Estate plans are designed to take care of future issues and concerns, such as planning for retirement, long-term health issues, avoiding estate taxes, planning inheritance, and preparing for Medicare and Medicaid eligibility. However, creating an estate plan now can also help eliminate a present-day issue: stress and worry that comes with the unknown. Most planners admit that they feel a certain level of relief once an estate plan has been put into place because they know that their loved ones are protected and provided for should anything happen.

Elements of a Stress-Free Plan

Every person’s needs and wants are different when it comes to an effective, stress-free estate plan. However, there are some basic elements that should be covered in every plan besides deciding who should get what from the estate. This includes issues surrounding the creator of the estate as well as any family issues that can be protected or prevented by the estate.

Determine who will manage your affairs
This applies first to who will be the executor of the estate and will make sure that it is distributed according to your wishes. However, it also means that you should determine who should be appointed as your durable power of attorney in case you become disabled, incapacitated, or otherwise unable to handle your own affairs. In that scenario, the power of attorney makes all of the financial and legal decisions for the estate.

Plan for long-term medical care
This includes planning for Medicaid eligibility and protecting assets for your spouse if you need to spend down to apply. It also means appointing a healthcare proxy and creating a living will so that your medical wishes will be adhered to even if you become incapacitated and cannot make those wishes clear for yourself. An advance directive binds the healthcare proxy to the wishes that you have made clear beforehand.

Avoid probate
Try to keep as much, or all, of your estate out of probate. There are a variety of planning tools, such as certain types of trusts, which keep your estate out of probate. Staying out of probate keeps your affairs private and out of the public record. It also saves time, money, and potential conflict for the rest of your family members.

Protect children from a prior marriage
In case you pass away before your present spouse, be sure that your children from a previous marriage are protected. This may include creating a trust or other estate planning vehicle to set aside money specifically for the children to ensure that they receive the full value of their inheritance.

Protect assets meant for your heirs
You should try and protect assets from any lawsuits, divorces, and other creditor claims against them after you have passed. This can include placing the assets in a specific trust or retirement planning vehicle. However, recent Supreme Court rulings have made some accounts, like an inherited Roth IRA, accessible to creditors.

This year saw a number of tragic celebrity deaths, and some were complicated further with estate planning issues. Using these stories can be a good way to transition into discussing issues of estate planning with your own family. A look back on the celebrity deaths and estate battles of the rich and famous shows just how many things can go wrong when an estate is not properly planned.

Patrick Swayze

Although Patrick Swayze died over five years ago, reports are coming out now that members of his family believe that his will was forged only a couple of months before his death while Mr. Swayze was hospitalized. His entire estate was left to his widow, and nothing was left to his mother or siblings. Because of the length of time that the estate has been closed, chances are that the estate documents will remain valid despite allegations of forgery.

The lesson learned: estates are administered according to state rules and regulations where the person died. Anyone who feels wronged by the terms of an estate must act quickly before the statute of limitations on the will runs out.

L’Wren Scott

Mick Jagger’s girlfriend and fashion designer L’Wren Scott committed suicide earlier this year, and Mr. Jagger was so distraught that he postponed part of The Rolling Stones’ world tour. The delay caused a multi-million dollar insurance claim that led to further legal proceedings between Mr. Jagger and insurance companies. The dispute was settled quickly after the insurance companies requested personal information regarding Ms. Scott’s death from her family members, medical records, and social media accounts.

The lesson learned is that insurance disputes regarding a deceased loved one are not uncommon, especially when there is a dispute about who should be the rightful beneficiary to part of the estate. Good estate planning can help avoid these types of issues between family members or from becoming public.

Tom Clancy

The late author’s estate is currently embroiled in a fight over eight million dollars because Mr. Clancy was never clear about who should be responsible for the taxes resulting from his $82 million estate. The dispute is whether his wife’s share of a trust should pay for half of the IRS bill or if his children from a prior marriage should be forced to pay it all.

The lesson learned from his estate is that it is important to be clear and unambiguous in the drafting of a will and other estate planning documents. This is especially important in families with subsequent marriages, children from multiple families, or if the bonds of family are strained in any way.

Lou Reed

Musician Lou Reed only relied on a will to distribute the entirety of his $30 million estate. Because the contents of a will are public record through the probate court system, newspapers and other media outlets could publish the details of Mr. Reed’s assets, income, and distributions.

The lesson learned from Mr. Reed is that probate is public, time consuming, and expensive. The use of other estate planning tools instead of or in conjunction with a will can help keep a family’s affairs private and out of probate.

Divorce is almost always an emotionally and financially draining experience, and high asset divorces come with an increased level of tension and drama. It is because of that emotion that some spouses in high asset divorce settlements make irrational decisions or financial errors that can cost them thousands or millions of dollars in the end. However, there are some areas in a high asset divorce that can be analyzed to ensure that you are getting the most out of the settlement proceedings.

Hiring a Valuation Expert

One way to minimize potential mistakes in a high asset divorce is to hire a valuation expert. This person is an objective professional who is hired to make accurate valuations of all assets for the couple based on specific metrics and methodologies. Many valuation experts are associated with accounting firms and carry special designations for their profession. However, more help may be necessary for the expert if highly specialized assets like a privately held company, holdings in a family business, or other technical investment interests are at stake.

When assets like stock or equity portions of a business are at play all of the contingencies surrounding distributions, transfer of ownership, and sale must also be considered by the valuation expert. A divorce valuation expert with investment management experience who deals regularly with high-value, complex portfolios can help navigate these types of situations.

Review Life Insurance Policies

This is another area where misjudgments are often made in high asset divorces. Many people do not think of life insurance as an asset, but as any other form of insurance like auto or home. It is possible to accumulate a large amount of wealth within a life insurance policy without the other spouse ever knowing.

Even when an insurance review is conducted, life insurance policies can be difficult to valuate. Different policies are structured in different ways depending on the needs of the client, and oftentimes the money in a life insurance policy is held in trust for estate planning purposes. It is important to have someone on your team with knowledge of trusts and insurance that can properly determine the current value of the policy in addition to the best way to equitably divide it.

Looking at Lifestyle

The cost of maintaining a certain lifestyle often comes up in high asset divorce cases, but it is not often treated with the seriousness or financial scrutiny that it deserves. Looking at the lifestyle is especially important when one of the divorcing spouses is a high earner and the other one is not. By thoroughly reviewing the accounting and financials of the couple, knowing how and where the money was spent can help determine a fair split of assets for lifestyle accommodation.

By taking a holistic approach to looking at all potential items of value in a high asset divorce, it ensures that nothing is left on the table for either party. It also safeguards one spouse from making an emotional or irrational decision during the divorce proceedings that could cost one of them or their family dearly.

It is risky to leave your estate and financial affairs unattended or secret from the rest of your family. According to research released this year, over 64% of all Americans do not have a will, and half of the people included in that statistic have children. When you do not have a will or keep your estate planning matters secret, it has the potential to cause discord in the family or cause the assets in the estate to be improperly handled. However, with the holiday season upon us, now can be a great time to discuss your estate plans with family members and avoid any potential problems in the future.

Choose the Right People for the Right Roles

One common error in the estate planning process is giving roles to members of the family according to what the testator thinks that they would want, rather than assigning tasks according to who would be best suited for the role. Acting as a fiduciary, trustee, or executor to an estate is a job, and you need to pick the right candidate. This means considering who would be truly best suited to handle tough responsibilities like medical, financial, and legal decisions.

Set the Tone of the Talk

Depending on your personal family dynamic, you can set the tone of the talk as something more informal as a purely family affair or more formal with the help of an estate planning attorney ready to answer any questions that may arise. Many experts believe that the informal approach is preferable because it keeps the talk from being too formal, antagonistic, or feeling like it is a preliminary round before litigation. However, some families prefer an estate planning attorney be there to help answer the more technical or difficult questions that the family may have.

Prepare the Paperwork and Bring Copies

Once you know who you want to fill key roles in your estate plan, have the paperwork drafted and any necessary documents notarized before the talk. This cements your wishes and presenting copies to all of your family members leaves little room for misinterpretation of your wishes.

Prepare Your Answers Ahead of Time

Another helpful tip is to prepare what you want to say beforehand, and think about how you will answer any potential questions that may arise during the talk. This includes giving clear answers to why you chose a person for a specific duty and what your goals are in setting up your estate plan. If an estate planning attorney is present, you can also go over what questions you will field and what is the attorney’s responsibility to answer.

Keep Discord to a Minimum

In order to keep argument to a minimum, remind your family that the goal of the talk is to let them know that you are securing their futures in addition to informing them about what your wishes are for your estate. Answers questions in a forthright manner, but try not to do so at the expense of antagonizing other family members. You can set ground rules for the discussion, and do not be afraid to squash any unnecessary drama that may arise.

Remember that It is an Ongoing Discussion

Estate plans often change and are revised over time, so keep in mind that this talk is an ongoing discussion between you and your family. It is also important for your loved ones to remember it, too, and to understand that as circumstances change the will may change with it. Because of this, you do not need to feel pressured to share every detail of your estate plan, and you can set up the expectation that future talks will happen about the estate.

Balancing the relationship between a trustee and beneficiary can be delicate, and if it is not handled properly the results can be costly problems and years of frustration. The beneficiaries are set to inherit valuables, homes, stock, and other assets. Yet it is the very nature of those assets that can cause tension with a trustee who controls the purse strings. However, there are some tips that can help ease the tension and create a good relationship between the person in charge of managing a trust and those set to inherit it.

Address Sources of Tension

The entire purpose of a trustee is to be a barrier between an heir and the money, so there are natural sources of tension between a trustee and a beneficiary. Most often, an heir wants access to their inheritance faster, and the trustee is hesitant out of fear that the money will be spent unwisely.

If a beneficiary wants access to the trust earlier, they should look into the terms of the trust and see if a case can be made to the trustee. However, some trusts give a lot of leeway to the trustee to change the terms as the circumstances change.

Both parties need to try and see the other perspective. For example, a beneficiary may think that taking money from the trust to put a down payment on a house is a good reason for distributions, but the trustee may be hesitant because money was distributed recently and wants to grow the portfolio before distributing again.

Discuss Money Issues

Fees are often another source of conflict between a trustee and beneficiary. The terms for fees can vary widely: private trustees can set their own terms, some states offer guidelines for fees, and other trustees do it for free as a personal favor to the trust creator. If a beneficiary thinks that the fees are too steep, he may hire another person to run the investment of the trust funds.

Splitting the roles may help keep the trustee’s costs down and thereby ease tension with the beneficiary. However, another money issue that sometimes arises is the actual investment of trust funds. Beneficiaries need to keep an eye on how the funds are being invested, and it should be tailored to the needs of the beneficiary at that time in their life.

Try to Resolve Disputes

If the beneficiary is unhappy with the way that the trust is being handled, the first thing to do is open the lines of communication to the trustee before doing something drastic, like litigating. Try setting a meeting with the trustee, and feel free to bring an attorney to mediate the situation.

First, try to figure out the reasoning behind the trustee’s actions because there may be a good reason why the decision was made. Also, try to seek compromise between the wishes as a beneficiary and the trustee. If the relationship is beyond saving, a change in trustee may be necessary. However, whenever possible, try to resolve disputes before taking more serious action.

Each decade of life ushers in a new set of challenges and issues for financial and estate planning. In your 20s, you are trying to establish yourself as independently financial and pay off your student loans. In your 30s, the estate and financial focus typically turns to planning for a family.

There can be more complications in your 40s, where you must balance supporting your children in addition to yourself and possible your parents. This decade is also crucial because there is still enough time before retirement to significantly affect your future. Here are some financial and estate planning moves to make before you turn fifty that can keep your retirement plan on track.

Increase Retirement Plan Contributions

By the time you are in your forties, you have hopefully paid off your student loans and hit a solid point in your career, allowing you to allocate more money into your retirement accounts. You should consider ramping up the amount that you set aside in retirement accounts every pay period. If you delay into your fifties, you will not have the compound interest working in your favor.

By increasing your contributions, you can also take advantage of any employer matching that takes place. If you have already maxed out your contributions, look into whether your employer offers other tax-advantaged options for retirement like a 457(b) plan.

Recalibrate Your Risk Tolerance

Now that you are nearing retirement age, you should also consider recalibrating the amount of risk that you are willing to take with assets in your estate. Called the “Rule of 120,” this method helps you determine the appropriate balance of stocks and bonds in your portfolio according to your age and time until retirement.

The rule is simple: subtract your age from 120, and that number is the percentage of your portfolio that should be allocated to stocks. If it still seems too aggressive, try subtracting from 110. Discussing these plans with a financial advisor and estate planning attorney can help you find the right mix for you.

Prepare with the Right Insurance

Over seventy percent of people over the age of 65 will require some form of long-term health insurance during his lifetime. Forty percent of those people will need nursing home care, and the chances are likely that you will have to cover most or all of the costs of care. By shopping for long-term health insurance in your forties, you will be able to afford any medical assistance that you may need later down the line.

At the same time, you should be looking into getting a life insurance policy as well. Many people in their forties have others that depend on them, and life insurance can cover their needs should anything happen to you.

Get Your Other Estate Planning Documents in Order

Many people in their forties have amassed some level of assets, and your estate plan serves to protect what you own. Estate planning tools give you control over the distribution of your property, allows you to designate custody of minor children or pets, and ensures that your loved ones are taken care of after you are gone.

In addition to drafting any documents that you have put off writing, be sure to also double check your existing documents. This includes anything outside of the typical estate plan, like accounts and policies with beneficiary designations. Update any forms, documents, or lists of digital assets, too.

Couples without children have two main tasks when it comes to estate planning: the first is determining how to distribute the assets in the estate. The second, and arguably trickier task, is to assign a person or people who will handle your medical and financial affairs in the unfortunate event that you become incapacitated.

Durable Power of Attorney and Healthcare Proxy

A durable power of attorney form names a person to handle all of your financial matters if you become incapacitated or otherwise unable to take care of your own finances. This includes some legal matters, as well. A healthcare proxy is similar to a durable power of attorney, but this person is responsible for all medical decisions if you are incapable of making those decisions for yourself.

Naming the Proper Proxies

Couples with children typically name one of them as the durable power of attorney and healthcare proxy; however, oftentimes people without children struggle to find someone that they can trust. Spouses can appoint each other to these positions, but almost every estate planning attorney recommends having a “Plan B.” This usually entails naming another, younger person to serve simultaneously or in succession to these positions in case the spouse also becomes incapacitated or passes away.

Horror stories abound of childless couples that only named each other as proxies and then had something happen to them both. Their loved ones or extended family members then had to go to court in order to have a successor appointed, a process that takes time and thousands of dollars in court fees.

In some states, there are professional fiduciaries that can be hired as professional powers of attorney or as a healthcare proxy. Some geriatric care managers will also agree to serve in proxy positions, as well. Other possible candidates for childless couples include nieces, nephews, friends, trusted neighbors, clergy, siblings, or cousins.

Other Considerations

When naming a durable power of attorney or healthcare proxy, it is important to do more than sign the forms. Be sure to sit down with the person or people that you appoint and go over what your wishes are for your legal, financial, and medical future.

For the healthcare proxy in particular, consider drafting a living will. This estate planning document lists your wishes regarding any and all medical care should you become incapacitated. This includes certain medications, procedures, resuscitation, and the like that you do or do not wish to have done to you in a medical emergency. Your healthcare proxy is bound to your wishes in the living will, and it can ensure that your medical wishes are carried out.

In addition, consider paying or bequeathing assets to your proxies as payment for services rendered. This lets them know not only that you appreciate the service that they are providing, but it also prevents your proxies from feeling resentful. It can also prevent your proxies from helping themselves to your assets or money while you are incapacitated.

In previous posts, we have discussed the use of trusts to pass down pieces of art and other collectibles to your heirs. However, special considerations come into play when estate planning involves the inheritance of guns. Regardless of whether it is an antique gun from the Revolutionary War, your grandparent’s service gun from his time in war, or a current collection of guns for hunting or home protection, gifting firearms comes with a set of unique challenges. However, some estate planning attorneys are solving these issues through the use of a new planning tool, the “gun trust.”

What is a Gun Trust?

A gun trust is typically set up as a revocable living trust. It is made specifically to transfer firearms, with the gun owner set up as the trustee. Gun trusts are most commonly used to transfer firearms that come with federal restrictions, such as guns with silencers. This is because the trust can cut down on some of the paperwork needed to possess, transfer, and own these types of guns. However, a growing number of people are now using gun trusts to pass down a deceased loved one’s personal collection.

Benefits of a Gun Trust

One benefit of a gun trust is that the person named as executor or trustee can have a working knowledge of state and federal gun laws, safety and storage protocols, and how to best liquidate a collection. In addition, any successor trustee named to the gun trust can be well-versed in firearms before inheriting control of the trust.

Another benefit of a gun trust is that the owner of the collection can state with specificity how the collection should be handled. In one case, the owner made a list of collectors that he knew would properly value the collection and instructed family to only interact with them when liquidating the guns.

Having a gun trust can also ensure that the beneficiaries are legally allowed to own or access the firearms. The trustee or successor trustee can check that all beneficiaries clear the restrictions of the U.S. Gun Control Act or enact contingency plans in the case that a beneficiary can no longer legally possess the collection.

One final benefit of a gun trust is avoiding the probate system. When a firearm collection has to go through the probate court, it and the beneficiaries involved become part of the public record. For collectors with particularly impressive gun collections, privacy also gives an added layer of protection against thieves.

When Isn’t a Gun Trust for You?

A gun trust does not always make sense for a client who wishes to pass down firearms. If your heirs are adept at firearms and know the laws surrounding them, a gun trust may not be for you. In addition, if the collection is not very valuable you do not have to worry as much about the guns going through probate and becoming part of the public record. Finally, if the guns do not come with federal restrictions, the benefits of a gun trust are also diminished.

Many parents with adult children find the idea of discussing their estate plans uncomfortable, embarrassing, or unnecessary. Few parents want to think about their mortality or bring up the subject with their kids. Concerns about family fights over parts of the estate, which child is getting what, or reliance on a future inheritance also put parents off from discussing their plans with their children; however, there are some great benefits both emotionally and financially that can come with sharing your plans with your children.

Telling your children ahead of time about your estate plans allows you as parents to explain your decisions and lets the children plan their lives accordingly. Feedback from the children can also have an effect on your estate plans that you can implement before it is too late. In some cases, there can even be tax benefits involved. Full disclosure of estate plans may not be right for every family, but here are five reasons why it might be worthwhile to share your estate planning with your children.

You Can Settle Any Issues

Resentment over distributions in an estate plan amongst children can last a lifetime and end up costing them their inheritance if someone decides to sue. By having the conversation with the children, parents can explain why they are bequeathing their estate in that way. Perhaps one child needs more assistance, one has multiple children and others have none, or maybe the parents plan on leaving a segment of the estate to a nonprofit or charitable organization. By discussing the “why” while alive, it can alleviate hurt feelings in the future.

You Can Save Hassles and Prevent Mistakes

When parents let their children know what to expect in the estate plan, and where everything is located, it can save them a lot of hassle during an already devastating time. Grieving while also trying to sort out financial and legal issues is a nightmare that can be easily avoided with a simple conversation.

You Can Presently Increase Their Quality of Life

Not all children will simply give up on their dreams or become lax in their lives because they know that they will eventually get an inheritance. In fact, many adult children could use that money now to help with a business, provide for their family, or use it in other productive ways. Sometimes gifting part of the inheritance while the parents are alive is more productive for the children than waiting until the parents are gone to receive it.

Your Children Might Have Been Ideas for the Estate

Some parents might have concerns about specific assets in the estate, particularly a house or business, and want to ensure that it will be taken care of. Discussing these plans with the children can help the parent see any potential pitfall in their requirements and allow the children to know what is expected of them.

You Can Save Them Some Taxes

Lastly, parents need to consider the tax consequences that leaving their estate might have on their children. This is especially important for adult children that already have a taxable estate without the assets that the parents leave behind. By coordinating estate plans with their children, parents can help save their children taxes by exploring other options for inheritance such as passing on wealth to the grandchildren or gifting assets while alive.

For wealthy donors who wish to put their name on a building, beware. There can be a lot of disappointment for donors who give away large sums of money, thinking that they would get to see their name on a building or institution like a university, science lab, or cultural center but end up in a legal battle instead.

Naming Rights and More

The best way to ensure that this type of drama is avoided is for donors to clearly state their wishes in a detailed, legally binding document. Donors need to make sure that all payment terms, signage, publicity, and deadlines for work to be done are also set within the contract. Each party should know exactly what they are agreeing to.

For example, one wealthy donor wanted to leave millions to his alma mater and have a library named after him. His agreement specified that his name was the only one to be on the library and that it must last into perpetuity. The detailed agreement came in handy when the university tried to replace the donor’s name with another after a few months. One phone call was all that it took to rectify the mistake because the contract provided that the donor could sue the school to enforce the agreement or get his money back.

Some disputes go beyond the naming rights and into other areas. For example, country singer Garth Brooks recently got into a battle with an organization over the construction of a building. Mr. Brooks made a $500,000 donation to Intigris Canadian Valley Hospital in Oklahoma on the condition that the hospital would build a women’s center named after his mother. The hospital argued that it never agreed to those conditions and used the money elsewhere. Mr. Brooks sued and the jury not only awarded him back his donation but also doubled the award for punitive damages against the hospital.

Donors have the right to decide how much flexibility an organization can have with a donation. The donation can be made with strict compliance guidelines, or it can be given with a little leeway. They should also be sure to elect someone to ensure that the recipient sticks to the agreement after the donor becomes incapacitated or dies.

Other Issues with Naming Rights

Donors much also consider how long the recipient must stick to the agreement. As years go by, the circumstances surrounding the donation and naming rights might need some flexibility. For example, donors should consider what should happen if the building needs serious renovation or is torn down, and new potential donors want naming rights.

Similar considerations apply if the donation is a bequest or a gift named in an estate plan to an organization or institution. In that case, the estate plan should include room for flexibility in case the gift’s purpose is no longer relevant. That can be accomplished by either giving the recipient leeway with the gift or by naming alternate plans for the donation.

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