Early Inheritances: Are They Right?

Does it make sense to give an early inheritance to your kids.  Remember that giving financial gifts to your children should be done only when you have the support of an experienced estate plan lawyer who can walk you through the various consequences and benefits of doing so.  It can be very satisfying to make a financial gift to your children now rather than in your will.
But don’t forget to include all the of the different and most important factors.  The current estate planning tax exemption for giving can be split between gifts made through your will and gifts made during your lifetime.  You’ll need to evaluate how much you might be able to afford now without jeopardizing your own retirement.  And rather you intend to treat all of your children or beneficiaries the same way at the same time.
Giving a financial gift now might make sense for one of your children who needs assistance the most.  If you’re in a position to help your children financially, you’ve probably already been thinking about leaving them gifts in their will, but will help with real-life needs that pop up now be more effective?
Giving now rather than later is a preferred approach for many people who consider themselves financially comfortable.  In fact, a Merrill Lynch retirement study found that more than 3/4 of retirees felt it was better to pass on inheritance while they were still alive.  This requires careful evaluation of whether giving to one child now requires giving to all and the possible impact of overgiving.
Don’t forget that certain members of your family might not be capable of managing a big inheritance in the same way.  This means that you should establish a trust or another estate planning tool to help ensure that they are appropriately protected and you can minimize the possibility of them squandering resources.  A trust is another way to help protect against the concern of outside predators like a creditor being able to access that inheritance as well.
 
 

Caring for a Child with Addiction or Mental Illness After You Pass Away

A woman in train alone and sad
Every parent has concerns about how they will pass on their assets to their loved ones in the future but there are many more complications when you have a child who is struggling with mental illness or with addiction issues.
Many parents who find themselves in this situation may feel overwhelmed by the process of caring for these children and therefore, avoid thinking about how these children will be taken care of when the parents are gone. Estate planning might differ in this situation when compared with another type of family. There are a couple of important steps that you need to take in order to plan appropriately for the future.
Whether the child is affected by addiction or mental illness, they may never fully recover from this condition and this is why it is important to think about using tools such as a trust in order to strategically allow access to them for support.
Not distributing the assets directly to your children means that they will most likely be invested with an experienced financial advisor with the ideal purpose of the money growing. In the event that the mental illness or addiction problem gets worse, this allows for more resources to fight the addiction. If the addiction problem is abated, however, the trustee may be able to help the child with new endeavors such as education or job opportunities. Careful planning should always go into any situation in which there is mental illness or serious concerns about addiction or spendthrift behavior. A trust may be the most appropriate way to plan for this- ask your Virginia estate planning attorney for more information.

Estate Planning Item Often Overlooked: Having ‘The Talk’ With Offspring

Inheritance note

Inheritance note

Estate planning is rife with difficult decisions, including one that not many people might think of going into the process:
What, and when, to tell the children?
This can turn out to be one of the most difficult, according to an article on the website for Lifecare Innovations, a 21-year-old firm that helps people navigate the health care, government and guardianship systems.
“There’s no single right answer for everybody; what to do depends on the nature of your planning and your family circumstances,” the article by Robert Ross, an attorney based in Inverness, Ill., with 30 years of experience, states. “But it’s worth giving the issue some consideration. Many people are very hesitant to reveal the details of their family’s expected inheritances. A recent survey by UBS of almost 3,000 investors showed that only 54 percent had discussed their estate plans with their heirs, and only 34 percent had mentioned specific dollar figures.
“Many parents say they fear that if their children find out they can expect a substantial legacy in the future, they’ll be less likely to work hard and save in the present. Another worry is that revealing an estate plan could lead to family squabbling and resentment. This is especially true if you plan to leave unequal inheritances to family members.”
Ross goes on, however, to argue more in favor of bringing the children more fully into the picture than keeping them in the dark.
“But while it can be difficult, there are also some very good reasons for having a detailed talk with your family about your estate plan,” he wrote. “For one thing, if there’s a chance of family squabbling and bitterness, it can be better to tell everyone what to expect now, while you’re still alive and have a chance to explain your motives and smooth things over. You could explain, for instance, why you’re leaving more assets to a child with a large family than to a child who is single, or why you’re leaving money to a charity that has always been important to you.
“In fact, the UBS survey showed that heirs who weren’t told in advance about inheritance arrangements were more than twice as likely to be unhappy about them afterward.”

Divorce Should Trigger Automatic Estate Update

Divorce is often the most major disruption people will experience in their lives.

It need not also disrupt things after their deaths.
“If you have just gotten divorced, you may be focused on getting on with your life,” notes a recent story in The Wall Street Journal by Liz Moyer. “But make sure you also have updated the financial arrangements that kick in at your death. Failure to do so, or to alert all relevant parties to the changes, could result in certain assets and benefits unintentionally going to your former spouse or his or her family upon your death.”
The story focuses on a specific example, that of a court case in New York involving a woman who died in 2009, two years after divorcing her husband.
“The family of Robyn Lewis, who died five years ago at the age of 43, is battling her former in-laws, who stand to inherit a $200,000 home in Clayton, N.Y., even though she and her husband divorced in 2007,” according to the story.
Robyn Lewis executed a will in 1996 in which she left everything to her then-husband with his father named as second beneficiary.
“While under New York law the divorce automatically cut her ex-husband out of her will, it didn’t cut out her father-in-law, who presented a copy of the 1996 will to the court,” Moyer writes. “Ms. Lewis, according to her family, wrote a new will after her divorce that changed the beneficiaries, but family members were unable to locate it to offer it as evidence.”
“The lesson is to stay on top of your estate plans,” Elizabeth Devillers Moeller, a lawyer at D.J. and J.A. Cirando in Syracuse, N.Y., the firm representing the Lewis family, was quoted as saying. “That means drafting a new will—and making sure that appropriate people have copies of the document or know where to find it.”
“The key is to make sure your estate planning documents, not only your will but also your power of attorney and health-care proxy, clearly reflect your intentions,” stated Julian Modesti, a lawyer at Syracuse firm Menter, Rudin and Trivelpiece who is representing Ms. Lewis’s former in-laws.

Parents, Children Need To Have That Other ‘Talk’

When it comes to parent-child relationships, “the talk” isn’t only from mom and dad to their offspring, and it doesn’t only deal with the facts of life.

As noted in an article by Jane Bryant Quinn in the January AARP Bulletin, an important communication among family members involves financial matters.
“What should you tell your adult children about your money?” Quinn writes. “That’s a question all of us confront. Some people think it’s none of the children’s business. A few tell all. Most of us are probably somewhere in the middle, revealing some things and reserving others, depending on our own feelings about money and whether the facts might cause anyone distress.”
The author consulted members of the National Association of Personal Financial Advisors, who are all fee-only financial planners, and found, she writes, that they “lean strongly toward having ‘the talk.’ ”
“Start by telling the children where to find your will, health care directive, financial records and any life insurance policies,” Quinn advises. “If the will leaves them uneven shares, explain your decision. Often, the children will understand. If you can’t bring yourself to discuss their shares in person, at least leave a thoughtful, explanatory letter so that the siblings won’t start blaming each other for secretly currying your favor. Tell them, too, if one of your children has power of attorney or is the executor of your will.
“They should hear this from the parents,” Marc Roland of Dean Roland Russell Family Wealth Management in San Diego was quoted as saying. “If they learn only after your death, they might think that mom and dad loved one kid over another.”

Estate Planning Increasingly Involves Charity Decisions

How to distribute one’s estate, never an easy decision and one with which people wrestle a great deal, becomes all the more complicated for those who don’t have children, stepchildren, grandchildren or other family members who might otherwise normally be in the mix.

(Photo credit: Tax Credits)

(Photo credit: Tax Credits)

A recent item in The New York Times by Caitlin Kelly May, leaving all or part of an estate to nonprofit organizations is something more and more older Americans are not merely considering but are actually doing.
Even some who do have close relatives but don’t feel they are in need of an inheritance or that some cause or another is the better bet are falling into this category, the article indicated.
“Today, with smaller families and more women choosing not to have children, ‘the dynamic has changed pretty significantly for the generation of baby boomers,’” Bob Carter, chairman of the board of the Association of Fundraising Professionals told May.
“The option of doing something charitably significant with their estates is a change,” he was quoted as saying.
“This situation is more and more prevalent,” said Kevin Pickett, executive director of development at MD Anderson Cancer Center in Houston.“Many people come to us to make a donation as a life stage decision. They’ve had a cancer diagnosis, or a friend or family member has. A retirement, divorce or new job can also prompt people to reflect on their legacy. What are we going to do with all this stuff we’ve accumulated in our lifetime?”
Carter, who has 40 years of experience in philanthropy and fundraising, termed this increased focus on charitable giving as part of estate planning complete shift for today’s long-retired population.
“Our family didn’t think of anything but leaving everything to us,” he told the writer. “The concept of estate planning didn’t exist in my parents’ lives.”
“The decision-making process should begin with some philosophical questions, said Isabel Miranda, a partner in the Bloomfield, N.J., law firm Pearlman and Miranda,” May wrote. “Ms. Miranda, a former bank trust officer, now specializesin helping clients plan their wills, trusts and estates.”
“Who do I owe my success to?” Miranda said. “What values do I want to reflect? How do Iwant to pay back the organizations I believe in?”

The Heart, As Well As The Head, Plays Role In Estate Decisions

Good estate planning goes behind the numbers to take the individuals involved into account.
When it comes to giving gifts to family and loved ones through a will or while still alive, there are tax implications to be taken into consideration, but a host of other factors come into play, as well.
A recent article on the Motley Fool website dealt with the subject in some detail.

Money (Photo credit: 401(K) 2013)

Money (Photo credit: 401(K) 2013)

“You’re in your golden years, and you’re thinking hard about estate planning,” Paula Pant, a contributor to WiseAdvisor, wrote in the article. “You want to leave gifts for your heirs, but should you wait until you pass away? Or should you give some money to them now?
“Gift tax versus estate tax – gift tax is the tax imposed by the federal government on any transfer of property to an individual without any compensation in return. ‘Property’ in this sense includes both tangible property, like art or furniture, and intangible gifts like stocks and cash.”
Pant goes on to point out that currently the law allows a lifetime gift limit of $5.34 million, after which taxes of 40 percent are imposed. But there’s also the added complication of an annual exemption $14,000 to consider.
A good estate planner will help people make up their minds from a purely financial perspective which options are the best for taking care of heirs.
Exceptional estate planning will help clients come to grips with the pros and cons to either approach Pant points out in her Motley Fool contribution.
For giving heirs money now, these include:

  • You get to see them enjoy it. If you’d prefer to see your gifts in action, giving your heirs the money now gives you a chance to see the difference it makes in their lives.
  • You can advise how they spend it. If you’d prefer to see your gifts in action in a specific way, giving the money while you’re still alive gives you a chance to let your heirs know how you’d prefer they spend it.
  • You can give the gift in the form of paying for something. If you really want to ensure the money is spent on the thing you want it to be spent on, you can pay for something rather than giving your heirs the money for it.
  • You can stop giving them money if you see them falling off the rails.

The factors that weigh in favor of waiting until you pass away include:

  • You may need the money later. What if you find that you need the money to pay for your own expenses during your lifetime?
  • Your heirs might appreciate it more and spend it more wisely. By waiting until you’ve passed away, you give your heirs a chance to ‘make their own way in the world’ at a younger age. Rather than relying on an annual cash infusion from you, your heirs will be older and more responsible when they receive the inheritance. This might cause them to appreciate the gift more, as they will have experienced the task of earning money.

“Which should you choose?” Pant asks. “Should you give your heirs gifts now? Or wait? Ultimately, there’s no ‘right’ answer. This is a personal choice.”

Reverse Mortgages May Lead To Problems For Heirs

While reverse mortgages may seem like a panacea for people in their golden years, caution should be exercised to ensure that not only is something of the estate preserved for heirs but also that debt isn’t passed along, too.

Reverse Mortgage

Reverse Mortgage (Photo credit: aag_photos)

A recent story in The New York Times referred to the potential for baby boomers to face a “bitter inheritance.”
“The same loans that were supposed to help their elderly parents stay in their houses are now pushing their children out,” according to the story by Jessica Silver-Greenberg. “Similar scenes are being played out throughout an aging America, where the children of elderly borrowers are learning that their parents’ reverse mortgages are now threatening their own inheritances. Reverse mortgages, which allow homeowners 62 and older to borrow money against the value of their homes that need not be paid back until they move out or die, have long posed pitfalls for older borrowers.
“Under federal rules, survivors are supposed to be offered the option to settle the loan for a percentage of the full amount. Instead, reverse mortgage companies are increasingly threatening to foreclose unless heirs pay the mortgages in full, according to interviews with more than four dozen housing counselors, state regulators and 25 families whose elderly parents took out reverse mortgages.”
In some instances, The Times found, lenders move for foreclosure scant weeks after the death of the borrowers.
“Reverse mortgage lenders say that they abide by federal rules, noting that their goal is to avert foreclosures, which can be costly and time-consuming,” the story stated. “And used correctly, reverse mortgages can help older homeowners get cash to pay for retirement.
“For heirs, the problem with reverse mortgages often centers on the little-known set of federal regulations administered by the Department of Housing and Urban Development. A spokesman for the agency said it vets participating reverse mortgage firms to spot any possible violations, but did not provide a tally of the participating firms found in violation or of the participating firms that have been penalized. The regulations apply to reverse mortgages that are insured by the Federal Housing Administration, virtually all of the market.
“Lenders must offer heirs up to 30 days from when the loan becomes due to determine what they want to do with the property, and up to six months to arrange financing. Most important, housing counselors say, is a rule that allows heirs to pay 95 percent of the current fair market value of the property, a price that is determined by an appraiser hired by the lenders.”

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Lessons Are There For The Learning In Actor’s Death

The tragic death of talented actor Philip Seymour Hoffman from an apparent drug overdose offers some important lessons for people least likely to learn them.

English: Philip Seymour Hoffman at the Paris p...

Philip Seymour Hoffman (Photo credit: Wikipedia)

“One key lesson is the need to make an estate plan when one is going through a personal crisis or a downward spiral,” according to a posting to a legal news website.
The posting points out that Hoffman, after more than two decades of sobriety following drug and alcohol problems when he was in his early 20s, relapsed and underwent rehab again in May 2013.
“It is easy to put off getting one’s affairs in order as it is not pleasant to think about one’s own demise or to find time to do it with a fast-paced lifestyle, but when one has a life-altering wakeup call such as being checked into a drug rehab facility it is important to take that chance to get important things like estate planning done,” the site states. “Other such wakeup call type events to inspire action could be a major medical incident or death of someone close. There are only so many second chances or pauses in the action of life to get one’s business in order.
“Another important lesson from Hoffman is the need to do estate planning any time there are minor children involved. Hoffman is survived by three minor children at his death. Making sure that there is a guardian and a backup guardian and that any inheritance that a child receives is properly managed are key components of any estate plan.”

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Changing will provisions at the end can be problematic

John Grisham’s latest bestselling novel revolves around a wealthy man crafting a handwritten will that completely cuts out his family and leaves the fortune to his housekeeper.

Last Will And Testament

(Photo credit: Ken_Mayer)

The reason the man did this just prior to taking his own life, other than that his two adult children are fairly odious people, is the crux of “Sycamore Row,” but the novel also points to some pertinent legal issues relating to last-minute decisions regarding estates.
While an individual may have valid reasons for revoking an existing will as death appears to be imminent, such decisions must be handled carefully to avoid potentially significant problems.
“When death grows near, the issue of a legacy can come into much sharper focus,” Arden Dole wrote in a recent Wall Street Journal article. “People with money and property sometimes choose that moment to change their wills or estate plans. Done right, deathbed revisions may save their families income and estate taxes and prevent misunderstandings and administrative hassles.
“If not handled carefully, though, it can leave a will open to legal challenges that can drag on for many years, particularly if the late changes are sweeping or appear out of character.”
Ideally, an estate plan is considered carefully when it’s created and is regularly reviewed, so it won’t need major deathbed changes.
Financial advisers are often asked to tweak elements when a client nears death, even though the best estate plan is one that’s been carefully considered and subjected to frequent reviews, according to Dale.
“Sometimes, clients can’t come to a decision until faced with their own mortality,” Atlanta-based adviser Scott Beaudin was quoted as saying. “But based on that poignant moment in time, it’s possible to do things that optimize your planning.”
“When the prospect of death becomes real, it also may change a person’s views on how, and how much, to give to various individuals, or to charity,” the story stated.
However, if a member of the dying person’s family becomes involved in making late changes, it is critical that they have a power of attorney or similar document, to ward off legal challenges.
“Normally, it’s the relative of a client who calls and says, ‘My father just had a stroke, can you help me?’ ” Barry Kaplan, a wealth manager at Atlanta-based Cambridge Wealth Counsel, told the WSJ.
“Issues like taxes and the cost basis of an investment are complicated enough in normal times, and many people don’t think about them when dealing with a death in the family,” Dale wrote. “Still, last-minute changes require special caution.
“To avoid a challenge to such changes, a medical or mental competency examination can prove invaluable, notes Michael Puzo, a partner in the Boston office of law firm Hemenway and Barnes LLP. Still, he cautions against too many substantive changes at the eleventh hour.”
“Typically, it’s a bad time to change a will,” Puzo stated.

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