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How to Plan a Successful Financial Future for Every Family Many clients with concerns about a struggling adult child are apprehensive about discussing such a sensitive topic. But broaching this subject can lead to a number of benefits for all parties involved — for the family, for the adult child, and for you as their financial advisor. Working with us rounds out the team of professionals needed to achieve the client’s goals and fully protect a client’s family, resolving these sensitive situations smoothly. Step #1: Discuss the issue with your client Adult children who are struggling with addiction, irresponsibility with money, or messy marital issues all fall into the “troubled adult children” category because these issues typically concern parents. Many parents are concerned about where their financial assets will end up if distributed to these troubled children. No one wants their legacy to be squandered on a harmful addiction, seized by a creditor, or absorbed by a contentious divorce. If you sense that this is an issue with a family you advise, ask them, on a scale of one to ten, what level of anxiety they feel about distributions going directly to the child in question. This is an easy way to determine how much follow-up is needed. If the anxiety is high (anything over a seven), then loop us in as soon as possible. This first step can be daunting, as it often touches on an emotionally loaded topic for the family, but asking them about the anxiety level in these numerical terms, rather than the specifics of the situation, helps clients express their concern without having to discuss potentially uncomfortable details. As a result, you can begin to put their minds at ease, assuring them that there are ways to manage the situation with everyone’s best interests in mind. Step #2: Explore trusts and policies together One solution that can mitigate the negative impacts of unstable adult children on a family’s wealth is the use of the lifetime trust. Lifetime trusts hold and manage assets, while making distributions throughout a beneficiary’s life rather than a one-time distribution of assets. This minimizes the risk of irresponsible or unwise spending. Because the inheritance is never distributed into a joint account, these types of trusts can also keep the assets out of the hands of unhappy ex-spouses after a divorce. Plus, lifetime trusts can contain tax planning that minimizes income and estate taxation. Keeping money within a trust not only solves your client’s concerns by adding extra protection to the management and distribution of a child’s inheritance, it also benefits you as their advisor by allowing you to retain more assets under management. It’s a win-win for all parties involved. Additionally, unmet life insurance needs, annuity needs, and other factors may need to be met in order for the plan to fully protect the client and his or her family. Step #3: Work with a professional team Working in concert as a professional team makes it easier to provide your clients with a sustainable and beneficial roadmap for dealing with the issue of troubled adult children. You can enjoy an enormous value-add when you partner with us to deliver a solution that puts the client’s mind at ease. As a trusted financial advisor, you are perfectly positioned to empower clients to protect their family from bad decisions and bad people, and we can help. Call us today to discuss how we can transform this all-too common challenge into a fantastic outcome for all parties involved. Read More

The Tax Cut and Jobs Act (TCJA) is now officially law. Both the House and Senate passed the new tax reform bill in December with straight party-line votes and no support from Democrats. President Trump signed it into law right before Christmas. It is the first overhaul of the tax code in more than 30 years. In this article, we will mostly look at how this tax law is likely to impact seniors and persons with disabilities. It’s Good News for Most Americans Retirees, most of whom are on relatively fixed incomes, are probably the most concerned about what the new tax law will mean for them. But, generally, they will be less affected than others because the changes do not affect how Social Security and investment income are taxed. In fact, many will benefit from the doubling of the standard deduction and, with the new individual tax brackets and rates, will be paying less in taxes when they file their tax returns in April, 2019. (Most of the changes will apply to 2018 income, not 2017 income.) Key Individual Provisions to Know Here are main provisions in the tax law that could particularly affect retirees and persons with disabilities. These individual provisions are set to expire at the end of 2025 so Congress will need to act before then if they are to continue. (Mostly) Lower Individual Income Tax Rates and Brackets There are still seven individual tax brackets and rates, but most are lower. Current rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. Here are the new rates and how much income will apply to each: Rate Individuals Married, filing jointly 10% Up to $9,525 Up to $19,050 12% $9,526 to $38,700 $19,051 to $77,400 22% $38,701 to $82,500 $77,401 to $165,000 24% $82,501 to $157,500 $165,001 to $315,000 32% $157,501 to $200,000 $315,001 to $400,000 35% $200,001 to $500,000 $400,001 to $600,000 37% $500,001 and over $600,001 and over Standard Deduction is Almost Doubled For single filers, the standard deduction is increased from $6,350 to $12,000. For married couples filing jointly, it increases from $12,700 to $24,000. Under the new law, fewer filers would choose to itemize, as the only reason to continue to itemize is if deductions exceed the standard deduction. Personal and Elderly Exemptions Currently, you can claim a $4,050 personal exemption for yourself, your spouse and each dependent, which lowers your taxable income and resulting taxes. The new law eliminates these personal exemptions, replacing them with the increased standard deduction. The blind and elderly deduction has been retained in the new law. People age 65 and over (or blind) can claim an additional $1,550 deduction if they file as single or head-of-household. Married couples filing jointly can claim $1,250 if one meets the requirement and $2,500 if both do. Medical Expenses Deduction Currently, people with high medical expenses can deduct the portion of those expenses that exceeds 10% of their income. For example, a couple with $50,000 in income and $10,000 in medical expenses can deduct $5,000 of those medical expenses. The new law increases this to medical expenses that exceed 7.5% of income. In the example above, the couple would be able to deduct $6,250 of their expenses. Note that this part of the new law applies to medical expenses for 2017 and 2018. State and Local Tax (SALT) Deduction The amount you pay in state and local property taxes, income and sales taxes can be deducted from your Federal income taxes—and the amount you can currently deduct is unlimited. The new law limits the deduction for these local and state taxes to $10,000. Residents in the vast majority of counties in the U.S. claim an average SALT deduction below $10,000. Most low- and middle-income families who currently itemize because of their SALT deduction will likely take the much higher standard deduction unless their total itemized deductions (including SALT) are more than $12,000 if single and $24,000 if married filing jointly. Originally lawmakers in the House and Senate wanted to repeal SALT entirely, to help pay for the tax cuts, but lawmakers in high-tax states (specifically CA, IL, NY and NJ) fought to keep it in. Those in higher income households in high-tax states will benefit from the SALT deduction. Lower Cap on Mortgage Interest Deduction Currently, if you take out a new mortgage on a first or second home, you can deduct the interest on up to $1 million of debt. The new law puts the cap at $750,000 of debt. (If you already have a mortgage, you would not be affected.) The new law also eliminates the deduction for interest on home equity loans, which is currently allowed on loans up to $100,000. Temporary Credit for Non-Child Dependents Under the new law, parents will be able to take a $500 credit for each non-child dependent they are supporting. This would include a child age 17 or older, an ailing elderly parent or an adult child with a disability. It is temporary because it is set to expire at the end of 2025 along with the other individual provisions. Higher Exemptions for Alternative Minimum Tax (AMT) The AMT was created almost 50 years ago to prevent the very rich from taking so many deductions that they paid no income taxes. It requires high-income earners to run their numbers twice (under regular tax rules and under the stricter AMT rules) and pay the higher amount in taxes. But because the AMT wasn’t tied to inflation, it has gradually been affecting a growing number of middle-class earners. The new tax law reduces the number of filers who would be affected by the AMT by increasing the current income exemption levels for individuals from $54,300 to $70,300 and for married couples from $84,500 to $109,400. Federal Estate Tax Exemptions Doubled The new law does not repeal the Federal estate tax, but it eliminates it for almost everyone by doubling the estate tax exemption to $11.2 million for individuals and $22.4 million for married couples. Amounts over these exemptions will be taxed at 40%. The new rates are effective starting January 1, 2018 through December 31, 2025. Eliminates Individual Mandate to Buy Health Insurance With the elimination of the individual mandate to purchase health insurance, there will no longer be a penalty for not buying insurance. This is expected to help offset the cost of the tax bill and save money by reducing the amount the federal government spends on insurance subsidies and Medicaid. The Congressional Budget Office expects that fewer consumers who qualify for subsidies are expected to enroll on Obama Care exchanges and fewer people who are eligible for Medicaid will seek coverage and learn they can sign up for the program. (Estimates of those who are expected to have no health insurance by 2027 are all over the place, ranging from 3-5 million to 13 million.) Critics, including AARP, claim that eliminating the individual mandate will drive up health care premiums, result in more uninsured Americans and add $1.46 trillion to the deficit over the next ten years, which could trigger automatic spending cuts to Medicare, Medicaid, and other entitlement programs unless Congress votes to stop them. Some claim the individual mandate helps to encourage younger and healthier Americans to sign up for coverage. Without it, the individual market might lean more toward sicker and older consumers, which might lead some insurers to drop out of the market. 29% of current enrollees on the federal exchange already have only one option in 2018. Others maintain that the mandate is not a key driver for obtaining insurance. About 4 million taxpayers paid the penalty in 2016. Inflation Adjustments Slowed The new tax law uses “chained CPI” to measure inflation, which is a slower measure than that currently used. This means that deductions, credits and exemptions will be worth less over time because the inflation-adjusted dollars that determine eligibility and maximum value would grow more slowly. It would also subject more of your income to higher rates in the future. 529 Plans Expanded 529 plans have been a tax-advantaged way to save for college costs. The new tax law expands the use of tax-free distributions from these plans, including paying for elementary and secondary school expenses for private, public and religious school, as well as some home schooling expenses. Educational therapies for children with disabilities are also included. There is a $10,000 annual limit per student. ABLE Accounts Adjusted ABLE accounts, established under Section 529A of the Internal Revenue Code, allow some individuals with disabilities to retain higher amounts of savings without losing their Social Security and Medicaid benefits. The new tax law allows money in a 529 education plan to be rolled over to a 529A ABLE account, but rollovers may count toward the annual contribution limit for ABLE accounts ($15,000 in 2018). The new law also changes the rules on contributions to ABLE accounts by designated beneficiaries who have earned income from employment. What to Watch Expect some clarifications and strategies as the experts weigh in. There will also undoubtedly be some adjustments as the new tax bill goes into effect. Please don’t hesitate to reach out if you have questions about these new provisions and how they may impact you or those you work with. Read More

Your 3-Step Guide to Creating an Informed Estate Plan Are you concerned about any of your adult children? Estate planning can pose extra challenges for families with adult children struggling with addiction, marital issues, or irresponsibility with money. The last thing you want is for your wealth to end up having a negative impact on your child, or to see them squander their inheritance. Many parents are concerned about what they can do to shield an adult child who struggles with problems like these from bad decisions and bad people that could worsen their child’s situation. This is often a hidden issue within estate planning conversations, as it’s a sensitive topic that can bring up painful memories or emotions. Some parents are apprehensive to discuss their troubled adult children with friends or colleagues because of its private nature and potential for judgment from those outside the family. However, estate planning offices like ours are safe spaces where we work diligently to craft the best possible plan for your family while taking your unique challenges into account. While these conversations may be difficult to have, they are crucial to ensuring that your wishes are carried out the way you want. It is important to put your trust in your estate planning attorney knowing that they have both you and your troubled adult child’s best interests in mind. Step #1: Figure out what works for your family First, understand that what works for your family doesn’t necessarily mean an identical plan for each of your children — it’s okay to customize your plan to work differently for each beneficiary depending on their unique path through life. Feel welcome to initiate a frank discussion with us about any issues you may be concerned about regarding your adult children. The worst course of action is to pretend the issue isn’t there or that it will somehow resolve itself. Bringing these factors to light can only improve the situation and help you create the best possible plan for your family. Step #2: Create a tailor-made plan to mitigate risk A lifetime trust can be a great solution to prevent an inheritance from making a troubled child’s situation worse. Lifetime trusts spread distributions over the course of your beneficiary’s entire life, significantly reducing the risk that they waste their entire inheritance on harmful substances, irresponsible spending, or contentious divorce proceedings. Lifetime trusts keep your wealth out of the hands of the probate and divorce courts and ensure that the assets contained in the trust stay in the family even after a divorce. If you don’t already have the benefits of lifetime trusts written into your estate plan (or simply aren’t sure), we can review your current plan to make sure that it is customized to optimize your child’s long-term security and well-being. Step #3: Follow up with us continually Once we have a plan in place to protect all members of your family, make sure you follow up with us, your financial advisor, and your family to make sure the plan continues to work as intended. You can rely on your financial advising and estate planning professional team to answer any questions that arise and make any necessary changes as time goes by. Staying in touch frequently means that your plans stay up to date and will continue to further your goals for your family. Give us a call today so we can make sure all your children get the most out of life and enjoy ongoing financial security for years to come. Read More

On January 11, the Centers for Medicare and Medicaid Services (CMS) issued a State Medicaid Director Letter providing new guidance for Section 1115 waiver proposals that would impose work requirements in Medicaid as a condition of eligibility. As of press time, CMS has approved work requirement waivers for Kentucky, Indiana and Arkansas. As many as 13 other states have pending waiver requests and/or have stated they plan to apply. These include Alabama, Alaska, Arizona, Kansas, Louisiana, Maine, Mississippi, New Hampshire, North Carolina, South Carolina, South Dakota, Utah and Wisconsin. In this article, we will look at the goals and concerns of this new guidance, as well as some of the work requirements that will soon be implemented. Overview The CMS guidance describes the potential scope of requirements that could be approved and asserts that such provisions would promote program objectives by helping states “in their efforts to improve Medicaid enrollee health and well-being through incentivizing work and community engagement.” It invites proposals that are designed to promote better mental, physical and emotional health or help individuals and families rise out of poverty and attain independence. Medicaid work requirement proposals generally would require beneficiaries to verify their participation in approved activities, such as employment, job search or job training programs, for a certain number of hours per week in order to receive health coverage. Certain populations, including children, the elderly, disabled, medically frail, pregnant women, caregivers and students would be exempt. The Goal CMS Administrator Seema Verma has stated that she hopes the work requirements will improve enrollees’ health while reducing Medicaid rolls, and that requiring people to work would encourage them to find jobs that offer health coverage or make enough money to afford private plans. Two Examples Kentucky was the first state to receive approval to impose work requirements as part of a broader overhaul of the state’s Medicaid program. It is set to go into effect in June. State officials have made it clear that the work requirements are aimed at the newly eligible Medicaid enrollees who gained coverage only after the state’s previous Democratic governor expanded Medicaid. The current Republican governor, Matt Bevin, has said that many of the newly eligible are able-bodied and that they have a moral responsibility to work for their benefits. Under Kentucky’s plan, able-bodied adults will be required to complete 80 hours a month of community engagement to qualify for coverage. This would include work, education, volunteering/community service or job training. Drug treatment is considered a work activity, not an exemption. Enrollees can seek “good cause” exemptions if they can verify one of the following in their month of noncompliance: disability, hospitalization or serious illness of the enrollee or immediate family member in the home; birth or death of family member living with the enrollee; severe inclement weather including natural disaster; family emergency or other life-changing event such as divorce or domestic violence. In addition, one primary caregiver of a dependent minor child or adult with disabilities per household is exempt, and caregiving for a non-dependent relative or another person with a disabling medical condition is considered a work activity. State officials estimate that up to 95,000 people would no longer have Medicaid at the end of five years. While they do expect people to lose coverage, they predict that most would transition off Medicaid by entering the workforce and gaining access to employer-sponsored insurance or private insurance. While other states may use Kentucky’s Medicaid program as a model, CMS officials said it was not meant to be a template. Arkansas became the third state to receive permission to compel some residents on Medicaid to work or prepare for a job, but the federal government denied the state’s request to shrink its Medicaid expansion. Instead of including people with incomes up to 138% of the federal poverty line, as designed in the ACA, Arkansas wanted to set its expansion limit at 100% of poverty, a move that would immediately cast out up to 60,000 people from the program. State legislators required that “shrinking the expansion” be included in the state’s application for the work requirements. Now, with the federal government’s rejection, the state Senate may not have enough votes to approve a budget for the agency that runs the program. (The proposed budget for the coming year does not include any extra money to help people train and look for a job.) Arkansas’ plan compels people to have a job, be in school or volunteer at least 80 hours per month. The requirements will apply to able-bodied adults unless they qualify for an exemption, which include caring for a young child, being pregnant, being medically or mentally unable to work, or are being treated for addiction. Requirements will begin in June for people ages 30 to 49, with estimates that nearly 40,000 of the 98,000 Medicaid expansion recipients will need to start complying. (The program will expand to include those starting at age 19 in 2019.) Individuals will need to document every month that they are fulfilling the rules. A person who fails to do so for three months will be removed from the program and locked out until the next year. Concerns Those opposed to the work requirements are voicing some concerns that will need to be addressed and monitored. These include: Potential loss of health coverage. Many people working full time are still eligible for Medicaid, especially in Medicaid expansion states, because they are working low-wage jobs. For example, an individual working full-time (40 hours/week) for the full year (52 weeks) at the federal minimum wage ($7.25/hour) would earn an annual salary of just over $15,000 a year, or about 125% of poverty. That is still below the 138% federal poverty level maximum targeted by Medicaid expansion. In non-expansion states with low eligibility levels, meeting Medicaid work requirements through 20 hours of work per week at minimum wage could lead to loss of Medicaid eligibility. For example, in Alabama, adults without children are not eligible for the program, and parents can only qualify if they earn not more than 18% of the federal poverty level, or less than $3,800 a year for a family of three. Also, low-wage jobs are unlikely to have health benefits. According to the Kaiser Family Foundation, in 2017 less than a third of workers who worked at or below their state’s minimum wage had an offer of health coverage through their employer. Increased administrative costs. Those who are working will need to successfully document and verify their compliance. And those who qualify for an exemption must also successfully document and verify their exempt status, as often as monthly. States would need to pay for the staff and systems to track work verification and exemptions. Some states have already decided to not implement waiver authority they have received due to administrative costs. For example, Kentucky amended its waiver application to move from a tiered-hour work requirement to a flat hourly requirement, citing administrative concerns. Additionally, the CMS guidance states that federal Medicaid funds may not be used for supportive services. This means the states must address and pay for ways to overcome multiple barriers (childcare, transportation, education, training, etc.) that interfere with the ability to work. Complicated processes can cause eligible individuals to lose coverage. Some eligible people may lose coverage due to their inability to navigate the processes, miscommunication or other breakdowns in the administrative process. This could be especially true of people with disabilities who may not obtain an exemption for which they qualify and end up losing coverage. Additionally, some people may have trouble getting the documentation to prove they aren’t healthy enough to work. According to a Kaiser study, roughly one-third of non-elderly adults with Medicaid report having a disability, but nearly 60% of those do not receive Supplemental Security Income (SSI). The impact of work requirements on people with disabilities will depend, in part, on whether states will correctly identify and exempt people who can’t work and what types of support services they provide to help them. What to Watch Expect lawsuits. Democrats are expected to argue the Trump administration is trying to undermine ObamaCare’s Medicaid expansion on its own after Congress failed to repeal the health care law. Lawyers for advocacy groups are likely to argue that work requirements don’t promote the objectives of the Medicaid program because they would be a barrier to coverage. The administration is hoping to show a correlation between work and improved health outcomes/independence. Expect more states to come on board, especially Red states. Requiring work for benefits is a GOP policy staple and most of the states who have applied for work waivers have Republican governors. Expect ongoing evaluations. CMS is requiring follow ups to determine if the work requirements lead to improved health, well-being and independence. Individuals who experience a lapse in eligibility or coverage because they failed to meet the program requirements or because they gained employer-sponsored insurance will also be surveyed. Expect refinements. Participating states will be in the spotlight. We should see ongoing efforts to improve their programs as they strive to make them successful and fair. Public Perception: A new poll from Kaiser shows the public is split on whether work requirements are more to cut spending or lift people up. If people do not see positive results, there will likely be a backlash. Sources https://www.kff.org/medicaid/issue-brief/medicaid-and-work-requirements-new-guidance-state-waiver-details-and-key-issues/ http://thehill.com/policy/healthcare/368823-five-things-to-know-about-medicaid-work-requirements https://www.vox.com/health-care/2018/2/5/16975574/medicaid-work-requirement-paradox-polls https://www.rollcall.com/news/policy/states-jump-medicaid-work-requirements-bandwagon http://www.al.com/news/index.ssf/2018/03/alabama_medicaid_agency_seeks.html https://www.washingtonpost.com/national/health-science/arkansas-wins-federal-permission-to-impose-medicaid-work-requirements/2018/03/05/a4fdaa88-2093-11e8-94da-ebf9d112159c_story.html?utm_term=.d69f5485932e https://www.politico.com/story/2018/01/11/trump-medicaid-work-requirements-280969 Read More

It’s a common misconception that clients can take a set-it-and-leave-it approach to trusts. Much as houses or office buildings, even those that were originally well-built, must be remodeled or updated from time to time, a trust-centered estate plan can often benefit from a remodel or refresh. Although the principle of trust-centered estate planning has stood the test of time, there are many reasons, such as the recent tax reform, a change in family wealth or circumstances, or just a change in estate planning goals, that may necessitate a remodel for an old trust. Clients gain peace of mind while you get an opportunity to provide value. Why updating old trusts serves both you and your clients Your clients may be missing out on lucrative new opportunities, such as income tax planning opportunities to reduce the impact of the new SALT deduction limitation, or necessary protections against overly aggressive creditors unless they update their old trusts. Seizing opportunity and avoiding risk adds value to your services and secures you as their top-of-mind financial professional. Modernizing old trusts isn’t just beneficial for your clients’ financial circumstances — it’ll also help you do your job with greater ease and efficiency. Old trusts can be hard to work with on a variety of levels. Managing assets across multiple, similar trusts can be more difficult for you as their financial advisor, makes tax reporting for the CPA more cumbersome, and makes administration for the client or trustee needlessly challenging. Remodeling these trusts, consolidating them, or otherwise modifying them to make administration easier saves costs for clients and makes your job easier. A common misunderstanding among many individuals is thinking that irrevocable means unmodifiable. Even if a trust is irrevocable, it is often possible to remodel and refresh. The exact mechanics will always vary depending on the client’s situation, but it’s almost always possible to make some improvements. A trust may need updating for a variety of reasons: Changes in legislation, like the December 2017 Tax Cuts and Jobs Act Changes in the clients’ asset mix or wealth level Changes in family structure, such as divorce, remarriage, birth of a new child or grandchild Changes in the clients’ risk profile, such as transitioning into a new business or career Although not common (but it does happen from time to time), trusts can and should also be refreshed any time an error is present in your clients’ estate planning documents. The good news is that this type of fix is often more like putting up a fresh coat of paint (an easy fix). Remember, it is far better to correct a typo or (what we see more often) an unclear section now, rather than waiting until it becomes a potentially costly headache later. Clients don’t expect perfection, but they do want their financial and estate plans to work when they’re needed. Remodeling Bill and Susan’s Plan Like many people, Bill and Susan had a trust prepared that provides for their two sons, Junior and Bobby, upon their death. To keep things fair, the same distribution provisions were used for the two boys. When they created the trust, the boys were young children. Of course, the inevitable passage of time has now made them young men, and both boys are now over 21. As many parents do, Bill and Susan set up the trust to divide into two shares: one for Junior and one for Bobby. The money was going to be managed until they turned 21 and then outright distributions are to be made as soon as the children turn 21. This is a common type of structure to provide asset management for minor children beneficiaries. As of today, the value of the trust is approximately $800,000, meaning each son will receive about $400,000 less expenses. When they initially prepared their trust, they did not yet know how Bobby and Junior would handle money since the boys were much younger. However, Junior’s lack of financial responsibility has left him with debts of over $400,000, some of which he pays on time and others he doesn’t. If Bill and Susan were to die today, Junior’s creditors could sue him and seize his inheritance, leaving Junior with nothing. Bobby, who’s been financially responsible, would receive his inheritance outright, without any protections or safeguards. By remodeling the trust, Junior’s share can be changed to ensure that the money is “locked down” with an independent trustee. Rather than creditors receiving the money, it could then be available for Junior’s medical or basic living needs. Additionally, Bill and Susan may decide to provide Bobby with a lifetime of asset protection as well by leaving his inheritance in a lifetime, beneficiary-directed trust. Because of the great relationship that Bill and Susan have with you, they indicate in the trust that they’d like you to serve as the continued investment advisor, providing you an opportunity to retain assets under management. Customizing the inheritance for each beneficiary is a great way for clients to enhance the legacy they leave their beneficiaries. And, when clients use lifetime trusts rather than outright inheritance, it provides you with a great opportunity to retain assets under management while building a relationship with the next generation of family. This is only a simple example of the possibilities. As always, we invite you to call and strategize with us about any particular client you think could benefit from our services. Supplementary benefits of trust modernization While there are many glaring reasons to update a trust like the ones listed earlier, your clients can also enjoy other perks when they modernize. Your clients could be paying unnecessarily (and avoidable) high income tax rates on some income or missing out on a second basis step-up option that would save them substantial sums in the long run. Outdated trusts can also minimize your clients’ ability to use their trusts effectively to pass along their values and legacy by requiring distributions that do not really reflect the clients’ goals. In addition to making sure your clients’ trusts still uphold their wishes for the distribution of their estate to their beneficiaries, there are also worthwhile financial incentives that they can benefit from right away when modernizing trusts. As their financial advisor, your clients will thank you for alerting them to the opportunity to remodel and refresh their old trusts to take advantage of new opportunities while continuing to avoid and minimize risk. The result? A fuller, more secure life. If you have clients with trust-centered estate plans that are more than five years old, we’d love to explore whether a remodel is in order. Give us a call today. Read More

Many people who inherit wealth or small businesses are at significant risk for essentially squandering the wealth. An Ohio University study shows that an astonishing 33 percent1 of all beneficiaries lose their entire inheritance within two years of receiving it. The ways they manage to do so are as varied as the imagination, but in our experience, we have seen a common thread: mismanagement. How beneficiaries lose their way There are a few key ways beneficiaries struggle to make the right financial decisions with their inheritances. For example, a beneficiary might not have been brought up with a strong education on the basics of money management. Or, even if the beneficiary knows what to do to properly manage their money, it can be challenging to manage an inheritance while dealing with the loss of a loved one. A beneficiary may invest unwisely, resulting in significant losses, or spend their wealth on an unsustainable lifestyle, rapidly exhausting an inheritance. Worse still, some heirs develop a sense of entitlement that can lead to problems like the well-publicized “affluenza teen,” Ethan Couch. No one wants these outcomes for their family. While a live-in-the-moment attitude can serve young people as they gain life experience, it can be very dangerous when large sums of money are added to their lifestyle. Often, they do not have the same experience and hard-won wisdom as the generation that acquired or built the wealth. Share your wisdom with your wealth One of the greatest gifts you can leave your children, grandchildren, and other beneficiaries is the gift of your wisdom. Sharing the stories, struggles, and journey of success that brought you to where you are, along with the money wisdom you’ve gained, is as important as leaving a financial legacy in your will or trust. Money alone can become just as much a burden as it is a gift if it doesn’t go hand in hand with practical guidance. Let your beneficiaries know that they can help build a legacy of wealth that supports them throughout their lives and for generations to come. 3 tips to set your beneficiaries up for success Here are a few pointers for setting up your beneficiaries for success: Use estate planning tools like discretionary and incentive trusts. In addition to talking with your beneficiaries about financial well-being, you can also use certain types of trusts that will reward their smart behavior. Discretionary and incentive trusts are two such tools that can hold payments until beneficiaries complete college or withhold payments unless beneficiaries are proven to be clean and sober. If you don’t already have a trust like this, we can work with you to tailor these types of trusts to your unique family goals. Talk to your beneficiaries about the right way to use their inheritances. Tips about compartmentalizing money for paying off debts and saving for the future might be second nature to you but a complete mystery to your heirs. Teach them the basics of money management and share your knowledge about smart investing. When you define a purpose for the money you’re leaving, you enhance the meaning of your estate plan. Bake your wisdom into your estate plan. Consider adding a supplement to your plan that includes your stories, struggles, and journey of success so your wisdom is passed to the next generation along with your wealth. You don’t have to go it alone Feel free to contact us to ensure that your will or trust is completely up-to-date and that we’ve included strategies like lifetime discretionary trusts, incentive trusts, trust protectors, substance abuse protection language, and more, so that your family’s financial legacy is as safe as possible. We can even help you navigate discussions with your beneficiaries so you can rest assured that you’re doing what’s necessary to make your wealth last. 1 Ausick, Paul. “A Third of Americans Blow Through Their Inheritance.” 247wallst.Com, 8 Nov. 2015, 247wallst.com/investing/2015/11/08/a-third-of-americans-blow-through-their-inheritance/. Read More

In many states, winter is starting to thaw and flowers are beginning to bud. This can only mean one thing: summer vacation planning season is here. As vacation planning kicks into high gear, here are a few important things to add to your vacation readiness checklist. Guardian nomination If it’s just you and a spouse leaving for a getaway this summer, who is going to take care of the kids while you’re gone? And, heaven forbid, who will care for them if you don’t return? Double check your guardian nomination for your minor children so you know that if, on the very slight chance something goes wrong, your children will be in the right hands. If you have not completed or updated a guardian nomination, now is the time to do so. Without this nomination, the court will determine who will raise your child if something were to happen to you, and it may not be the person you want. For example, Sally has two boys. She’s concerned about who will raise them if she is not able to do so. Sally’s younger sister, Carey, is fairly wealthy (thanks to a favorable divorce settlement), is unemployed, and lives a life of leisure. Her carefully curated social media would have you believe she’s a well-off, stable jetsetter. On the other hand, Sally’s older sister Tracy is the total opposite. She recently adopted a boy with special needs from the foster system, and although she works incredibly hard at a museum, she does not earn much income. If a court were to compare them, Carey could very well be the clear winner for guardianship. But, Carey is the last person Sally would ever want raising her kids because Carey does not share the same values or respect for hard work. Sally is also concerned that Carey would fight hard to win custody of the boys just so she would gain access to the boy’s inheritance. Unfortunately, situations like Sally’s are a common occurrence for parents who haven’t named a guardian, and the courts do not have the resources to do a deep-dive into everyone’s background. This is why the nominations are so important. The guardianship nominations give you the opportunity to make your wishes known to the court. By having the guardianship nomination prepared, Sally can ensure that Tracy, who shares her values, will be the one raising her boys. Beneficiary designations and other funding issues Many people have an out-of-date beneficiary designation, or, at the very least, one that hasn’t been looked at in a while. Taking 10-15 minutes to log into your IRA, 401(k), and life insurance company’s website to double check your beneficiary designations is an easy way to put your mind at ease so you can relax on a tropical beach or explore the sights of a brand-new city stress-free. Beyond beneficiary designations, other funding issues with trust-based plans are sadly common. But many can be easily and quickly fixed. If you’ve opened a new bank or investment account, or bought a different home, let us know so we can work with you to update the funding of your trust. This type of work is just like touching up the paint at your house – quick and painless if you do it on a regular schedule – but a much bigger project if you let it wait. The great news is that you’ll rest easy on your vacation, knowing everything is in order back home. Advance directive and powers of attorney Getting sick or injured while traveling is stressful enough without the added worry of not having advance directives and powers of attorney in place. Knowing that your care will be handled according to your wishes makes travel easier. If you need a fresh copy of these documents, give us a call so we can make sure you have a readily accessible copy. Signatures Are your will, trust, and other documents still unsigned? Maybe you’ve been reviewing them. It’s better to have a plan in place that addresses your big issues and concerns before leaving rather than waiting until it’s “perfect.” If you haven’t yet signed, give us a call so we can make sure your documents get signed properly. Remember, with a will or revocable trust you can always make changes in the future. Stay organized Where do you keep your hard copy and digital copy of your estate planning documents? Choose a safe location in your home to store at least one printed hard copy and create a folder on your hard drive or personal cloud storage site so that you’ll always have access to a backup digital copy as well. Checking this to-do off your list before your vacations means one less thing to keep track of later. If you need a fresh copy because you’ve misplaced yours, give us a call. We’re happy to help. Now’s the time to get started so everything is in place before your upcoming travel. Please remember that it may take three to six weeks to complete a comprehensive plan or revise an existing one, so plan ahead and don’t wait until the eve of your vacation to get your estate plan refreshed. Call now! Read More

When Circumstances Change, So Should Your Estate Plan Your estate plan was written to reflect your situation at a specific point in time – and – as we all know – our lives continually change, unfolding in ways we might not have anticipated. Just like you meet with your doctor, financial advisor, or CPA on a regular basis, you need to meet with us on a regular basis as well. In this issue, we: Identify and provide examples of life changes which typically trigger a need to update your plan Examine how often you should “check in” with our office The goal? To make sure that your estate plan achieves your goals and works for your family. Update Your Estate Plan if Any of These 6 Circumstances Apply to You Marriage, divorce, or death of a spouse Changes in financial status – good or bad The launch or wind down of a business Birth, adoption, or death of a child or grandchild Change in personal or family circumstances – including the need to replace trustees, address disabilities or addictions, moving to a new state, and more Change in your goals – such as changing amounts of inheritances, adding or removing a charity, and more It’s not just changes in your life you need to think about – Congress, the courts, and the legislatures are constantly changing the rulebook. If you haven’t had your will, trust, or estate plan reviewed since 2013 or if any of these 6 circumstances apply to you, it is essential to contact us, so we can get you back on track. Examples of When You Should Update Your Trust To illustrate when a revocable trust should be updated, let’s take a look at the Thomas family: Jim and Carol have been married for 20 years and have three grown children. Several years ago, they created a trust to provide for themselves and their children. However, since that time, their family has gone through many changes – some good and some not so good. Jim and Carol are considering updating their estate plan to reflect changes in their family’s circumstances. Here’s a look at their circumstances and how they may affect their estate plan: Divorce. Their eldest son has filed for a divorce from his wife. Jim and Carol need to update their revocable trust to exclude the soon to be ex-wife as an intended beneficiary. Changes in financial status. Carol’s aunt passed away and left her a great deal of money. Jim and Carol need to determine how this inheritance will affect their current plan and future estate tax liability. Birth. Their youngest child recently announced that she and her husband are expecting their first child. Jim and Carol need to update their trust in order to provide for the child. Changes in personal circumstances. Their middle son was recently diagnosed with a severe disability and can no longer work. He is eligible for government disability benefits, but receiving traditional trust income would disqualify him. Jim and Carol need to convert their son’s current trust into a special needs trust so the government does not consider that income for qualification purposes. Changes in tax law / venue. Jim and Carol moved from Chicago to Miami to beat the cold winters. Since their estate plan will now be subject to Florida (rather than Illinois) law, it’s time to determine if Florida law might provide them with additional benefits. How Often Should You “Check In” On Your Estate Plan? It is a certainty that your life will change. All manner of life and financial changes make it necessary to “check in” on your estate plan. We can help you to manage your plan. If it’s been 3 to 5 years – or – you have experienced significant life change since you signed your estate planning documents, call our office now. We’ll help you determine whether your estate plan needs to be updated. Life moves fast and procrastination can harm you and your loved ones. We welcome your call now. Read More