If you make a mistake in naming beneficiaries for your life insurance policy, you could hurt the very people you’re trying to protect. Insure.com recently provided a list of 10 common life insurance beneficiary mistakes to avoid. We elaborate on how they’ll affect your loved ones and how to fix them. Note these mistakes can hurt you and your whether you live in or around Rochester or elsewhere in the country.
1. Naming minor children. If proceeds of your life insurance are directed to your minor child (instead of to a trust for his/her benefit), a Judge will decide who controls the proceeds and when your child receives them. And your child could get access to all of that money at 18! That’s bad news. And unnecessary. Your estate planning attorney can counsel you on the best way to leave life insurance proceeds to minor children.
2. Naming a person with special needs. By naming a child with special needs child or other person eligible for government benefits as a beneficiary, you could unwittingly disqualify them from receiving those benefits. Instead, you could name a special needs trust. We can help you with that.
3. Not considering community property and/or spousal rights. You don’t have to name your spouse as a beneficiary, but if you live in a community property state, your spouse will need to sign a waiver before you can name someone else as beneficiary. And, if you name a married adult child as the beneficiary of your policy (without a trust), you could be putting your child’s inheritance at risk inadvertently.
4. Ignoring tax consequences. While life insurance proceeds are usually income tax-free, they are subject to the estate tax. Talk to us about these issues so we can identify any traps for the unwary.
5. Trying to use your Will. A properly executed beneficiary designation form always trumps your Will, so don’t make the mistake of thinking you can change beneficiaries by naming someone else to receive insurance proceeds through your Will.
6. Failing to update. Many ex-spouses are enriched by a life insurance benefit because their ex forgot to update the policy’s beneficiary form. Review your beneficiary designations every time you have a significant life change, or at least every three years.
7. Not being specific. You should name your beneficiaries in as specific a manner as possible, which means using their legal names, not just a designation such as “my spouse” or “my children.”
8. Not informing family or losing track of policies. If you have a life insurance policy, tell your family about it. Otherwise, it may be overlooked and the benefit never claimed. We track our clients’ assets using a Family Wealth Inventory that is updated regularly so no assets are lost after your passing.
9. Not considering individual circumstances. If you leave a large sum of money to an adult child with a substance abuse problem or someone not equipped to handle money, this can lead to more problems. Consider establishing a trust that can protect your beneficiaries’ inheritance. We can even protect these assets from bankruptcy, creditors and divorce, for multiple generations.
10. Naming only one beneficiary. If you name only one beneficiary and that beneficiary dies at the same time, or before you, the proceeds of your insurance could wind up passing by state law. To prevent this from happening, name secondary and tertiary beneficiaries.
If you would like to learn more about protecting the inheritance you’ll leave behind, call our office today to schedule a time for us to sit down and talk. Call us today at (585) 244-2170 begin_of_the_skype_highlighting (585) 244-2170 FREE end_of_the_skype_highlighting and mention this article.
Single parents tend to work hard for their children, so it’s no wonder that those in Rochester want to protect the children they would leave behind should the adult be killed or become incapacitated. Every day it falls to the single parent to provide just about everything for his or her children, and with 13 million single parent households in the U.S., there are a whole lot of folks doing their best to provide everything their children need today. Working with a Rochester-based estate planning attorney lawyer is the right step to make sure they are also provided for in the future. The easiest way to start is with a Kids Protection Plan® and build from there.
As a single parent, your estate plan may look different from that of a married parent. In those cases, there are laws in place to ensure that both property and custody have a means of passing to the surviving spouse. In your case, however, the courts would determine your next of kin and disperse your property, as well as appoint a guardian, based on New York State state laws. While it’s great that there are laws like this to rely on when a single parent dies with no will in place, it’s not necessarily such a wonderful thing if the person/people named are not those you would have chosen yourself.
For example, it’s quite common for grandparents to be given custody of a child upon the parent’s death. In many families, that would be the perfect choice. In others, however, a better choice could be made. Perhaps there has been a falling out between family members, or it’s possible that the grandparents are either too old or just otherwise not in the right place in their lives to be starting over raising children.
Clearly, appointing a guardian for your child or children is one of the most pressing issues for which to see an estate planning attorney in Rochester. It’s not the only one, though. This lawyer can also help you review your financial plan to help support your child even if you aren’t there. You might be advised to look into a life insurance policy or to participate in a New York college savings plan. Likely, an estate planning lawyer in Rochester will also help you to create a trust or trusts which can not only protect some of the money from being heavily taxed, but also give you say over how the money is to be used and by whom.
An estate planning attorney will also help you to make sure that everything is in order. He or she will ask you about bank accounts, insurance policies, retirement accounts, and even military service, as all of these can possibly be directed to the care of your child or children. Every family, no matter what the marital status is, is unique. With the help of a Rochester estate planning lawyer, you can put together a plan that works for your specific situation. I would love to assist you and all you need to do is call me to set up a Family Wealth Planning Session (585) 244-2170. We work with all kinds of families to address your unique needs.
By now, the flood of floral commercials has already reminded us that Mother’s Day is Sunday, May 12th. But before you plunk down a good chunk of change on something that will wilt and die in a week or so, consider a gift that is truly priceless: a plan for your kids (or grandkids) that provides Mom with peace of mind that, if anything should happen to mom and dad, her children will always be in the care of the people she knows, loves and trusts.
We all hate to think that something could happen to us, but we know it happens to others like us every day.
We’ve all seen the news stories of moms and dads who leave their children with a babysitter, get into a terrible accident and don’t make it home.
The babysitter calls and calls, but there is no one to answer. The police are summoned and the children have to be placed with Child Protective Services. It’s the thing every mother is most afraid of happening.
We’ve seen the stories of children placed in the care of people they barely know just because they are related by blood since there was no plan in place that dictated who would take on this incredible responsibility.
And we have seen the fall out of family fights created when mom and dad didn’t make a plan and the family couldn’t agree on what would happen. Or in the worst case, what happens when there is no family available.
In all cases, it’s left up to a Judge decide when mom and dad don’t.
We know you don’t want this for your children (or grandchildren, nieces or nephews). And this is where a Kids Protection Plan® can ensure it never does. Not for your kids.
Developed by a nationally recognized attorney who is a mom herself, the Kids Protection Plan® provides Moms (and Dads) with the legal planning tools you need to make sure there is never a question about who will take care of your kids if you are in an accident. The plan includes:
• Legal documents to name short-term guardians who can be there immediately for your children so they’ll never be taken into the arms of strangers or anyone you wouldn’t want. Not even for a moment.
• Letters to the people you name as short-term guardians so the people you’ve named will know just what to do if called upon.
• Instructions to everyone who takes care of your kids as to exactly what to do if you are in an accident … so there’s never any question about who to call.
• Legal documents to name long-term guardians who will raise your children just as you would so there is no family feuding over your children.
• Letters to your long-term guardians letting them know what to do if called upon.
• Instructions and guidelines for your long-term guardians on how you want your kids to be raised…make sure your kids are raised with your values, insights, stories and experience.
• Medical authorizations for your minor children so the next time they travel without you or you travel without them, you know they’ll get the medical care they need.
• A custom, personalized I.D. card for your wallet stating that you have minor children at home and who should be contacted if you are in an accident.
As a Personal Family Lawyer®, I am one of the few lawyers in the world licensed to prepare a Kids Protection Plan® for your family and if you do not have one in place already for your children (or know a mom who doesn’t), this Mother’s Day is the perfect time to gift this plan to your family.
We include a Kids Protection Plan® with all the planning we do for the lucky families with children at home who plan with our office. But you can get started for FREE just by going to my kids protection planning page at http://ny.kidsprotectionplan.com .
Any trust and estates lawyer in Rochester can tell you that they have to ask their clients a lot of very uncomfortable questions. Who really wants to think about their own mortality and contemplate what life will be like for their families after their own death or if they were to be incapacitated? But, by facing these thoughts and questions, you are actually able to have a greater say in what will happen than you would by avoiding the topic altogether.
So, what kinds of issues need to be addressed with your trust and estates lawyer? Whether you live in Chili or Honeoye Falls, there are some basic questions that absolutely must be answered.
You and Your Spouse
One of the most difficult issues to contemplate is what should happen if you and your spouse were both killed together. While the chance of passing away at the same time is relatively low, it happens. Laws are typically set up so that one spouse’s estate passes to the surviving spouse, but when both are gone at the same time, things get a little more complicated.
For example, those with minor children need to put serious thought into who will become their children’s guardian. If you don’t make these decisions in advance, the courts will make them for you; and their choices may not reflect your own. It’s not uncommon for grandparents to receive custody of the children in these cases if they are still living, but that still leaves open the question of which spouse’s parents would be chosen. If you have a preference (or want someone else chosen), then you need a trust and estates lawyer in Rochester to help you make those wishes legally binding.
Children are not the only concern, of course. Should you and your spouse be killed or incapacitated, who will take care of your finances, inherit your home, or even take care of your pets? These are all issues which need to be considered in advance.
You and Someone Else
Your Rochester estate planning lawyer isn’t just being nosey if he or she asks if there is someone in your life besides your spouse who may have a claim to your property. This definitely falls into the category of “uncomfortable questions,” but if you had a relationship with someone other than your spouse, he or she may come forward after your death with the expectation of receiving an inheritance.
This can also be the case with family members who are estranged. If you have a child you are no longer in contact with, he or she may still have a claim to your property. Long-lost siblings or parents to whom you are no longer speaking can also still have a claim. By setting out your plan with an estate planning lawyer in Rochester, you can help to ensure that only those you want to inherit will do so.
As a final note in this area of “uncomfortable topics,” if you and a spouse, previous spouse, or other person have chosen to store genetic material such as eggs, sperm, or embryos, you need to have plans for what is to become of this material. Not only do you need to consider the material itself, but you also need to consider who might end up with children that have been conceived after you die.
Each of these issues is complicated in and of itself, but in order to come up with a workable estate plan, they must all be considered. If your trust and estates lawyer in Rochester doesn’t bring up some of these questions but they apply to you, it is in your best interest to bring it up now to avoid problems with your estate later.
Three-time New York City Mayor Ed Koch died on Feb. 1, leaving an estate estimated between $10-$11 million. And it’s a good thing that Ed loved government, because one-quarter of his estate will be going to the state and federal governments.
During his tenure as Mayor, Koch was famous for asking people on the street, “How’m I doin’?” He would have been better served to ask that same question to a Personal Family Lawyer® before he passed on.
In his will, Koch bequeathed most of his assets to blood relatives – a sister and her husband, a sister-in-law, and three nephews – as well as to his secretary and a charity. And because Mayor Koch used a Will and didn’t put his assets in Trust, it’s all public. In fact, you can read the details of exactly what Mayor Koch left behind and to whom right here.
When the former Mayor died, the federal estate tax exemption was at $5.25 million; and since his estate is estimated at twice that amount, Uncle Sam will net a cool $1.45 million. New York State has an estate tax exemption of just $1 million, meaning it will receive $1.1 million from the estate, according to a Forbes article.
As Forbes notes, Koch could have made some savvy estate planning moves before he died by:
Creating a trust for the benefit of his nephews, who inherited the bulk of his estate, and their descendants. Up to $5.25 million that goes into a trust would have been exempt from generation-skipping transfer tax. (And, would have protected those assets for multiple generations.)
Making additional gifts up to $5.25 million right before he died could have significantly reduced his state tax bill, since New York does not have a gift tax. This would have saved his heirs an estimated $600,000.
And there’s more he could have done as well, but he either didn’t get good counsel or he didn’t heed it. Now, it’s too late. And, of course, it’s all public.
If you would like to learn more about strategies to keep your money out of the government and the size of your assets totally private, call The Powers Law Firm today at 585-244-2170 to schedule a time for us to sit down and talk.
Often times clients come in to my office and I ask a simple question “Who would take care of your pets if something happens to you?” and more often than not the client responds with “I have never thought about that.” I then have to tell them the heartbreaking news that every year, thousands of pets are put to sleep following the death, disability or incapacity of their owners and that without proper planning it could happen to their very own beloved pet.
If something tragic happened to you, who would look after your pets? Would the new caregiver provide your pet with the love and attention that he or she deserves? Would they have the financial resources to do it? What if no one is willing to take your pet? Will he or she end up scared, shaking and all alone at a shelter – or worse, put to sleep?
Pet planning helps to ensure your beloved friends are always cared for by the people YOU want in your absence. By naming caregivers and allocating funds via your will or trust you can rest easy know your pets will be safe and treated the way you expect, no matter what happens.
Understanding Pet Trusts
Just like a parent who creates a trust fund to guarantee the physical and financial protection of their children if something happens to mom or dad, pet owners can create special trusts that allocate money and provides instructions for their pet’s long-term care.
Common instructions set forth in a pet trust may include dietary preferences, grooming instructions, guidelines for veterinary care, preferences for activities and socialization and boarding preferences should your caregiver leave town or go on vacation.
The pet trust will also provide financial resources to cover the costs associated with your pet’s care, while also providing compensation for your chosen caregiver. You may also put aside additional funds to pay for pet sitters, boarding facilities, burial/cremation expenses or unexpected emergency medical bills that may arise over the course of your pet’s life.
A pet trust is a wonderful legal tool that provides pet owners with the peace of mind knowing their faithful friend will always receive the love and care they deserve if the unthinkable happens.
To learn more about pet trusts and how to best plan for your pet’s long-term care, simply call my office at (585)244-2170 and ask to schedule a Pet Planning Session.
Tip #1: Update your will immediately.
This may not be top-of-mind, but updating your will is extremely important if you are going through a divorce. Having your assets go to your ex can be like adding insult to injury…and can tie up your estate for years to come.
Tip #2: Update your life insurance policy and retirement beneficiaries.
Actor Dennis Hopper was in the middle of a highly contentious divorce when he died. Since he didn’t change his life insurance policy beneficiaries, his ex received the proceeds. Be sure to name new beneficiaries on your life insurance and retirement accounts so your ex doesn’t inherit your assets.
Tip #3: Do not wait until the divorce is final.
Contrary to popular belief, you do not have to wait until your divorce is final to update your estate planning documents. If your divorce is likely to drag on for months or even years, you can still protect your assets from your ex by updating your estate plan.
Tip #4: Revisit your choice of executor and trustee.
While your ex may become the legal guardian of any minor children if you die, he or she should not necessarily be named as executor of your will or the trustee of your children’s inheritance.
Tip #5: Update your health care proxy.
If you do not want your ex making decisions about your health care, you will need to update your health care proxy (as well as your living will if you’ve created one). This also applies to any other advance directives that name your ex as a decision maker.
If you’d like to learn more about estate planning and asset protection, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call today at (585) 244-2170 and mention this article.
Many parents want to know the best way to leave a home to their children. Before you make a plan, you should first be sure that your children actually want the property. We have seen too many parents take on unnecessary financial hardship in order to keep a home as an inheritance their children do not truly want.
That said, here are some of the most common ways to leave your home to your kids:
Will. You can leave real estate to anyone in your will. Once the will has been probated and your Executor appointed by the Surrogate’s Court the Executor can sign a new deed and your children will receive title to the property. (In New York if you do not have a will your children may automatically inherit your home without the need for probate but as with many legal issues each situation is unique so we cannot advise you without knowing your personal details.)
Trust. Using a trust is a convenient way to transfer property without having to go through probate. Title is transferred automatically upon a triggering event — in this case, the death of the original property owner.
Joint tenancy with right of survivorship. This method allows you to add your children to the property title while you are still alive. When you pass, the children become owners of the property as surviving joint owners.
Transfer on death deed. This allows you to name a beneficiary for your property without giving a present interest in it to the beneficiary. Upon your passing, the beneficiary takes title.
Life estate. You can transfer title to the property while you are still living, and retain the right to live there during your lifetime. After your death, the beneficiary owns the entire interest in the property.
There are pros and cons to each of these options. Deciding on the best option for you and your family should be done with the assistance of a Personal Family Lawyer®.
If you’d like to learn more about estate planning, call our office today at (585) 244-2170 to schedule a time for us to sit down and talk.
The American Taxpayer Relief Act of 2012 that Congress passed on New Year’s Day extended the Bush era tax cuts, but the benefits of those cuts for most American taxpayers will be offset by a 2% increase in payroll tax.
According to the Tax Policy Center, a nonpartisan Washington research group, less than 1% of American households will see an increase in income taxes this year. Here are the specifics of what the bill that President Obama signed into law on January 2 entails:
The Bush era tax cuts were extended permanently for individuals making less than $400,000 annually and married couples earning less than $450,000 annually. Those making over these amounts will see the top tax rate increase from 35% to 39.6%.
The personal exemption phase-out (PEP) and itemized deduction limits (Pease) were extended, with a cap of $250,000 for individuals and $300,000 for married couples.
Tax rates for capital gains and dividends increased 20% for individuals earning more than $400,000 per year and married couples with annual income of $450,000.
The alternative minimum tax (AMT) exemption increases to $50,600 for individuals and $78,750 for married taxpayers filing jointly, and is permanently adjusted for inflation.
The charitable IRA rollover has been extended for one year. This means that those over the age of 70 1/2 with traditional IRAs can funnel their required minimum distributions to an IRS-approved charity. Those who waited until December 2012 to take their required minimum distribution have until the end of January to transfer those funds to a charity for 2012, but cannot make the contribution directly. You must contact the financial institution holding your IRA and request the donation.
Several individual tax credits – including those for college tuition, child tax credit and earned income tax credit – have been extended for five years.
Estate and gift tax
Good news here. The individual federal estate tax exemption stays at $5 million per individual, adjusted for inflation. Over that, a top tax rate of 40% applies. The annual gift tax exclusion limit is $14,000 for 2013, with a lifetime gift tax exclusion of $5 million.
While the focus on estate planning will now likely turn away from TAX planning there are still lots of great reasons for including trusts in your estate plan: protecting your surviving spouse and children from predators (including children’s spouses), safeguarding against unwise spending and creditor protection against future lawsuits all come to mind.
As expected, payroll taxes will increase 2% in 2013. The rate goes from 4.2% to 6.2% on the employee portion of Social Security contributions.
If you’d like to learn more about how the new tax laws will affect you, call our office today at (585) 244-2170 to schedule a time for us to sit down and talk.
Planning for the transfer or liquidation of your business when you are ready to retire or when you die is just as important as the planning you did in starting up your small business. Here are some tips on how to use estate planning strategies to transfer your business interests:
Business Structure – How your business is set up – as a partnership, a sole proprietorship, an LLC (limited liability corporation), a C corporation or an S corporation – can have a great impact on estate taxes. If you want to preserve your business for future generations, a family limited partnership is just one option that can allow you to transfer ownership of the business to children as limited partners and enable you to maintain control over the business. Setting a business up as a corporation allows for the issuance of stock to the shareholder, which can then be used with a strategy to transfer ownership of the stock to children effectively freezing the value for estate tax purposes and allowing gains to transfer free of estate tax liability. None of these options are cookie-cutter solutions, however, so be aware that there are transactional costs in addition to the planning fees you will want to pay your planning attorney and accountant. There should be a real business valuation to utilize freeze techniques, which if done correctly is not inexpensive. The future savings, especially as we see the so-called fiscal cliff looming, however, far outweigh the transaction costs.
Trusts – Business owners can use trusts to remove the value of the business from their estates and pass business interests on to the next generation while still having a voice in the management of the business.
Buy-Sell Agreements – If you plan to transfer a business to a partner or partners upon your retirement or death, a buy-sell agreement is a necessity. Having the agreement specify the transfer of sale proceeds to a carefully created trust for your beneficiaries keeps the value of your business out of your estate, so your heirs will not be hit with a hefty estate tax bill. And of course, any good buy-sell agreement is properly funded. Drafts sitting in files without funding are invalid and do nothing for you or your partners.
Estate planning for businesses can be complicated, so small business owners should consult with a Creative Business Lawyer™ to ensure the right strategies are put in place for your individual circumstances.
If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar for January, we will waive that fee.