Your clients likely set up a living trust with the goal of avoiding probate. When properly prepared and funded, a trust based estate plan will avoid the public, costly, and time-consuming probate court process. Shockingly, many people still make a big mistake, catapulting their assets and loved ones right into the oft dreaded probate court system. That mistake? They fail to fund their trust.
Creating family limited partnerships (FLP) can be a great asset protection strategy for business owning clients when it’s time to hand down that business to younger generations. Doing so can reduce gift and estate taxes.
However, the Internal Revenue Service appears to be willing to challenge this strategy in court, according an article in the Wall Street Journal, which highlighted a U.S. Tax Court case where the IRS fought the passing down of portfolios of publicly traded securities at a large discount.
Is “Empire” the best estate planning drama on television?
Season 2 of the well-received Fox show began Sept. 23. WealthManagement.com recently published a great article highlighting the series, explaining why the epic squabbling family drama has grown a legion of dedicated fans. The show has been called “King Lear”-meets-hip-hop by some television critics.
If we set aside the show’s entertainment industry backdrop and wild storylines of murder, manipulation, and mental illness, you’re left with a core story of real-world estate planning issues faced by a business owner.
There’s a not-so-funny joke we hear some clients in midlife say when they don’t have a retirement plan engaged: “Oh, I’ll never retire. I’ll just keep working.”
That’s a pretty naïve outlook when you consider the many potential health, housing and financial pitfalls that can eliminate even the wealthiest client’s life savings.
Creating an estate plan is more than just about one person’s desire to legally transfer property and assets after death to a spouse or children. As advisors, we’re mindful of the unique, but certainly not uncommon, planning needs of single clients.
A recent article in MarketWatch did a great job examining the issue of estate planning for singles.
When a person dies without a last will and testament, assets are disbursed according the laws of the state. For married people, that means a surviving spouse inherits those assets, even if they’re not jointly titled. For a single person, the same law means the assets will be handed off to close relatives (i.e. children, parents, siblings). And, when no relatives are available to inherit the estate, your client’s assets might even go to the state.
Let’s keep the state out of it, shall we?
Clients often choose a relative or a close friend as executor or trustee (a fiduciary) of their estate. It makes sense, they trust them during life and trust their judgement when they stand in their shoes so to speak. However, the job can prove more difficult than either of them imagined.
A fiduciary must carry out the terms of your client’s plan at the very time she is grieving, and many times she is unfamiliar with the ins and outs of the job’s responsibilities. She may not have enough financial knowledge to understand what’s expected or may miss important deadlines due to a lack of understanding, often costing some serious penalties for the estate.
What if Fido or Fluffy outlive your client?
Have your clients made plans for what happens to their “furry children” if they die or become incapacitated? Or are they just assuming someone will step in and give their animals the same level of care and attention? As advisors, it’s important to discuss animals care as part of your clients’ estate plan.
In the past, people made designations for ownership and care of their pets in a will, but their wishes were not enforceable. However, pet trusts are gaining more ground in the courts and are becoming more prevalent with clients who have no adult children as beneficiaries of their estates.
Some of the most overlooked assets in estate planning include your client’s online accounts. A recent Pew study reported that 51 percent of American adults bank online and 32 percent do so on a mobile phone. (http://tinyurl.com/mava6g3)
Our key suggestion: Clients should create an inventory of usernames and passwords for their online accounts. For many, this information is often memorized, not written down. However, in the event of death, business associates or loved ones will need access to manage at least some of these accounts.
The world lost blues music legend B.B. King in May after a lifetime of touring and delighting his fans.
King, 89, fell ill last October. At the time, his longtime business manager, Laverne Toney, held power-of-attorney over his affairs. The following month, police were called to King’s Las Vegas home on allegations of neglect and elder abuse. The case remained open, and police and social services were called again in April 2015. A judge dismissed the case in early May, declaring neither investigation had revealed evidence of abuse, leaving Toney in legal control of King’s affairs.
When most of your clients think about prenuptial agreements, they think in terms of divorce settlements, but prenups are also useful in estate planning. By determining in advance the terms of an inheritance, your clients can ensure their spouses abide by their wishes in the event of their death. A prenup can be used to avoid painful legal and emotional disagreements in the future, both for themselves and their loved ones.
Between 2010 and 2013, the number of prenuptial agreements increased 63 percent, according to a recent article in the Wall Street Journal. The majority of these were used to protect property rights and estate issues.