Will 2023 Be a Good Year for Your Clients?

Inflation Has Hit the Estate Planning World

The rate of inflation has reached a historic high, but it has also created estate planning opportunities that some of your clients may not have anticipated. Both the annual gift tax exclusion and the lifetime gift and estate tax exclusion amounts are adjusted for inflation each year, so when the rate of inflation is higher, the increases in these amounts are also greater. Now is a great time to remind your clients of the opportunity to take advantage of these tax-saving opportunities.

Annual Gift Tax Exclusion

Clients who are interested in making an outright gift to a loved one can take advantage of the annual gift tax exclusion, which was increased to $17,000 for 2023 (up from $16,000 in 2022), to make tax-free gifts of money or property up to the exclusion amount directly to as many loved ones (including nonfamily members) as they wish. Married couples can each give $17,000 per recipient; for example, they can provide tax-free gifts of $34,000 to each of their children. Annual exclusion gifts do not count against your clients’ lifetime estate and gift tax exemption amount, and the recipients will not owe any income or gift taxes on the amount they receive. Remind your clients that their gifts of money or property must be of a present interest, that is, they must transfer full title with no limitations to avoid disqualifying the gift from eligibility for the annual exclusion. Annual exclusion gifts are a use-it-or-lose-it opportunity each year and do not accumulate from year to year, so the gifts must be made by the end of 2023, or the chance to use the 2023 annual exclusion will be lost.

Lifetime Gift and Estate Tax Exclusion Amount

The basic exclusion amount for decedents dying in 2023 and the generation-skipping transfer tax exemption amount for 2023 is $12.92 million (up from $12.06 in 2022). The increase in the basic exclusion amount means that an individual will be able to transfer an additional $860,000 ($1.72 million for married couples) free of transfer tax liability in 2023. Gifts exceeding the annual exclusion amount will be counted against their lifetime exemption amount. These gifts are considered taxable gifts, but your clients can simply file a gift tax return and use part of their exemption amount as a credit, so they will not owe any gift tax unless the total value of all gifts made exceeds their remaining basic exclusion amount. The lifetime estate and gift tax exemption amount is set to be cut in half in 2026 in the absence of a change in the current law, so time is of the essence for clients who are interested in taking advantage of the current high exemption amount.

Remember the Anti-clawback Regulations

Under 2019 regulations issued by the Internal Revenue Service (IRS), a special rule was adopted allowing an estate to compute its estate tax credit using the greater of the basic exclusion amount (BEA) applicable during a taxpayer’s lifetime and the BEA applicable on the taxpayer’s date of death, ensuring that taxpayers will not be adversely impacted if they take advantage of the increased BEA by making lifetime gifts and then die in a year with a reduced BEA. The final regulations also clarified that the increased BEA is a use-or-lose benefit, available only to the extent that a taxpayer actually uses it by making gifts during the period in which the increased BEA amount is available.

Proposed regulations released in April 2022 deny the benefit of the special anti-clawback rule to completed gifts that are treated as testamentary transfers for estate tax purposes and are included in the donor’s gross estate (includible gifts). The exception to the special rule, which requires the estate tax credit to be calculated using the BEA applicable on the taxpayer’s date of death (and thus a lower exemption amount after 2025), is likely to apply to grantor retained annuity trusts, qualified personal residence trusts, promissory note transactions, and possibly preferred partnership techniques. However, the anti-clawback rule would continue to apply to transfers includible in the donor’s gross estate where the taxable amount is 5 percent or less of the total amount of the transfer valued on the date of the transfer. The proposed regulations would also claw back gifts into a decedent’s estate made by the decedent less than eighteen months prior to the death of the decedent.

We Can Help

No one is happy about the high rate of inflation, but you can help your clients turn lemons into lemonade by strategic gifting. Please contact us if we can help your clients determine if they should take advantage of the estate planning opportunities provided by the historic increases in the exclusion amounts, especially in light of the sunset of the doubled gift and estate tax exemption amount at the end of 2025.

New Business Succession Strategy: The Purpose Trust

The beginning of a new year is when many of us reflect on where we have been and what we would like to accomplish in the future. However, business owners are often tempted to succumb to the tyranny of the urgent and fail to take time to consider the future of their businesses. You can provide a great service to your business-owning clients by encouraging them to think about what they would like their life’s work to accomplish in the future. Those who would like to help make the world a better place for future generations should consider a relatively new and perhaps unfamiliar planning tool: the purpose trust.

What Is a Purpose Trust?

A typical trust is an agreement involving several parties: the grantor, the trustee, and the beneficiary. After the trust is created, the grantor funds it with money or property, and the trustee is responsible for managing those assets as specified in the trust for the benefit of specific named beneficiaries. One exception recognized under the law is a charitable trust that is created for a charitable purpose but has no specific beneficiaries. In recent years, however, some states have enacted statutes that allow the establishment of non-charitable purpose trusts (generally known as purpose trusts). In some states, they can be established only to care for pets or maintain a grave site. However, other states (for example, Delaware, New Hampshire, South Dakota, Utah, and Wyoming) allow purpose trusts for most lawful purposes, as long as they are reasonable, attainable, and do not violate public policy. Because there are no beneficiaries to ensure that the trustee is carrying out the purpose of the trust, the grantor must designate an independent trust “enforcer” who can petition the court if the trustee fails to perform its duties under the trust. The same or a different party could also be appointed as a trust protector who can modify the trust if necessary, for example, to add beneficiaries if the purpose of the trust has ended, change the situs of the trust, or even terminate it. The goal of a purpose trust is different from that of more common estate planning tools in that it is not aimed primarily at minimizing taxes or transferring wealth efficiently (although it may achieve those goals) but instead at ensuring that the grantor’s stated purpose is carried out.

The Patagonia Purpose Trust

In September 2022, Yvon Chouinard, the founder of Patagonia, a $3 billion clothing company, transferred the voting stock of the company to a purpose trust designed to further his lifelong goal of fighting the environmental crisis. In a message from Chouinard on Patagonia’s website, he explained that his desire was for the company to continue to pursue its stated purpose: “We’re in business to save our home planet.”[1] After learning that his children were not interested in running the business, he considered his options. Although he could have sold the company and donated the proceeds to other organizations that would continue to pursue the company’s goals, he worried that a new owner of Patagonia would have different values and that his employees would not have job security. The voting stock of the company was transferred to the Patagonia Purpose Trust, which, guided by the family and their advisors, will ensure that the company’s values are pursued and that its profits further their goals. All of the nonvoting stock was contributed to a 501(c)(4) nonprofit organization that will be funded by Patagonia’s dividends, worth an estimated $100 million a year,[2] which it will use in its efforts to protect the environment. Because the business interests were not donated to a charity, the gift will be subject to an estimated $17.5 million in gift tax, and no charitable deduction will be available to Chouinard. However, he will avoid $700 million in capital gains taxes, and when he dies, Chouinard’s estate will avoid substantial estate tax liability.[3]

Why Would a Client Want to Transfer Their Business to a Purpose Trust?

There are a number of reasons why clients who own profitable companies may be interested in a purpose trust as they consider business succession planning. Like the Chouinard family, they can ensure that in addition to providing job security for their employees, the values underlying their business continue to be pursued for many decades into the future. If they do not have children who are interested in running the business, or if their children do not share their values, they can use a purpose trust to require future management to adhere to the purposes set forth in the terms of the trust. Transferring the business to a purpose trust will also ensure that it remains a private company and that the pursuit of profits will never replace the owner’s cherished values as its main goal.

As your client’s financial advisor, you know them well and are aware of their goals for the future of their business and whether they have a desire to use the wealth they have acquired for the benefit of others. You can do a great service for civic-minded clients by informing them about the planning opportunity presented by a purpose trust. Give us a call if we can help you and your clients determine if this opportunity is one they would like to explore.

Important Dates to Be Aware of in 2023

The new year brings with it important dates that may impact your clients’ financial situations and tax deadlines they may need to meet. By providing them with the following information, you can help them plan ahead to avoid financial trouble and avoid penalties for nonpayment or late payment of taxes.

March 6, 2023, is the deadline under the sixty-five-day rule for trust distributions. Under Internal Revenue Code (I.R.C.) § 663(b), distributions made to beneficiaries of nongrantor trusts (and estates) made within sixty-five days of the end of 2022 may be counted as distributions made during 2022. This could be an important tax savings opportunity for your clients, as a nongrantor trust must pay income tax at the trust level on any taxable income it retains. For 2022, a trust is taxed at the maximum rate of 39.6 percent when its taxable income exceeds $13,451, in contrast to individuals, who reach the top tax rate of 37 percent when their income exceeds $539,900. In some cases, the Medicare surtax (net investment income tax) may also apply, meaning that the trust will have an even higher marginal tax rate. As a result, the overall tax savings may be significant when distributions of trust income are made to a beneficiary in a lower tax bracket. An election to treat the distribution as being made in 2022 must be made by the trustee on a timely filed income tax return for the trust.

April 18, 2023, is the deadline for 2022 individual retirement account (IRA) contributions. Encourage clients who are still working to review their 2022 IRA contributions so they can take full advantage of tax-free or tax-deferred growth, as they are permitted to make contributions for 2022 until April 18, 2023. Due to the high rate of inflation, the limits on contributions to traditional and Roth IRAs will increase from $6,000 in 2022 to $6,500 in 2023. Individuals who are fifty years old or over are permitted to contribute an additional catch-up contribution of $1,000 (unchanged from 2022). In addition, remind older clients to take their required minimum distributions: under the SECURE Act, those who reached age seventy and a half in 2020 or later must take their first required minimum distribution by April 1 of the year after they reach age seventy-two.

April 18, 2023, is tax day. Now that a new year has started, remind your clients to gather the paperwork they need to prepare for filing their income tax returns: W-2s, Forms 1099, records of income from other sources, records of IRA contributions, health savings account contributions, and other items that can reduce their taxable income, as well as documentation that will allow them to take advantage of tax deductions or credits, such as charitable contributions and mortgage interest.

Student loan repayments resume sometime in 2023. To provide relief to students holding eligible federal student loans during the COVID-19 pandemic, the 2020 CARES Act required the US Department of Education to pause loan payments, implement a zero percent interest rate, and stop collection on defaulted loans starting March 13, 2020. The relief was extended by subsequent legislation and administrative forbearance, and in November 2022, the Department of Education instituted another extension of the pause on repayments while Biden’s student loan forgiveness plan is being litigated in the courts. However, in the absence of another extension, the pause on repayments is currently set to end sixty days after the litigation is resolved or sixty days after June 30, 2023, whichever happens first, amid a period of record high inflation. If your clients are among the millions who owe a substantial amount on their student loans, help them create a plan that will enable them to resume payments by helping them determine how much they owe, the size of their payments, how it will affect their budget, and if debt consolidation could be helpful.

Although the Biden Administration’s plan to forgive up to $10,000 in eligible federal student loan debt for non-Pell Grant recipients and up to $20,000 for Pell Grant recipients was recently struck down by several courts as unconstitutional, if the plan is eventually implemented, be sure to advise your clients that the amount forgiven may be taxable. Although the Internal Revenue Service has indicated that the amount forgiven will not be taxable income at the federal level, it will be taxable in some states.

Your role in helping your clients assess their financial and tax situation and advising them appropriately is critical. If we can help your clients further secure their financial future by creating or updating their estate plan, please give us a call.

[1] Yvon Chouinard, Earth Is Now Our Only Shareholder, Patagonia, https://www.patagonia.com/ownership/ (last visited Dec. 12, 2022).

[2] David Gelles, Billionaire No More: Patagonia Founder Gives Away the Company, N.Y. Times (Sept. 14, 2022), https://www.nytimes.com/2022/09/14/climate/patagonia-climate-philanthropy-chouinard.html.

[3] Patagonia Billionaire Ducks $700 Million Tax Hit by Giving It Up, Bloomberg L. (Sept. 16, 2022), https://news.bloombergtax.com/daily-tax-report/patagonia-billionaire-ducks-700-million-tax-hit-by-giving-it-up.

Check Out my Victory against my Brother!

A little friendly competition with my brother. This is the first time I’ve beat him in basketball, and it was actually caught on video! Naturally, that requires a victory dance and some celebration!

Important Milestones You Can Incorporate in Your Estate Plan

Life is full of contingencies. While some outcomes are relatively certain, other events are more difficult to predict. This uncertainty can create estate planning challenges. Because life changes quickly and sometimes unexpectedly, your estate plan needs to be flexible.

You can make changes to your estate plan when you are still alive, but when you pass away, your plan is effectively—but not entirely—set in stone. Incorporating milestones into your estate plan is one way to hedge against the unpredictable future. By creating incentives for particular events, you can continue to exercise your values and provide for your loved ones beyond your lifetime.

Clarifying Your Wishes with If-Then Statements

If-then statements allow outcomes to be determined with conditions. They are found in deductive logic, computer programming, and legal documents, including estate planning documents.

The premise of an if-then statement is simple: if a given criteria is met, then a certain action follows. For example, you might write in your will that, “If my spouse predeceases me, then I leave my house to my oldest son,” or, “If both my spouse and I pass away, then [Person X] will be nominated as guardian of our children.”

Such clauses can help you retain some power over outcomes that would otherwise be out of your control. They can also help you to plan for future contingencies in a way that is not possible with simple declarative statements (e.g., “I leave my house to my spouse.”).

If-then clauses can be combined to account for numerous future possibilities. So, in addition to “If my spouse predeceases me, then I leave my house to my oldest son,” you could specify that “If my son is not employed, then I put my home in a trust to be managed by [Trustee Y].”

Common Beneficiary Milestones Used in Estate Plans

Conditional provisions that offer enhanced flexibility to your estate plan can take many forms. These provisions do not always have to be if-then statements. They can also include gifts or distributions that are triggered at specific times or milestones.

The following are some events that you might consider incorporating into your estate plan:

●        A child turning eighteen or twenty-one. A child celebrating a milestone birthday could trigger an action in your estate plan, such as the child receiving distributions from a trust to which they are a beneficiary.

●        Completing a degree or certificate. A gift in your will might be conditioned upon the beneficiary graduating from college or earning a professional certificate.

●        Purchasing a first home. You could give some or all of a bequest to a beneficiary when they purchase their first home.

●        Financing a first wedding. Parents typically pay for most wedding expenses.[1] A clause in an estate plan can direct wedding money to a child the first time they tie the knot.

●        Employment. You might hesitate to leave money to a beneficiary who is bad with money or has a poor employment record. As a compromise, you can base their inheritance on being fully employed for at least a year.

●        Sobriety. Like an employment clause in your estate plan, there can be a clause that releases an inheritance only if the beneficiary has stayed sober for a certain length of time such as a year or has successfully completed a rehab program. 

●        Having children. Having a child is expensive. To help with the expenses of childbirth and childrearing, include an estate planning provision that kicks in extra money to a family member when they give birth, adopt, or require assistance with reproductive technology, such as in vitro fertilization.

●        Retiring. Approximately two-thirds of Americans are not financially prepared for retirement.[2] If you want to ensure that a beneficiary continues to work but can retire comfortably at an appropriate age, reward them with a lump sum inheritance to be used once they reach retirement age.

Keep in mind that these estate planning milestones can be combined and modified as you wish. For example, you might give wedding money to a child, but keep the rest of their inheritance in a trust so that if your child gets divorced, the money and property you pass on will not end up in the hands of their ex-spouse.

Another option is to set up your estate plan to direct more money to someone if the value of a certain account or property rises. Or, if the account overperforms, the increase in value could be donated to a charity of your choice. You could also use an if-then statement to provide that a beneficiary receives an extra gift only if they meet a certain milestone. The options are nearly endless.

Now Is the Time to Plan for the Future

Populating your estate documents with numerous if-then clauses and milestones can make things more complicated. But it might give you greater peace of mind knowing that numerous potentialities have been anticipated.

It is crucial to make sure that everything is in writing. Your estate planning attorney can create a diagram or flowchart that helps you keep track of all the moving pieces. Having a chart—rather than a jargon-filled legal document—can make it easier to review and update your estate plan if there is a major life event, such as a death, birth, marriage, or illness).

Whatever you decide to do, do not put it off. Act now to create a plan that provides for your loved ones while honoring your wishes. Schedule an appointment with our office to get started.

[1] Kim Forrest, Who Pays for the Wedding? Here’s the Official Answer, WeddingWire (May 21, 2021), https://www.weddingwire.com/wedding-ideas/who-pays-for-what-in-a-wedding.

[2] Sean Dennison, 64% of Americans Aren’t Prepared for Retirement—and 48% Don’t Care, Yahoo (Sept. 23, 2019), https://www.yahoo.com/now/survey-finds-42-americans-retire-100701878.html.

Interesting End-of-Year Considerations

Unique Gift Ideas that Benefit You Too

You may associate the month of December with giving holiday gifts, but it is also a great time for you to think about the valuable estate planning opportunity presented by year-end gift giving. In making lifetime gifts, you can experience the pleasure of providing immediate benefits to your loved ones while shaping your legacy, for example, by funding a loved one’s education or starting a family tradition of charitable giving. There are several advantageous ways for you to make year-end gifts.

1. Direct payment of medical expenses. You can make an unlimited number of tax-free gifts by paying your loved ones’ medical expenses. These gifts should be made directly to the medical providers rather than to your family members or friends. In addition, it is important to verify that the payments are for expenses that would qualify as deductible itemized medical expenses on the tax return of the individual receiving the healthcare.

2. Direct payment of tuition. Similar to paying medical expenses, you can also pay for your loved ones’ tuition. There is no limit on the amount of tax-free gifts or restrictions on who can benefit from them, but payments must be made directly to the educational institution, not to the parents or students themselves. The payments must fall within the Internal Revenue Code’s definition of “tuition,” which is not limited to college or graduate school tuition, but also includes private school tuition for younger students. It does not include payments for living expenses, books, or other fees, however.

3. Charitable gifts on behalf of or in honor of a loved one. If you are charitably inclined or want to honor a loved one by donating to their favorite charity, a year-end contribution to a qualified organization will also enable you to claim a charitable deduction. You must keep records of any contribution, and you may need to obtain written acknowledgment from the charity to deduct a contribution of cash or property. There are additional requirements for larger gifts of property. You can claim charitable deductions during your lifetime or your estate can claim it when you pass away, depending upon the strategy you use. We can help you determine the best strategy for your unique circumstances.

Your Best Gift

Have all your affairs in order

Your Best Gift

The best gift you can provide for your loved ones is to have all of your affairs in order. Please contact us if we can help you create or update a comprehensive estate plan that will help provide for your loved ones through thoughtful lifetime gifts and after you pass away.

Have You Made New Year’s Resolutions?

A new year is a great time to start fresh and implement positive changes that will enhance our lives. Many of us want to lose weight, spend more time with friends and family, eat healthier, learn a new skill, or save money. Although we can implement these goals anytime, the beginning of the new year is often a good starting point to help us measure our progress.

There are pros and cons to setting New Year’s resolutions, and people have varying opinions about their helpfulness. People who have a favorable attitude towards New Year’s resolutions often point out the following benefits: 

• Having goals provides people with a sense of purpose and a positive, forward-looking perspective. 

• If you do not set goals, it is axiomatic that you will not achieve them!

• Accomplishing a goal—or at least making significant progress—provides a sense of satisfaction.

Others point out the following cons of New Year’s resolutions:

• The initial motivation generally wanes over time, making failure likely.

• Not keeping them could lead to a feeling of failure or shame.

• They reflect dissatisfaction with oneself or one’s life circumstances.

If you have decided that New Year’s resolutions are helpful to you, think about goals that can provide significant security for yourself and your family. Although they may not be the first New Year’s resolutions that come to mind, there are several steps that you can take that will benefit your family.

1. Choose a guardian. If you are a parent, create a plan to ensure that your children are cared for if you or the other legal parent are unable to care for them by naming a person you trust to be their guardian. If you do not choose someone to serve as a guardian, a court will appoint someone for you—and it may not be the person you would have chosen. Designate the person you choose in your will or in a separate document, if your state allows for it. 

2. Create medical and financial powers of attorney. If you are unable to communicate or make your own medical or financial decisions, your agent under a power of attorney can step in and make decisions on your behalf. Even if you are married, it is still prudent to appoint an agent to act for you because your spouse may not be able to step in for you depending on the situation. If you want your spouse to be your agent, you must have medical and financial powers of attorney prepared. This will help your spouse or other loved one avoid the stress of having to go to court to be appointed as your guardian.

3. Have enough life insurance. If you pass away, will the proceeds of your current life insurance policy provide adequate funds for your loved ones? It is important to regularly evaluate whether your coverage is sufficient, particularly if you have had another child. If you do not have life insurance, one of your New Year’s resolutions should be to ensure that this gap in your planning is filled.

4. Establish a plan for your money and property. Have you decided who you would like to inherit your money and property when you pass away? If you do not have a written estate plan, your money and property will go to individuals specified in your state’s statute instead of to the beneficiaries you choose. You should create a will, which is a document that states how you would like your money and property to be distributed at your death and the individuals (or organizations if you would like to give to a charity) who you would like to receive it. Alternatively, many people create trusts to hold their money and property on their behalf and on behalf of their beneficiaries and which specifies when and to whom the money and property should be distributed. Trusts provide privacy because, unlike wills, the trust documents do not become public record during probate proceedings. In addition, a trust can protect your beneficiaries from unwise spending and creditors.

Let Us Help You Keep Your Resolutions

We can help you create a comprehensive estate plan that will fulfill all of your goals and provide you and your loved ones with substantial peace of mind. Please give us a call to discuss how we can assist you in creating the best plan for you as you enter the new year.

We love to listen and are eagerly waiting to speak to you regarding your estate planning concerns. Call Us: 714-451-5766

'Tis the Season to have a Family Meeting

Along with jingle bells, vacations, and holiday cheer, family gatherings are bound to happen during these colder months. Whether you’re ditching Christmas traditions all together and enjoying a family cruise, or traversing long roads to come together in your family cabin, getting the whole family together is a rare occurrence. Consider taking advantage of this special holiday time together to discuss your estate and financial wishes with your family by including a family meeting in your family gathering.

Have a Family Meeting

High five to good coffee, great company and important conversations this holiday season!

What Should You Talk About in a Family Meeting?

Although there is no right or wrong answer to this question, a family meeting could cover the following topics:

● Who you have appointed as your trusted decision makers.

You can let your family members know who you have selected to be your executor or personal representative, successor trustee, and agents under financial and medical power of attorneys. You may also consider explaining the reasons why you have chosen these people to act in these roles.

● What your end-of-life wishes are.

People sometimes select a healthcare agent to act on their behalf but then never discuss with that agent their end-of-life wishes. This puts the agent in the uncomfortable position of trying to guess what the person would have wanted or being presented for the first time with the person’s wishes in an advance directive or living will in a moment of crisis. Expressing your end-of-life wishes in a family meeting helps ensure that everyone is on the same page when the time comes for decisions to be madeon your behalf.

● What specific tangible personal property family members want.

A family meeting can be a great opportunity for family members to express their hope of receiving certain items of tangible personal property, such as furniture, jewelry, art, and vehicles. We are often surprised to learn the items that family members have emotional attachments to. For example, your daughter may wish to have the platter you always used to serve the Thanksgiving turkey. The family meeting is a great forum to express these wishes.

● Who will receive certain tangible personal property and why.

Along with family members expressing their wishes to receive certain items of tangible personal property, a family meeting is the perfect opportunity for you to express who you wish to receive certain pieces of tangible personal property and why. Particularly if multiple people want the same item (such as Grandma’s wedding ring), a family meeting can be a great time to discuss who should receive the item and why. Family members are more likely to respect your wishes if you make them known, and future disputes can be avoided. You can even pass on some of the items at the family gathering so you can witness the joy that the gift brings your loved one.

Use the Family Meeting to Create a Family History

The topics discussed in a family meeting do not have to be limited to issues related to your estate and financial plans. A family meeting is also a great time to reminisce about favorite family memories. Hearing family members share their favorite memories and seeing the sparks of recollection in others is a lot of fun and can be the best part of a family meeting.

Because family legacy is about more than just money and property, we recommend video recording or having someone take notes about the memories shared so the information will be kept for future reference for all family members. A family history like this is often the most cherished family possession.

Invite Your Trusted Advisor to Conduct the Family Meeting

If you are hesitant about having a family meeting because you do not feel that you have the skill set or an adequate level of knowledge to explain the sometimes complicated legal or financial concepts involved in your plans, consider asking your trusted advisor to conduct the family meeting. After all, it is one thing to understand a concept when it is explained to you and quite another to try and explain the concept to someone else. You may also feel uncertain about how your family will react to the estate and financial plans you have made. Having your advisor, an unrelated and objective party, there to explain your plans and their benefits and answer any questions or concerns that your family members may have can remove some of the emotional upset and criticism that could emerge. Thanksgiving and Christmas time is a common time for families to get together. Take advantage of this time to discuss your estate and financial wishes with your family in a family meeting. Communicating your plans to your family now, while you are alive and able to answer any questions or concerns family members may have, greatly increases the likelihood of your plan working as it was designed. We would be happy to help you organize a family meeting or even conduct it for you, so please give us a call if you would like to include a family meeting as part of your family’s holiday gathering.

Estate Planning Pop Quiz

TAKE THE POP QUIZ

Test your estate planning knowledge

November means holidays are here or just around the corner, signaling the return of festive decor, colder weather, and surprise visits from Santa himself. Speaking of surprises, try your hand at this estate planning pop quiz to discover if your knowledge of estate planning makes the grade and if it is time for us to schedule a meeting.

Question #1: True or false? You must name the same person to make both your financial and medical decisions on your behalf.

Answer: False. When choosing who should be your trusted decision makers, you should select individuals based on their strengths. In other words, you should consider what characteristics or traits each decision-making role requires and select the people who have those traits. For example, if one of your children is a doctor and another child is a certified public accountant (CPA), then it makes sense that the doctor would make medical decisions on your behalf and the CPA would make financial decisions on your behalf. It is also a common misconception that you must choose the same person to be your children’s guardian and to handle the money that you leave for your children. This is false: you can choose the person who you think will make the best and most loving guardian for your children and choose another person to handle the finances.

You may also need to consider that choosing the right person for the job could mean going with a professional. If none of your children have the organizational skills or focused temperament to handle administering your estate, or if your children are type A personalities that would second-guess every decision made by a sibling, then perhaps the best option would be to appoint a professional to act as one of your trusted decision makers. This could end up preserving your property and family relationships.

Question #2: True or false? If I do not create my own estate plan or if my plan fails to provide for my current situation, my state’s law will decide what happens.

Answer: True. Every state has default laws (called intestacy laws) that kick in if a person has not made their own estate planning choices. These laws are designed with a “one size fits most” situation in mind. For example, if you are married, your spouse will usually have priority with regard to making decisions and receiving your property because most married people would choose their spouse. However, there are innumerable reasons why you may not want your spouse to make certain decisions or receive certain items of property. For this reason, it is essential that you create your own estate plan and make your own decisions. If you have not created or finished your estate plan, now is the time to stop procrastinating and make an appointment with us to complete it.

If you have an estate plan, consider reviewing it in case your existing estate plan does not accurately reflect your current situation. For example, perhaps one or more of the people you chose as your trusted decision makers or beneficiaries is no longer living or able to serve, or there may be other people (e.g., a new child or a new spouse) who you want in those roles instead. When you experience a significant life event such as a marriage, divorce, retirement, change of occupation, or birth or death of a loved one, a change to your estate plan may be necessary.

Further, the ever-changing laws governing taxes and estate planning may necessitate an update to your estate plan. Even if no change is required, a periodic review with your estate planning attorney will give you peace of mind knowing that your plan will work as anticipated when the time comes.

Question #3: True or false? A will accomplishes all of the same goals as a trust, but a will is cheaper.

Answer: False. While both a will and a trust can give instructions about how you want your property to be distributed upon your death, one of the biggest differences between a will and a trust is that a will has no effect until the time of your death. A trust, on the other hand, can be utilized to deal with a period of incapacity (a time where you cannot make or communicate your wishes) that may occur prior to your death, which can be very helpful for loved ones trying to care for you. For example, Son wants to sell Mom’s home to help pay for the cost of an assisted living facility for her. If Mom only has a will, then Son has no power to sell the home and must go to court to be given the authority to act on Mom’s behalf. This situation might be avoided if Son was named as an agent under Mom’s financial power of attorney, but relying on this as the only method can sometimes be problematic. On the other hand, if Mom’s home was owned by her trust, then Son, acting as successor trustee, would have the power and authority to sell Mom’s home without court intervention.

In addition, a will guarantees that your loved ones will have to go through the probate court process upon your death. The executor or personal representative who you have named in your will must be approved and appointed by a probate court to have the power to deal with the property in your estate. On the other hand, when you use a trust and properly fund it, your successor trustee can immediately step in and deal with the property in your trust without any court intervention.

No matter your score on this estate planning pop quiz, you can be an A+ student by ensuring that you have a specially tailored plan in place with carefully chosen trusted decision makers. We can help you create or update your plan to ensure that it will work as you intend when the time comes. Contact us today to learn more.