When sibling, children and grandchildren start to enter the mix, along with such things as deaths or divorces, the structure of ownership within a business can start to muddy.
]]> Proper succession planning is vital in these situations to ensure that key leadership positions are filled once the original business founder has passed away or walked away from his or her work life. When business owners fail to do this, they're essentially leaving the livelihood of their business up to chance once they are gone.In many family businesses, the owner thinks that the succession plan must include family members in key positions. While this might appease the emotional side of things, sometimes certain people simply do not have the skills to proficiently hold a certain position. The owner must take the emotion out of the equation and pick successors that are qualified to help the business continue to thrive.
This could mean that a business goes from being strictly a family affair to bringing in outside people to take over key positions.
Other business owners want to be fair to their families and divvy up management responsibilities amongst their offspring or family members.
A business can only thrive with a clearly defined blue print of power and trying to put too many people in a leadership role is simply welcoming upheaval within the business. There are other ways that a business owner can be fair to his or her family like by granting them equal stake in the company.
Source: Southern Business Journal, "Succession planning vital for family business," Garrett Reuter, May 1, 2012
]]>For those that choose to tackle this sometimes-complicated manner, one slip up could cost a lot. This is why turning to the Internet or other methods of do-it-yourself estate planning can be a bad idea.
]]> As the evolution of technology continues to crawl along, more and more people are confident they can secure their estate plans using online resources rather than an estate planning professional.While these websites can certainly offer a man or woman the appropriate documentation, they lack the advice that an estate planning attorney can offer. Everyone's situation is different and requires different estate planning methods. Estate planning websites just offer one cookie-cutter method and provide the documents to aid in the process.
Whether planning an estate with, or without, an attorney, people make a common batch of mistakes. One major mistake comes when a man or woman does not regularly review beneficiary designations or titling assets on a regular basis. These are tied to things like 401(k)s, IRAs and company plans. The beneficiaries listed on these assets will inherit them no matter what a living will says. That is why it is important to make sure the appropriate beneficiaries are tied in with them.
Having a plan in place is important. If a man or woman passes away without any documentation to direct their assets, they will be handled by the state. All assets will be dictated by that state's inheritance laws. There is a slight possibility that the assets will transfer to the right hands, but there is no valid reason for leaving it to chance.
Source: Forbes, "7 major errors in estate planning," Rob Clarfeld, April 25, 2012
]]>Many state officials, including those in Florida, have accused life insurance providers of not putting in an effort to locate beneficiaries who are in line for money once the policyholder has passed on. In fact, the Florida Insurance Commissioner claimed that insurance companies owed beneficiaries at least $1 billion combined, but also added that the total may actually be as much as several billion dollars.
]]> Investigations into these claims proved there is some merit to them. Generally, insurance providers do not keep tabs on policyholders and leave it up to the beneficiary to determine when their loved one has died and if they are entitled to money. This is especially unacceptable as insurance providers could turn to the Social Security Administration's Death Master File to help determine the status of policyholders. This system tracks almost all of the deaths in America from the previous 75 years.Officials that regulate the industry ordered that insurance providers use the Death Master File, but in November of last year, the Social Security Administration announced that it would not longer update the file in fear the system could be compromised by identity thieves.
Luckily for beneficiaries, one of the largest public data providers and will take a list of policyholders and cross reference it with over 10,000 sources to determine which of them has died. This will help beneficiaries get the money they rightfully deserve in a shorter period of time.
Source: FOX Business, "LexisNexis helps life insurers search for missing beneficiaries," Ed Leefeldt, April 16, 2012
]]>Estate planning is a process that couples can choose to take on together or separately, depending on what they are hoping to achieve and how well they are at communicating with each other. Acting together or by yourself has its share of advantages.
]]> For instance, if a couple hires one estate planning lawyer to represent both of them, that couple would be able to save money and work more efficiently. Without going back and forth from one lawyer to the other, couples will be expected to communicate efficiently and work together to brew up an estate plan that appeases both sides.When this simply cannot happen, it is better that each spouse hires his or her own legal representation. This way, both sides can bluntly state their wishes and concerns without having to worry about what the other side thinks. An individual knows their personal best interests will be served if they get their own lawyer.
Having separate legal representation is often an appropriate route for blended families where many different interests are at stake. Some suggestions that a couple might want to seek separate estate planning lawyers are when:
These are scenarios where both sides may not see eye-to-eye on key estate planning issues and could benefit from separate estate planning assistance.
Source: Forbes, "Estate planning for couples: Should it be a solo or a duet?," Deborah L. Jacobs, April 10, 2012
]]>Nevertheless, many people inherit property, money and other assets. From a beneficiary's prospective, the key to managing these key estate planning tools is learning how to use them responsibly and not treat it as found money reserved for spending on frivolous purchases.
]]> Baby boomers in particular are in line to inherit a combined $8 trillion from their parents. Much of this money -- roughly a quarter -- has already been paid out.According to data collected by the Center for Retirement Research at Boston College, the median inheritance reaped by baby boomers is around $64,000. Some of the wealthiest baby boomers, however, will bring in an average of $1.5 million. Unfortunately for non-baby boomers, the tough economic climate has generally taken a bite out of their future inheritances for now.
Regardless, these are significant amounts of money, and are left to the beneficiaries for a reason. They must then tackle the task of incorporating this money into their existing financial plans.
Many financial planners would advise a beneficiary to shy away from using the money quickly to meet short-term financial goals, like purchasing a new vehicle or completing renovations to a home. Tending to these goals might hinder the long-term stability that can come with this kind of money, liking funding retirement.
Just like many elements of an estate plan, an inheritance will be subject to taxes. Most financial planners would suggest that beneficiaries pay these taxes up front so it does not dog them for years to come.
If you are a beneficiary that has not yet received the inheritance, pay not attention to how much you're in line for. This sum can change drastically with the tides of the markets. A beneficiary should not count on his or her inheritance money to survive, rather, treat it as supplemental cash for retirement.
Source: CNBC, "What to do with an inheritance? Save first, then splurge," Sharon Epperson, April 3, 2012
]]>When a loved one enters the hospital and is so sick or incapacitated that they cannot express their wishes to doctors, medical professionals must follow the direction of an advance directive or living will -- provided that the patient has had these documents drafted. Sadly, many individuals have neglected to memorialize their wishes in these important documents
]]> In a living will or advance direction, a person can detail how they would like to be treated in such situations. Some men and women prefer doctors not to take aggressive action if their quality of life looks grim. Others want doctors to do everything they can to keep them alive. This is why an advance directive or living will is so important.This is also why the absence of one creates a sticky situation.
In situations where there is no advance directive or living will, a doctor will continue to treat a patient as long as he or she has a chance at recovering. While doctors are instructed to do that, family members will often intervene and try to make a different argument. But, without an advance directive or living will to confirm that argument, a doctor's hands are tied. With modern medicine, doctors can keep an individual alive for a long time. This might not necessarily be a good thing, as a patient could suffer debilitating effects from this prolonged treatment.
Men and women are instructed to consult a qualified estate planning attorney and adopt an advance directive or living will that contains their wishes in these situations. Even men and women who are married need one as their spouse could disagree with doctors during treatment.
One physician admitted that fellow doctors will sometimes push for prolonged treatment to make money. But, that same doctor disclosed that they do not want to be the ones responsible for taking hope away by ceasing treatment.
These are important decisions that should not be in the hands of doctors who may sometimes have a hidden agenda. Patients can control this situation through a living will.
Source: Pittsburgh Tribune-Review, "Do yourself a favor: Fill out a living will," Luis Fabregas, March 24, 2012
]]>A current trend in Florida illustrates some of the potential pitfalls of inheriting a deceased loved one's estate.
]]> A financial planner and estate attorney in Florida said that he has seen a lot of men and women inherit condominiums left behind by their parents. In many of these cases, the price tag on the mortgage for the condo was more than the condo was actually worth. Instead of inheriting something of worth, these people are inheriting debt.Rest assured, there are provisions set in place that protects an unassuming beneficiary from having debt piled on them from a deceased loved one. Normally, personal debt like medical bills and student loans are scratched upon the debtor's death. This debt cannot be passed on to loved ones, nor are they responsible to make things right with creditors.
The only way a loved one would be held responsible for paying off the debt is if they were a co-signer on the loan. They then must pay off the remaining balance of the loan. This is commonly seen when adult children co-sign with aging parents for loans to pay for things like medical bills. The same applies for joint credit cards. Even if the remaining loved one did not rack up the debt, they will be responsible to pay it off.
If a man or woman dies with debt, and they have the assets to settle that debt, all debt will be deducted from the estate. Whatever is left over after will go to the beneficiaries of the estate.
Source: Business Insider, "Here's what happens to debt when you die," Shelly K. Schwartz, March 25, 2012
]]>However, the untimely demise of a celebrity can shift a person's focus to their own mortality so they can aptly prepare. Nonetheless, average men and women can learn from the mistakes made by a celebrity in their own estate planning.
]]> Take, for example, the late pop singer Whitney Houston. With her recent and sudden death, the process is to now sort through her estate and transfer her assets accordingly. Unlike some of the rich and famous, Houston had a will in which she named her daughter as the sole beneficiary of her assets. The will was signed in 1993, with one change made in April 2000.Surprisingly, there are some downsides for a woman of Houston's status opting for a will rather than establishing a living trust. The main reason celebrities should not rely on just a will is because they must enter probate court in order to be effective. When entered into court, the contents of a will become public record.
A living trust can keep all this information private. You do not have to be one of the rich and famous to benefit from using living trust, though. If you are someone who values personal privacy, it might be a good route to go.
We could learn from other aspects of Houston's will, like the fact she transferred her assets to her daughter via a testamentary trust. A testamentary trust is one that is created by the will. In Houston's will, she ensured her daughter won't inherit the entire fortune at once. Instead, the distribution of Houston's estate will be spaced out until her daughter is 30-years-old. Allowances will be made if Houston's daughter goes onto college or decides to purchase a home, along with other scenarios.
Source: Forbes, "Whitney Houston's will was far from perfect," Danielle and Andy Mayoras, March 15, 2012
]]>In addition to major life changes, errors in documents for an existing estate plan can sometimes crop up as well. This must be fixed in order for the estate plan to properly reflect the intentions of the property's owners.
]]> With irrevocable trusts being all the rage in estate planning as men and women discover their usefulness, exactly how easy is it to make changes to an existing estate plan? There are still ways to make important tweaks to these existing plans.For starters, it is quite easy to make adjustments to revocable wills and trusts as long as the settler is still alive and mentally competent. The only problem is estate planners do not scrutinize their wills or trusts often enough to detect possible problems or inaccuracies. These are problems that arise when the settler passes away, leaving a mess to be sorted out in probate court.
For irrevocable estate planning documents, state laws specify when and how they can be changed. Four possible methods are as follows:
It is never too late, or impossible, to craft estate plans to your exact specifications.
Source: Forbes, "Fixing the broken estate plan," Rob Clarfeld, March 9, 2012
]]>The offense and punishment should be a clear sign to Florida residents that they must follow the orders of probate court just as they would follow the guidelines of a judge in criminal court. The woman was locked in a dispute over the care of her 81-year-old mother. The dispute was being dragged out in probate court. The elderly woman, who now suffers from Alzheimer's and dementia, was assigned a third-party conservator to manage her estate planning affairs and was set to live at her son's home in Connecticut.
]]> The woman who was found guilty of wrong doing claimed that her mother said long ago that she did not want to live with her son; rather, she wanted to live with her in Florida. Both sides put in applications to be the woman's caregiver. Court documents revealed that the woman was motivated by money to take custody of her mother.Right now, the elderly woman's son receives $1,000 a week to take care of her. The guilty woman accused her family and their lawyers of squandering funds from her elderly mother's estate, which is worth several million dollars.
Lawyers for the woman's other children said they wanted to see a stiffer penalty levied against the woman, who committed a serious crime and is liable to do it again.
This marks the importance of spelling out these details in an estate plan. When instructions are vague, it leads to messy disputes such as this one.
Source: Stratford Star, "Woman who took her mother granted special probation," Jill K. Dion, March 2, 2012
]]>Under federal estate planning laws, a certain amount of each person's assets are shielded from estate and gift taxes. With a portability election, the unused estate and gift tax exclusion from a deceased spouse can be transferred to the surviving spouse. This simply means that the surviving member of the marriage will be able to shield more of his or her assets from being hit by taxes.
]]> The deadline extensive for this has been offered to married couples that have $5 million worth of assets or less. One of the spouses had to have died in the first six months of 2011. The executor of the deceased's individual's estate must file a Form 4768 to seek this extension. Normally, the executor of the estate has nine months following the individual's death to file the Form 4768 to request the extension. The Form 4768 can still be filed. The actual portability election is made with a Form 706.Estate planners should now note that with the new deadline, both Form 4768 and Form 706 must be filed with the IRS no later than 15 months following the individual's death. Many estate planning experts would encourage widows and widowers to make the election. Even if an individual has few assets now, it could come in handy if unexpected wealth lands in his or her lap.
The federal estate tax was very much in limbo throughout 2010 because lawmakers allowed it to expire at the end of 2009. Congress finally extended the estate tax in December of 2010.
Source: Accounting Today, "IRS extends deadline on estate tax portability election," Michael Cohn, Feb. 17, 2012
]]>As the multimillionaire awaits his trial for a drunk driving accident he caused -- claiming the life of another man in the process -- he made an unconventional maneuver that many believe was a form of asset protection. The man adopted his 42-year-old girlfriend to be his daughter. The story has captivated the nation for its bizarre nature and almost blatant attempt at protecting some of his fortune.
]]> By taking on the woman as a daughter, he could secure some of his fortune for her, shielding it from the victim's family, which has also filed a lawsuit for punitive damages. However, the family did not specify how much money they will be fighting for. With the woman now legally listed at the man's daughter, a few transactions could successfully hide the 48-year-old's "true wealth."In 2004, the man sold a family business for $1.43 billion and then built a successful polo club. The man also has two biological children, which he established a trust for in 1991. That fund is worth an estimated $300 million and that money is shielded from any prospective lawsuit filed by the victim's family.
He could do the same thing for his new "daughter", but there has been no word on whether he has put money into the trust following the fatal accident. The man's attorney said that there is no foul play involved in the recent arrangement and that the man has an existing agreement with his ex-wife that his biological children will receive 95 percent of the trust.
The man is facing up to 30 years in prison after being charged with DUI manslaughter and vehicular homicide. He struck another car in Feb. 12, 2010 while drunk. A 23-year-old man and his car rolled down into a canal after being struck and the defendant left him behind without assistance. The man eventually called police 50 minutes later.
Source: CBS News, "Fla. mogul facing trial, adopt his girlfriend," Feb. 11, 2012
]]>In large, wealthy estates, inheritances left behind for loved ones can be of a substantial amount. The mistake that many beneficiaries make is focusing in on this large sum of money and living their financial lives like they already have it. They might run up substantial debt just because they know that fortune will some day be theirs.
]]> Men and women tend to do this with impending inheritances from their parents. But, this is a completely wrong financial mindset to have. In fact, this is just another case of immature children relying on their parents' money to make ends meet. When school age kids still live in the house, parents often help them with purchases and money to cover everyday necessities. This arrangement tends to change when a young adult goes to college and finds that their parents are paying for less. By relying on an inheritance so heavily, a man or woman is conceding the fact that they cannot make it financially unless they have money from their parents to help.Not only is this a foolish game, but also a dangerous one. It is possible that an inheritance can shrink if the investments go bad or it is hit with taxes. If a person relies on an inheritance to fund their life, and then misjudges how much they will receive, they still end up in a hole.
Another morbid aspect to this mindset is an individual is essentially left waiting for a parent or loved one to die in order to receive the inheritance. What son or daughter should be waiting for that day to come in order to appear to have gained financial independence?
Source: The Globe and Mail, "An inheritance should be a windfall, not a financial plan," Preet Banerjee, Feb. 9, 2012
]]>This document can help loved ones avoid a lot of heartache in an already tough situation, but how does a surgeon or medical professional react to such a process? One study stated surgeons feel limited by it.
]]> In a recent study headed up by an assistant professor of surgery at the UW School of Medicine and Public Health, 54 percent of surgeons said they would not even bother operating on an individual if that patient's living will specified they did not want to be put on life support when the doctor thought it was necessary.What's equally as alarming is that only 50 percent of surgeons that regularly perform high-risk operations discuss living wills or other medical directives with their patients. More than 900 surgeons were questioned in the study.
If you look at the situation from a surgeon's point of view, their top priority is to see their patient makes it out of a procedure alive. If a living will limits the measures they can take to make that happen, they might not be as confident in the outcome.
While all the surgeons were sure to discuss the risks involved with their patients, only 52 percent of them asked what the patient's living will specified about post-operative life supporting therapy.
The woman behind the study argued that living wills are more or less moot in these surgical settings, and instead, the patient and surgeon should have a conversation before the procedure on what their expectations are for these situations.
Source: The Capital Times, "Can 'living wills' tie a surgeon's hands? UW study indicates so," Bill Novak, Jan. 26, 2012
]]>There are many scenarios in which we can't clearly state what we want or need. This is why you need to appoint a trusting individual to take on estate administration by assigning them power of attorney. This will allow them to make legal decisions on your behalf. But, this can only be done when you officially grant them these powers. If you are married, you might assume your husband or wife will step in and make decisions for you. This is not the case unless you grant them this power legally.
]]> When an individual has not identified someone to take on this role, the state will. Who wants total strangers deciding what is good for us? Therein lies the importance of granting powers of attorney and other legal rights in estate planning.Powers of attorney, paired with a legal trust and living will is most effective. The power of attorney names a person -- and back-up individuals -- who can sign your name on legal documents. A living will and legal trust essentially are instructions for that individual, and dictates how they are to divide assets and conduct other estate administration on your behalf.
A medical directive is also very important in estate planning. By filing one of these, you are naming someone who can make medical decisions on your behalf when you are not in a state to do so.
Source: Times of Trenton, "Assessing the benefits of assigning a power of attorney," Eleanore Szymanski, Jan. 29, 2012
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