Most Common Estate Planning Mistakes Related to Beneficiaries

Far too many people make mistakes related to their beneficiaries on their bank accounts, retirement accounts or life insurance policies. These mistakes usually end up being a problem after the fact for your loved ones when they are not able to receive the assets and benefits that you intended. 

There are seven common mistakes that can easily be avoided by conducting an annual review of your estate planning documents with an experienced estate planning attorney. Far too many of these mistakes can be easily avoided with a little bit of regular review and more often than not, the planning mistakes relate to situations in which you haven’t updated your materials after a major life change. The biggest mistakes include:

  •   Not naming a beneficiary at all.
  •   Naming your estate as the beneficiary of your retirement plan.
  •   Having outdated beneficiaries.
  •   Naming a special needs loved one as a direct beneficiary.
  •   Naming a minor as a direct beneficiary.
  •   Naming a child as the co-owner of an investment or deposit account.
  •   Naming separate children or just one beneficiary for separate accounts.

These can all lead to catastrophic problems for your loved ones down the line and should be avoided with the help of an experienced lawyer.

Five Crucial Ways That Estate Planning Can Help Your Business

 

When most people think of estate planning, they are looking at their individual opportunities available with putting together critical documents and strategies to protect them and their loved ones. The truth is however, that if you play a critical role in any business, you can also benefit from estate planning for the company. Without a proper plan in place, you’ll leave many difficult questions to be answered and problems that may arise if you need to suddenly exit the company or if something happens to you. There are five primary reasons why you need to consider the benefits of estate planning in your business. 

  •   It helps ensure the longevity of your business so that your brand lasts well beyond your lifetime.
  •   It minimizes your taxes since estate taxes can put significant financial problems in front of a business. Transferring business assets to your children is one such example.
  •   It gives you the option of a buy/sell agreement. Estate panning allows you to use a buy/sell agreement that can be beneficial if you have multiple co-owners of a company. This means that they may be eligible to automatically purchase a deceased owner’s interest in the company and this can prevent unintended beneficiaries from accidentally becoming owners or key players in the business.
  •   It allows your business to look forward towards the future. Estate planning allows you to look to the future of your business while you’re still around and maintain your message in years to come. Since no one knows what the future holds, estate planning for the business is important.
  •   It generates a succession plan, if you want to include multiple components in your business succession plan, including strategies to keep the employee, outside directors that may be used to bring objectivity, support training and development of successors and the delegation of responsibility and authority to successors.

Schedule a consultation with an experienced estate planning lawyer to learn more

Important Documents Series Part 1: What Should You Keep for Estate Planning Purposes?

Many people worry about having the appropriate documents on hand. In this four-part series, we’ll explore the various issues associated with keeping documents so that you know exactly what to hold on hand for the long term and what can be disposed of in a safe manner after an appropriate period of time. Certain documents should only be kept for three months or less. 

These might initially seem important or have personally identifying information on them, but they don’t need to be kept over the long haul and could actually expose you to a higher risk of identity theft if they’re floating around your home.

These may be good to keep for a couple of months, in case you become incapacitated and your financial power of attorney agent needs to step in. These documents to keep for 90 days or less include:

  • Utility bills
  • Receipts for everyday purchases
  • Credit card receipts
  • ATM receipts

Unless you have specific issues, like business deductions on your income tax return or company reimbursement practices, these receipts become inconsequential after a three-month period and can only add to the clutter in your office or your home. Your canceled checks or credit card and bank statements can be proof of payment for regular purchases and utilities. Certain documents need to be kept on hand for longer and we will explore these in tomorrow’s blog.

These Crucial Elements Should Be Included in A Business Succession Plan

Opening your own business is an exciting opportunity, but it is also one that requires thought about things that will happen long into the future in an ideal situation. Most people find themselves suddenly grappling with the problems of a business succession plan far too late. Putting their loved ones in the difficult situation of trying to figure out what to do with the company, and even whether they are legally empowered to take action with that company without all of the tools and implements necessary. Thankfully, doing some advanced planning with the help of a business succession planning lawyer can give you a great deal of peace of mind and also provide clarity to your loved ones in the event that something suddenly happens to you.

Are you ready concept on black blackboard with businessman hand holding paper plane

There are six critical elements of a powerful business succession plan that enables everyone in a power position to make the crucial decisions required when someone suddenly becomes disabled, wishes to exit the business or suddenly passes away. These six elements include:

  •   Beginning the planning process as early as possible even before the business owner has a clear idea for the exit plan.
  •   Structuring the plan with some flexibility to allow to evolve or change
  •   Bifurcating equity in control
  •   Diversifying the planning techniques used for the future of the business
  •   Transferring any tax savings
  •   Incorporating non-tax factors such as family harmony when the exit plan does include some family members but not others.

The right business succession planning lawyer is a strong advocate for the rights of the business owner as well as for the future of the company when engaged early.

Consider Your Estate Planning as Some Decisions That Could Last for Many Years to Come

Consider that by the time you are reading this article, some people who have already articulated their new year’s resolutions, may have broken them. Whether or not you put forward new year’s resolution this year, you do have an opportunity in the New Year to make a decision that can impact you and your loved ones for many years to come. 

This decision has to do with your estate planning. Research shows that more than half of American adults don’t have any estate plan in place, including a basic will. This means that other people and mainly the court system, will be making decisions on their behalf. This can put your family members in a very uncomfortable and difficult situation after you pass away because your estate will likely need to pass through the probate system.

If you don’t take actions to plan ahead, your loved ones are left dealing with the repercussions, all of which can be serious.

The court is responsible for determining what happens to your assets and this means any individual wishes you may have had prior to an unexpected death were not recorded and will not be carried out. The decision-making process associated with estate planning is not always an easy one, but sitting down and investing some time into doing it can benefit your family for many generations to come.

What Did Whitney Houston, Michael Jackson And Prince All Do Wrong?

The death of icons Whitney Houston, Michael Jackson and Prince rocked the world, but unfortunately, left their families burdened and broken hearted with estate taxes and fees. Despite having professionals to help with practically every aspect of their lives, none of these artists had a total estate plan, which ultimately ended up costing their heirs millions of dollars and what would have otherwise been avoidable taxes and legal fees.  

An estate plan is crucial for the peaceful transfer of assets from your generation to the next. However, even if your estate doesn’t include things like private amusement parks or music rights, there are still takeaways from these artists’ situations to avoid the same costly mistakes. Even though Prince, for example, had paid all necessary taxes without audits from the IRS and had appropriately valued assets, he left no will when he died.

This means that more than 45 people ultimately came forward claiming to be heirs, including nieces, half siblings, siblings and supposed children, which cost the estate tremendous amounts in legal fees to investigate this and respond to it. In order to avoid these challenges, schedule a consultation with an experienced estate planning attorney, regardless of the size of your estate. You can get your own peace of mind and ensure that your beneficiaries receive the assets to which they are entitled well in advanced.

Make Sure Your Retirement Planning Includes the Costs of Long Term Care

You might be relatively healthy now and assume that this will continue for many years. But considering that plenty of research shows that most people entering retirement will need long term care assistance at some point in their life, you should never neglect the possible health care costs of long term care in your retirement plan. 

The most expensive long-term care options, a nursing home, can cost up to $97,000 per year. Many Americans have a blind spot when it comes to retirement planning because they do not incorporate long term care at all.  

Many underestimate the costs of health care planning and assume that their health insurance will cover it but Medicare is extremely limited as far as the coverage provided to those individuals in nursing homes and Medicaid can be difficult to qualify for if you do have access.

This means you might be required to spend through your assets or to self-fund your long-term care until Medicaid kicks in. The U.S. government has conducted research showing that up to 70% of people aged 65 will receive some type of long term care during their lives. This could add up to nearly $150,000 in long term care costs over the lifetime of an elderly person, according to research released by a 2007 Bipartisan Policy Center report.

Up to two-thirds of Americans aged 40 and older admit that they have done no planning for their long-term care needs, according to research shared by the Associated Press NORC Center for Public Affairs Research. Your retirement planning should always incorporate long term care needs. Schedule a consultation directly with an experienced attorney today.

Entering Retirement with Significant Debt May Affect Your Estate Plans

A recent study completed by the National Bureau of Economic Research finds that older individuals today are more likely to enter retirement with debt than compared with previous decades. 

The number of older people taking on mortgages, for example, has increased significantly when compared with previous age cohorts. Massive debt generated by American households has been featured in plenty of different academic studies but very little has been done to determine how senior citizens are affected by debt or the volume debt they accumulate close to retirement.

The study was analyzing financial vulnerability and older individuals’ debt by comparing information collected by the National Financial Capability Study and the Health and Retirement Study. Planning ahead for your assets and ensuring that your debts as they decrease are incorporated into your estate plan is extremely important.

It is also crucial to consider how indebtedness in retirement years may affect your ability to pay for your own care such as long-term care support and other medical needs that you may develop over the course of your retirement. Consulting with a knowledgeable estate planning attorney about these issues and ensuring that your retirement plan, estate plan and long-term care plan are all working together can make for a better retirement for you.

Common Retirement Issues You May Not Be Planning For

It can be overwhelming to think about retirement and estate planning. However, these are crucial processes that should be considered by any adult. Many people put off the process every time in estate planning because they assume they will have time to make up for it in the future. plan for your retirement

However, a sudden issue or disability can illustrate to you just how important it is to engage in these estate planning and retirement planning issues. Be aware of these common challenges that many people face but neglect to think about. They include:

  •      Inflation
  •      Taxes
  •      Estate planning
  •      Long term care

The reality is that many people underestimate the risks that they will face both in retirement and towards the end of their life. For this reason, they neglect taking part in the planning process and can make it more difficult for them when they approach that age and realize they have not set enough aside. By thinking about the potential risks and the steps that you’ll take to guard against them now, you can get the peace of mind that if something happens to you, your family members will not be disadvantaged.

What Makes IRAs Different from Other Types of Inherited Assets?

Passing on an IRA is different from stipulating another piece of property in your estate planning materials like a will to pass on to someone else if something happens to you. IRAs are managed differently and there are a complex set of regulations involved in this process. 

There are a few different ways that IRAs may surprise you in terms of how they are classified and how they impact your beneficiaries. These include:

  •       IRA beneficiaries may be eligible for particular tax breaks that are often missed.
  •       IRAs are distributed in a different manner than any other asset, both after death and during life.
  •       IRAs cannot be jointly owned or change ownership during the life of a person who manages it.
  •       An IRA may require a unique and separate estate plan.
  •       The investment gains inside an IRA do not always have to be subject to the 3.8% investment income surtax.
  •       An IRA passes on to someone else by contract rather than by a will.

Depending on the estate in question, the IRAs could be subjected to double tax at death; an estate tax and an income tax.

The deductions available to IRA beneficiaries are easy to overlook because it requires the coordination of tax planning between the settling the estate and the IRA beneficiary. It is valuable for both of these entities to work together to identify tax saving opportunities. The distributions from an inherited IRA could be taxable to the beneficiary. However, it is a good idea to explore tax planning opportunities well in advance to avoid this situation, if possible.