April 7, 2017

The Aging Wealthy are Making Plans

Much of the world's wealth is in the hands of a relatively small number of super wealthy individuals. Many of them are now elderly and making plans about what will happen to their wealth, after they pass away.

Over the past few years, you may have heard reports about income and wealth inequality in the U.S. Economic data shows that the country's wealth is rapidly being concentrated into fewer and fewer hands, at the top of the socioeconomic scale.

As a result, many politicians like to talk about the top 1%. However, the data shows that wealth is even far more concentrated than that. Actually, it is in the top 0.1%.

This same phenomenon is not just occurring in the U.S. It is happening all over the world.

What will happen to all of that concentrated wealth when the current holders pass away, is a burning question as they continue to get older and older and eventually die?

This was the subject of a recent Private Wealth article "The World's Aging Rich Are Plotting What's Next."

The article provides many examples of what various wealthy people are planning. They naturally wish to keep their wealth away from waiting governments and do not want their families to fight over it.

This has led to various legal methods to avoid estate taxation and other problems.

Some are choosing to transfer the bulk of their assets to family members now. Others are planning to give a large portion of their wealth away to charities, so their families have nothing to fight over.

Since much of the world's wealth is in complicated trusts and other entities, it will be interesting to see how it all gets sorted out when the current holders continue to age and do pass away.

Reference: Private Wealth (March 3, 2017) "The World's Aging Rich Are Plotting What's Next."

April 4, 2017August 9, 2024

What Estate Planning Really Is

You can think about estate planning in many different ways. One of the simplest and best approaches is to think of estate planning as a way of telling your family that you love them.

Estate planning is often thought of in cold or detached legal and financial terms. It is a way to decide who will get your assets, after you pass away and what the best legal instruments are for distributing those assets.

Viewed in that way, estate planning might not seem very important to many people, especially if they do not have many assets and do not particularly care about the legal aspects of transferring those assets after they pass away.

There is, however, another way to think about estate planning as Lifezette reports in “Estate Planning: A Love Note to Your Family.”

Estate planning is a way to let your family know that you love them.

As the article suggests, it is a love note to your family. You might not care too much about how your assets will be distributed when you are no longer around to worry about it, but it can make a big difference to your family.

Getting a proper estate plan, can spare your family the costs and legal headaches of having to go through the probate process. It can even stop them from fighting over who gets which assets.

When you think about estate planning in those terms, then it should be obvious that everyone should get an estate plan. If you love your family, it is one the best things that you can do for them.

Reference: Lifezette (March 7, 2017) “Estate Planning: A Love Note to Your Family.”

March 31, 2017May 16, 2022

A Common Estate Planning Myth

People who do not have a large amount of assets, think that they do not really need an estate plan. They are wrong.

Not everyone is wealthy. Not everyone has billions, or even millions, of dollars that need to be divided up between their relatives after they pass away. In fact, most people do not have that kind of fortune and never will.

Many of the people who are not wealthy, think that means they do not need estate plans. They reason that if there is little to divide up, then there is little to fight over. Consequently, they believe everything will go smoothly.

Unfortunately, that is a myth.

Even people who do not have a large estate need an estate plan, as the Pauls Valley Daily Democrat explains in “More on estate planning myths.”

You never know when family members will decide to fight over an estate and exactly what they will fight over. While it is true that a large amount of money often leads to a fight, it does not always do so.

Sometimes the most bitter of estate battles are actually over little things. Some estates have even been known to easily settle large fortunes, but have long and bitter feuds over small personal items that are not worth very much.

This means families might choose to argue over estates that do not have anything of value, if there are sentimental items wanted by more than one family member.

It happens a lot more often than you think.

No matter how much money you have, you need to see an estate planning attorney and get an estate plan.

Reference: Pauls Valley Daily Democrat (March 1, 2017) “More on estate planning myths.”

March 29, 2017November 29, 2022

Millennials Also Need Estate Plans

Many articles are written about what the Millennial generation wants and needs. Not enough articles are written about their need for estate plans.

Whatever field you are in, you have undoubtedly heard a lot of talk about how it relates to the Millennial generation. No one hears about it more than Millennials themselves. They like to discuss what their generation needs and their elders like to tell them about what they think they need.

With all of the talk about how Millennials live, behave and even vote, there is not much room left for talk about what will happen if they pass away.

It might seem premature to have those discussions, because Millennials are young and expect to live for a long time. However, many of them will pass away long before they think they will.

That means they need to think about their mortality and get estate plans established, as the Christian Science Monitor points out in “Millennials, don’t forget estate planning.”

One of the most important things estate planning can do for Millennials is to get them to think about what happens to their belongings and their children after they pass away. Estate planning focuses the mind on how the decisions we make, can have a long-term impact on our loved ones.

If done properly, estate planning also gets young people to think about their need to save money for retirement, emergencies and the possibility they might pass away while they have minor children.

If you are a Millennial, then seek out an estate planning attorney.

You should go ahead and get your first estate plan, just in case something does happen. That will get you started on making important plans, which is a good habit to get into.

Reference: Christian Science Monitor (March 7, 2017) “Millennials, don’t forget estate planning.”

March 28, 2017May 15, 2022

Hire the Right Estate Planning Attorney

Most attorneys are specialists in their particular practice areas. For your estate planning, you should hire an attorney who is a specialist in estate planning.

Human beings can only become truly knowledgeable in a limited number of areas. We cannot all be experts on everything. This is true even within disciplines.

For example, if you wanted to learn something about the history of 16th century Britain, you would be unlikely to learn very much by asking a historian who specializes in the Roman Empire. You would want to ask a historian who specializes in English history. Even better would be asking someone who only studies 16th century Britain.

A similar need for specialization is even more obvious, when you think about your health.

If you need heart surgery, you would not seek the services of an ear, nose and throat specialist. You would not even want a neurosurgeon. You would want a cardiac surgeon.

The same thing is true with legal matters and estate planning, as the Norman Transcript points out in “The right attorney is needed for wills and estate planning.”

Estate planning is a complicated and specialized legal field.

Only attorneys who have dedicated their lives to studying the field can be guaranteed to give you the services that you need. You might know someone who is excellent in criminal law or who excels at writing contracts. While he or she might even be willing to help you with your estate planning, you would be better off going to an estate planning expert.

Many avoidable mistakes are made when people do not seek out the services of an estate planning attorney. Do not let those mistakes happen with your estate plan.

Reference: Norman Transcript (March 5, 2017) “The right attorney is needed for wills and estate planning.”

March 27, 2017October 2, 2024

IRS Audit Strategy Targets the Wealthy

In 2017 it is expected that the IRS will focus its auditing efforts on the wealthy, in order to get the most that they can out of their limited enforcement budget.

It used to be that the IRS was actually more likely to target middle class taxpayers for an audit than wealthy people. It is more difficult to audit the wealthy because they can afford to hire expert lawyers and accountants to fight the auditors.

However, years of cuts to the IRS budget have led to a change in tactics.

The IRS now prefers to target the wealthy for audits, so the agency gets the most bang for its buck. There is simply more money that the IRS can get by auditing the wealthy than by making sure middle class Americans have filed all of their taxes correctly.

This trend is expected to continue in 2017, according to Private Wealth in “This Year’s Audits Are Bad News For The Rich.”

The IRS is expected to go after common ways the wealthy often lower their tax bills and challenge them to prove that they have done everything correctly.

For example, a charitable deduction over a certain limit might trigger the IRS to send a letter demanding proof of the donation. Reporting that money was put into a 529 education savings plan over a certain amount, could also trigger an automatic letter as could a whole lot of other common practices.

It is important that wealthy people get together with their estate planning attorneys and accountants to make sure they have done everything correctly to lower their tax bills, if they want to avoid problems with the IRS.

Reference: Private Wealth (Feb. 28, 2017) “This Year’s Audits Are Bad News For The Rich.”

February 21, 2017

Have You Really Talked to Your Children About Your Finances?

For most estate plans to go well, it is important that parents talk to their adult children about the family finances. While many parents claim that they do, the children say that they do not.

Estate plans often have many complicated pieces, since they reflect the complicated nature of people's finances. Those who are not financial experts, often have problems dealing with the complexity of handling an estate, if they have not been told beforehand what they will be dealing with and how to handle it.

For this reason, estate planning attorneys normally advise their clients to have an in-depth conversation with their children about their finances. If the children are going to be called upon to act as a power of attorney in the event of incapacity or to administer any portion of the estate, then they need to know what to do before they need to do it.

Forbes reports that those conversations may not be happening nearly enough in "The Last Taboo: Your Parents Still Won't Talk About Their Money With You."

A total of 70% of parents report that they have had detailed conversations with their children. However, only 50% of their children report that those conversations have actually taken place.

What this suggests is that while parents might be giving what they think are detailed explanations about their finances, the children still have questions that should be answered.

It is important not to assume that your children know what they are supposed to do from a brief overview. Invite them to ask questions and answer any that they have.

Reference: Forbes (Jan. 31, 2017) "The Last Taboo: Your Parents Still Won't Talk About Their Money With You."

February 20, 2017February 15, 2024

Personal Items Cause Fights In Estates

Most of the estate disputes that get reported, involve large fortunes that are being fought over. In reality, most family estate fights involve much smaller things such as personal items.

You may not realize it, but many of the personal items you have around the house have a special meaning to your adult children. Some items might remind them of childhood memories. Some items might remind them of you. Other items they just might like for one reason or another.

While you are alive, these items are unlikely to cause any problems. However, after you pass away, they could very well cause problems for your estate.

If you have more than one child that wants a particular piece of personal property, there needs to be a way for them to decide who gets it, as Business Vancouver points out in “Wills: Leave’em laughing.”

There are several different things you can do to make sure that your children do not argue over your possessions. If you want a child to have something in particular, then you can give it to them before you pass away or you can make specific designations in your estate plan.

Another method is to direct that your children use a reverse draft method. One child picks an item. Then the next child goes and so on. When every child has picked something, then the order of choosing is reversed and they all pick again.

A list could also be presented to each child of all the important items and they can rank them all by preference. The estate executor can then use those rankings to guide the distribution of personal items.

The important thing is that you need to think about the potential problems in your estate plan and have a way for those problems to be resolved.

Reference: Business Vancouver (Jan. 31, 2017) “Wills: Leave’em laughing.”

February 16, 2017

Signing an Inheritance Away. It Happens.

It is every parent's worst fear. A child will agree to give away their inheritance for far less than it is worth for quick money.

Recently, MarketWatch published an advice column with the following question as its title: "My drug-addicted friend signed away his $800,000 inheritance to his brother — now he’s clean, can he get it back?"

The title is an almost complete description of what happened. A reader wrote in with a story about his friend who inherited $800,000 from his father's will. The friend was addicted to drugs and agreed to sign his rights to the inheritance away to his own brother for only $10,000.

Now, that the friend is sober, the reader wonders whether there is any way to get the inheritance back.

The column writer suggests that the friend hire an attorney and sue the brother for fraud based on the premise that he knowingly took advantage of someone who was mentally incapacitated. That might work in some cases.

But not so fast.

There are some states and courts that are not quick to undo agreements that drug addicts voluntarily enter into, especially if it cannot be proven they were high at the time of making the agreement.

This is the type of scenario about which many parents have nightmares, when it comes to their addicted children. Leaving the child an inheritance outright can quickly be lost.

Fortunately, there are ways to avoid the problem altogether without disinheriting the drug-addicted child. A trust can be used to protect the inheritance with a trustee who is granted the discretion to only distribute money when the child is able to handle it.

Reference: MarketWatch (Jan. 24, 2017) "My drug-addicted friend signed away his $800,000 inheritance to his brother — now he’s clean, can he get it back?"

February 13, 2017

Estate Planning Challenges for a Really Long Life

Increasingly wealthy people are paying for medical services that could potentially help them live for over a century. That creates estate planning challenges that did not exist for previous generations of the ultra-wealthy.

No one can guarantee that they will live a longer than normal life, no matter how much money they have to spend on their health care. However, medical advances and new personalized medical care plans, such as concierge care, make it so that those with enough means can make it far more likely than ever that they will live much longer than their peers.

This could mean that in the near future it will be common for the ultra-wealthy to live for 100 years and even decades longer, in some cases. This will have some benefits, but it also comes with some unique estate planning challenges.

Forbes recently discussed some of the challenges in "Estate Planning For The Ultra-Wealthy When Living To 120 Or Beyond."

The biggest issue is that it is common for people to retain control of their own assets until they pass away. That can become a problem the longer people live. Scientists still do not have a cure for dementia and the longer people live, the more likely they are to suffer from it.

A long life of carefully managing money could easily be undone. Younger family members might also start to grow impatient waiting to take control and cause problems.

The ultra-wealthy who plan to live long lives, might want to consider an estate plan that gives control to someone else before they pass away. At what age should that be done and under what circumstances, are matters these families should discuss.

Reference: Forbes (Jan. 18, 2017) "Estate Planning For The Ultra-Wealthy When Living To 120 Or Beyond."

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Tag: Estate Planning