Author: Sara Thomas

13 Ways to Show Your Finances Some Love This Year – Part 1

Post author By Sara Thomas
Post date March 7, 2024
No Comments on 13 Ways to Show Your Finances Some Love This Year – Part 1

While thoughtful financial planning doesn’t sound as fun as a fancy night out or a night in with Netflix, making smart planning decisions with your assets is one of the best gifts you can give – and a gift that keeps giving over time.

This week, we explore seven tax planning tips that not only secure your financial future but also spread love and prosperity to those you cherish most.

1 | Make a Qualified Charitable Distribution (QCD)

Want to spread love to a charity you’re passionate about? Is your retirement account looking good? Consider making a Qualified Charitable Distribution from your account directly to charity. Not only does this fulfill your required minimum distributions, but it also exempts the amount from your taxable income. By giving back to causes close to your heart, you can make a meaningful impact while reducing your tax burden.

2 | Front-load your 401(k) contributions

Show love to your future self by maximizing your 401(k) contributions early in the year as opposed to spreading them out evenly over 12 months. By reaching the 2024 limits of $23,000 sooner, your investments will have more time to grow, potentially enhancing your retirement nest egg even more. It’s a proactive step toward securing financial stability for yourself and your family down the road.

3 | Set Up a Roth IRA for a Child

Want to inspire financial skills in your kids while getting a tax advantage? Teach the next generation the value of financial planning and responsibility by setting up and contributing to aRoth IRA for a child who has earned income. If your child has earned from babysitting or odd jobs, you (and they!) can contribute to a custodial Roth for their benefit, and every dollar invested grows tax-free, providing a solid foundation for their future financial well-being.

4 | Make Donations During Spring Cleaning

Ah, the annual ritual of spring cleaning. This year, let’s infuse this mundane task with a dose of love and generosity. As you sift through your belongings, consider the items that no longer serve you but could bring joy to others. From gently used household furnishings to clothing and books, each item holds the potential to make a difference in someone’s life.

Here’s the cherry on top: for items in good condition, you may claim a charitable deduction on your 2024 income tax return, making your act of kindness even sweeter. So, as you purge the old and welcome the new, keep receipts of your donations – it may add up to some real tax savings.

5 | Give the Gift of Appreciated Stock Shares

Strengthen familial bonds while supporting charitable causes by giving appreciated securities and stock shares directly to your sibling’s favorite charity. By donating your appreciated stock instead of selling it, you can potentially avoid recognizing the gain as your income, maximizing the impact of your charitable giving while minimizing your tax liability. Sweet deal, right?

6 | Establish a 529 College Plan

Invest in the educational future of your loved ones by setting up a 529 plan. While the contributions you make to a 529 account aren’t tax deductible, contributions to these plans grow tax-free and can be withdrawn tax-free when used by your loved one for qualified education expenses like housing, books, tuition, and more. Whether it’s for your child, grandchild, niece, nephew, or another family member, a 529 plan is a gift that keeps on giving.

7 | Roth Conversion

Show love to your retirement savings by considering a Roth conversion on a traditional IRA. If your traditional IRA has declined in value, now is the ideal time to convert it to a tax-saving Roth. Doing so can reduce your income tax liability later on and let you potentially enjoy tax-free withdrawals in retirement. It’s a strategic move that can optimize your retirement income while minimizing tax obligations.

Let Us Help You Show Your Finances Some Love

There’s no time like the present to demonstrate love through practical Life & Legacy Planning®. By incorporating these tax planning tips into your overall planning strategy, you can secure a brighter future for yourself and your loved ones while making a positive impact on your community.

Not sure where to start? We’re here to guide you through every step of your planning journey, from taking inventory of what you have and what’s important to you, to the practical steps of how to plan for the life and legacy you dream of.

Schedule a complimentary 15-minute call with our office to learn more.

This article is a service of August Law, a Personal Family Lawyer® Firm. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Life & Legacy Planning™ Session, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love.

The content is sourced from Personal Family Lawyer® for use by Personal Family Lawyer® firms, a source believed to be providing accurate information. This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal, or investment advice. If you are seeking legal advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

Tags 401(k), 529, Appreciated Stock Shares, Assets, Donation, Estate Plan, Finances, IRA, Personal Family Lawyer, QCD

Estate Planning

Your Kids Might Not Automatically Be Cared For Unless You Do This

Post author By Sara Thomas
Post date February 29, 2024
No Comments on Your Kids Might Not Automatically Be Cared For Unless You Do This

As parents, we’re hardwired to prioritize our children’s well-being above all else. We work tirelessly to provide for them, nurture them, and ensure they have every opportunity to thrive. Yet, amidst the hustle and bustle of daily life, it’s easy to overlook a crucial aspect of their future: what happens to them if we’re no longer here to care for them?

It’s a sobering thought, but one that deserves your attention. You may assume that in the event of your untimely passing, your children will automatically be cared for and inherit your assets. However, the reality is far more complex and potentially unsettling.

Let’s unpack why relying on these assumptions could leave your children’s future in uncertain hands.

The Myth of Automatic Care

Yes, it’s true that your children will inherit your assets upon your passing. However, without advance planning, the management of those assets will fall into the hands of a court-appointed trustee. This is an expensive proposition for the people you love most, and worse, the trustee may not necessarily align with your values or financial philosophy, leaving your hard-earned assets vulnerable to mismanagement.

On top of that, and maybe worst of all, under current laws, once your child reaches the age of 18, they gain unfettered access to their inheritance. While you may have envisioned these assets providing a foundation for their future endeavors, the reality is that many 18-year-olds lack the financial maturity to handle such responsibility. From impulsive spending to falling prey to financial scams, the risks are significant.

The Importance of a Kids Protection Plan®

So, what’s the solution? Enter the Kids Protection Plan—a comprehensive legal planning system designed to safeguard your children’s well-being and financial future in the event of your incapacity or passing.

While the decision of who will assume care for your children will always need to be approved by the court, a Kids Protection Plan allows you to nominate trusted guardians and ensures that the court knows who you trusted and chose to care your children, rather than leaving their fate to the discretion of a judge who may lack intimate knowledge of your family dynamics.

Moreover, a complete Kids Protection Plan goes beyond short-term and long-term guardianship appointments. It includes a detailed roadmap for the management of your assets on behalf of your children, specifying how funds should be allocated for their upbringing, education, and other needs. By setting clear guidelines, you mitigate the risk of financial mismanagement and ensure that your children’s inheritance serves its intended purpose: supporting their growth and development.

Leave Behind Detailed Instructions

Naming legal guardians is just the first step. Your Kids Protection Plan won’t do much good if the people named in it aren’t aware of your plan or your wishes. You want to make sure your children’s guardians know your desires for their upbringing. Some things to include might be:

Faith and religious practices
Philosophy on education and where you’d want them to go to school
Activities you’d want your children involved in
Nutrition, medical care, or any other health considerations

One of the benefits of working with our firm is that I make sure that everyone named in your plan is informed of what to do if the unthinkable happens to you. And, if you are working with me, I’ll be there to guide them each step of the way.

Planning for the Future

We understand the gravity of planning for your children’s future. That’s why we consider your family dynamics, and your assets, and then help you choose the right planning package and fees to safeguard and protect what matters to you most.

Whether you’re a new parent or revisiting your estate plan, our team is here to provide the guidance and expertise you need to secure your family’s future for generations to come. Schedule a complimentary 15-minute call to learn more about our unique Life & Legacy Planning process. During your complimentary 15-minute call, we’ll explore your current arrangements and identify any gaps that may leave your children vulnerable.

Don’t leave your children’s future to chance. Take the first step toward peace of mind and lasting security. After all, your children deserve nothing less than the assurance that they’ll be cared for and cherished, no matter what the future holds.

Tags Automatic Care, Emergency Family Planning, Kids Protection Plan

Estate Planning

How to Save for Retirement and Pay Off School Loans at the Same Time

Post author By Sara Thomas
Post date February 23, 2024
No Comments on How to Save for Retirement and Pay Off School Loans at the Same Time

Navigating your financial journey with the heavy burden of student loan debt on your back can feel overwhelming. You’re faced with a critical decision: should you prioritize paying down those loans, or should you focus on the future, contributing to your workplace retirement plan? It’s a tough call, especially when choosing loan payments means missing out on the opportunity to grow your savings through employer retirement matches.

But there’s good news on the horizon, thanks to the SECURE 2.0 Act. This groundbreaking legislation is here to offer a helping hand, allowing your student loan payments to qualify for employer retirement matching contributions. It’s a win-win, enabling you to tackle your debt while also building your nest egg.

Are you wondering if this financial boost applies to you? Keep reading, because we’re about to explore how the SECURE 2.0 Act could be the solution you’ve been searching for.

What The SECURE 2.0 Act Means for The Student Loan Dilemma

For many of us, juggling student loan debt is a bit like trying to balance a coffee cup on a stack of books—tricky and maybe a bit messy, especially when we’re also trying to save for retirement. Those monthly loan payments can take a big bite out of our budgets, making it hard to stash away cash for our future selves. And when we skip on contributing to our retirement plans, it’s like missing out on the whipped cream in our favorite latte—those employer retirement matches that could seriously boost our savings.

Enter the SECURE 2.0 Act, ready to smooth out this balancing act. This new legislation suggests to employers a clever workaround: treating your student loan payments as if they were direct deposits into your retirement savings account.

This shift is subtly brilliant. It means the money you’re dedicating to student loans can now help you unlock those employer retirement contributions, offering a streamlined path to beef up your retirement savings. It’s a bit like finding a shortcut on your daily commute that makes life just a little easier and a lot more rewarding. So, let’s explore how this can help secure your financial future.

How It Works

The SECURE 2.0 Act is like a breath of fresh air for employees weighed down by student loan payments. It gives employers the green light to get creative with retirement benefits, turning those hefty student loan payments into a force for good in your retirement savings plan. By treating these payments as if they were contributions to your retirement account, employers can now match them, just like they would with traditional retirement contributions. Imagine that—your student loan payments not only help you chip away at your debt but also build your nest egg, without you having to put extra money into your retirement account.

This twist means you can focus on paying down your student loans without missing out on the magic of compounding interest in your employer-sponsored retirement account. It’s a game-changer for anyone who’s felt stuck between a rock and a hard place, trying to decide between paying off debt and saving for the future.

However, there’s a catch… Not every employer will automatically jump on this bandwagon. The SECURE 2.0 Act opens the door, but it’s up to individual companies to walk through it. This means the availability of this perk will vary from one employer to the next.

So, what’s your next move? Start a conversation with your employer to see if they’re planning to offer this innovative benefit starting in 2024. It’s an opportunity too good to miss for anyone looking to make their student loan payments do double duty.

Helping You Navigate Towards Financial Wellness

If you’re one of the many people grappling with student loan debt, the SECURE 2.0 Act offers a ray of hope. Now, individuals can navigate the intricate landscape of student loan relief without sacrificing their long-term retirement goals. As employers have the option to align student loan payments with retirement savings, employees can effectively manage their finances and work towards a more stable financial future.

No longer bound by the dilemma of choosing between student loan payments and retirement contributions, individuals who qualify for the benefit can strategically plan their finances for a brighter future.

Want to take control of your financial future and that of the ones you love most? Then I invite you to meet with us. We look at everything you own and everyone you love to determine whether your assets and your loved ones will be cared for exactly as you want if you die or become incapacitated. And if the way things are currently set up doesn’t serve you, your assets, or your family exactly as you want, we can help you develop a Life & Legacy Plan that will protect everything you love for generations to come.

Schedule a complimentary 15-minute call.

Tags Estate Plan, Personal Family Lawyer, Retirement, SECURE 2.0 Act, Student Loans

Estate Planning

3 Reasons Why Adding Your Partner to Your Will is an Act of Love

Post author By Sara Thomas
Post date February 15, 2024
No Comments on 3 Reasons Why Adding Your Partner to Your Will is an Act of Love

Love is undoubtedly the most profound and cherished thread that weaves us all together, and there are many different ways to express our love to the people who mean the most to us. Often when we think of showing our love, we think of bouquets of flowers, surprise gifts, and meaningful notes. But an often overlooked – and incredibly meaningful – way of showing your love is to put that love into a plan for the future.

While estate planning may seem like a realm of financial jargon and legalities, it is, at its core, a tangible expression of your care for those closest to you. (And that’s why I refer to estate planning as Life & Legacy Planning.)

In this blog, we’ll look at why adding your partner to your Will and estate plan as a whole isn’t just a romantic gesture but an act of love.

1. Providing Care and Protection

Estate planning is typically associated with financial matters and legal technicalities, but at its core, it’s an expression of love for those we hold dear. It’s about not leaving a mess for the people you love. It’s about providing comfort and security to your loved ones long after you’re gone. And, when you include your partner in your estate plan, you are solidifying the foundation of your love and commitment, ensuring they are cared for when you can no longer be there in person.

One of the most tangible ways to demonstrate your love is by securing your partner’s legal and financial future through thoughtful estate planning, but not just any old estate planning — in our book, it needs to be “Life & Legacy Planning” so you know you have a plan that works when your family needs it to.

While a Will, Trust, and other estate planning documents are valuable, if they are not properly counseled, regularly updated, and combined with additional planning tools such as a Kids Protection Plan®, if you have minor children, and an asset inventory, your loved ones could be left with an expensive mess.

If you are married, your spouse already has some rights in the event of your incapacity or death, but that does not mean they have automatic access to your accounts, or even to make your health care decisions for you the way you would want. If you are not married, your unmarried partner would have no rights to anything in the event of your death or incapacity. Truly the greatest gift you can give your beloved is a Life & Legacy Plan.

2. Avoiding Legal Complications

Love conquers many things, but we have to acknowledge that legal matters often require a bit more than just sentiment. Without a well-counseled, prepared, and updated Life & Legacy Plan, your partner might find themselves entangled in legal complications when it comes to inheriting assets if something happens to you. In fact, if you and your partner aren’t married, they won’t inherit anything at all!

That’s because the law that controls what happens to your assets if you die without a plan is written with married couples in mind. Unless you plan in advance, anyone you love who isn’t married to you or directly related to you through blood will be left with nothing when you die or if you become incapacitated.

By including your partner in your Will and overall Life & Legacy Plan, you ensure they’ll receive what you would want them to in the event of your loss and spare them the stress of navigating legal intricacies during an already emotionally trying time.

3. Protecting The Life You Built Together

Maybe the institution of marriage isn’t your thing or you and your partner are putting off marriage plans for the time being. Nonetheless, having a plan in place isn’t something you want to put off until you’re older. Chances are good that you’ve already begun to build a life together that’s worth protecting.

Whether it’s the charming house you turned into a home or the vintage car you spent countless road trips in, shared assets are more than just possessions – they’re a part of your shared history. Including your partner in your estate plan ensures that these shared treasures are passed on smoothly, preserving the memories you built together.

And if you have children with your partner, Life & Legacy Planning takes on an even greater significance. If your partner isn’t biologically related to your children and hasn’t legally adopted them, there is no legal guarantee that your partner would be able to care for your children or even visit them if something happens to you.

Creating a Kids Protection Plan® for your kids in your estate plan is an act of profound love and responsibility. By ensuring your partner has legal authority in matters of your children’s well-being, you’re displaying a commitment to everyone’s future happiness and security.

Helping You Show The One You Love Just How Much You Care

Love binds us together – but proper estate planning, and specifically Life & Legacy Planning® puts the love you have for your partner and your family into action. It’s not just about assets and legalities; it’s a declaration of your commitment and a promise to provide for your loved one even when you’re no longer physically present.

After all, in matters of the heart, there’s no gesture more profound than securing a future together.

If you want to show your partner just how much you love them, contact us today to learn more about our Life & Legacy Planning® process to get started.

Schedule a complimentary 15-minute call to learn more.

Tags Estate Planning, Last Will & Testament, Marriage, Personal Family Lawyer

Estate Planning

Important Planning Conversations to Have With Your Parents

Post author By Sara Thomas
Post date February 8, 2024
No Comments on Important Planning Conversations to Have With Your Parents

If you’ve given any thought about estate planning, you probably associate it with preparing for death. But there are critical reasons for and significant benefits to planning while you’re still alive and well. Planning for your assets and your death is something that should start right now through honest, open conversations with your family.

It starts by talking with your parents, siblings, and children about what you want the future of your family to look like, how you’d like assets managed, and what type of care each family member would want in the event of a debilitating or terminal illness.

You may have already started a conversation about estate planning with your family. But this week, I dive deeper into the conversations you need to have to truly understand your family’s financial picture and plan for the future in the best way.

Conversation #1: What Exactly Do Your Parents Own?

The first conversation involves fundamental questions for the older members of your family: “What do we have? Where is it? And, how would I access it if you weren’t here to guide me?”

The potential risk to your family’s wealth is intricately tied to the costs incurred in the event of a passing or incapacity. Beyond the visible expenses of funerals, burial, or cremation, and end-of-life medical care, there are a myriad of unseen costs.

Unclaimed assets, amounting to approximately $70 billion in various departments across the U.S., often slip through the cracks because family members don’t know where the assets are, how to get them, or that they even exist.

Because of this, tracking and documenting assets, including crypto assets, before incapacity or death is essential to protecting your family’s wealth when someone dies or becomes incapacitated.

It may be difficult to bring up this topic with your parents or other family members, but how you approach it with them will make all the difference. The secrecy of asset locations or the fear of appearing greedy may hinder an open discussion between family members, but this can be overcome by building trust between relatives and entire generations.

For the junior generation, building trust involves understanding the root causes of distrust and stepping into a mature, caring perspective for the greater family good. Similarly, senior generations can nurture trust by taking ownership of past parenting shortcomings and demonstrating faith in the individuals their children have become.

Navigating these challenges may be daunting, but the rewards of building trust and initiating this crucial conversation are immeasurable. Use the conversation as an opportunity to record the locations and access permissions of family assets. If you aren’t sure how to do this, we can help you create a clear inventory of your assets so nothing is lost when death or illness strike.

Conversation #2: What Are Their Wishes for Long-Term Care?

The next conversation you need to have with your parents is about long-term care planning. This conversation extends beyond financial considerations and looks into the emotional intricacies of care, posing questions about who will provide care if your parents become incapacitated or disabled, how it will be administered, and the potential burdens on loved ones.

While money can be a less vulnerable entry point to this conversation, the core involves the tender question of personal care. Addressing concerns such as, “Who will take care of me? How will I be cared for? Will I be a burden on my loved ones?” brings a level of vulnerability that goes beyond financial considerations.

Neglecting this conversation can leave crucial decision-making up to the medical system, often resulting in undesirable outcomes and accumulating costs. By engaging in the long-term care conversation, clarity emerges on preferences, funding, and avenues for protection against unforeseen care costs.

Let Us Guide The Conversation

If initiating these conversations feels challenging or uncomfortable, we can help. We focus on building personal relationships with our clients and their families, and can help guide you and your family through difficult discussions and tough questions about your family’s assets and wishes.

It starts with a planning session, where we look at everything you own and everyone you love to identify gaps in your family’s security and make a plan that ensures everything will be cared for the way you want when you die or if you become incapacitated.

To learn more, schedule a complimentary 15-minute discovery call with us.

Tags Aging Parents, Estate Planning, Family Conversations, Money, Personal Family Lawyer

Estate Planning

3 Best Practices For Setting Up Your Life Insurance Policy

Post author By Sara Thomas
Post date February 1, 2024
No Comments on 3 Best Practices For Setting Up Your Life Insurance Policy

A comprehensive Life & Legacy Plan is about creating a strategy that lets you enjoy your life to the fullest while protecting your loved ones’ future when you can no longer be there. It might seem like life insurance is an easy way to help secure your loved ones’ future – and it is – but your policy must be set up in the right way to have the best possible impact on your family.

The way you set up your beneficiary designations on your insurance policy can significantly impact its effectiveness, how it’s used, and who controls it after you die. In this blog, we’ll explore how to name beneficiaries to ensure your loved ones have the funds they need to thrive when something happens to you.

DO NOT Name a Minor As The Beneficiary of Your Life Insurance Policy

Naming your child or grandchild as a direct (or even backup) beneficiary of your life insurance policy may seem like a natural choice.

However, if a minor child is the beneficiary of a life insurance policy, it guarantees a court process called “guardianship” or “conservatorship” must occur to name a legal guardian or conservator to manage the assets for your minor beneficiary until they turn 18. Then, at 18, your minor child receives everything left in the account–outright and unprotected–with no oversight or guidance. This is the worst possible outcome for everyone involved.

You might think the answer is to name a trusted family member or friend as the beneficiary of your life insurance, hoping they’ll use the funds for your kids, but that may not produce the desired outcome either.

If you name another adult as the beneficiary for a life insurance policy intended for your kids, your kids will have no legal right to the money. The adult you named as beneficiary can use the money however they want and don’t have to use it for your kids at all!

So what’s the solution? Keep reading until the end to find out what to do instead.

DO NOT Name Adult Beneficiaries Directly

Direct payouts to adult beneficiaries may seem straightforward, but can have unintended consequences. Life circumstances change, and the lump sum received from a life insurance policy might be at risk if not managed properly. By avoiding direct payouts, you can ensure that the financial security provided by the insurance is preserved for the long term.

One key concern is the potential for beneficiaries to hastily misuse or exhaust the funds. A sudden windfall might lead to imprudent spending, leaving your loved ones without the financial support you intended. Additionally, if your beneficiaries are not financially savvy, they may struggle to manage a lump sum effectively, meaning the policy might lose money over time.

Even if an adult beneficiary is financially responsible and savvy – or knows enough to speak to a financial advisor – life events can put the funds at risk. Because the life insurance proceeds now belong entirely to your beneficiaries in this case, the proceeds of the policy are now completely vulnerable to any future divorces or lawsuits that your beneficiary may go through in the future.

That means that if your beneficiary is divorced, sued, or accumulates debt, all the money they received from your insurance policy could be lost.

Plan For Your Life Insurance The Right Way: Use a Trust

A Trust is an agreement you make with a person or an institution you choose. This person is called your Trustee, and their job is to manage the assets you put into or leave to your Trust, according to the rules you create.

Instead of naming minors or adult loved ones as the direct beneficiaries of your life insurance, name your Trust as the beneficiary of your policy instead. By doing this, your loved ones will still receive the funds you intend for them while the decisions you made in the Trust maintain control over how the funds are managed and distributed. This ensures that your wishes for your assets and your loved ones are carried out even after you’re gone.

How does it work?

A well-drafted Trust allows you to specify conditions for distributing the Trust funds, ensuring that the funds are used for intended purposes such as your beneficiaries’ education, homeownership, or other specific needs. Distributions from the Trust can also depend on the ages and circumstances of each beneficiary. This level of control can prevent the misuse of funds and promote responsible financial behavior for everyone involved. Plus, assets held in a Trust bypass the probate process, ensuring a more efficient and timely distribution of funds to your beneficiaries. This can be crucial in providing immediate financial support to your loved ones when they need it the most.

And while you can choose to have your Trustee distribute life insurance proceeds directly out to your beneficiaries outright, at specific ages and stages, you may want to provide even more protection for your beneficiaries. One of the considerations we’ll help you make is whether to retain the assets in trust, giving your beneficiaries control over the Trust assets, but in a manner that keeps the inherited life insurance protected from lawsuits, future divorces, and creditors.

Let Us Set Up Your Entire Plan In The Best Way Possible

Setting up your life insurance policy with the right beneficiaries involves careful consideration of your unique family dynamics, financial goals, and long-term objectives while being proactive to avoid future issues. By doing so, you maximize the benefits of your life insurance to provide a lasting legacy of financial security and support for your loved ones.

But planning for your life insurance is only one step in creating a plan for everything you own and everyone you love today and in the future. My mission is to guide you to create a comprehensive estate plan that ensures your wishes are fulfilled and your family’s future is protected no matter what the future holds.

Schedule a complimentary call with my office to learn more. Contact us today to get started.

Tags Asset Protection, Estate Planning, Life Insurance

Estate Planning

This Change to the FAFSA Rules Could Help Your Grandkids Qualify for More Student Aid

Post author By Sara Thomas
Post date January 25, 2024
No Comments on This Change to the FAFSA Rules Could Help Your Grandkids Qualify for More Student Aid

Want to contribute to your grandchild’s future college education? The FAFSA Simplification Act, which went into effect in December, now makes it possible for grandparents to do even more to help finance their grandchild’s education.

In the past, any contributions or distributions from a grandparent’s 529 college savings plan were subject to FAFSA reporting, potentially impacting the student beneficiary’s eligibility for federal financial aid. The new changes, however, bring a breath of fresh air.

In this blog, you’ll learn what has changed under the new rule and how grandparents can leverage it to support their grandchild’s educational pursuits.

Understanding the 529 Account

First things first – what exactly is a 529 college savings account? It’s a special savings account designed to help individuals, including grandparents, set aside money for future college expenses. Contributions aren’t federally tax-deductible, but the good news is that earnings within the account grow tax-free. When funds are withdrawn for qualified education expenses, they remain untaxed.

What The New Rule Changes

When the account owner is a dependent student or custodial parent, the total value of the 529 plan is reported as an investment asset on the Free Application for Federal Student Aid (FAFSA). Previously, if a grandparent owned the 529 plan, any distributions were considered untaxed income for the student, potentially affecting financial aid eligibility. The upcoming change eliminates this concern.

In a nutshell, a 529 plan owned by a grandparent will no longer require reporting on the FAFSA. Even more impactful is that distributions from this grandparent-owned 529 plan will not be deemed as untaxed income for the student. This opens up opportunities for grandparents to contribute to their grandchild’s education without jeopardizing financial aid eligibility.

Maximizing Grandparent Contributions

It’s important to keep the following in mind when you make contributions to a 529 account for a grandchild:

1 | Funds Must Be Used For Qualified Educational Expenses

Grandparents can use 529 plan funds for a range of qualified educational expenses, including tuition, room and board, books, supplies, laptops, and internet access. However, certain expenses like insurance, student health fees, transportation, and extracurriculars are not covered and may incur a ten percent penalty if 529 plan funds are used toward these expenses.

2 | The Annual Gift Exclusion

While grandparents can contribute to their grandchild’s 529 plan, it’s essential to be mindful of the federal annual gift exclusion, which is the amount of money a person can gift to someone else without needing to file a gift tax return. The limit currently stands at $18,000 for an individual and $36,000 for those filing jointly with a spouse. A special rule allows gift givers to spread larger one-time gifts across five years to stay within their lifetime gift exclusion.

3 | Reconsider Payments Made Directly to The School

Distributions directly paid to the school from grandparent-owned 529 accounts will not affect aid eligibility. However, for now, it’s recommended to pay the grandchild directly.

4 | Timing Matters

When withdrawing funds from the 529 plan, it’s crucial to do so within the same tax year as the educational expenses. This strategic move ensures smooth financial transactions and adherence to tax regulations.

5 | Watch Your Withdrawal Limits

The amount withdrawn from all 529 plans should be no more than the total cost of the qualified educational expenses billed by the school. Excess withdrawals may incur a 10 percent penalty, but there’s a 60-day window to rectify the situation without penalties.

Helping You Plan For Your Family’s Future In The Most Loving Way Possible

It’s a heartwarming prospect to be able to help shape a brighter future for the younger generation. By understanding the new FAFSA rule and strategically utilizing 529 plans, you can contribute meaningfully to your grandchild’s education without compromising financial aid opportunities. This makes a 529 account an even better investment tool that not only helps your grandchild afford their education but leaves behind a legacy of love and wisdom.

At our firm, we believe this is what estate planning is all about – your Life & Legacy. That’s why we refer to estate planning as Life & Legacy Planning. It isn’t just about making a plan for what happens to your assets when you die – it’s about making meaningful, heart-centered decisions that provide peace, love, and guidance to the ones you love today and for years to come in the future.

If you’re ready to create a plan that takes care of everything you own and everyone you love in the most loving way possible, schedule a complimentary 15-minute call to find out what our heart-centered approach can do for you.

Tags Estate Plan, FAFSA, FAFSA Simplification Act, Grandkids, Kids, Personal Family Lawyer®, Student Ai

Estate Planning

Your Most Important New Year’s Resolution: Creating a Kids Protection Plan

Post author By Sara Thomas
Post date January 19, 2024
No Comments on Your Most Important New Year’s Resolution: Creating a Kids Protection Plan

As we welcome the New Year, filled with hope and resolutions for a brighter future, one commitment should be at the top of your list– creating a Kids Protection Plan™. It can be hard to think about a future where you couldn’t be there for your children, but having a plan in place will ensure that your kids stay in the care of the people they know and love in the event you become incapacitated or die (instead of their care decisions being left up to chance or whichever judge is overseeing the family court at the time).

This is not just some task to add to your to-do list; it’s a warm embrace of security for your little ones. So, why is this the ultimate resolution for you in 2024? Keep reading to find out.

Unforeseen Circumstances Can Leave Your Kids In Foster Care

Imagine your kids at home with a babysitter, and you don’t come home. You’ve been in an accident and are unconscious at the hospital. Authorities are called, but the babysitter doesn’t have the legal authority to care for your children until you return or until a Permanent Guardian is appointed. Even if you already named a Permanent Guardian for your kids, this doesn’t offer immediate legal authority for the Guardian to care for them.

In such scenarios, law enforcement might place your child into protective custody with social services. A Kids Protection Plan™ bridges this gap by providing legal documentation and instructions for Temporary Legal Guardians who have the immediate legal authority to care for your children until you return or until a Permanent Guardian is appointed by the court. This minimizes the risk of your children ending up in foster care or with a family member that you would never want in charge of your children.

Planning Lets You Pick Who Cares for Your Kids – Not a Judge

Is there someone in your life whom you unequivocally would never want raising your kids? Even if you’ve already named Permanent Legal Guardians for them, it’s still up to a judge to make the official determination of who should raise your children long-term. If this person is an immediate family member, the judge may choose them as your kids’ Permanent Legal Guardian if they come forward as a candidate, despite what your Permanent Guardian Nomination paperwork says.

A comprehensive Kids Protection Plan™ confidentially excludes anyone you would never want raising your kids and provides crucial information about your decision to exclude them that can be presented to the judge if needed. With this confidential document, you ensure that your children are always kept away from someone you wouldn’t want as their Legal Guardian.

You Have Unique Desires for Your Kids’ Education, Healthcare, and Financial Well-Being

Every parent has distinct desires regarding their children’s education, healthcare, and financial well-being. A Kids Protection Plan™ allows you to articulate these wishes thoroughly in a way that provides your kids’ Legal Guardians with guidance and your children with the comfort of their routine.

Plus, providing clear instructions to potential guardians ensures that your children’s upbringing aligns with your values and aspirations. This process not only secures their future but also grants you profound clarity about your parenting priorities.

Comprehensive Protection for the Ones You Love Most

While nominating Permanent Legal Guardians is fundamental, it might not suffice in every situation. A full-fledged Kids Protection Plan™ offers a holistic approach, addressing the potential pitfalls of leaving your kids with caregivers, excluding unwanted individuals from guardianship, and outlining your unique desires for their well-being. This comprehensive plan ensures that your children remain in the care of trusted individuals who understand and respect your values.

If you’re ready to make creating a Kids Protection Plan™ your most significant New Year’s resolution, the first step is scheduling a complimentary 15-minute call with us. And unlike other resolutions that may be hard to stick to, we’re here to guide and support you through every step to ensure your Kids Protection Plan™ offers the best protection for the people you love – both now and for years to come.

Tags Estate Plan, Excluded Guardian, Family Emergency Plan, Kids Protection Plan™, Permanent Guardian, Personal Family Lawyer®, Temporary Guardian

Estate Planning

What Caregivers Need to Know About Estate Planning for a Loved One With Dementia – Part 2

Post author By Sara Thomas
Post date January 12, 2024
2 Comments on What Caregivers Need to Know About Estate Planning for a Loved One With Dementia – Part 2

Last week, we started our discussion on estate planning for a loved one with a dementia diagnosis and what this means for their ability to protect their wishes through an estate plan. We covered:

What it means to have mental capacity or be incapacitated
How dementia affects capacity for estate planning purposes
The essential estate planning tools a person with dementia needs to create right away

However, as dementia progresses, estate planning must become more proactive and strategic than ever to avoid court and conflict over your loved one’s wishes in the future. If dementia becomes too advanced before planning is complete, the question of who will manage your loved one’s assets and care will be left to a judge who doesn’t know your loved one or their wishes.

Keep reading to learn what steps need to be considered when estate planning for someone with more advanced dementia.

Seek a Cognitive Evaluation

If your loved one’s cognitive capacity is in question, seeking a professional evaluation is a prudent and proactive step in the estate planning process. Schedule an appointment with your loved one’s primary care physician or a specialist in dementia care to assess their mental state and make a recommendation on your loved one’s ability to make estate planning decisions.

During this evaluation, the medical professional will talk to your loved one and ask them questions about their everyday life, how aware they are of their circumstances, and what they would do in certain situations, such as if a stranger came to the door or if a pipe burst in their home.

Your loved one doesn’t need to remember every detail about their life for the evaluation to be beneficial. The professional will be most concerned with your loved one’s ability to analyze a scenario and make a thoughtful decision on how to respond. For example, your loved one may not remember what day of the week it is but may remember they shouldn’t open the door for a stranger.

Receiving a report from your loved one’s doctor stating they have the cognitive ability to make estate planning decisions (at least when they are in a lucid state) protects their ability to make decisions for their finances and healthcare, and dissuades any future debate from third parties as to whether your loved one had the ability to make a plan in the first place.

Encourage Private Meetings Between Your Loved One and Their Lawyer

It may be second nature to help your loved one with appointments, especially if hearing and memory troubles make it difficult for your loved one to follow along. But as much as possible, allow your loved one to meet with their lawyer independently. A private meeting between your loved one and their lawyer will provide them with the opportunity to express their wishes without external influence.

Even if you have your loved one’s best intentions at heart and they would prefer to have you present during the meetings, encouraging your loved one to have private conversations with their lawyer when possible helps avoid questions about whether or not you influenced their estate planning decisions.

If it isn’t feasible for your loved one to have an entire meeting with their lawyer alone, make sure they at least have opportunities to talk to their attorney in private by leaving the room while your attorney confirms their wishes.

Be sure to document every time your loved one meets alone with their lawyer and ask their lawyer to document it as well.

Make Sure Their Estate Plan Is Executed Carefully

Unfortunately, errors that occur at the time an estate plan is signed are common. Every state has different laws for how estate planning documents are executed, how they can be signed, and what witnesses or notaries are required to make the document binding.

If your loved one’s plan isn’t executed properly, it can result in your family needing to involve a judge to determine whether the estate plan is still valid. This also creates an opportunity for family members to question whether your loved one had the mental capacity to create the plan at all.

It’s also essential to document your loved one’s capacity at the time the estate plan documents are signed. Make sure that their lawyer reviews the documents carefully with your loved one before they sign them, that the documents reflect your loved one’s wishes, and that your loved one is creating the plan of their own free will.

If you have any concerns about other family members questioning your loved one’s estate planning decisions or mental state at the time, ask your loved one and their attorney if they could record the signing meeting to dispel any claims that your loved one was coerced into planning or didn’t know what they were signing.

Conclusion

If your loved one received a dementia diagnosis and hasn’t addressed their legal matters, don’t despair. Even in the advanced stages of dementia, individuals may have moments when they can participate in decision-making and estate planning. But, due to the progressive nature of dementia, time is of the essence for your loved one to create an estate plan, and the sooner they plan, the easier it will be for them to get the help they need as their condition progresses.

In cases where your loved one’s capacity is severely diminished and estate planning hasn’t been completed, your family will need to pursue a court guardianship. This legal arrangement involves a court appointing a legal guardian who assumes responsibility for making decisions on behalf of the person with dementia. This process can be stressful, and it’s possible the court will appoint someone your loved one never would have wanted to manage their assets or healthcare decisions.

To make sure your loved one’s wishes are documented before it’s too late, I invite you to meet with my office today. Our team is dedicated to providing compassionate guidance and legal expertise to ensure the well-being and wishes of your loved one are preserved.

Tags Caregiver, Dementia, Estate Planning, Personal Family Lawyer®, Sandwich Generation

Estate Planning

What Caregivers Need to Know About Estate Planning for a Loved One With Dementia – Part 1

Post author By Sara Thomas
Post date January 3, 2024
3 Comments on What Caregivers Need to Know About Estate Planning for a Loved One With Dementia – Part 1

Caring for a loved one with dementia is a challenge that millions of families undertake each year. As a caregiver, understanding how a dementia diagnosis affects your loved one’s legal decision-making is crucial to ensuring their wishes are honored and that you are providing them with the best possible care.

In this blog, we’ll explore the importance of estate planning, even after a dementia diagnosis, as the best method to ensure the wishes and rights of your loved one are protected.

Understanding Incapacity

Dementia is a progressive condition that affects memory, cognition, and daily functioning. As dementia causes your loved one’s cognitive abilities to decline, there may come a time when they are no longer able to make sound decisions about their finances, healthcare, and overall well-being.

When the effects of dementia make it difficult for a person to understand information and make sound decisions, that person is considered to be incapacitated, which means they can no longer legally make healthcare or financial decisions for themselves. This change in their memory and cognition can be emotionally overwhelming for both your loved one and your whole family, and without proper planning, can require court involvement.

Thoughtful estate planning can ensure that your loved one is cared for by the people they know and trust if they can no longer care for themselves, and even if you’re loved one has already been diagnosed with dementia, it is still possible for them to create a legally-binding estate plan during the early stages of the disease.

Estate Planning In The Early Stages of Dementia

Every adult should create certain legal documents to protect their rights and wishes, and this is no different for a loved one with a dementia diagnosis. What is important to remember is that in order to create a legal document, you need to be fully aware of what you are doing and what the consequences of your choices will be.

Thankfully, a person does not need to constantly be in a state of capacity to create an estate plan. As long as your loved one has the mental capacity at the moment they sign their estate plan documents, the documents will be valid, even if they regress into a state of incapacity afterward.

In the early stages of dementia, and ideally long before any health problems surface, your loved one should create the following estate planning documents:

1. General Durable Power of Attorney

A General Durable Power of Attorney (POA) is a legal tool that allows your loved one to appoint someone to make financial and legal decisions on their behalf. Their POA can write checks, pay bills, maintain their home, and manage their financial assets.

This document becomes especially significant as dementia progresses. Encourage your loved one to designate a trusted individual as their Power of Attorney while they are still able to make such decisions.

2. A Revocable Living Trust

A General Durable Power of Attorney is an important tool, but many financial institutions place constraints on the use of a POA or don’t acknowledge their authority at all. To make sure your loved one has complete protection of their financial wishes, encourage them to establish a Revocable Living Trust and move their assets into the name of the Trust.

As part of creating a Trust, your loved one will name the person they want to manage their assets, called the Trustee. The Trustee and Power of Attorney are usually the same person, but not always. By having these two estate planning tools in place, you can rest assured that the people your loved one knows and loves will be able to manage their assets for them as their dementia progresses.

3. Power of Attorney for Healthcare

Similar to a General Durable POA, a Power of Attorney for Healthcare (HPOA) appoints someone to make medical decisions on behalf of your loved one when they are unable to do so for themselves. Discussing and establishing a Healthcare Power of Attorney early on allows your loved one to express their medical preferences and ensures their wishes are honored.

Their Power of Attorney for Healthcare should also include a Declaration to Physicians, also called a Living Will, that outlines their desires regarding medical treatment, life support, and end-of-life care. Creating a Declaration to Physicians and discussing their wishes with you ensures that their preferences regarding life-sustaining treatment, resuscitation, and other medical interventions are documented and respected.

Plan As Early As Possible

One of the most crucial steps in preparing for the challenges of dementia is to help your loved one complete their estate planning while they still have the capacity to do so. Waiting until the later stages of the disease can limit their options and increase stress for everyone involved.

By addressing legal matters early on, you can ensure that your loved one’s wishes are respected, and their affairs are managed in the way they intended, by the people they trust, without the need for court involvement.

If you have a loved one with more advanced dementia, check back here next week as we explore late-stage estate planning options and methods to avoid family and legal conflict over your loved one’s care.

To learn more, schedule a complimentary 15-minute call with our office. Contact us today to get started.

Tags Caregivers, Dementia, Estate Plan

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