Monday, January 09, 2012 Happy 2012! Make Getting Your Affairs in Order Your Goal for the New Year
Each year, I make a list of goals that I want to accomplish for the year. Some years, the goals have a theme – unfortunately, the theme is almost always the same: lose weight, exercise more. . .
This year, I’m challenging you to make one of your New Year’s goals to get your estate planning affairs in order. This is one goal that is easy to accomplish – I promise!
Here are 5 easy steps you can take to accomplish this goal.
1. Get educated about estate planning. Attend an estate planning workshop or two. Estate planning attorneys like me are always giving seminars and workshops to educate people about estate planning. Yes, these workshops help attorneys attract clients, but the goal of these workshops is really to educate people about the basics of estate planning so clients can have meaningful conversations and can make thoughtful decisions about their own estates.
2. Review your old documents. Do you have a will or trust? Advanced Directives or Healthcare Powers of Attorney and Living Wills? Do you have a Durable Financial Power of Attorney? How old are your documents? If your wills name guardians for your children who are now 30 years old, your documents are definitely out of date. Did you name an executor who is now dead or is your ex-wife named as your executor? Probably time to revise your will.
What about your health care documents? If they were done in Georgia before 2007, you may want to update them to the Advance Health Care Directive that went into effect in 2007. Who have you named to make healthcare decisions for you? Is that person still the right person to make decisions for you?
3. Look at the ownership of all of your accounts. How is your bank account titled? Title indicates who owns the account. Are you the sole owner or is it a joint account? Who is the joint owner and is this someone who should be a joint owner of your account? Here’s a link to a blog I wrote last year about the pros and cons of joint ownership of accounts: http://bit.ly/xm8W5o.
4. Check the beneficiary designations of your accounts. The beneficiary is the person who would receive the proceeds of the account at your death. Is the beneficiary your estate? If so, why did you make your estate the beneficiary? Having your estate as the beneficiary pretty much ensures that your estate will have to be probated. Is your beneficiary under the age of 18 or someone with special needs? It may not be the best thing to give someone under the age of 18 a large inheritance. Although the court will put protections in place for those under 18, those protections can be expensive and once the beneficiary has their 18th birthday, the money is all theirs – to spend however they wish. Yikes!
If the beneficiary has special needs, a gift may mean they lose governmental benefits.
Distributions from IRA’s and 401(k)’s have income tax consequences, so have you considered how your beneficiary designations will affect the tax liability of your beneficiaries?
5. Make an appointment with an estate planning lawyer, a CPA and your financial advisor. A good, comprehensive plan involves a group of professionals who can guide and counsel you in making decisions about your estate.
Will you accept thechallenge to make getting your New Years Goal getting your affairs in order?
Here's to a great new year!
Sunday, June 19, 2011 Trust Me - Who Should Be My Trustee?
Once I convinced my client, Mary, that a trust is a safe, and not so scary, way to protect herself and her stuff during any incapacity, she wanted to know who could possibly serve as a backup trustee? According to Mary, her daughter was a kind and loving person who would do everything she could to support her mother, but her daughter’s financial skills were somewhat suspect. Mary’s son is a busy family man with a great job, but he seems too busy to help Mary now.
Who could she choose?
First, what does a trustee do exactly? A trustee is a fiduciary, which means that he or she has a legal or ethical duty regarding the management of property for another. Although a trustee may have either the duty to manage the trust assets or the duty to distribute those assets, many trustees both manage and distribute. A trustee is usually responsible for investing the assets in the trust, distributing those assets to the beneficiaries according to the trust terms, and making sure any required accountings are prepared and that taxes are paid when necessary.
A trustee can be an individual who is a family member or friend. Parents often want their children to succeed them as trustee. When deciding whether to have a child as a successor trustee – or when choosing which child – be sure to be realistic about your adult child’s financial abilities. Make sure that the person you choose understands that the trust will be managed for the benefit of beneficiaries – and that the trustee might not be one of those beneficiaries. Be aware that a trustee might have a conflict of interest if the trust assets will eventually pass in part or whole to the trustee or his or her family members. Also, it is best not to choose someone who has financial problems such as large debts, a failing business, or a looming bankruptcy. Someone with financial issues might be tempted to borrow or use trust assets for his or her own benefit, despite the terms of the trust.
A trustee can also be a professional individual, like a lawyer or CPA, who can be hired to serve as a trustee. Trustees may charge a percentage of the assets in the trust, or an hourly fee for any time spent administering the trust.
Of course, a bank or trust company may also serve as a trustee. Generally, a bank or trust company will have a trust department and will hire employees to serve as Trust Officers with primary responsibility for administering the trusts. The bank or trust company will charge a fee – usually a percentage of trust funds – to serve in that capacity. Many banks and trust companies will only serve as a trustee if the assets in the trust are whatever minimum amount the bank or trust company deems appropriate for their business.
You can also choose co-trustees who will work together to administer the trust. Sometimes it makes sense to have a professional or corporate trustee along with a family member. In that case, the family member’s role might be to make sure the professional or corporate co-trustee is aware of the needs of the beneficiary and is making investment and distribution decisions appropriate to the circumstances.
The best way to choose a trustee is to start with a list of relatives, friends, business or professional people you know, and banks and trust companies, and think hard about their ability to manage money. Think about their character and ethics, and choose the best from that list. Sunday, June 05, 2011 Trust Me, It's Like A Little Red Wagon
Trust Me, It's Like A Little Red Wagon
Mary, an independent, strong-willed woman all of her life, realized that she might need help managing her finances. She came to me with concerns that her memory might be slipping a little, and she was afraid that she might forget to pay her bills. After assuring her that she was fine, I encouraged her to consider placing her assets in a trust so that she could write her own rules for management of those assets. Mary was skeptical. “Trusts are way too complicated for me! I don’t even know what a trust is. And who would be the trustee?”
I explained that a trust is very much like that little red wagon you had when you were a kid. I have a picture of my sister hauling me around in a red Radio Flyer wagon when I was about three years old, and I remember using that wagon to cart my Barbie dolls to the neighbor’s house. I also remember that I was the boss of that wagon, and would only let my best friend, Paula, touch that wagon and the Barbies in it.
So, how is a trust like that wagon?
A wagon is a receptacle – a place to put your “stuff”. When you were a kid, you probably put all of your important toys, and things you found by the side of the road, inside that wagon. You took the handle of the wagon and pulled the “stuff” wherever you wanted it to go. You could take things out of the wagon, or put new things in the wagon, whenever you wanted. When you got tired, you put down the handle. If you wanted, you could allow someone else to take the handle and haul your stuff for you. You made the rules for your wagon.
A trust is like that. You put your assets – your adult “stuff” – in the trust. While you are alive and well, you can be the trustee. The trustee is the person that puts the stuff in the trust, makes sure the stuff in the trust is taken good care of, and takes the stuff out of the trust whenever necessary. When you no longer want to be the trustee, or you can no longer serve as trustee because of incapacity or death, someone else will pick up the handle and serve as the trustee.
As the trust maker, you get to decide the rules of the trust. Just like you could decide who got to pull your wagon, you get to decide who will be the trustee. You can also decide who will benefit from the things in that trust and when they can benefit.
Unlike the rules you made up as a child, though, the rules of the trust are written in a document so that the person serving as trustee knows the rules and must legally follow those rules.
In the next blog post, I’ll discuss how to decide who should be the trustee – who can pull your little red wagon. |