Category Archives: Uncategorized

Your Rights as the Parent of a Young Adult—What You Need to Know When a Medical Crisis Hits

As a parent, you are most likely quite accustomed to managing the legal and medical affairs of your children, as circumstances require. If your child requires urgent medical attention while away from you, a simple phone call authorizing care usually can do the trick. But what happens when those “children” turn 18, and are now adults in the eyes of the law, and need of urgent medical attention far from home?

4 Things Trusts Can Do That Wills Can’t

Both wills and trusts are estate planning documents that can be used to pass your wealth and property to your loved ones upon your death. However, trusts come with some distinct advantages over wills that you should consider when creating your plan. That said, when comparing the two planning tools, you won’t necessarily be choosing between one or the other—most plans include both. Indeed, a will is a foundational part of every person’s estate plan, but you may want to combine your will with a living trust to avoid the blind spots inherent in plans that rely solely on a will. Here are four reasons you might want to consider adding a trust to your estate plan: 1. Avoidance of probate One of the primary advantages a revocable living trust has over a will is that a revocable living trust does not have to go through probate. Probate is the court process through which assets left in your will are distributed to your heirs upon your death. During probate, the court oversees your will’s administration, ensuring your property is distributed according to your wishes, with automatic supervision to handle any disputes. Probate proceedings can drag out for months or even years, and your family will likely have to hire an attorney to represent them, which can result in costly legal fees that can drain your estate. Bottom line: If your estate plan consists of a will alone, you are guaranteeing your family will have to go to court if you become incapacitated or when you die. However, if your assets are titled properly in the name of your revocable living trust, your family could avoid court altogether. In fact, assets held in these trusts pass directly to your loved ones upon your death, without the need for any court intervention whatsoever. This can save your loved ones major time, money, and stress while dealing with the aftermath of your death. 2. Privacy Probate is not only costly and time consuming, it’s also public. Once in probate, your will becomes part of the public record. This means anyone who’s interested can see the contents of your estate, who your beneficiaries are, as well as what and how much your loved ones inherit, making them tempting targets for frauds and scammers. Using a revocable living trust, the distribution of your assets can happen in the privacy of our office, so the contents and terms of your trust will remain completely private. The only instance in which your trust would become open to the public is if someone challenges the document in court. 3. A plan for incapacity A will only governs the distribution of your assets upon your death. It offers zero protection if you become incapacitated and are unable to make decisions about your own medical, financial, and legal needs. If you become incapacitated with only a will in place, your family will have to petition the court to appoint a guardian to handle your affairs. Like probate, guardianship proceedings can be extremely costly, time consuming, and emotional for your loved ones. And there’s always the possibility that the court could appoint a family member you'd never want making such critical decisions on your behalf. Or the court might even select a professional guardian, putting a total stranger in control of just about every aspect of your life. With a revocable living trust, however, you can include provisions that appoint someone of your choosing—not the court’s—to handle your assets if you’re unable to do so. Combined with a well-drafted medical power of attorney and living will, a revocable living trust can keep your family out of court and conflict in the event of your incapacity. 4. Enhanced control over asset distribution Another advantage a trust has over just having a will is the level of control they offer you when it comes to distributing assets to your heirs. By using a revocable living trust, you can specify when and how your heirs will receive your assets after your death. For example, you could stipulate in the trust’s terms that the assets can only be distributed upon certain life events, such as the completion of college or purchase of a home. Or you might spread out distribution of assets over your beneficiaries lifetime, releasing a percentage of the assets at different ages or life stages. In this way, you can help prevent your beneficiaries from blowing through their inheritance all at once, and offer incentives for them to demonstrate responsible behavior. Plus, as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce, which is something else wills don’t provide. If, for some reason, you do not want a revocable living trust, you can use a testamentary trust to establish trusts in your will. A testamentary trust will not keep your family out of court, but it can allow you to control how and when your heirs receive your assets after your death. An informed decision The best way for you to determine whether or not your estate plan should include a revocable living trust, a testamentary trust, or no trust at all is to meet with us for a Life and Legacy Planning Session. During this process, we’ll take you through an analysis of your personal assets, your family dynamics, what’s most important to you, and what will happen for your loved ones when you become incapacitated or die. Sitting down with us to discuss your family’s planning needs will empower you to feel 100% confident that you have the right combination of planning solutions in place for your family’s unique circumstances. Schedule your appointment today to get started. This article is a service of Legacy Counsel PLC, a trusts and estates law firm in Saint Joseph, Michigan. We don’t just draft documents; we ensure that you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life and Legacy Planning Session, during which you will get more financially organized than you’ve ever been before and become empowered to make all the best choices for the people you love. You can begin by calling our office today at 269-932-4017 to schedule a Life and Legacy Planning Session. Mention this article to find out how to get this $750 session at no charge.

The SECURE Act’s Impact on Estate and Retirement Planning—Part 1

This article is the first of a new two-part series discussing the SECURE Act, which is the most significant law impacting retirement accounts in the last 30 years. I originally posted an article about the SECURE Act on January 7, 2020. Please read that original post for even more information about this impactful new law. [UPTIME LEGAL: PLEASE INSERT HYPERLINK TO JANUARY 7, 2020 POST]On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and it represents the most significant retirement-planning legislation in decades. Indeed, the changes ushered in by the SECURE Act have dramatic implications for both your retirement and estate planning strategies—and not all of them are positive. While the law includes a number of taxpayer-friendly measures to boost your ability to save for retirement, it also contains provisions that could have disastrous effects on planning strategies families have used for years to protect and pass on assets contained in retirement accounts. Given this, if you hold assets in a retirement account you need to review your financial plan and estate plan as soon as possible. To help you with this process, here we’ll cover three of the SECURE Act’s biggest changes and discuss how they stand to affect your retirement account both during your lifetime and after your death. Next week, we’ll look more deeply into a couple of additional strategies you may want to consider. 1. Increased age for Required Minimum Distributions (RMD) Prior to the SECURE Act, the law required you to start making withdrawals from your retirement account at age 70 ½. But for people who haven’t reached 70 ½ by the end of 2019, the SECURE Act pushes back the RMD start date until age 72. 2. Repeal of the maximum age for IRA contributions Under previous law, those who continued working could not contribute to a traditional IRA once they reached 70 ½. Starting in 2020, the SECURE Act removed that cap, so you can continue making contributions to your IRA for as long as you and/or your spouse are still working. These two changes are positive because with our increased life spans people are now staying in the workforce longer than ever before, and the new rules allow you to continue contributing to your retirement accounts and accumulating tax-free growth for as long as possible. However, to offset the tax revenue lost due to these beneficial changes, as you’ll see below, the SECURE Act also includes some less-favorable changes to the distribution requirements for retirement accounts after your death. 3. Elimination of stretch provisions for inherited retirement accounts The part of the SECURE Act that’s likely to have the most significant impact on your heirs is a provision that makes significant changes to distribution requirements for inherited retirement accounts, and effectively ends the so-called “stretch IRA.” Under prior law, beneficiaries of your retirement account could choose to stretch out distributions—and, therefore, the income taxes owed on those distributions—over their own life expectancy. For example, an 18-year old beneficiary expected to live an additional 65 years could inherit an IRA and stretch out the distributions for 65 years, paying income tax on just a small amount of their inheritance every year. And in that case, the income tax law would encourage the child to not withdraw and spend the inherited assets all at once. Under the SECURE Act, however, most designated beneficiaries will now be required to withdraw all the assets from the inherited account—and pay income taxes on them—within 10 years of the account owner’s death. Those who fail to withdraw funds within the 10-year window face a 50% tax penalty on the assets remaining in the account. The law does offer exemptions to the mandatory 10-year withdrawal rule for certain beneficiaries, known as eligible designated beneficiaries (EDB): 1. A surviving spouse named as an outright beneficiary of a retirement plan still has the option of rolling over the benefits to his or her own IRA or taking distributions based on his or her own life expectancy. 2. Beneficiaries who are less than 10 years younger than you can still take distributions based on their own life expectancy. 3. Your minor children, who have not reached the “age of majority” don’t have to deplete the account until 10 years after they come of age. Yet that still would be a much shorter “stretch” than previously available. 4. Disabled individuals and chronically ill individuals can take distributions based on their life expectancy. Apart from these exceptions, opportunities for stretching an IRA over an extended period of time are no longer available. This means if you want the people who will inherit your retirement account after your death to benefit from long-term income tax deferral—as well as asset protection from lawsuits, creditors, or divorce—you must meet with us now to rework your plan. Impact on trusts: Depending on the value of your retirement account, you may have already addressed the distribution of its assets using a “conduit” provision in your will, revocable trust, or standalone retirement trust. Prior to the SECURE Act, a trustee of a trust that included a conduit provision would only distribute the required minimum distributions (RMD) to trust beneficiaries each year. This allowed the beneficiary to take advantage of the continued “stretch” based on their age and life expectancy. In this way, the conduit trust protected the account balance and only exposed the much smaller RMD amounts to creditors and divorcing spouses. Under the SECURE Act, however, the 10-year limit for taking distributions will lead to the acceleration of income tax due, possibly bumping your beneficiaries into a higher income tax bracket. This potentially hefty tax burden would likely result in your beneficiary receiving significantly less funds from the retirement account than you had initially planned on. What’s more, because the SECURE Act requires all funds in your retirement account to be withdrawn within 10 years after your death, a conduit trust would be required to distribute all of its assets outright to the beneficiary within this shortened period. This means you would also lose any long-term asset protection you may have built into your plan. Alternative options: Given the SECURE Act’s new rules, you may want to consider amending your trust to shift it from a “conduit trust” to become an “accumulation trust.” Such a trust structure can’t extend the tax benefits any longer than 10 years, but it can ensure the assets are protected from your beneficiary’s future risky activities and/or a divorce. One important thing to note: Retained distributions from a traditional IRA distributing to an accumulation trust would be exposed to compressed income tax rates that apply to trusts. Currently, trusts reach the maximum 37% tax bracket with undistributed taxable income of $12,950. Facing such a tax hit, if you opt for this solution, your plan should include additional strategies to address the tax obligation. We’ll share some options for this in next week’s article. Update your estate plan now As your personal family lawyer, we can update your plan to address all of the potential ramifications the SECURE Act might have on the distribution of your retirement account’s assets to your loved ones following your death. But to do that, we need to meet with you to consider your family dynamic and all of your assets, so we can thoroughly assess the big-picture impact the SECURE Act stands to have on your estate. This is exactly what we do during our Life and Legacy Planning Session, a two-hour, working meeting that educates and empowers you to know you’ve done the right thing for the people you love no matter what happens to you. Whether you’ve yet to create a plan or already have one created by another lawyer, call 269-932-4017 or email [email protected] to schedule an appointment today. Next week’s second part of this series, we’ll cover some of the potential ramifications the SECURE Act stands to have on your financial-planning strategies and how you can make the most of the new legal landscape. This article is a service of Legacy Counsel PLC, a trusts and estates law firm in Saint Joseph, Michigan. We don’t just draft documents; we ensure that you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life and Legacy Planning Session, during which you will get more financially organized than you’ve ever been before and become empowered to make all the best choices for the people you love. You can begin by calling our office today at 269-932-4017 to schedule a Life and Legacy Planning Session. Mention this article to find out how to get this $750 session at no charge.

Lifetime Asset Protection Trusts: Airtight Asset Protection For Your Child’s Inheritance—Part 1

As a parent, you’re likely hoping to leave your children an inheritance. In fact, doing so may be one of the motivating factors driving your life’s work. But without taking the proper precautions, the wealth you pass on is at serious risk of being accidentally lost or squandered. In some instances, an inheritance can even wind up doing your kids more harm than good. Creating a will or a revocable living trust offers some protection, but in most cases, you’ll be guided to distribute assets through your will or trust to your children at specific ages and stages, such as one-third at age 25, half the balance at 30, and the rest at 35. If you’ve created estate planning documents, check to see if this is how your will or trust leaves assets to your children. If so, you may not have been told about another option that can give your children access, control, and airtight asset protection for whatever assets they inherit from you. In our planning process, we always offer parents the option of creating a Lifetime Asset Protection Trust for your children’s inheritance. A Lifetime Asset Protection Trust safeguards the inheritance from being lost to common life events, such as divorce, serious illness, lawsuits, or even bankruptcy. But that’s not all they do. Indeed, the best part of these trusts is that they offer you—and your kids—the best of both worlds: airtight asset protection AND use and control of the inheritance. What’s more, you can even use the trust to incentivize your children to invest and grow their inheritance. Not just for the uber rich Contrary to what you might think, Lifetime Asset Protection Trusts are not just for the super wealthy. Indeed, these protective trusts are even more useful if you’re leaving a relatively modest inheritance because they can be used to educate your children about how to grow your family wealth, instead of quickly blowing through it. And without such guidance, most people blow through their inheritance very quickly. In fact, one study found that, on average, an inheritance is totally gone in about five years due to debt and poor investment. Another study found that one-third of people who receive an inheritance actually had a negative savings within just two years. Not to mention, the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency. Regardless of how much financial wealth you have (or don’t have), if you plan to leave your kids anything at all, you should do everything you can to make it more likely that they grow what’s left behind, instead of losing it. This way, your resources can have a truly beneficial effect on their lives—and even the lives of future generations. A Lifetime Asset Protection Trust can achieve each of those goals and so much more. Not all trusts are created equal Many lawyers will advise you to put the assets you’re leaving your kids in a revocable living trust—and this is the right move. But as mentioned earlier, most lawyers would structure the trust to distribute those assets outright to your children at certain ages or stages. And if you’ve used an online do-it-yourself will or trust-preparation service like LegalZoom®, Rocket Lawyer,® or any of the newer options frequently coming online now, you will most likely be offered only two options: outright distribution of the entire inheritance to your kids when you die, or partial distributions when they reach specific ages and stages as described above. Either of those options leaves their inheritance—and your hard-earned and well-saved money—at risk. Indeed, once assets pass into your child’s name, all of the protection previously offered by your trust disappears. For example, say your son racked up debt while in college, which can sometimes happen. If he were to receive one-third of his inheritance at age 25, creditors could take his inheritance if it's paid to him in an outright distribution. The same thing would be true if your daughter gets a divorce after receiving her inheritance, only it would be her soon-to-be ex-spouse who would claim a right to the funds in a divorce settlement. And despite what you may have heard about an inheritance remaining separate property, once it’s in your child’s hands, outright and unprotected, those assets are at risk. There’s just no way to foresee what the future has in store for your kids—these kinds of events happen to families every day. And that’s not even taking into consideration that your kids might simply blow through the money and spend it all on unnecessary luxuries. Airtight asset protection—and easy access Lifetime Asset Protection Trusts are specifically designed to prevent your hard-earned assets from being wiped out by such risks. And at the same time, your children will still be able to use and invest the funds held in trust as needed. For example, even though the assets are held in trust, your kids would be able to invest those funds in things like stocks, a business, or real estate, provided they do so in the name of the trust. Plus, if your child needs to pull money out to pay for college, a new home, or medical bills, they can do that by asking a Trustee—who’s chosen by you to oversee the money—for a distribution. Or, as will cover next week, you may even allow your child to become Sole Trustee at some point in the future, allowing him or her to make decisions about the trust’s management. Obviously, creating a trust like this requires significant understanding of how to properly draft the trust, so don’t attempt to do create one without our guidance. And as you’ll see next week, Lifetime Asset Protection Trusts offer additional benefits that can be used to teach your kids how to invest and grow their inheritance, so that the assets you leave behind can be passed on to their children and beyond. Next week, we’ll continue with part two in this series on Lifetime Asset Protection Trusts. [UPTIME LEGAL – PLEASE INSERT HYPERLINK BEHIND TEXT TO NEXT ARTICLE IN BLOG WHEN READY] As your personal family lawyer, we can guide you to make informed, educated, and empowered choices to protect yourself and the ones you love most. Contact us today to get started with a Life and Legacy Planning Session. This article is a service of Legacy Counsel PLC, a trusts and estates law firm in Saint Joseph, Michigan. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Life and Legacy 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 our office today at 269-932-4017 to schedule a Life and Legacy Planning Session. Mention this article to find out how to get this $750 session at no charge.