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Factors to Consider When Selecting a Guardian for Your Children

When I ask my clients what is driving them to come see me for estate planning, I usually get the same answer; we want to make sure that our family is taken care if something ever goes wrong. It’s a simple enough objective, but all too often clients are only thinking in terms of financial help for their family.  One of the most important things a parent should include in a Will has nothing to do with money, it is deciding who would be their preferred choice of guardian for their minor child(ren) in the event of the parent’s death.  

A guardian is a Court appointed person who can legally care for a child who has lost both of their biological or adopted parents.  A guardian is appointed only by a Judge after judicial proceedings.  During that proceeding the Judge will consider evidence to decide who is the best person to care for that child now that the parents are deceased.  An overwhelming piece of evidence in that decision would be the deceased parent’s choice of guardian, which is commonly listed in their Will.  Here are some factors to consider when trying to decide who would be a good choice of guardian for your child(ren):

  1. Have that discussion.  No matter who you ultimately decide would be a good choice of guardian for your child(ren), be sure to have a talk with that person to make sure this is a responsibility they are prepared to take on.  Serving as a guardian for a child is an awesome responsibility, make sure your guardian is willing to assume this responsibility before making your choice.
  2. Plan for the immediate future, not forever.  Remember, you can always revise your Will in order to change your list of preferred guardians over time.  Therefore, choose guardians who would best serve your child(ren) now, and in the next few years.  The right choice for a toddler may not be the right choice for a teenager.
  3. Have a back-up plan.  Never just list one choice for guardian of your child(ren).  It is important to always list at least one back-up choice.  Your first choice may not be able to serve for many reasons, so always be sure to include a second or third choice.
  4. What if I don’t think anyone in my family is the right fit?  Your preferred choice of guardian for your children does not have to be a family member.  You can choose anyone who you feel would be best suited to serve in that capacity.  When making the decision as to who should serve as a guardian the Court simply makes that decision based upon what is in the best interest of the child.  The Court is not restricted to only consider family members.

Remember, don’t get caught up in just focusing on financial oversight.  Engage in a thoughtful analysis of what the real world implications would look like if your guardian were doing your parenting.  From daily life to finances, and everything between.  By doing so, you will ensure your children are best cared for if the unimaginable would ever occur.

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Check on Your Beneficiaries…Today!

Fortune cookie inheritanceWhen you pass away, what you leave to your loved ones is important, but so too is how you leave those assets. Making certain that you leave the right assets to the right beneficiaries, is a critical element of effective estate planning.

Forbes’ recent article, “Pass On Your Assets Wisely: How To Choose The Right Beneficiaries,” examines several common asset types and considerations to be taken when naming beneficiaries.

Life insurance. These proceeds can be paid to the beneficiaries quickly. After proof of death is established, the funds are paid. Think about heirs who may need ready access to funds after you pass. That’s usually not a minor child. However, if you do name a child, you must designate a guardian or place the proceeds in trust. Otherwise, the state may take control and assign a stranger to manage the money on your child’s behalf.

Assets in a Will. When you pass away, your will is going to be probated, and the assets can’t be distributed until the probate process is complete. Because of this, be sure the beneficiary of any property or assets specified in the will is in a position to wait. You can also create a revocable living trust to hold those assets, so a trustee can distribute assets directly to beneficiaries without waiting to go through probate.

Retirement plans. When you select the beneficiaries for retirement plans, remember that it can result in tax implications. The younger the recipient, the longer their life expectancy, and the more time they will have to withdraw funds from the plans. That means the account can continue to grow tax-deferred. You can also name a trust as the beneficiary of a retirement plan, and the assets in the trust will be protected from creditors. A retirement plan inherited outside of a trust may not enjoy this protection. In addition, if a beneficiary is young, the trustee can make distributions under conditions that you state when you create the trust.

Last, be certain the beneficiaries named in your retirement and other financial accounts are consistent with your estate plan. A beneficiary designation of your 401(k) plan supersedes anything in your will.

Reference: Forbes (May 30, 2017) “Pass On Your Assets Wisely: How To Choose The Right Beneficiaries”

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Planning Ahead with Long-Term Care

Middle aged coupleAs we think of our parents aging, we may also start to think about our own aging. Sometimes it takes a negative experience with a parent’s estate planning to motivate us to start planning for our own long-term care and end-of-life decisions.

WTOP’s recent article, “Preparing for old age: Long-term care, insurance and estate planning,” says the first step is to mirror the kind of conversations you held with your parents and have the same conversation with yourself.

Take a look at your vision for how you want to age and how you want to address your end-of-life issues, before you make any moves with your estate plan or insurance coverage. If you have a partner, first work independently on your own wishes, and then have a conversation together.

Working with aging parents can also make you think about your planning for long-term care insurance. Start the process when you’re in your 50s. The older you get, the greater chance you have of running out of time to save or of becoming uninsurable. Recent statistics published by AARP show that 52% of  those individuals who turn 65 today, will develop some form of severe disability requiring long-term care support. The average lifetime cost of long-term care in retirement tops $250,000.

 The next step is to review your current estate plan in light of your goals. Many individuals or couples who have a plan in place will forget about them, letting their documents become out-of-date. If you don’t have an estate plan yet, getting it completed should be a top priority. Your estate planning attorney is experienced at working with clients to understand their wishes and to create a plan that reflects those intentions.

Before executing a plan, you’ll need to calculate your total level of wealth, create a list of intended heirs and charitable organization names, as well as a divorce decree, if applicable. If you have minor children, you’ll need to designate guardians to act in your absence.  It is also necessary to decide whether those same people will manage the inheritance for your children or whether you want someone else to assume that responsibility.

Planning for aging means taking careful consideration of many components of your financial plan. Look at how your retirement lifestyle and legacy plan could be impacted by a long-term care need.

Reference: WTOP (May 3, 2017) “Preparing for old age: Long-term care, insurance and estate planning”

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Here’s What an Estate Plan Can Do for You

Wills-trusts-and-estates-coveredThe need for an estate plan applies to everyone, says Trust Advisor’s recent article, Why An Estate Plan Is Beneficial.”

With a small estate, you should be even more careful to avoid unnecessary expenses and to retain the most resources for fulfilling your personal, financial, and charitable goals. The article cites four key reasons why you should have an estate plan:

  1. Stipulating Care for Yourself. This includes a healthcare proxy, power of attorney and living will that states how you want to be cared for, if you become incapacitated.
  2. Financial Security. Your will lets you specify the way that you want your assets distributed and to whom. Without a will, state probate law will determine who receives your assets.
  3. Designating Guardians. If you have minor children, it’s critical to make written arrangements for their care. A will is the only legal way to do so in most states (e.g., California is an exception). You must designate a person that you want to be entrusted with the care of your children.
  4. Designating Beneficiaries. Your estate plan will include completing beneficiary forms for insurance policies and retirement accounts. It’s a good idea to review your designated beneficiaries after any major life event, like marriage, divorce, a death in the family or the birth or adoption of a child. Remember, you can also name a charity as a primary beneficiary or contingent beneficiary in your plan.

Reference: Trust Advisor (April 29, 2017) Why An Estate Plan Is Beneficial

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These Are Two of the Biggest Estate Planning Misconceptions

Man in cafe“Although these are just two of the misconceptions regarding wills, they take on special significance because they relate to some of the most important assets owned by a person.”

There are several misconceptions floating around in estate planning, and the Pauls Valley Daily Democrat reviews some misunderstandings about wills in “More on estate planning myths.” Let’s take a look:

“I’m young, so I don’t need a will.” This is not true. One of the most important parts of a will for a young couple, is a provision that designates a guardian—the person(s) who will care for their young children in the event of their mutual death. This is rare,  although it does happen. To make matters worse, what if there’s a family fight for custody of your children? Make this selection so the court isn’t forced to select a guardian for your minor children, if the event arises. A will can give you peace of mind concerning the care of your children.

“I really don’t have much of an estate, so I don’t need a will.” This is also not true. Even if you don’t have young children, a will is essential for the distribution of your personal effects. Surprisingly, even some very large estates have been contested, simply because of disputes over small items.

Typically, large cash amounts can be resolved without difficulty because the details should be provided in the will. However, sentimental family items, like jewelry, family photographs, a valuable baseball card collection and other articles can become the source of conflict and lawsuits. A will can clarify your wishes.

An estate planning attorney will also advise you to use techniques like Payable on Death transfers, TOD deeds or other non-probate transfers that simplify and speed up most asset transfers after death, without probate. Nonetheless, it’s still smart to have a will prepared as a backup, in case you’ve forgotten to provide for the transfer of any asset.

The emotional and sentimental items owned by a person may be of great importance to his or her heirs. Failure to carefully describe your plans for distribution of those items at death, can frequently generate conflicts that are just as bad—and sometimes worse—as the conflict over monetary funds.

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

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