.

How much they cost

Wills and Trusts do differ in cost—not only when they’re created, but also when they’re used. The average Will-based plan can run between $500-$2000, depending on the options selected. An average Trust-based plan can be set up for $3,500-$6,000, again depending on the options chosen. So at least on the front end, Wills are far less expensive than Trusts.  However, Wills must go through Probate, where attorney fees and court costs can be quite hefty, especially if the Will is contested. Given this, the total cost of executing the Will through probate can run $15,000 or more plus all of the other disadvantages of going through a Court proceeding.

Even though a Trust may cost more upfront to create than a Will, the total costs once Probate is factored in can actually make a Trust the less expensive option in the long run.  And if you think you can cut costs by having your “trust” done through an online program like LegalZoom or through a Trust-mill company, please think again.  While you will end up with a document with the word “Trust” on the first page, the document is likely filled with errors and problems that will leave your loved ones in Court proceedings that you thought you were avoiding.  Since the problem will be discovered at your incapacity or at your death, it will be too late to correct.  As the old adage goes “you get what you pay for.”  While we all like getting a bargain, your estate plan is not the place to cut corners.

During our Family Wealth Planning Session™, I’ll compare the costs of Will-based planning and Trust-based planning with you, so you know exactly what you want and why, as well as the total costs and benefits over the long-term.

As your Personal Family Lawyer®, I offer expert advice on Wills, Trusts, and numerous other estate planning vehicles. Using proprietary systems, such as my Family Wealth Inventory and Assessment™ and Family Wealth Planning Session™, I’ll carefully analyze your assets—both tangible and intangible—to help you come up with an estate planning solution that offers maximum protection for your family’s particular situation and budget. Contact me today to get started.

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.

Sign up for the Cheever Law Newsletter

Roth IRA Conversions After Tax Reform…Still a good idea?

Roth IRA Conversions After Tax Reform…Still a good idea?

What are the implications for your family if you don’t spend all the money?

Twenty years ago, the Roth IRA first became available to investors as a financial tool for their estate planning needs. These accounts have maintained their popularity because unlike their traditional IRA counterpart, a Roth IRA provides account owners tax-free income during retirement.  In fact, many people chose to convert their traditional IRA or 401(k) plan into a Roth IRA to benefit from this long-term tax advantage. (Of course, there is a current tax bill that has to be considered when you make a conversion.) The recently enacted tax reform, however, has removed one helpful opportunity: the ability to recharacterize — or undo — a Roth IRA conversion.

You can think of these recharacterizations as a second-look at whether the conversion made financial sense. For example, Kevin decides to convert a $100,000 traditional IRA to a Roth IRA. When Kevin does this, he has to pay income tax on the $100,000 now. This isn’t as bad of a deal as it sounds, because now the money is in a Roth IRA, where eventually all of the withdrawals will be tax free. When Kevin retires, he’ll have “tax-free” income from the Roth IRA instead of having to pay income tax on each withdrawal if it were still in the traditional IRA. In the past, if the market were to decline to say $90,000, Kevin could recharacterize — or undo — the conversion. This is important because he had to pay income tax on the full $100,000 of the conversion, but assets have declined in value only $90,000. So, Kevin would be paying income tax on a “phantom” $10,000 IRA conversion. Now, this second-look that a recharacterization offered is closed, so a Roth IRA conversion is just a little riskier than is used to be.

Implications For Loved Ones

Many people who create IRAs, and the ones who inherit them, are unfamiliar with the rules that apply to them. There are several basic scenarios that will result in different consequences for your loved ones in the event you pass away and leave behind an IRA.

First, if you die before spending all the money in your IRA you can leave the retirement account to your surviving children, grandchildren, or other beneficiary you have designated in your estate plan.

Second, the type of IRA — in other words, whether it is a traditional IRA versus a Roth IRA — is important as it vastly affects the amount of benefit your loved ones will receive. For example, when you leave behind a traditional IRA your family will pay income taxes on the money they withdraw when it is taken out of the account. On the other hand, if you leave behind a Roth IRA the money will be income tax-free for your family. Although both types of accounts are subject to the estate tax (or death tax), the death tax is likely a non-issue for most people now, as the federal estate exemption is presently over $11 million per person.

Third, you can create an IRA trust as part of your comprehensive estate plan. An IRA trust is special trust that is purposefully designed to receive IRA distributions for the benefit of your loved ones after you die. This powerful tool maximizes the benefit to your family upon your passing and can be used for both traditional or Roth IRAs. So, whether you decide to convert or not, you still need to consider an IRA trust.

Finally, although tax reformed altered the flexibility of IRA conversions by removing the ability to undo them with a recharacterization, a conversion may still be a good financial planning option for some. As you work with your financial and tax advisors on your conversions, consider your beneficiary designations and whether an IRA trust might be right for you.

Contact an Estate Planning Professional

There are several factors that should be considered when choosing financial and estate planning tools. Always work with a knowledgeable financial and tax professional. Then, work with me, as your knowledgeable Personal Family Lawyer, so we can achieve your goals and maximize the benefit to your loved ones.

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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Five Surprisingly Common Planning Mistakes Many Baby Boomers are Making

Five Surprisingly Common Planning Mistakes Many Baby Boomers are Making

Baby boomers – the first generation tasked with the responsibility of planning for and funding their golden years. This generation, which includes those born between 1946 and 1964, have entered and continue to enter into retirement. As they make this financial transition into retirement, many are learning that they have made some of the most typical retirement mistakes.

But, even if you’ve made a financial mistake or two, there’s still time to avoid these five surprisingly common planning mistakes baby boomers are making in droves.

Mistake #1: Believing Estate Planning is Only for the Wealthy: While baby boomers are not the only ones guilty of this mistake, the common misconception is that only the ultra-rich need to have an estate plan prepared. By some reports, about half of Americans between the ages of 55 and 64 do not even have a Will. Because estate planning encompasses not only protection of your assets (regardless of how much you’ve accumulated), but also your incapacity planning and healthcare choices, the lack of planning can leave you in a dire situation should any medical issues arise.

Mistake #2: Checklist Mentality: For many, estate planning is just the preparation of legal documents. Once the documents are signed, the client crosses off the item from his or her to-do list and moves on. But, your circumstances may (and usually will) change. And the likelihood of this happening increases the longer time goes by. To ensure your estate planning objectives are carried out and that you plan will actually work by minimizing family conflict and avoid court intervention, you should update your estate plan every time a major (or minor) life change happens, such as retirement.

Mistake #3: Not Completing Your Estate Planning Homework: Just because the estate planning documents have been signed does not necessarily mean that the planning is complete. It is important that any assets that need to be retitled are done so as soon as possible, before you forget. If the ownership or designations on financial accounts and property do not align with your estate planning strategy, there can be major problems in the future. Improper titling of financial accounts or property can result in an unexpected or undesirable distribution. This can happen because you may make one plan through your will or trust, but the ultimate determination of who inherits will rely on the ownership or beneficiary designation of those assets upon your death.

Mistake #4: Leaving Out Little (And Not So Little) Things: It is important to consider all forms of property, not just the high-value assets when putting together an estate plan. Some of the most commonly overlooked assets include digital assets and family pets. If not expressly addressed in your estate plan, your family may end up fighting over valuable assets, abandoning those they deem worthless, or not even realizing certain assets existed.

Mistake #5: Not Preparing for Life Events & Emergencies: No one has a crystal ball. However, with proper estate planning, you may be able to weather the storm brought on by some of life’s unexpected events or emergencies. With long term care costs increasing year after year, planning for the future possibility of a nursing home can save you money and reduce worry if the time comes.

Estate Planning Help

Although many baby boomers have made these mistakes, you do not have to be one of them.   As a Personal Family Lawyer®, I can give you the peace of mind knowing you have a plan in place that will work for you and your family in the event of incapacity and at death. I can teach you some estate planning options and you can be sure that you and your family are protected from these common mistakes.

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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Estate Planning Best Practices Gleaned From Famous Celebrity Deaths

Estate Planning Best Practices Gleaned From Famous Celebrity Deaths

Discussing death can be awkward, and many people would prefer just to ignore estate planning all together. However, ignoring—or even putting off—such planning can be a huge mistake, as these celebrity stories will highlight.

The next time one of your relatives tells you they don’t want to talk about estate planning, share these famous celebrities’ stories to get the conversation started. Such cautionary tales offer first-hand evidence of just how critical it is to engage in estate planning, even if it’s uncomfortable.

The Marley Family Battle
You would think that with millions of dollars in assets—including royalties offering revenue for the indefinite future—at stake, more famous musicians would at least have a will in place. But sadly, you’d be wrong. Legendary stars like Bob Marley, Prince, and Jimi Hendrix failed to write down their wishes on paper at all.

Not having an estate plan can be a nightmare for your surviving family. Indeed, Marley’s heirs are still battling one another in court three decades later. If you do nothing else before you die, at least be courteous enough to your loved one’s to document your wishes and keep them out of court and out of conflict.

Paul Walker Died Fast and Furious at Just 40
While Fast and Furious actor Paul Walker was just 40 when he died in a tragic car accident, he had enough forethought to implement some basic estate planning. His will left his $25 million estate to his teenage daughter in a trust and appointed his mother as her legal guardian until 18.

But isn’t 18 far too young for a child to receive an inheritance of any size? Walker would have been far better advised to leave his assets in an ongoing trust, with financial education built in to give his daughter her best shot at a life well lived, even without him in the picture.

Most inheritors, like lottery winners, are not properly educated about what to do after receiving an inheritance, so they often lose their inheritance within just a few years, even when it’s millions.

Indeed, none of us has any clue when we’ll die, only that it will happen, so no matter how young you are or how much money you have—and especially if you have any children—don’t put off estate planning for another day. You truly never know when it’ll be needed.

Heath Ledger Didn’t Update His Estate Planning
Even though actor Heath Ledger created a will shortly after becoming famous, he failed to update it for more than five years. The will left his entire fortune to his parents and sister, so when he died unexpectedly in 2008, his young daughter received nothing, as she hadn’t been added to the will. Fortunately, his parents made sure their granddaughter was provided for, but that might not always be the case.

Creating an estate planning strategy is just the start—be sure to regularly update your documents, especially following births, deaths, divorces, new marriages, acquiring new assets, or retiring. Many estate plans fail because most lawyers don’t have built-in systems for updating your estate plans, but we do—mostly because we don’t want this to happen to your family.

Paul Newman Cut Out His Daughters Too
Though it’s a good idea to regularly update your estate plan, be sure your heirs know exactly what your intentions are when making such updates, or your family might experience significant shock by not knowing why you did what you did.

The final update to Paul Newman’s will, which was made just a few months before his death in 2008, left his daughters with no ownership or control of Newman’s Own Foundation, his legendary charity associated with the Newman’s Own food brand. Prior versions of Newman’s will— and indeed his own personal assurances to his family—indicated they’d have membership on the foundation’s board following his death.

Instead, the final version of his will left control of the foundation to his business partner Robert Forrester. Some allege that during his final months, when Newman was mentally unstable, he was secretly persuaded to change his estate plan to leave control of the Newman’s Own brand and foundation to Forrester. Newman’s daughters are currently fighting Forrester in court over the rights they believe they’re entitled to receive.

While changes to your estate plan may seem perfectly clear to you, make sure your family is on the same page by clearly communicating your intentions. In fact, if you are making significant changes to your plan, and your children are adults, we often recommend a full family meeting to go over everything with all impacted parties, and we often facilitate such meetings for our clients.

Muhammad Ali Made His Wishes Clear
Boxing great Muhammad Ali wanted multi-day festivities to be held in his honor, including a large festival, an Islamic funeral, and a dazzling public memorial at the KFC headquarters in Louisville, KY. Given such elaborate plans, he worked with his lawyers for years, ensuring his wishes would be properly carried out.

While you probably won’t need a multi-day festivity to celebrate your life, you may have wishes regarding how your life should be memorialized when you pass or how your care should be handled if you’re incapacitated. If you eat a special diet or want certain friends by your side while incapacitated, you have to make these wishes clearly known in writing or they very well might not happen. At the same time, you should spell out exactly how you want your remains cared for and what kind of memorial service, if any, you prefer.

As your Personal Family Lawyer®, we can help ensure your final wishes are carried out exactly how you want. But more importantly, we’ll help protect your family and keep them out of conflict and out of court in the event of your death or incapacitation. With a Personal Family Lawyer® on your side, you’ll have access to the exact same estate planning strategies and protections that A-List celebrities use, so don’t wait another day—contact us now to get started!

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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What do successor trustees and executors do?

What do successor trustees and executors do?

Executor’s Duties

An executor, sometimes called a personal representative, is the person who is named in a will, appointed by the court, and responsible for probating the will and settling the estate. Depending on the state, an executor may work under court supervision or may use so-called “independent” administration for an unsupervised probate.

Typically, a petition of probate must be filed with the court for an executor to be appointed. If the person agrees to be the executor, and no one objects, the court will issue letters of testamentary. These letters authorize the executor to gather the estate’s assets, sell assets, pay creditors, and open an estate bank account. An executor is ultimately responsible for distributing the estate assets to the heirs in accordance with the terms of the will. If there is no will, then your executor will distribute assets in accordance with state law. Distribution of estate assets, in either case, happens only after debts, taxes, and administration expenses are paid.

Trustee’s and Successor Trustee’s Duties

A trustee, on the other hand, is an individual or trust company named in a trust document and is in charge of the assets that are held in a trust. Assets held in a living trust avoid probate, which means that court supervision is typically not required. In most revocable living trusts, you act as the trustee. While alive and well, you can make changes including moving assets to and from the trust, changing its beneficiaries, or even revoking the trust entirely if you choose it is no longer necessary. If you are no longer able to manage your affairs, because of cognitive impairment or another injury, your incapacity trustee will step in and handle the trust for you. Upon your death, the successor trustee will distribute the assets held in the trust to your named beneficiaries and subsequently close down the trust, similar to an executor, without the burden of probate.

Other Thoughts

You have the option of having more than one trustee or executor. It is better to name a sequence of trustees or executors rather than joint ones. The executor and successor trustee can be the different people, but do not have to be. Designating the same person as the executor of your estate and your successor trustee will minimize expenses but naming different ones will not allow one single person to have unilateral control. There are advantages and disadvantages to each setup. Contact me today so I can help you select your executor and trustee.

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