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Whether it’s to qualify for Medicaid, avoid probate, or reduce your tax burden, transferring ownership of your home to your adult child during your lifetime may seem like a smart move. But in nearly all cases, it’s actually a huge mistake, which can lead to dire consequences for everyone involved.

With this in mind, before you sign over the title to your family’s beloved homestead, consider the following potential risks.

1. Your Eligibility For Medicaid Could Be Jeopardized

With the cost of long-term care skyrocketing, you may be worried about your (or your senior parents’) ability to pay for lengthy stays in an assisted-living facility or a nursing home. Such care can be extremely expensive, with the potential to overwhelm even those families with substantial wealth.

Since neither traditional health insurance nor Medicare will pay for long-term care, you may look to Medicaid to help cover the costs of long-term care. To become eligible for Medicaid, however, you must first exhaust nearly every penny of your savings.

In light of this requirement, you may have heard that if you transfer your house to your adult children, you can avoid selling the home if you need to qualify for Medicaid. You may think transferring ownership of the house will help your eligibility for benefits, and this strategy may seem easier and less expensive than passing on your home (and other assets) through estate planning.

However, this tactic is a big mistake on several levels. It can not only delay—or even disqualify—your Medicaid eligibility, it can also lead to other serious problems. Here’s why: In February 2006, Congress passed the Deficit Reduction Act, which included a number of provisions aimed at reducing Medicaid abuse.

One of these provisions was a five-year “look-back” period for eligibility. This means that before you can qualify for Medicaid, your finances will be reviewed for any “uncompensated transfers” of your assets within the five years preceding your application. If such transfers are discovered, it can result in a penalty period that will delay your eligibility. Any transfers made beyond that five-year window will not be penalized.

The length of the penalty period is calculated by dividing the amount of the uncompensated transfer by the average cost of one month of private nursing home care in the state you live in. These days, the average cost of nursing home care is roughly $10,000 a month. Given these figures, this means that for every $10,000 worth of uncompensated transfers made within the five-year window, your Medicaid benefits will be delayed for one month. So if you transferred the title to a home worth $500,000 within the look-back period, your Medicaid benefits would be delayed for 50 months.

In light of this, if you transfer your house to your children and then need long-term care within five years, it could significantly delay your qualification for Medicaid benefits—and possibly even prevent you from ever qualifying. Rather than taking such a risk, consult with us, your Personal Family Lawyer® to discuss safer and more efficient options to help cover the rising cost of long-term care, such as purchasing long-term care insurance.

2. Your Child Could Be Stuck With A Massive Tax Bill

Another drawback to transferring ownership of your home in this way is the potential tax liability for your child. If you’re elderly, you’ve probably owned your house for a long time, and its value has dramatically increased, leading you to believe that by transferring your home to your child, he or she can make a windfall by selling it. And by transferring the property before you die, you may think that you can save your child both time and money by avoiding the need for probate.

Probate is the court process used to distribute your assets according to the wishes outlined in your will or according to our state’s intestate succession laws if you don’t have a will. Depending on the complexity of your estate, probate can be a long and expensive process for your loved ones; however, that expense is likely to be relatively minor compared to the tax bill your heirs could face.

That’s because if you transfer your home to your child during your lifetime, he or she will have to pay capital gains tax on the difference between your home’s value when you purchased it and the home’s selling price at the time it’s sold by your child. Depending on your home’s value, that tax bill can be astronomical.

In contrast, by transferring your home at the time of your death via your estate plan, your child will receive what’s known as a “step-up in basis.” This tax savings is one of the only benefits of death, and it allows your child to pay capital gains taxes when he or she sells your home, based only on the difference between the value of the home at the time of inheritance and its sales price, rather than paying taxes based on the home’s value at the time you bought it.

For example, say you originally purchased your home for $80,000, and when you die, the home had appreciated in value to $250,000. Your daughter inherits the home upon your death, and then she sells it five years later for $300,000. With the step-up in basis in effect, she would only owe capital gains taxes on the $50,000 of difference between the home’s value when it was inherited and when it was sold.

However, if you transferred ownership of the home to her while you were still living, your daughter would lose the step-up in basis, and would face a capital gains tax bill of $220,000.

Capital gains tax is only one kind of tax that could be impacted by a transfer of your home during your lifetime. You may also destroy valuable property tax basis, which could cause a re-assessment of your home for property tax purposes, depending on the county or state your home is located in.

There are much better ways to avoid probate using estate planning, such as by putting your home into a revocable living trust, in which case your home would immediately pass to your loved ones upon your death, without the need for any court intervention. As your Personal Family Lawyer®, we can help you choose the most advantageous estate planning strategies to minimize your beneficiaries’ tax liability and ensure they get the most out of their inheritance, all while allowing them to avoid court and conflict.

3. Your Home Could Be Vulnerable To Debt, Divorce, Disability, & Death

There are a number of other reasons why transferring ownership of your house to your child is a bad idea. If your child takes ownership of your home and has significant debt, for example, his or her creditors can make claims against the property to recoup what they’re owed, potentially forcing your child to sell the home to pay those debts.

Divorce is another potentially thorny issue. If your child goes through a divorce while the house is in his or her name, the home may be considered marital property. Depending on the outcome of the divorce, the settlement decree may force your child to sell the home or pay his or her ex spouse a share of the home’s value.

The disability or death of your child can also lead to trouble. If your child becomes disabled and seeks Medicaid or other government benefits, having the home in his or her name could compromise their eligibility, just like it would your own. And if your child dies before you and owns the house, the property could be considered part of your child’s estate and end up being passed on to your child’s heirs, leaving you homeless.

There’s Simply No Substitute For Proper Estate Planning

Given these potential risks, transferring ownership of your home to your adult child as a means of “poor-man’s estate planning” is almost never a good idea. Instead, you should consult with us, as your Personal Family Lawyer®, to find alternative solutions. We can help you find much better ways to qualify for Medicaid and other benefits to offset the hefty price tag of long-term care, and at the same time, we will keep your family out of court and conflict in the event of your death or incapacity.

As your Personal Family Lawyer®, we offer a variety of different estate planning packages at a variety of different price points as part of our Life & Legacy Planning Process. With our guidance and support, we will not only help you protect and pass on your home, but all of your family’s wealth and assets, while also enabling you to better afford whatever long-term healthcare services you might require. Contact us today to learn more.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

If you are a mom or dad with children under the age of 18 at home, your number-one estate planning priority should be selecting and legally documenting both long and short-term guardians for your kids. Guardians are the people legally named to care for your children in the event something happens to you.

And if you’ve named guardians for your children in your will—even with the help of another lawyer—your kids could still be at risk of being taken into the care of strangers!

One of the most disturbing aspects of this situation is that you probably have no idea just how vulnerable your kids are, since this is a blind spot inherent to the estate plan of countless parents around the world. Even many lawyers aren’t fully aware of this issue—and that’s because most lawyers simply don’t understand what’s necessary for planning and ensuring the well-being and care of minor children.

Why? Well, most estate planning over the years has been primarily focused on the elderly, not on young families. And until our mentor discovered this hole in the estate plan she had created for her own child, no one had thought about it. You can read all about her discovery, as well as a lot more detail on what to do about it in the book Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents. If you’d like us to send you a free copy of this book, click here to learn how.

Fortunately, whether you’ve named guardians for your kids in your will or have yet to take any action at all, you’ve come to the right place. As your Personal Family Lawyer® firm, we specialize in legal planning for the unique needs of families with minor children, and we can ensure that you have all of the proper legal safeguards in place to make sure that your kids will always be cared for by the people you would want, in exactly the way you would want, should anything ever happen to you.

A Far Too Common Problem

As you’ll learn here, unless you’ve worked with us, a specially trained Personal Family Lawyer® to name guardians for your kids, your children could be vulnerable to being taken out of your home and placed in the care of strangers. This might be temporary, while the authorities figure out what to do, or they could even end up being raised to adulthood by someone you’d never choose.

Even if you don’t have any minor children at home, please consider sharing this article with any friends or family who do—it’s that important. While it’s rare for something to happen to both parents of a minor child, it does occur, and the consequences are simply too severe to not take the few simple steps to select and legally name guardians the right way.

Regardless of whether you own any other assets or wealth, it’s vital to complete this process immediately, so you know the ones you care about most—your kids—will always be in the care of people you’ve chosen, no matter what.

For a quick and easy way to get the legal guardian-naming process started, visit our free website shown below. It’ll only take you 15-20 minutes, and you’ll have legal documentation naming guardians for the long-term, and that’s a great place to start, because no matter what happens, you definitely need that.

⇒ Visit our website to go through these steps and create legal documents naming guardians for the long-term care of your children, absolutely free. Do it here now: https://lawmother.kidsprotectionplan.com/

What’s So Complicated About Naming Guardians?

Naming and legally documenting guardians for your kids might seem like a fairly straightforward process, but it entails a number of complexities most people simply do not think about. Even lawyers with decades of experience typically make at least one of six mistakes when naming long-term legal guardians.

If you named legal guardians for your kids in your will—whether on your own using a do-it-yourself (DIY) online document service or with the help of another lawyer—consider each of the following scenarios to see if you have a blind spot in your estate plan that would leave your kids at risk:

• Did you name back-up candidates in case your first choice of guardian is unable to serve? If so, how many back-ups did you name?
• If you named a married couple to serve and one of them is unavailable due to injury, death, or divorce, what happens then? Would it still be okay if only one of them can serve as your child’s guardian? And does it matter which one it is?
• What would happen if you become incapacitated by illness or injury and are unable to care for your kids? You might assume the guardians named in your will would automatically get custody, but did you know that a will only goes into effect upon your death and does nothing to protect your kids in the event of your incapacity? Have you created a guardianship plan that goes into affect if you become incapacitated?
• Do the guardians you named live far from your home? If so, how long would it take them to make it to your house to pick up your kids: a few hours, a few days, or even a few weeks? Who would care for your kids until those guardians arrive? Did you know that without legally binding arrangements for the immediate care of your children, your kids are likely to be taken into the care of strangers until those named guardians arrive?
• Would your care providers even know where to find your will and other legal documents if you didn’t make it home? If not, what would the authorities do while they tried to figure out who should care for your kids?
• If you named a family who live nearby as guardians, what happens if they are out of town or otherwise can’t get to your kids right away?
• Assuming the guardians you named can immediately get to your home to pick up your kids, do they even know where your will is located? How will they prove they are the people you wanted named as your children’s legal guardians if they can’t find your estate planning documents?

The Kids Protection Plan®

These are just a few of the potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. And if just one of these contingencies were to occur, your children would more than likely be placed into the care of strangers, even if just for a short period of time.

If the idea of this is as frightening to you as it was to me when I discovered it, you need to put the Kids Protection Plan® in place to make sure this never happens to your family. The Kids Protection Plan® was created by a nationally recognized attorney, who is a mom herself, to make 100% certain that her kids would always remain in the loving care of people she knows and trusts and never be raised by anyone she didn’t want. And now, you can put this same plan in place for your kids.

As your Personal Family Lawyer® firm, we have been personally trained by the creator of this plan and the author of the best-selling book, Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents, which was written to help parents address this very issue. As a result of this training, we’re one of the few lawyers in the world licensed to prepare the comprehensive Kids Protection Plan® for your family. In fact, the Kids Protection Plan® is included with every estate plan we prepare for families with young children.

The full Kids Protection Plan® provides parents of minor children with a wide array of legal planning tools—including legal documents to name short- and long-term guardians, instructions for those guardians, medical powers of attorney for your minor children, an ID card for your wallet, and much more—to make sure there is never a question about who will take care of your kids if you are in an accident or suffer some other life-threatening incident.

Get Started Right Away

While you should meet with us to put the full Kids Protection Plan® in place as soon as possible, protecting your children is such a critical and urgent issue, we’ve created the totally free website we mentioned earlier, where you can visit to get your plan started right now.

⇒ If you’ve yet to take any action at all, visit this easy-to-use and 100% FREE website, where you can take the first steps to create legal documents naming long-term guardians for your children. By doing this, you can ensure that should anything happen to you prior to creating your formal estate plan, your kids would be cared for by the people you would want in exactly the way you would want. Get started here now: https://lawmother.kidsprotectionplan.com/

After you’ve completed those initial actions, schedule a Family Wealth Planning Session™ with us, your local neighborhood Personal Family Lawyer®, so we can put the full Kids Protection Plan® in place. From there, we can determine if there is anything else your family might need to ensure the well-being and care of your children no matter what happens.

⇒ If you have already named long-term guardians in your will, either on your own or with a lawyer, we can review your existing legal documents to see whether you have made any of the six common mistakes that could leave your kids at risk, and then revise your plan to ensure your children are fully protected.

Comprehensive Protection For Those You Love Most

While selecting and naming guardians for your minor children should be at the top of your to-do list, when it comes to estate planning, that’s just the start. Once you’ve named guardians, you should seriously consider putting a variety of other estate planning tools, such as a revocable living trust, in place for your kids.

These tools can help ensure that the wealth and assets you want your children to inherit will be passed on in the most effective and beneficial way possible for everyone involved. Meet with us, your neighborhood Personal Family Lawyer® to determine which planning strategies and tools are best suited for your family’s unique situation. Contact us today to get started.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

In today’s highly litigious society you are at near-constant risk for costly lawsuits—even if you’ve done nothing wrong. This is especially true if you have substantial wealth, but even those with relatively few assets can find themselves in court facing a potentially devastating lawsuit.

If you are sued, your traditional homeowners or auto insurance will likely offer you some liability coverage, but those policies only cover you up to a certain dollar amount before they max out, and you can be held personally liable for anything beyond that limit. For this reason, you should consider adding an extra layer of protection by investing in personal liability umbrella insurance.

An Extra Level Of Protection

Umbrella insurance offers a secondary level of protection against lawsuits above and beyond what’s covered by your homeowners, auto, watercraft, and other personal insurance policies. Umbrella policies can cover a wide array of potentially ruinous costs related to a lawsuit, such as medical bills, legal fees, lost wages, court costs, and other expenses.

For example, say you cause a car accident in which multiple people are seriously injured. Their medical bills total $800,000, which exceeds the $250,000 in your auto insurance policy limits. This is where umbrella insurance kicks in. The umbrella policy will pay for the remaining $550,000, as well as your legal expenses if you lose the case. And whether you win or lose, your legal fees would be covered.

But medical bills and legal expenses are only one potential expense you could face. In the above example, let’s say one of the injured parties is a highly paid executive who is unable to work for four months because of their injuries, so in addition to his or her medical bills, the person also sues you for lost wages totalling $80,000. With your auto insurance limits maxed out, you are now on the hook for $630,000, and unless you have umbrella coverage, your personal assets like your home and/or retirement savings could be at risk to cover those costs.

Who Should Have Umbrella Insurance

Umbrella insurance is valuable for anyone who can afford it. Anyone can be sued at any time for anything, which means it’s a particularly good idea if you are engaging in any activity that could leave you liable for a judgment in excess of your policy limits.

If you are sued and a judgment is ordered against you for an amount that exceeds your insurance policy limits, the court can allow the plaintiff to go after your future earnings, potentially garnishing your wages for years. In this regard, umbrella insurance not only protects your current assets but your future assets as well. Additionally, umbrella insurance is especially valuable if you fit into any of the following categories, which generally increases the likelihood of getting sued.

• You have a swimming pool, hot tub, trampoline, playground set, or other potentially hazardous recreational equipment.
• You have dogs, horses, cattle, or other large animals.
• You employ household staff.
• You frequently host large parties or other events in your home.
• You are a well-known public figure.

How Much Coverage Should You Have

Most people will be adequately covered with a $1 million umbrella policy. If you earn more than $100,000 a year or have more than $1 million in assets, you may want to invest in additional coverage. A good rule of thumb is to buy an umbrella policy with coverage limits that are at least equal to your net worth.

What’s more, as mentioned earlier, if you are involved in a particularly large lawsuit, your future income and assets could be a risk as well. So even if you have fairly limited income and assets now, you should consider your future earning potential when purchasing coverage. This is especially important if you plan to go into a highly paid career field, such as medicine, law, or financial management.

How Much Does Umbrella Insurance Cost

Umbrella insurance is fairly inexpensive, especially compared to other types of insurance and how much coverage it offers. Most people can buy a $1 million umbrella liability policy for between $150 and $300 per year, according to the Insurance Information Institute. An additional million in coverage will run you between $75 and $100, and then you are looking at roughly $50 for every million in coverage beyond that.

Umbrella policies are generally inexpensive because they only go into effect after your underlying homeowners, auto, watercraft, or other policy is exhausted. Given this, most insurers require you to have at least $250,000 in liability on your auto policy and $300,000 on your homeowners before they’ll sell you a $1 million umbrella policy.

How To Purchase Umbrella Insurance

You can buy an umbrella policy from the same insurance company you use for your other home and business policies. In fact, some companies require you to purchase all of your policies from them in order to obtain umbrella coverage. If your current insurance company offers umbrella coverage, you may qualify for a discount for bundling all of your policies. Of course, you can also purchase a stand-alone umbrella policy, so shop around for the best rates.

Better Safe Than Sorry

No matter how careful and responsible you may be, accidents happen all the time, and no one is immune to the threat of a potentially devastating lawsuit. To make certain your family’s current and future wealth has the maximum level of protection, consult with us, your Personal Family Lawyer® to determine if umbrella insurance is right for your particular situation.

As your Personal Family Lawyer®, we will evaluate your assets, assess your level of risk, and analyze your current insurance coverage to be sure you have the optimal level of umbrella coverage in place to safeguard your family’s wealth from today’s lawsuit-crazy culture. Contact us today to schedule your appointment.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

As a parent, you’re likely hoping to leave your children an inheritance. In fact, doing so may be one of the primary factors motivating your life’s work. But without taking the proper precautions, the wealth you pass on is at serious risk of being accidentally lost or squandered due to common life events, such as divorce, serious debt, devastating illness, and unfortunate accidents.

In some cases, a sudden inheritance windfall can even wind up doing your kids more harm than good.

Creating a will or a revocable living trust offers some protection for your kid’s inheritance, but in most cases, you’ll be guided to distribute assets through your will or trust to your children at specific ages and stages, such as one-third at age 25, half the balance at 30, and the rest at 35.

If you’ve created an estate plan, check to see if this is how your will or trust leaves assets to your children. If so, you may not have been told about another option that can give your children access, control, and airtight asset protection for whatever assets they inherit from you.

As your Personal Family Lawyer firm®, in our planning process, we always offer parents the option of creating a Lifetime Asset Protection Trust for their children’s inheritance. These unique trusts safeguard your kids’ inheritance from being lost to common life events, such as divorce, serious illness, lawsuits, or even bankruptcy.

But that’s not all they do.

Indeed, the best part of these trusts is that they offer your kids the best of both worlds: 1) airtight asset protection and 2) the ability to use and control their inheritance. You can even provide your heirs with a unique educational opportunity in which they gain valuable experience managing and growing their inheritance. More on all of this below.

Not Only For The Super Rich

Contrary to what you might think, Lifetime Asset Protection Trusts are not just for those with massive wealth. In fact, these trusts are even more useful if you’re leaving a relatively modest inheritance because they can be used to educate your children about how to grow your family wealth, instead of quickly blowing through it.

And without such guidance, most people blow through their inheritance very quickly. In fact, one study found that, on average, an inheritance is totally gone in about five years due to debt and poor investment. Another study found that one-third of people who receive an inheritance actually had a negative savings within just two years.

Not to mention, the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency, lawsuit, or serious accident.

To demonstrate how Lifetime Asset Protection Trusts provide protection to families leaving behind a modest inheritance, here we’ll describe a true story involving a tragic accident. While the following events are entirely true, the individual’s name has been changed for privacy protection.

The Flooded Penthouse

Eric was staying at a friend’s apartment in New York City. The apartment was the penthouse of the building, and Eric decided to run himself a bath. While the bath was running, another friend called and invited Eric to go out with him, which he did.

At about 2 a.m., Eric came back to the apartment and discovered he made a huge mistake and left the bath running when he left the apartment. The resulting flood caused more than $400,000 in damage to the apartment and the one below it.

While there was insurance to cover the damage, the insurance company sued Eric for what’s known as “subrogation,” meaning the company sought to collect the $400,000 they paid out to repair the damage Eric caused to the property.

Because the flood was due to his negligence in leaving the bath running—a simple, but costly mistake—Eric was responsible for the damage. Now here’s where the inheritance piece comes into play and why it’s so important to leave whatever you’re passing on to your heirs in a protected trust. If Eric had received an inheritance outright in his own name, he would have lost $400,000 of it to this unfortunate mishap.

However, if Eric had received his inheritance in a Lifetime Asset Protection Trust, instead of an outright distribution, his money would be completely protected from such a lawsuit—and just about any other threat imaginable.

Don’t Take Any Chances

Regardless of how much financial wealth you have (or don’t have), if you plan to leave your kids anything at all, you should do everything you can to make it more likely that they grow what’s left behind, instead of losing it. This way, your resources can have a truly beneficial effect on their lives—and even the lives of future generations.

A Lifetime Asset Protection Trust can achieve each of those goals and so much more.

Not All Trusts Are Created Equal

When it comes to leaving an inheritance, most lawyers will advise you to place the money in a revocable living trust, which is the right thing to do. However, most lawyers would have you distribute the trust assets outright to your loved ones at specific ages, such as one-third at 25, half of the balance at 35, and the rest at 40. Check your own trust now to see if it does this or something similar.

But giving outright ownership of the trust assets in this way puts everything you’ve worked so hard to leave behind at risk. While a living trust may protect your loved ones’ inheritance as long as the assets are held by the trust, once the assets are disbursed to the beneficiary, they can be lost to future creditors, a catastrophic accident or illness, divorce, bankruptcy—or as in Eric’s case, a major lawsuit.

Rather than risking their inheritance by leaving it outright to your children at certain ages or following certain life events, such as graduating college, you can gift your assets to your children at the time of your death using a Lifetime Asset Protection Trust. When you gift the inheritance to your kids via a Lifetime Asset Protection Trust, the Trustee of the trust owns the assets, not your children.

Therefore, if your kids ever get divorced, file bankruptcy, have a major medical issue, or are ordered to pay damages in a lawsuit, they can’t lose their inheritance because they never owned it in the first place. A Lifetime Asset Protection Trust can be built into a revocable living trust, which becomes irrevocable at the time of your death and holds your loved one’s inheritance in continued protective trust for their lifetime.

Here’s how it works: A Trustee of your choice holds the trust assets upon your death for the benefit of your child or children. Because a Lifetime Asset Protection Trust is discretionary, the Trustee has the power to distribute the assets at their own discretion, instead of being required to release them in a rigid structure. This discretionary power enables the Trustee to control when and how your kids can access their inheritance, so they’re not only protected from outside threats like ex-spouses and creditors, but from their own poor judgment as well.

A Lifetime Of Guidance & Support

Given that distributions from a Lifetime Asset Protection Trust are 100% up to the Trustee, you may be concerned about the Trustee’s ability to know when to make distributions to your child and when to withhold them. Granting such power is vital for asset protection, but it also puts a lot of pressure on the Trustee, and you probably don’t want your named Trustee making these decisions in a vacuum.

To address this issue, you can write up guidelines to the Trustee, providing the Trustee with direction about how you’d like the trust assets to be used for your beneficiaries. This ensures the Trustee is aware of your values and wishes when making distributions, rather than simply guessing what you would’ve wanted, which often leads to problems down the road.

In fact, many of our clients add guidelines describing how they’d choose to make distributions in up to 10 different scenarios. These scenarios might involve the purchase of a home, a wedding, the start of a business, and/or travel. Some clients choose to provide guidelines around how they would make investment decisions, as well. This is something we can support you with if you decide to use a Lifetime Asset Protection Trust.

An Educational Opportunity

Beyond these benefits, a Lifetime Asset Protection Trust can also be set up to give your child hands-on experience managing financial matters, like investing, running a business, and charitable giving. And he or she will learn how to do these things with support from the Trustee you’ve chosen to guide them.

This is accomplished by adding provisions to the trust that allow your child to become a Co-Trustee at a predetermined age. Serving alongside the original Trustee, your child will have the opportunity to invest and manage the trust assets under the supervision and tutelage of a trusted mentor.

You can even allow your child to become Sole Trustee later in life, once he or she has gained enough experience and is ready to take full control. As Sole Trustee, your child would be able to resign and replace themselves with an independent trustee, if necessary, for continued asset protection.

Regardless of whether or not your child becomes Co-Trustee or Sole Trustee, a Lifetime Asset Protection Trust gives you the opportunity to turn your child’s inheritance into a valuable teaching tool. Do you want to give your child the ability to leave trust assets to a surviving spouse or a charity upon their death? Or would you prefer that the assets are only distributed to his or her biological or adopted children? You might even want your child to create their own Lifetime Asset Protection Trust for their heirs.

We offer you a wide variety of options that can be tailored to fit your particular values and family dynamics. Be sure to ask us which options might be best for your particular situation.

Find Out If A Lifetime Asset Protection Trust Is Right For Your Family

Of course, Lifetime Asset Protection Trusts aren’t for everyone. If your kids are going to spend the vast majority of their inheritance on everyday expenses and consumables, they probably don’t make much sense. But if you want the assets you are leaving behind to be invested and grown over the long term, even through their own business or investments, a Lifetime Asset Protection Trust can be immensely valuable.

When you meet with us, your Personal Family Lawyer®, we will work with you to look at your family circumstances and your assets to decide together if a Lifetime Asset Protection Trust is the right option for your loved ones. In the end, it’s not about how much you’re leaving your heirs that matters. It’s about ensuring that what you do pass on is there when it’s needed most and put to the best use possible. Schedule a Family Wealth Planning Session today to learn more.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

Although many strategies to save on your income taxes must be locked in before the end of the year, there are still numerous ways you can reduce your tax bill right up until the filing deadline, which has been pushed back to Monday April 18th due to a holiday on April 15th.

Some of these strategies are time tested and available every year, but with all of the legislative changes made during the past two years to deal with the pandemic, there are also a few opportunities that won’t be around much longer, with some only available this year. While there are dozens of potential tax breaks you may qualify for, here are 7 of the leading moves you can make to save big on your 2021 tax return.

1. Max Out Your Retirement Account Contributions

The lower your income is, the lower your taxes will be, and tax-advantaged retirement plans, such as 401(k)s, 403(b)s, and individual retirement accounts (IRAs), are a great way to reduce your taxable income and save for retirement at the same time. And you have until the April tax-filing deadline to add money to your plan for the previous tax year, so you still have time to contribute.

For those with workplace retirement plans, such as a 401(k), 403(b), and most 457 plans, you can contribute up to $20,500 in 2022, up from $19,500 in 2021. For those 50 and older, you can make an extra catch-up contribution up to $6,500 in 2022 (no change from 2021) for a total contribution of $27,000.

For those with IRAs, both traditional IRAs and Roth IRAs, you can contribute up to $6,000 in both 2021 and 2022, or $7,000 for those 50 or older. However, the ability to deduct your traditional IRA contributions from your taxes comes with certain limitations, depending on whether you or your spouse is covered by a retirement plan at work and your adjusted gross income (AGI). Roth contributions are not tax deductible, since they are made after taxes are taken out; however, withdrawals from a Roth in retirement are tax-free.

Note: RMDs Reinstated For 2021

Although you are typically required to take an annual required minimum distribution (RMD) from your traditional IRA, 401(k), or other tax-advantaged retirement account starting in the year you turn 72, the CARES Act waived the RMD requirement for 2020 due to the pandemic. The waiver also applied if you reached age 70 ½ in 2019, but waited to take your first RMD until 2020.

However, RMDs were reinstated in 2021, so if you are 72 or older, you were required to make a withdrawal from your retirement account before the end of 2021. Similarly, if you reached age 70 ½ in 2019 and your RMD in 2020 was waived, your 2021 RMD was also required to occur by Dec. 31, 2021. And if you reached age 72 in 2021, your 2021 RMD is required to occur by April 1, 2022.

If you failed to distribute the RMD, you may owe a 50% penalty on the amount not distributed. That said, you may be able to avoid the penalty by requesting a waiver from the IRS. You can request a waiver if your failure to take the RMD is due to a reasonable error, and you take steps to make the required distribution. To request a waiver, submit Form 5329 to the IRS, with a statement explaining the error and the steps you are taking to correct it.

2. Contribute To A Health Savings Account

As with tax advantaged retirement plans, if you have a high-deductible health insurance plan, you may be able to reduce your taxable income by contributing to a health savings account (HSA), which is a tax-exempt account you can use to pay medical expenses. The deadline for making a 2021 contribution to your HSA is April 15, 2022.

HSAs offer three different tax breaks: Contributions are tax-deductible, they allow for tax-free growth, and withdrawals are tax-free if they are used to pay for qualified medical expenses.

For 2021, if you had self-only health coverage, you could have contributed up to $3,600. For 2022, the individual coverage contribution limit is $3,650. If you have family coverage, the limit was $7,200 in 2021 and is $7,300 in 2022. And if you’re 55 or older, you can add an extra $1,000 catch-up contribution to your HSA.

To be eligible, you must have a high-deductible health insurance plan with a minimum deductible of $1,400 for self-only coverage or $2,800 for family coverage. The maximum out-of-pocket expenses cannot exceed $7,000 for a self-only plan or $14,000 for a family plan.

3. Claim The New Expanded Child Credit

The American Rescue Plan’s expanded child tax credit was made fully refundable in 2021, and it was increased up to $3,600 per child through age 5, and up to $3,000 per child aged 6 to 17. Dependents who are 18 can qualify for $500 each. Dependents aged 19 to 24 may also qualify, but they must be enrolled in college full-time.

Eligible families automatically received half the total of the payments in advance monthly payments between July and December 2021, unless they opted out. When eligible parents file their taxes in 2022, they’ll get the remainder of the benefit they didn’t receive through advance monthly payments. If you did not receive the advance payments because you opted out or didn’t receive them for some other reason, you can claim the full credit when you file in April.

Because the IRS based these payments on your 2020 tax return, a change in income or the number of qualifying dependents in 2021 could have resulted in an overpayment. If so, you’ll have to pay that back when you file in April.

Even if you made little to no income, you are still eligible for the child tax credit, though payments begin to phase out when your AGI reaches $75,000 for single filers, and $150,000 for joint filers. To find out where you stand with this credit, visit the Child Tax Credit Update Portal on the IRS website.

4. Take The Increased Deduction For Charitable Donations

The CARES Act allowed for up to a $300 deduction per tax return for charitable donations in 2020, even for those taxpayers who don’t itemize. For 2021, this benefit expanded to up to $300 per person.

This means if you are a married couple filing jointly, you could be eligible for up to a $600 deduction for your charitable giving last year, even if you take the standard deduction, which increased to $12,550 for single filers and $25,100 for joint filers in 2021.

5. Claim The Increased Child & Dependent Care Credit

If you care for a child under age 13, or a spouse, parent, or another adult dependent who is unable to care for themselves, you may be able to get up to 50% back as a tax break or refund for your care-related expenses. For 2021, the amount you can claim maxes out at $8,000 for one dependent and $16,000 for two or more.

For 2021 only, this credit is fully refundable, meaning that you can receive money even if you don’t owe taxes. Note that this credit is different from the child tax credit mentioned above, and qualifying for the child tax credit does not affect your eligibility for this credit and vice versa. Learn more about the requirements for the Child and Dependent Care Credit on the IRS website.

6. Claim The American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) provides undergraduate college students or their parents with an annual tax credit up to $2,500 for eligible education expenses incurred during the first four years of college. The credit can be used to cover 100% of the first $2,000 spent on tuition, books, school fees, and other supplies (excluding living expenses or transportation) plus 25% of the next $2,000 for a total of $2,500.

To qualify, the student must be pursuing a degree or credential and be enrolled at least half-time for one academic period (semester, trimester, or quarter) beginning in 2021 or the first three months of 2022. The credit can be claimed for a maximum of four years, and it can be claimed by the student or their parents provided they paid the expenses and the student is listed as a dependent on their tax return.

The full credit is available for individual filers with an AGI of $80,000 or less or $160,000 or less for joint filers. A reduced credit is available for individuals with an AGI over $80,000 but less than $90,000 or over $160,000 but less than $180,000 for joint filers. Taxpayers who earn more than that can’t claim the credit. The credit is partially refundable, so you can still receive 40% of the credit (up to $1,000) even if you had no income or owed no taxes.

7. Claim The Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is another tax credit for qualifying educational expenses, but it’s slightly different from the American Opportunity Credit. The credit can be used to cover 20% of the first $10,000 spent on tuition and school fees for a maximum of $2,000. Unlike the AOTC, the LLC does not generally cover books or other supplies (unless those books or supplies were required to be purchased to take the course), and it also does not cover living expenses or transportation.

The LLC is not just for undergraduates; it applies to undergraduate, graduate, and non-degree or vocational students, and there’s no limit on the number of years you can claim it. To qualify for the LLC, the student must be enrolled in at least one course for an academic period beginning in 2021 or the first three months of 2022. The credit can be claimed by the student or their parents provided they paid the expenses and the student is listed as a dependent on their tax return.

The full credit is available for individual filers with an AGI of less than $59,000 or less than $118,000 for joint filers. A reduced credit is available for individuals with an AGI between $59,000 and $69,000 or between $118,000 to $138,000 for joint filers. Those who earn more than $69,000 or $138,000 can’t claim the credit.

The LLC is not refundable, so you can use the credit to pay any taxes you owe, but you won’t get any of the credit back as a refund. Additionally, you can’t claim both the American Opportunity Tax Credit and the Lifetime Learning Credit in the same year.

Maximize Your Tax Savings for 2021

These are just a few of the tax breaks available for 2021. There are plenty of other deductions and credits that your family might qualify for depending on your circumstances. Meet with us, your Personal Family Lawyer®, to make certain you don’t miss out on a single one. Contact us today to schedule your appointment.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

Unless you’ve created an estate plan that works to keep your family out of court, when you die (or become incapacitated) many of your assets must go through probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate—and keeping your family out of court—is often a central goal of estate planning.

To spare your loved one’s the time, cost, and stress inherent to probate, last week in part one of this series, we explained how the probate process works and what it would entail for your loved ones. Here in part two, we’ll discuss the major drawbacks of probate for your family, and outline the different ways you can help them avoid probate with wise planning.

What’s At Stake For Your Family

Probate court proceedings can take months, and sometimes even years, to complete. In the immediate aftermath of your death, that’s the last thing you likely want your loved ones to have to endure. And the cost of their time and emotional strain are just the start of the potentially devastating consequences your family could face if you don’t plan ahead.

Without easy and immediate access to your assets, your family could face serious financial hardship at a time when they need the most support. Not only that, but to help them navigate the legal proceedings, your loved ones will almost certainly need to hire a lawyer, which can result in hefty attorney’s fees and the real risk of them hiring a lawyer who is uncommunicative, which only creates more stress for them. All of that is on top of the court costs, executor’s compensation, and all of the various other administrative expenses related to probate. By the time all of those costs have been paid, your estate could be totally wiped out, or at the very least, seriously depleted.

Another drawback of probate is the fact that it’s a public process. Whether you have a will or not, all of the proceedings that take place during probate become part of the public record. This means that anyone who’s interested can learn about the contents of your estate, who your beneficiaries are, and what they will inherit, which can set them up as potential targets for scammers and frauds.

Probate also has the potential to create conflict among your loved ones. This is particularly true if you have disinherited someone or plan to leave significantly more money to one relative than the others, in which case, a family member may contest your will. And even if those contests don’t succeed, such court fights will only increase the time, expense, and strife your family has to endure.

How To Avoid Probate

Before we discuss the more advanced ways you can use estate planning to allow your loved ones to avoid probate, it’s important to point out that not all of your assets will have to go through the probate process—and that’s true even if you don’t have any estate plan at all.

Assets That Do Not Require Probate: Certain assets, such as those with beneficiary designations like 401(k)s, IRAs, and the proceeds from life insurance policies, will pass directly to the individuals or organizations you designated as your beneficiary, without the need for any additional planning.

The following are some of the most common assets that use beneficiary designations and therefore, bypass probate:

• Retirement accounts, IRAs, 401(k)s, and pensions
• Life insurance or annuity proceeds
• Payable-on-death (POD) bank accounts
• Transfer-on-death (TOD) property, such as bonds, stocks, vehicles, and real estate

Outside of assets with beneficiary designations, other assets that do not go through probate include assets with a right of survivorship, such as property held in joint tenancy, tenancy by the entirety, and community property with the right of survivorship. These assets automatically pass to the surviving co-owner(s) when you die, without the need for probate.

However, it’s critical to note here that if you name your “estate” as the beneficiary of any of these assets, those assets will go through probate before being distributed. The same goes if you overlook a beneficiary designation, or if you die at the same time as a joint property owner—each of those assets will also go through probate, even though they have beneficiary designations.

In addition, we generally recommend that you do not rely on beneficiary designations to handle the distribution of your assets. These designations give you little to no control over how your assets are distributed, and they can result in negative outcomes you did not intend, especially if you have a blended family with children from a prior marriage or if you have no children at all.

Although there are several different types of assets that automatically bypass probate, the majority of your assets will require slightly more advanced levels of planning to ensure your loved ones can immediately access them, without the need for any court proceedings in the event something happens to you. The primary estate planning tool for this purpose are trusts.

Avoiding Probate With A Revocable Living Trust

Trusts are a popular estate planning tool for avoiding probate. Although there are a variety of different types of trust, the most commonly used trust for probate avoidance is a revocable living trust, also called a “living trust.”

A trust is basically a legal agreement between the “grantor” (the person who puts assets into the trust) and the “trustee” (the person who agrees to manage those assets) to hold title to assets for the benefit of the “beneficiary.” With a revocable living trust, this agreement is typically made between you as the grantor and you as the trustee for the benefit of you as the beneficiary. You act as your own trustee during your lifetime, and then you name someone as a “successor trustee” to take over management of the trust when you die or in the event of your incapacity.

It might seem odd to make an agreement with yourself to hold title to assets for yourself in order to benefit yourself. Yet by doing so, you remove those assets from the court’s jurisdiction in the event of your incapacity or when you die. Instead, those assets transfer to your successor trustee, without any court intervention required.

At that point, your successor trustee is responsible for managing the trust assets and eventually distributing them to your beneficiaries, according to the terms you spell out in the trust agreement. This is how a trust avoids probate, saving your family significant time, money, and headache.

The Key Benefits Of A Living Trust

Unlike a will, if your trust is properly set up and maintained, your loved ones won’t have to go to court to inherit your assets. Instead, your successor trustee can immediately transfer the assets held by the trust to your loved ones upon your death or in the event of your incapacity. And since you can include specific instructions in a trust’s terms for how and when the assets held by the trust are distributed to a beneficiary, a trust can offer greater control over how your assets are distributed compared to a will.

For example, you could stipulate that the assets can only be distributed upon certain life events, such as the completion of college or marriage, or when the beneficiary reaches a certain age. In this way, you can help prevent your beneficiaries from blowing through their inheritance and offer incentives for them to demonstrate responsible behavior. And as long as the assets are held in trust, they’re protected from the beneficiaries’ creditors, lawsuits, and divorce—which is something else wills don’t provide.

Finally, trusts remain private and are not part of the public record. So, with a properly funded trust, the entire process of transferring ownership of your assets can happen in the privacy of us, your Personal Family Lawyer®’s office, not a courtroom, and on your family’s time.

Transferring Assets Into A Living Trust

For a trust to function properly, it’s not enough to simply list the assets you want the trust to cover. When you create your trust, you must also transfer the legal title of any assets you want to be held by the trust from your name into the name of the trust. Retitling assets in this way is known as “funding” a trust.

Funding your trust properly is extremely important, because if any assets are not properly funded to the trust, the trust won’t work, and your family will have to go to court in order to take ownership of that property, even if you have a trust. In light of this, it’s critical to work with us, your Personal Family Lawyer® to ensure your trust works as intended.

While many lawyers will create a trust for you, few will ensure your assets are properly inventoried and funded into your trust, and then ensure the inventory of your assets is kept up-to-date as your life and assets change over time. As your Personal Family Lawyer®, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This will keep your assets from being lost, as well as prevent your family from being inadvertently forced into court because your plan was never fully completed.

Living Trusts, Taxes, Creditors, & Lawsuits

When you create a revocable living trust, you are free to change the trust’s terms or even completely terminate the trust at any point during your lifetime. Because you retain control over the assets held by a living trust during your lifetime, those assets are still considered part of your estate for estate tax purposes. Similarly, assets held in a living trust are not protected from your creditors or lawsuits during your lifetime. This is an important and often misunderstood point.

Again, a revocable living trust does not protect your assets from creditors or lawsuits, and it has no impact on your income taxes. However, as mentioned earlier, as long as the assets are held by a living trust or a Lifetime Asset Protection Trust, those assets can be protected from your beneficiaries’ creditors, lawsuits, and even divorce settlements. Be sure to ask us about the different trust-based estate planning options we offer to find one that’s best suited for your particular situation.

The primary benefit of a living trust is to pass your assets to your loved ones without any need for court or government intervention, and to ensure your assets pass in the way you want to the people you want.

Life & Legacy Planning: Do Right By Those You Love Most

Although a living trust can be an ideal way to pass your wealth and assets to your loved ones, each family’s circumstances are different. This is why us, your local Personal Family Lawyer® will not create any documents until we know what you actually need and what will be the most affordable solution for you and your family—both now and in the future—based on your family dynamics, assets, and desires.

The best way for you to determine which estate planning strategies are best suited for your situation is to meet with us, your local Personal Family Lawyer® for a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this process, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.

Sitting down with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. As your Personal Family Lawyer® firm, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

Unless you’ve created a proper estate plan, when you die many of your assets must first pass through the court process known as probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate—and keeping your family out of court—is a central goal of most estate plans.

During probate, the court supervises a number of different legal actions, all of which are aimed at finalizing your affairs and settling your estate. Although we’ll discuss them more in-depth below, probate typically consists of the following processes:

• Determining the validity of your will (if you have one).
• Appointing an executor or administrator to manage the probate process and settle your estate.
• Locating and valuing all of your assets.
• Notifying & paying your creditors.
• Filing & paying your taxes.
• Distributing your assets to the appropriate beneficiaries.

In most cases, going through all of these steps is a real pain for the people you love. It’s expensive, can take a long time, and be highly inconvenient, and sometimes, even downright messy.

By implementing the right estate planning strategies, however, you can help your loved ones avoid probate all together—or at least make the process extremely simple for them. To spare your family from the time, cost, and stress inherent to probate, here in this two-part series, we’ll first explain how the probate process works and what it would entail for your loved ones, and then we’ll outline the different ways you can avoid probate with wise planning.

When Probate Is Required

As mentioned previously, if you fail to put in place a proper estate plan, your assets must go through probate before they can be distributed to your heirs. In general, this includes those individuals who have no estate plan at all, those whose estate plan consists of a will alone, and those who have a will that’s deemed invalid by the court.

It’s important to point out that even if you have a will in place, your loved ones will still be required to go through probate upon your death. Therefore, if you want to keep your family out of court and out of conflict when you die, you cannot rely solely on a will, and you’ll need to put in place additional estate planning vehicles, which we will cover in further detail later.

If you die without a will, it’s known as dying intestate, and in such cases, probate is still required to pay your debts and distribute your assets. However, since you haven’t expressed how you wish your estate to be divided among your heirs, your assets will be distributed to your closest living relatives based on our state’s intestate succession laws. These laws typically give priority to spouses, children, and parents, followed by siblings and grandparents, and then more distant relatives. If no living heirs can be found, then your assets go to the state.

Some states allow estates with a relatively low value to bypass probate and use an abbreviated process to settle the estate. For example, Texas law allows estates with a total value of less than $75,000 to skip probate. In those cases, beneficiaries can claim the estate’s assets using simpler legal actions, such as by filing an affidavit or other form.

Additionally, when an individual’s debts exceed the value of their assets, or a person has no assets at all, probate is often not initiated, and the estate is settled using alternative legal processes.

How Probate Works

How probate plays out is largely determined by whether or not you had a valid will in place at the time of death. However, even in cases where no will exists, or the will is deemed invalid, the probate process is quite similar. Indeed, once the court appoints someone to oversee the probate process on your behalf, the process unfolds in a nearly identical manner, regardless if you had a will or not.

1. Authenticating The Validity Of Your Will: Following your death, your executor is responsible for filing your will and death certificate with the court, and this initiates the probate process. From there, the court must authenticate your will to ensure it was properly created and executed in accordance with state law, and this may involve a court hearing.

Notice of the hearing must be given to all of the beneficiaries named in your will, along with all potential heirs who would stand to inherit under state law in the absence of a will. This hearing gives these individuals the opportunity to contest the validity of your will in order to prevent the document from being admitted to probate.

For example, someone might contest your will on the grounds that it was improperly executed (signed, witnessed, and/or notarized) as required by state law, or someone might claim that you were unduly influenced or coerced to change your will. If such a contest is successful, the court declares your will invalid, which effectively means the document never existed in the first place.

2. Appointing The Executor Or Administrator: If you created a will, the court must formally appoint the person you named in your will as your executor before they can legally act on your behalf. If you died without a will, the court will appoint someone—typically your closest living relative—to serve in this role, known as your personal representative or administrator.

In some cases, the court might require your executor to post a bond before they can serve. The bond functions as an insurance policy to reimburse the estate in the event the executor makes a serious error during probate that financially damages the estate.

3. Locating & Valuing Your Assets: Once probate begins, the executor must identify, locate, and take possession of all of your assets, so they can be appraised to determine the total value of your estate. This includes not only those assets listed in your will and other estate planning documents, but also those you may have not included in your estate plan. This is why keeping a regularly updated inventory of your assets is so important.

Any assets the executor is unable to locate will end up in our state’s Department of Unclaimed Property. Across the U.S., there is more than $58 billion (yes, that’s billion with a ‘b’) of assets stuck in state Departments of Unclaimed Property. Fortunately, this is easy to prevent when you work with us. As your Personal Family Lawyer®, we will not only help you create a comprehensive asset inventory, we will make sure this inventory stays updated throughout your lifetime.

In the case of real estate, although the executor is not expected to actually move into your home or other residence, he or she is required to ensure that your mortgage, homeowners insurance, and property taxes are paid while probate is ongoing. These and all other debts can be paid from your estate.

Once all of your assets have been located, the executor must determine their value, which is typically done using financial statements and/or appraisals. From there, the combined value of all of your assets is used to estimate the total value of your estate.

4. Notifying & Paying Your Creditors: To ensure all of your outstanding debts are paid before your assets are distributed, the executor must notify all of your creditors of your death. In most states, any unknown creditors can be notified by publishing a death notice with your local newspaper.

Creditors typically have a limited period of time—usually one year—after being notified to make claims against your estate. The executor can challenge any creditor claims he or she considers invalid, and in turn, the creditor can petition the court to rule on whether the claim must be paid.

From there, valid creditor claims are then paid. The executor will use your estate funds to pay all of your final bills, including any outstanding medical and funeral expenses.

5. Filing & Paying Your Taxes: In addition to paying all of your outstanding private debts, the executor is also responsible for filing and paying any outstanding taxes you owe to the government at the time of death. This includes personal income and capital-gains taxes, as well as state and federal estate taxes, if your estate is valuable enough to qualify.

That said, the federal estate tax exemption is currently set at $11.7 million for individuals and $23.4 million for married couples, so most families won’t have to worry about estate taxes. And for those who do exceed that threshold, there are several strategies you can use to reduce the size of your estate to avoid these taxes.

Any taxes due are paid from estate funds. In some cases, this may require liquidating assets to raise the needed cash. As your Personal Family Lawyer®, we will not only support you during your lifetime to implement tax-saving strategies to minimize your tax bill, but we will also work with your loved ones following your death in the same capacity to ensure the wealth and legacy you’ve built provides the maximum benefit to those you leave behind.

6. Distribution Of Your Remaining Assets: Once the court confirms all of your debts and taxes have been paid—which typically requires the executor to file an accounting of all transactions he or she engaged in during the probate process—the executor can petition the court for authorization to distribute the remaining assets in your estate to the beneficiaries named in your will, or according to state intestate succession laws, if you didn’t have a will.

Once all assets have been distributed, the executor must file a petition with the court to close probate. If all creditors and taxes have been paid, your assets have been distributed, and there are no other outstanding issues to be addressed, the court will issue an order formally closing the estate and terminating the executor’s appointment.

Keep Your Family Out Of Court & Out Of Conflict

As your Personal Family Lawyer® firm, one of our primary goals when creating your estate plan is to keep your family out of court and out of conflict no matter what happens to you. Yet, as you can see, if your family has to go through probate, your estate plan falls woefully short of that goal, leaving those you love most stuck in an unnecessary, expensive, time-consuming, and public court process.

Fortunately, it’s easy for you to spare your family the burden of probate with proactive planning. Next week, we’ll look at the ways you can do just that in the second part of this series. Until then, if you haven’t put an estate plan in place or have one that would force your family to go through probate, work with us, your Personal Family Lawyer® for a Family Wealth Planning Session.

Next week, in part two, we’ll discuss the estate planning strategies that you can use to avoid the need for your loved ones to go through probate.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

Over just the last two years, we’ve seen historic levels of damage caused by natural disasters in the U.S. From blizzards in Texas and wildfires in California to hurricanes in Louisiana and tornados in the Midwest, few regions of the country are immune to such catastrophes. And based on the latest data from the United Nations World Meteorological Organization (WMO), things are only going to get worse.

The WMO found that climate change has helped drive a five-fold increase in the number of weather-related disasters in the last 50 years, and these calamities are getting more severe each year. As a result of climate change, weather records are being broken all the time, turning previously impossible events into deadly realities.

Despite this threat, a majority of homeowners lack the insurance coverage needed to protect their property and possessions from such calamities. Roughly 64% of homeowners don’t have enough insurance, according to a 2020 report from CoreLogic, the nation’s largest source of property and housing data. One major factor contributing to this lack of coverage is the mistaken belief that homeowners insurance offers adequate protection from natural disasters.

In truth, however, much of the damage caused by natural disasters is not covered by a standard homeowners policy. To fully protect your home and other property, you often need to purchase a separate policy or endorsement that covers specific types of natural disasters. To help you get the proper coverage, here we’ve highlighted the various types of insurance available and explained what these policies typically will—and won’t—cover.

Wildfires

Although homeowners insurance typically doesn’t pay for damage caused by natural disasters, most policies do cover fire damage, including wildfires like the recent ones that have devastated the West. Generally, the only instances of fire damage a homeowners policy won’t cover are fires caused by arson or when fire destroys a home that’s been vacant for at least 30 days when the fire occurred.

That said, not all homeowners policies are created equal, so you should review your policy to make certain that it includes enough coverage to do three things: replace your home’s structure, replace your belongings, and cover your living expenses while your home is being repaired, known as “loss-of-use” coverage.

What’s more, in certain areas that are extremely high-risk for wildfires, it can be quite difficult to find a private company to insure your home. In such cases, you should look into state-sponsored fire insurance, such as California’s FAIR Plan.

Earthquakes

Unlike fires, earthquakes are typically not covered by homeowners policies. To protect your home against earthquakes, you will need a freestanding earthquake insurance policy. And contrary to popular belief, Californians aren’t the only ones who should have such coverage.

Most parts of the U.S. are at some risk for earthquakes. In fact, the U.S. Geological Survey found that between 1975 to 1995, earthquakes occured in every state except Florida, Iowa, North Dakota, and Wisconsin. To gauge the risk in your region, consult with the Federal Emergency Management Agency’s (FEMA) earthquake hazard maps.

While earthquake insurance is available just about everywhere, policies in high-risk areas typically come with high deductibles, ranging from 10% to 15% of a home’s total value. Additionally, though earthquake insurance covers damage directly caused by the quake, some related damage, such as that caused by flooding, will likely not be covered. Carefully review your policy to see what’s included—and what’s not.

Floods

Though homeowners insurance generally covers flood damage caused by faulty infrastructure like leaky or broken pipes, nearly all policies exclude flood damage caused by natural events like heavy rain, overflowing rivers, and hurricanes. To protect your property and possessions from these events, you’ll need stand-alone flood insurance.

The threat from flooding is so widespread, Congress created the National Flood Insurance Program (NFIP) in 1968, which allows homeowners in flood-prone areas to purchase flood insurance backed by the federal government. In some coastal regions, especially where hurricanes are prevalent, you might even be required by law to have flood insurance for your home. To determine the risk for your property, consult FEMA’s Flood Maps.

Even if you live in a location where flood insurance isn’t required, you may want to consider buying it anyway. That’s because 90% of all natural disasters include some form of flooding, and more than 20% of flood-damage claims come from properties outside high-risk flood zones. Given how commonplace flood damage can be, you should carefully consider whether or not such coverage is warranted in your area.

Hurricanes & Tornadoes

Most homeowners policies do provide coverage for wind-related damage. However, whether or not a policy covers such claims often depends on the type of storm that caused the damage. For example, wind damage from tornadoes and even some tropical storms is typically covered, while wind damage from hurricanes generally requires a separate windstorm policy, or in some cases, a hurricane rider.

Because damage from hurricanes is often measured in the billions, windstorm policies usually have high deductibles, and they are frequently based on a percentage of your home’s value, instead of a fixed dollar amount. Some policies also come with a cap on coverage, so be sure to review exactly what type and amount of coverage your policy offers.

Of course, high winds aren’t the only threat posed by hurricanes. These tropical systems often cause severe flooding, which is typically the storm’s most damaging element. But as mentioned earlier, whether it’s caused by a hurricane or a tornado, flooding is generally not covered by homeowners insurance. For flood protection, you’ll need to purchase a separate flood insurance policy through the NFIP.

Be Ready To Go: Pack A Go-Bag

Beyond having the right insurance, if your family is forced to evacuate your home in the event of a natural disaster, you’ll need important documents and supplies on-hand to recover in the wake of the catastrophe. We recommend you take a cue from the U.S. military, which requires its members to always have a “go-bag” ready and packed with the essential items needed to survive for at least three days following a disaster or other emergency.

In addition to clothes, toiletries, medications, and food, your go-bag should include copies of your passport, birth certificate, driver’s license, state ID card, and/or other essential identification. Other documents to pack include the deed to your home if you have one on-hand, copies of your insurance policies, the original copy of your will (if your lawyer isn’t already storing it for you in a fireproof safe), vehicle titles/registration, and a recent family photo with faces clearly visible for easy identification.

While all of your estate planning documents should be included in your go-bag, having your medical power of attorney and living will readily accessible is especially critical for medical emergencies. Without these documents, doctors and other medical professionals won’t know your wishes for treatment or which of your loved ones should help them make decisions in the event of your incapacity from illness or injury, which is all the more likely during a disaster scenario.

To make everything as portable as possible, download your estate plan and other important documents to a flash drive you can carry in your go-bag, and upload additional copies to the cloud.

Finally, make sure your family knows about your go-bag and estate planning documents—as well as how to find them. Even if you have all of the necessary legal documents in place, they won’t do you any good if your loved ones don’t know about them or can’t quickly locate them during an emergency. You might even want to keep your go-bag near your home’s primary exit, so you or someone else can grab it on the way out the door.

Preserving Your Family’s Most Precious Mementos

Obviously, not all of your family’s belongings can be replaced, so you should take additional precautions to safeguard your most precious sentimental items: photo albums, home videos, old letters, family histories, and treasured cards from the past. Since you won’t have the time or space to pack these items in your go-bag, we recommend you make digital copies of these keepsakes and store them in the cloud.

As your Personal Family Lawyer®, we are keenly aware of the priceless value these items represent, and we believe safely storing your sentimentals online is so important we offer this as a service to all of our clients. Be sure to ask us how we can help you preserve your family’s most precious mementos.

Protect Your Home & Family Today

To make certain that you have the proper insurance and other estate planning documents in place to protect your home, family, and belongings from the ever-increasing threat posed by natural disasters, consult with us, your Personal Family Lawyer®. We’ll help you evaluate the specific risks for your area, assess the value of your home and other assets, and support you to obtain the proper insurance and estate planning vehicles to fully safeguard you and your loved ones from every possible emergency. Call us today to get started.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.

Whether you’ve met with an estate planning lawyer before or it’s your first time, it’s important to understand how working with us, your Personal Family Lawyer® is different from meeting with a traditional lawyer.

Here we will explain what’s involved with our process, in hopes that it will inspire you to meet with us, your Personal Family Lawyer® and get clear on what your family needs you to have in place, so you don’t leave behind a mess if you become incapacitated or when you die. We promise to help you make the wisest, most affordable, most effective, time-saving plan for yourself and the people you love.

Meeting With A Traditional Lawyer

Given the unique approach of Personal Family Lawyer® firms, an initial consultation with our firm is quite different from an initial consultation with a typical estate planning attorney. A typical “initial consultation” would be a meet-and-greet-type of meeting, in which the lawyer describes the various legal documents you need to put in place and quotes you a fee to provide those documents.

In those types of meetings, it will likely be quite difficult for you to know exactly what you need for your unique family situation, assets, and how to make the right decision, outside of simply considering whether the cost of these documents fits within your budget. Deciding what you need based solely on the cost of documents will likely lead to you receiving a set of documents that won’t serve and protect your family or your assets when they need the most support.

Unfortunately, we’ve seen it all too often: You have the best of intentions to do the right thing and get a will or trust in place, but you either don’t do it, don’t complete it, or work with a lawyer who puts in place a documents-only plan that is little more than what you could do yourself online through an online document service. And then you become incapacitated or die, and your family is left with a mess: They don’t know where your assets are, they don’t know who to turn to, your documents are out-of-date, and your loved ones are lost, confused, and grieving all at once.

We’ve designed our entire process, which we call Life & Legacy Planning, to support an entirely different reality—one in which you use the estate planning process to not only leave behind a plan for the people you love, but to make your life even better right now. Let me explain how we do that.

Family Wealth Planning Session™

As your Personal Family Lawyer® firm, our entire process is designed to support you to make the right decisions for yourself and the people you love during your life and to leave a legacy of support and love to the people you care about most.

In service to that, our initial meeting with you is a two-hour working session, called a Family Wealth Planning Session. During this session, you’ll educate us on everything you own and all of your family dynamics, and we’ll educate you on how the law would apply to you, your assets, and your family in the event of your incapacity or death. Then, together we will create a plan for how to structure your affairs, how you’d like to have your family supported, and how to keep track of your assets, so your family never feels lost, confused, or alone during a time of grief. And by the time you leave the Session, you’ll feel relieved, cared for, and more clear than you’ve ever been about how to make life choices in alignment with the legacy you desire to leave, as a parent, as a business owner or professional, and as the CEO of your life.

This Planning Session is $750. But if you’d like us to waive this fee, we will do so if you are willing to do a bit of homework ahead of time. This homework is a critical part of the planning process, and it will benefit your loved ones whether you engage in a full plan with us or not. The homework will guide you to find everything you own, and document it, using our Personal Resource Map: Family Wealth Inventory and Assessment.

Just completing this initial assessment will likely get you more financially organized than you’ve ever been before.

We are consistently surprised to see that many of our clients do not have a clear awareness of what they own or how to locate all of their assets. And if you don’t know what you have and where it is and you haven’t documented it, how will your family know? This is exactly why there is more than $58 billion (yes, that’s billion with a “b”) of lost and unclaimed assets held by state and federal agencies in the U.S. This happens when you become incapacitated or die, and your family is unable to find or simply overlooks assets you’ve worked so hard to create because most people fail to properly inventory their assets and/ or keep that inventory regularly updated. So we support you to start there.

We know you haven’t devoted years of your precious time and energy to build your family wealth only for your heirs to lose track of it when something happens to you. That’s one reason the Family Wealth Planning Session is so beneficial. Whether you decide to create a full estate plan or just rework the one you have, after working with us, at the very least your family will know what you have and how to locate it should anything happen to you.

And if you do decide to create an estate plan or redesign an existing plan with us, the Family Wealth Planning Session will guide you to choose the type of plan you want based on your budget, what’s most important to you, what’s not important to you, and with a clear understanding of the impact of your choices. We will guide you to choose the most affordable and effective planning solution for your life and the people you love, so you can get your affairs in order and keep them that way throughout your lifetime and through all of life’s changes.

This investment of your time now will save your family countless hours of heartache and work down the road, while also keeping your loved ones out of conflict and out of court. If you choose to work with us, you’ll get the peace of mind that comes with knowing you never have to make another financial or legal decision without our guidance again. And if and when something happens to you, your loved ones will get the same type of trusted advisor, who will be there for them when you can’t be.

Death is unavoidable. But you can make it far easier on the people you love by the choices you make now. And facing the reality of this fact allows you to make choices that will let you enjoy your current life even more. In fact, our clients often report a huge sense of relief after meeting with us, and they frequently say they wished they’d created a life and legacy plan sooner.

Life & Legacy Planning

You see, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning.

As your Personal Family Lawyer®, we are specially trained to educate, empower, and support you to make the right decisions for your life and for the people you love. Furthermore, because your plan will be designed to provide for your loved ones in the event of your death or incapacity, we aren’t just here to serve you—we’re here to serve your entire family.

In the end, your Life & Legacy Plan goes far beyond simply creating documents and then never seeing us again. We will develop a relationship with you and your family that lasts not only for your lifetime but for the lifetime of your children and their children if that’s your wish. And this all starts with our Family Wealth Planning Session. If you’d like to learn more about this process or schedule your appointment, contact us, your Personal Family Lawyer® today.

This article is a service of a Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. Are you ready to protect your loved ones and legacy? Check out my next presentation.