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The 5 Most Common Estate Planning Mistakes Parents Make

Written by support@seostats.com on . Posted in Estate Planning.

In an effort to continue to bring you valuable insights, this month’s guest post is from attorney Laura Cowan, an estate planning attorney with offices in Manhattan and Minneapolis.

Laura’s practice focuses on helping individuals and families make important decisions today to avoid unnecessary pain and conflict tomorrow. She understands how complicated the estate planning process can be and guides her clients to ensure that their loved ones are taken care of and their final wishes are carried out. Laura’s expertise includes family protection, wealth preservation, and values-based planning, as well as planning strategies for unmarried couples and divorced individuals. Whether you are married or single, with a traditional family or blended one, just starting out or looking back on a life well-lived, Laura will help you craft a plan that achieves your goals today and for years to come.

Virtually every parent would agree that their children are by far their most valuable asset. Yet few parents do what is necessary to ensure their children are taken care of by the people they want should the unthinkable happen.

Maybe it’s because they assume a family member would step in and take care of everything. Or maybe it just seems too burdensome or upsetting to think about it that you continue to put it off. Perhaps you envision it being so time-consuming to sit down and figure these things out amongst your busy life that you just avoid it.

We have all heard stories about nightmare situations that have occurred without estate planning. Children placed in the care of unfit guardians. Money becoming the priority instead of the best interest of the people at hand. Unending legal battles that drag on for years and years. The sad part is that all of this can be avoided with some basic planning documents.

Here are five mistakes I have seen when it comes to estate planning and how you can avoid them:

 

#1: Naming Your Minor Children as Beneficiaries

This is one of the most common mistakes parents make with their estate planning. When a minor inherits property – whether through a will, life insurance policy, or retirement plan – a Guardianship must be established through the Probate Court for management of that property. A minor can’t own property, so a Guardian must be appointed to manage the property for them.

So, what’s the problem with a Guardianship? Besides the fact that the judge could pick the last person you would want managing your kid’s money, the Guardianship ends when the child turns 18. At age 18, your child is legally an adult and can therefore own and manage property. The Guardianship will be terminated, and your child will get a check for all the remaining assets. This is true whether she is being given $5,000, $500,000, or $5,000,000. Ask yourself: would you feel comfortable giving an 18-year old $500,000 – with no strings attached?

 

#2: Not Naming Guardians in a Will

Most parents agree that their children are their most precious asset. Yet many parents with young children fail to create an estate plan or name guardians in a will in the event tragedy strikes. Why? Many are simply unaware of the consequences of not planning. Some assume their closest relatives will step in and accept responsibility should something happen. In reality, what would happen is that a judge will decide who raises your children. And the judge could end up picking the last person you would ever want. Equally bad, you could have two or more family members who want to raise your children, and because you didn’t make your wishes known, they would have to battle it out in court.

 

#3: Thinking a Will is Enough

If you are a parent of minor children, a will is necessary, as this is the document where you legally name guardians for your children. There are many things a will does not do, however. It does not prevent your children from getting their inheritance outright at 18. It does not put any protections on the money you leave behind. It does name anyone to manage your health and finances should you become incapacitated. It does nothing to minimize or eliminate estate tax. It won’t adequately protect a child with special needs. Most importantly, a will does not let you bypass Probate Court.

Probate Court is the process of distributing your assets when you are gone. It is expensive, time-consuming, and public. A common misconception is that having a will means you avoid Probate Court. Not so. A will guarantees Probate Court. The only way to avoid Probate is to create a Revocable Living Trust. Attend one of our Free Estate Planning Seminars or Webinars to learn more about how a Revocable Living Trust can save your family time, money, and hassle when you are gone.

 

#4: Not Adequately Protecting Your Kid’s Inheritance

Many parents don’t realize they have options in terms of how their children receive their inheritance. Do you want them to get a big check outright? Or do you want to put some protections in place? Leaving money outright is problematic as it leaves it at risk of being spent, gambled away, or lost to a lawsuit or ex-spouse. A better option is setting up an asset protection trust for your children. It will keep the money accessible for their health, education, maintenance, and support, but protect it from a lawsuit, creditors, or divorce. It’s a win-win for everyone.

 

#5: Putting Off Planning Indefinitely

We totally get it. It’s not fun to think about these things. It forces you to imagine the worst-case scenario. But the alternative of not doing anything is much worse. Passing away without an estate plan is putting your family and assets at risk.

 

At the Law Office of Laura Cowan, we specialize in creating estate plans that will ensure your family and assets are protected no matter what! If you are interested in learning more, you are cordially invited to a Free Estate Planning Seminar or Webinar. We give a comprehensive overview of your estate planning options, and review our firm’s process, packages, and fee structure in detail. We look forward to meeting you!

Having A Tough Conversation & Helping Your Aging Parents

Written by support@seostats.com on . Posted in Estate Planning.

Although it can be an uncomfortable experience, there comes a time when every child has to discuss estate planning matters with their aging parents.

It can be a tough conversation to have, especially if your parents (or you) are avoiding the subject, but there are ways to address their needs for their elder years and end-of-life wishes successfully with a little tact and preparation.

Here’s an overview of the most important factors you’ll want to cover with your parents sooner rather than later.

Health and Medical

With age, comes increased medical needs and concerns. Take the time to review your parent’s current medical coverage and conditions to make sure they are able to receive the care they need.

·        Review their healthcare insurance coverage

·        Assess if long-term care insurance is a good option for them

·        Address any limitations or future limitations that need to be planned for logistically and financially

·        Make sure they have (and you understand) their healthcare proxy

·        Identify who has durable power of attorney to express their wishes and make healthcare decisions if they are unable to speak for themselves

Financial and Legal

It’s best to address financial and legal matters before your parents face a difficult circumstance, like the loss of a spouse, cognitive difficulties, or other healthcare concerns that could make it more challenging for your parents to share important estate planning information with you and their long-term care wishes.

Regarding financial concerns, be sure to ask and find out:

·        Do they have enough savings for unexpected expenses?

·        Retirement income to live off of?

·        Other assets that they eventually plan to sell or transfer?

·        Charitable giving plans?

You’ll want your parents to feel in control of their money and privacy as much as possible, so don’t approach the conversation like an interrogation. Instead, simply make yourself available to them to help them manage their affairs.

And aside from knowing if they are adequately covered financially, there is certain information you will need in order to best help them with any of their financial and legal affairs, especially if the parent who usually handles these matters is no longer able to:

·        Name and contact information of their financial advisor or CPA

·        List of all their financial accounts/holdings, who to contact regarding these accounts, and who has access to them besides them

·        Name and contact information of their attorney

·        Location and information on all the insurances they carry (health, long-term care, etc.)

·        Access to their living will and/or last will and testament

·        Access and information for their power of attorney (if it’s not you) over their financial accounts should one or both of them become deceased or disabled

·        Access to their healthcare proxy

·        Access to tax returns

More than anything, it will be invaluable to you to know what their wishes are from them directly rather than trying to figure it out after they are no longer around or able to communicate with you directly.

Many estate planning attorneys also offer to video tape their clients communicating the wishes they decided upon in their will so that there is no misunderstanding by their beneficiaries of what they wanted after they are gone.

Care-taking

In addition to legal and financial matters, you’ll need to talk to your parents about some practical concerns as well.

For example, if you don’t live in their proximity, who will be their support system when they require it? Is there a third party who can intervene in times of difficulty? Do they have trusted friends who could fulfill this role if necessary? If the answer is no, it’ll be important for you to work with your parents to make decisions regarding their care when they need it eventually.

Perhaps at a certain point, your parents will come to live with or near you or another sibling, or you can arrange for in-home professional assistance or an assisted living community. Either way, this shouldn’t be decided for your parents; you should discuss all their options and learn what they and you are ultimately most comfortable with.

At the end of the day, this isn’t a conversation about how old your parents are and how needy they will become. This is a conversation that gives them a voice to share exactly what they want with someone they love and trust more than anyone in this world. Parents spend a lifetime taking care of you and being self-sufficient. Reassure them that they aren’t a burden, and that you just want to help make sure that you do your best to help them maintain their independence as long as possible.

Knowing what your parents want, properly and legally documenting their wishes, and preparing for the unknown (but inevitable) can provide a tremendous amount of comfort and peace later for both you and your parents.

Getting Married? Have This Conversation Now

Written by support@seostats.com on . Posted in Budgeting & Money, Financial Planning.

Incompatibility about finances is one of the leading contributors to divorce in the United States (source). Therefore, getting on the same page about your finances now before you get married is just another great way to prioritize your relationship and help safeguard it against potential disruptions down the road.

Perhaps you experienced the all-to-familiar money arguments in your own household growing up. Did your parents have conversations about money or full out fights about the finances? Sadly, it’s not uncommon for couples to share the following accusatory exchanges about money, but it certainly can be avoided with a little practice and preparation.

“You act like eating out once in a while is going to bankrupt us both! I work and so do you, so why can’t we enjoy our lives? I don’t want to spend the next 40 years scrimping and living under self-induced poverty!” – Kristen

“How did you manage to spend that much again this month? I thought we agreed to a budget and here you are blowing it again. I’m telling you: we can’t afford Whole Foods, and you can do your own manicures!” – Mike

While the couple in this hypothetical dialogue are talking, they aren’t communicating effectively or productively with one another about their finances and ultimately what their priorities are.

When you understand and discuss your experiences and deepest beliefs about money early on, before the marriage, even couples with differing money mindsets can find a happy middle ground. Here’s how:

 

5 Important Financial Topics to Cover Before You Get Married

 

Topic #1: Understand Your Money Scripts

Everyone has a money script, an unconscious belief about money that affects your behaviors and attitudes about money. There are four money scripts that most people fall into. Take the time to understand which money script you are and which one your partner is so that you can address how you will deal with potential conflicts when they arise:

Money Avoidance – These people have a lot of negative feelings about money and often worry about running into financial problems. This can cause them avoid spending or taking advantage of opportunities for fear of something bad happening.

Money Worship – People with this money script love money and the pursuit of it. There can never be enough money and this can result in discontentment around finances.

Money Status – These people assign self-worth to the amount of money they have and the things money can buy.

Money Vigilance – These are your financial contrarians. They are the avid savers and are always ready and prepared for the “what ifs” in life that can cause financial distress.

 

Topic #2: Explore the Ways Money Impacts Your Relationship

Once you understand your money script, explore your differences and agree how you would like to work through them as a couple.

Those with money vigilance can become overbearing with their supervisory attitude towards their partner’s spending, while worshipers can wreck the budget with their spending habits. Anticipate what may cause arguments and get on the same page with how you would like to avoid these issues altogether and productively address them when issues to inevitably arise.

 

Topic #3: Discuss What the Two of You Are Building Together

A marriage is about building a future together, which includes the financial goals you set for yourselves. Talk about your goals and how you’ll reach them together.

The beauty of this is that once your goals are aligned, your behavior should change accordingly. The money worshipers of the world may curb their expenditures when they have a clear goal in mind, while the money vigilantes might ease off on the nit-picking if you’re both making good progress toward shared goals.

 

Topic #4: Make Clear Your Expectations, but Adjust Accordingly

Set your roles and responsibilities together: who pays the bills? Who manages the accounts? Is one of you expected to be the breadwinner? You may be surprised at your partner’s preconceived ideas, so get them all out on the table now, and make small adjustments if necessary so you’re both working from the same set of blueprints.

 

Topic #5: Decide Whether to Merge Your Accounts

Should you pool all your money in joint accounts? Keep them separate? There is no right answer. It really just depends on what will work best for you as a couple. If you decide to merge accounts, you can open a joint checking account just for paying bills or to aggregate all your resources together. If you want to keep separate accounts, you may decide to divide up the bills between the two of you and cover expenses that way.

In the end, it’s about having good communication and coming together as a couple to decide how you will work as a team on your finances.