Author: Sara Thomas

3 Ways to Comfort and Support A Loved One in Mourning

Post author By Sara Thomas
Post date December 21, 2023
2 Comments on 3 Ways to Comfort and Support A Loved One in Mourning

Losing a loved one is an incredibly challenging experience, and the journey through grief can be both complex and overwhelming. Unfortunately, we all experience grief at one time or another, and knowing how to manage your own grief and how to be there for others who are grieving is an important skill that can improve your life and relationships.

Our firm understands that our role extends beyond legal matters. In times of loss, it’s crucial to provide comfort and support to those grieving, and when they’re ready, guidance for the steps ahead.

In this blog, we explore practical and heartfelt ways to hold space for your loved ones who are mourning.

01 | Express Empathy

When someone is grieving, the simple act of expressing empathy can provide immense comfort. Let your loved one know that you are there for them, ready to listen without judgment. Phrases like “I’m here for you,” or “I’m so sorry for your loss” can make a significant impact.

If you have also lost a loved one, consider relying on your own experience to relate to their feelings and encourage the person that they will make it through this. Just be mindful to keep the focus on their feelings, as everyone experiences the emotions of loss differently.

If you aren’t sure what to say or aren’t able to be with them physically, a heartfelt card or a handwritten note can convey your sympathy in a tangible and lasting way. Being present on a telephone call can also be extremely comforting. Even if your loved one doesn’t want to talk, just being together in silence can help.

02 | Create a Safe Environment

Grief is a personal journey, and everyone copes differently. Some may need solitude, while others seek companionship. Respect your loved one’s grieving process and offer support tailored to their needs.

Grieving individuals often need a safe space to express their feelings without fear of judgment. Encourage open communication and let your loved one know that it’s okay to feel a range of emotions. Avoid offering unsolicited advice and instead, provide a listening ear. Sometimes, just being present and allowing them to share memories or express their pain can be incredibly therapeutic.

If your loved one doesn’t feel like talking or being around others, don’t push them. Leave them a message of support and give them space. Check in with them only if you haven’t heard from them in an unusual amount of time based on your relationship with them.

Be patient and understand that the stages of grief are unique to each individual. Even if your loved one is feeling better, they will likely have days or weeks where they will feel overwhelmed by grief again. Offer comfort in these moments without trying to change how they feel.

03 | Offer Practical Help

During times of grief, even daily tasks can feel insurmountable. Offering practical help, such as preparing a meal, running errands, or assisting with household chores, can make a world of difference to someone in mourning. Small gestures can alleviate the burden on your loved one, allowing them the time and space they need to navigate their emotions.

If your loved one is grieving for their spouse, they may be at a loss for how to manage their finances or other daily tasks that their partner normally would have handled. Offer to help them pay their bills, set up memorial arrangements, or inform your other relatives about the loss. If your loved one has children to care for, offer to watch their kids for a while, pick them up after school, or help with homework.

Where you’re able, try to assist your loved one as part of a routine or ritual. Establishing routines can provide a sense of stability amid grief. This could be as simple as giving them a weekly phone call to check in, a monthly visit to a special place, or inviting them over for dinner every Sunday. The consistency and socialization these routines bring can offer a source of connection and help ease the depression that comes with loss.

Ease The Burden of Loss on Your Family By Planning Ahead

In times of grief, the support of friends and family is crucial. But the best way to alleviate some of the stress and anxiety that comes with the loss of a loved one is to create a plan ahead of time. By doing so, everyone you love will know exactly what you want to happen if you become incapacitated or die, and the care of your assets, bills, and loved ones will be handled quickly and smoothly by the people you trust.

Even more importantly, your loved ones will have our support to walk them through any necessary legal steps they need to take during the mourning process.

To learn more about how we can help you create a plan that will provide guidance, comfort, and ease for your loved ones after your death or incapacity, schedule a complimentary call with our office.

We would be honored to be there for your family.

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 Estate Plan, Estate Planning Attorney, Grief, Mourning, Personal Family Lawyer ®

Roll Unused 529 College Savings Into a Roth IRA

Post author By Sara Thomas
Post date December 18, 2023
2 Comments on Roll Unused 529 College Savings Into a Roth IRA

In December 2022, Congress passed the SECURE 2.0 Act, bringing significant changes to the world of retirement savings and student loans. Two key parts of the Secure 2.0 Act are in effect, and they could substantially impact your family’s financial future.

We’ll explain how the new law affects your unused 529 college savings account and what that means for your future savings.

You Can Now Roll 529 College Savings Into A Roth IRA

A 529 college fund is a tax-advantaged savings account that is designed to help families save for their children’s college education. With the SECURE 2.0 Act, Congress expanded the ways you can use these accounts by introducing a new rollover option, which is especially helpful if the beneficiary has money left over after their education is complete.

Starting this year, a 529 plan account beneficiary will have the opportunity to roll over up to $35,000 from your 529 college savings plans into a Roth IRA – and the best part is it’s tax and penalty-free.

But there are some rules you’ll need to follow to take advantage of this retirement fund boost:

01 | Annual and Lifetime Contribution Limits

Any rollover from your 529 account is subject to annual Roth IRA contribution limits. For example, if in 2024 the Roth IRA contribution limit remains the same as in 2023 ($6,500 for individuals under 50), you can roll over an amount up to this limit, including yearly contributions withheld from your income. There is also a rollover contribution limit of $35,000 over your lifetime.

02 | The 15-Year Rule

To qualify for tax and penalty-free rollovers, the 529 plan must have been open for at least 15 years. This 15-year clock starts ticking from the day the 529 plan was initially opened, usually by a parent or grandparent. It’s crucial to remember that changing the beneficiary of the 529 plan at any point may potentially restart this 15-year clock.

03 | 5-Year Rollover Blackout

Funds that were contributed to your 529 plan within five years of the rollover date cannot be rolled over. Only contributions made outside of this five-year window are eligible. But, you can continue to rollover funds as time goes on and the 5-year window moves farther away from the most recent contributions.

Here’s an example of how these rules work in real life: Imagine your mother opened a 529 account for you in 2001. She contributed money to the account every year for 20 years, through 2020. When you graduated college in 2022, there were some funds left in the 529 account. You want to roll over these funds into a Roth IRA on January 1, 2024.

In this scenario, the account has been open for at least 15 years, so you can roll over funds into a Roth IRA, up to the annual contribution limit of $6,500 per year. But, the funds you roll over from the 529 cannot include funds your mother contributed in the 5 years before your rollover date of January 1, 2024. That means you can’t roll over funds contributed to the 529 account between January 1, 2019, and January 1, 2024.

Let’s look at another example: Your father opened a 529 college savings account for you in 1998 and contributed money to it every year until your graduation from trade school in 2015. Since graduation, you and your employer have contributed a total of $3,000 to your retirement account this year. There is $10,000 left in the account and you want to roll over the funds into a Roth IRA on January 1, 2024.

In this example, the account has been open for more than 15 years and all of the funds in the account were contributed to it more than five years ago, so all of the funds are eligible for a rollover. However, you can only contribute up to $6,500 to your retirement accounts annually. Because of this, you can only roll over a maximum of $3,500 from your 529 account into your Roth IRA this year if you or your employer don’t make any more contributions to your retirement this year. After the rollover, you’ll have $6,500 in your 529 account at the end of 2024.

In 2025, you’ll be able to roll over the remaining $6,500 from your 529 into your Roth IRA (if you make no other contributions from your income that year).

An Extra Bonus For Grandparent-Owned Accounts

In order to be considered for federal financial aid, students must disclose their personal and family financial information on the Free Application for Federal Student Aid (FASFA). Funds in a 529 account created by a parent are counted as a financial asset of the student on the FAFSA application.

But funds in a 529 account owned by a grandparent or other third party have never been counted as an asset for FAFSA purposes. Only money withdrawn from the account is considered untaxed income of the student which FAFSA considers in its application review.

The big news is that with the new Secure 2.0 Act, any withdrawals from a grandparent-owned 529 for education expenses will no longer be considered untaxed income of the student, which means the funds will not hurt the student’s eligibility for federal aid.

Planning for What’s Really Important

While you take steps to secure your financial future, don’t forget to protect everything you’ve worked so hard to build. Your retirement savings is likely the largest asset you own, and making sure it’s managed and passed on in the best way possible is essential for your well-being and the future well-being of those you love.

To make sure there’s a plan for your future, give our office a call. We’d be honored to learn more about your goals for your family and share with you the unique process we use to ensure everything you own and everyone you love is cared for, no matter what.

Schedule a free 15-minute discovery call to learn more.

Tags 529 College Savings, Estate Plan, Grandparent-Owned accounts, Personal Family Lawyer®, Roth IRA, SECURE 2.0 Act

Estate Planning

How To Pass On Family Heirlooms and Keepsakes Without Causing A Family Feud

Post author By Sara Thomas
Post date December 11, 2023
No Comments on How To Pass On Family Heirlooms and Keepsakes Without Causing A Family Feud

When creating an estate plan, people are often most concerned with passing on the “big things” like real estate, bank accounts, and vehicles. Smaller items, like family heirlooms and keepsakes, which may not have a high dollar value, frequently have the most sentimental value for our family members. However, these personal possessions are often not specifically accounted for in wills, trusts, and other estate planning documents.

It’s important that you don’t overlook this type of property in your estate plan, as the distribution of such items can become a source of intense conflict and strife for those you leave behind. In fact, if you don’t properly address family heirlooms and keepsakes in your estate plan, it can lead to long-lasting disagreements that can tear your family apart.

Little Things With Big Value

Heirlooms and keepsakes are both prized for their sentimental value, but these possessions are slightly different from one another in terms of the manner in which the items are passed on.

Heirlooms: Heirlooms are passed down among family members for generations, and the passing of heirlooms sometimes involves traditions.

Keepsakes: Keepsakes, on the other hand, are possessions that are given or kept specifically for sentimental or nostalgic reasons, and these items may only get passed on once.

Although just about any personal possession could be considered an heirloom or keepsake, some of the most common examples of these items include the following:

Jewelry
Photographs
Books
Art
Musical instruments
Furniture
Clothing
Bibles
Recipes
Family documents (such as birth certificates, baptism records, and citizenship papers)
Collections (such as sports memorabilia, coins, stamps, and doll collections)

Issues Raised By Passing On Heirlooms & Keepsakes

In the legal world, both heirlooms and keepsakes are considered “non-titled personal property.” Given the potential trouble the distribution of heirlooms and keepsakes can cause for your heirs, you’ll want to take extra care in seeing that these family treasures are passed on properly. And this means incorporating them into your estate plan in one way or another.

Strategies For Peacefully Distributing Heirlooms & Keepsakes

While there is no one perfect way to distribute these items in your estate plan, your primary goal should be to maintain harmony among your loved ones during an already emotional time. As with most sensitive issues, clear communication is vital to this process.

Because your family members can have vastly different values associated with certain heirlooms and keepsakes and you may have little idea about how each person feels, you should speak with each family member in advance. By talking with family members about their feelings and expectations regarding your possessions ahead of time, you will have a much better idea how to distribute these items to your loved ones with the least amount of conflict.

Additionally, you should decide ahead of time if you need to have any of your heirlooms or keepsakes appraised. In doing so, you provide your heirs with the necessary documentation to gauge the monetary value of these items. Again, the manner in which you distribute your heirlooms and keepsakes will depend largely on the items you have to pass on and your specific family situation.

That said, here are a few estate planning strategies to consider when passing on these precious possessions:

Gifting during your lifetime: Of course, you don’t have to wait until you die to pass on your heirlooms and keepsakes, and you may prefer to give away certain special items while you are still living. By doing so, you get to personally witness the joy your loved ones experience when they receive the gift, and you can also personally explain the reasons you want each person to have a particular item.

If your heirlooms and/or keepsakes have a high monetary value, you should keep gift tax issues in mind when you give them away. If you have possessions you want to give away that might trigger gift taxes, meet with us to discuss your options.

Include items in your estate plan using a personal property memorandum: As with other assets you want to pass on after your death, you should include heirlooms and keepsakes in your estate plan by adding them to your will or trust. The best way to do this is by using what’s known as a personal property memorandum.

A personal property memorandum is a separate document that is referenced in your will or living trust. The memorandum allows you to list which items you wish to leave to each individual and detail the reasons you are giving each item. In many states, if it’s properly incorporated into your will or trust, a personal property memorandum is a legally binding document.

Furthermore, unlike a will or trust, you can create and update your memorandum without a lawyer’s help. You can change your memorandum as many times as you like, just make sure you sign and date it each time to ensure authenticity. Your memorandum can be as long or short as you like, which allows you to account for even the smallest or seemingly insignificant possessions.

Most types of tangible personal property can be included in your memorandum, but it’s important to note that you cannot list certain assets in a memorandum, including titled property, such as real estate and vehicles; assets with a beneficiary designation, such as life insurance, 401(k)s, and bank accounts; or intellectual property, such as works protected by a copyrights or trademark. If you are unsure if you should include a certain possession in your personal property memorandum, consult with us.

Pass on the values and stories behind the possessions: You may want to consider making audio recordings to accompany your heirlooms and keepsakes. In this way, your loved ones not only get to hear your voice, but they will also be able to learn the stories behind the possessions, as well as the reasons why you gave each person a particular item.

Maintain an inventory of your assets: Of course, if no one can find your heirlooms and keepsakes, they aren’t going to do anybody any good. It’s vital that you create and maintain a comprehensive inventory of all of your assets, including each of your family heirlooms and keepsakes and make sure your inventory stays consistently updated throughout your lifetime.

Keep The Peace After You Are Gone

To ensure your heirlooms and keepsakes don’t create any unnecessary conflicts among your heirs, make sure that your estate plan includes all of your assets, especially your family heirlooms and keepsakes. We can support you to ensure these precious treasures are protected and preserved as part of your Life & Legacy Plan, and that they pass to each of your loved ones in exactly the manner you would want, without causing a family feud.

Tags Estate Plan, Family Heirlooms, Family Keepsakes

Estate Planning

Protect Your Children’s Inheritance With A Lifetime Asset Protection Trust

Post author By Sara Thomas
Post date December 5, 2023
No Comments on Protect Your Children’s Inheritance With A Lifetime Asset Protection Trust

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.

Creating a will or a revocable living trust offers some protection for your kid’s inheritance and you can set parameters for distribution at specific ages and stages. In our planning process, we 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.

These trusts offer 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.

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.

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 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 even 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. 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.

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.

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, 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 complimentary call today to learn more.

Tags Asset Protection, Estate Plan, Inheritance, LIfetime Asset Protection Trust, Personal Family Lawyer®

Estate Planning

What You Need To Know About The Corporate Transparency Act Reporting Deadline

Post author By Sara Thomas
Post date December 1, 2023
No Comments on What You Need To Know About The Corporate Transparency Act Reporting Deadline

Business ownership is a fulfilling and exciting endeavor, but it also comes with rules, responsibilities, and reporting requirements that can be hard to track. If you own a small business or have a Trust that owns a business interest, you’ll need to comply with the Corporate Transparency Act (CTA).

Beginning January 1, 2024, the Corporate Transparency Act (CTA) will require small companies to disclose the names of any owners who hold a 25% or more ownership interest in the company, as well as any individuals who exercise significant control over the company’s activities. This new rule also applies to Trusts that own or control a company.

The Corporate Transparency Act (CTA) was enacted in 2020 to enhance corporate transparency and prevent money laundering, terrorist financing, and other financial crimes. By requiring businesses to report information about their owners and controllers, the Act seeks to make it easier to identify “shell” corporations – companies that don’t actually perform an active business or trade and which are often used to move money around illegally.

Since money laundering and terrorist financing are usually conducted using small businesses, the Act largely aims to collect information on these companies, so entrepreneurs and small business owners should take extra care to meet the filing requirements.

What Must Be Done to Comply with the CTA?

In order to comply, a business must file an annual report to the Financial Crimes Enforcement Network (FinCEN) with the following information on each owner or controller of the business:

Business name and current business address
State in which the business was formed and its Entity Identification Number (EIN)
Owner/controller’s name, birth date, and address
Photocopy of a government-issued photo ID (such as a driver’s license or passport) of every direct or indirect owner or controller of the company

If a company doesn’t file an annual report, it may be penalized with a $500 fine for every day the report is late and its owners could even face imprisonment for up to two years.

When Do Businesses Need to File Their Report and How Can You Extend Your Deadline?

If your company’s formation occurred on or before December 31, 2023, you have until January 1, 2025, to file its CTA report.

If your company was created after January 1, 2024, you’ll need to file your report within 30 days of the company’s creation.

This means if you’re thinking of creating a new company or changing the entity structure of an existing company, doing so before January 1, 2024, will give you a year-long grace period to file the report. Otherwise, once January 1 rolls around, it’ll be too late to take advantage of this extension.

The extension provides a valuable window of time for business owners to understand the reporting requirements thoroughly, gather the necessary information, and engage with legal professionals to ensure they’re in compliance with the Act without the pressure of a 30-day deadline.

The Act’s reporting rules seem straightforward, but the penalties for non-compliance can be substantial. Creating your new business entity by year-end provides a cushion against potential penalties and risks associated with overlooking or misunderstanding reporting requirements. It’s a proactive step that gives your business the advantage of time.

There is no fee for the annual report, and it may be filed electronically with FinCEN. The system and report are currently under development and won’t be ready to accept submissions until January 1, 2024.

For more information about the annual report, please check out their FAQ page.

Helping You Make Strategic Moves for The Wellbeing of Your Family and Your Business

If you own a family business or you’re thinking of creating a new business entity soon, I encourage you to do it NOW before the end of the year so you can take advantage of the year-long window to file your Corporate Transparency Act report for existing businesses.

And don’t wait until the end of December to get started, as we anticipate there will be a rush of new business entity filings at the end of December as business owners and their professionals rush to file their creation documents before the new year. If you need assistance filing your report or aren’t sure whether the CTA rule applies to your company, we can help.

Our goal is to guide your family (and business!) through every stage of life and every change in the law through an ongoing relationship with you. Our approach to serving clients doesn’t end when the paperwork is filed. We keep in touch with you and keep you abreast of any changes in the law so you can have peace of mind knowing that your family and assets are well cared for now and in the future.

Schedule a complimentary call with my office to learn more.

Tags Beneficial Ownership, Corporate Transparency Act, Family Business, Financial Crimes Enforcement Network (FinCEN), Personal Family Lawyer®, Small Business

Estate Planning

3 Things You Need To Know About Retirement Distributions

Post author By Sara Thomas
Post date November 27, 2023
No Comments on 3 Things You Need To Know About Retirement Distributions

If you’re part of a blended family (meaning you are married with children from a prior marriage in the mix), you’re no stranger to the extra considerations and planning it takes to keep your family’s life running smoothly. You’ve also probably given some thought to what you want to happen to your assets and your family if something happens to you.

But what you might not have realized is this: If you don’t create a plan for your assets before you die, the law has its own plan for you that might not reflect your wishes for your assets, especially your retirement assets. And if you’re in a blended family, this can have a significant financial impact on the ones you love and even create expensive, long-term conflict.

This week, I explain how the law affects retirement distributions for married couples, and why you need to be extra careful with your retirement planning if you’re in a blended family to ensure your retirement account assets go to the right people in the right amounts after you’re gone.

01 | Be Aware of How ERISA Affects 401K Distributions

If you’ve remarried, you and your new spouse have probably talked about updating the beneficiary designations on your retirement accounts to reflect your blended family arrangement. (If you haven’t talked about it, you need to talk about it ASAP). Sometimes, people who are remarried decide to leave their retirement funds to their children from a prior marriage and leave other assets like their house and savings accounts to their current spouse. You may do this to avoid future conflict between your spouse and your children over your assets.

However, if you’re married and your retirement account is a work-sponsored account and you want to leave your retirement for just your children, there are other considerations to make. The federal Employee Retirement Income Security Act (ERISA) governs most employer-sponsored pensions and retirement accounts. Under ERISA, if you’re married at the time of your death, your spouse is automatically entitled to receive 50 percent of the value of your employer-sponsored plan – even if your beneficiary designations say otherwise.

The only time that your surviving spouse would not inherit half of your ERISA-governed retirement account is if your spouse signs an official Spousal Waiver saying they are affirmatively waiving their right to inherit 50 percent of the account, or if the account beneficiary is a Trust of which your spouse is a primary beneficiary.

02 | IRAs Have Different Rules Than 401Ks

If you want your children to inherit more than 50 percent of your work-sponsored retirement benefits, and completing a Spousal Waiver isn’t an option, consider rolling the account into a personal IRA instead.

In contrast to 401(k)s and similar employer-sponsored plans, IRAs are controlled by state law instead of ERISA. That means that your spouse is not automatically entitled to any part of your IRA.

When you roll a 401(k) into an IRA, you gain the flexibility to name anyone you choose as the designated beneficiary, with or without your spouse’s consent.

On the other hand, if you want to ensure your spouse receives half of your retirement savings, make sure to include them as a 50 percent beneficiary or better yet, have your individual retirement account payout to a Trust instead. With a Trust, you can:

Document exactly how much of your retirement you want each of your loved ones to receive.
Control when they receive the funds outright.
Easily update and change the terms of your Trust without having to remember to update your financial accounts.

03 | Beneficiary Designations Always Trump Your Will

Whether you have an employer-sponsored 401K or an IRA you manage yourself, there is one critical rule that everyone needs to know: beneficiary designations trump your Will.

A Will is an important estate planning tool, but most people don’t know that beneficiary designations override whatever your Will says about a particular asset.

For example, if your Will states that you want your retirement account to be passed on to your brother, but the beneficiary designation on the account says you want it to go to your sister, your sister will inherit the account, even though your Will says otherwise.

Similarly,if you forget to update your ERISA-controlled account and have remarried, your current spouse would receive half of the account and your former spouse would receive the other half. That’s why it’s so important to work with an estate planning attorney who can make sure your accounts are set up with the proper beneficiary designations and ensure that your assets are passed on according to your wishes.

Work With An Attorney Who Makes Sure All Your Assets Will Be Passed On How You Want Them To

Understanding how the law affects different types of assets is essential to creating an estate plan. But there’s more to it than just having a lawyer – you need an attorney who takes the time to really understand your family and your assets so they can design a custom plan that achieves your goals for your assets and your legacy.

That’s why we help our clients create an inventory of all of their assets to ensure that every asset they hold is accounted for and passed on to their loved ones exactly as they want it to.

Learn more about how we serve our clients differently than most lawyers; schedule a complimentary call with us. We’d be honored to share how our unique process can help your family.

Tags Beneficiary, Blended Family, Estate Plan, Retirement, Retirement Benefits, Spousal Rights

Estate Planning

3 Tips For Discussing Finances With Your Family Over The Holidays

Post author By Sara Thomas
Post date November 17, 2023
No Comments on 3 Tips For Discussing Finances With Your Family Over The Holidays

The holidays are right around the corner, which means more time to gather with family and relatives than any other time of the year. If you’ve been meaning to talk with your family about finances, inheritance, end-of-life decisions, estate planning, and creating a plan for your whole family’s wealth – now and in the future – having everyone in the same room is ideal.

But asking your relatives how they want their assets handled when they die or if they become incapacitated might not go over well while opening presents or carving a turkey.

To keep your family from feeling blindsided and to make the most of your conversation, consider the following three tips.

01 | Share Your Intention Ahead of Time

To help your loved ones feel at ease, don’t bring up finances and estate planning for the first time while the family is gathered around the TV watching football. Instead, approach the topic weeks ahead of time if possible.

If you have regular visits or phone calls with your loved ones, let them know you’ve been thinking about creating a plan for your own finances and the care of the family in case something happens to you. Casually mentioning that it’s on your mind will help plant the seed for a future conversation with your loved ones and likely get them thinking about their own plan or lack of a plan.

As your family gathering approaches, bring up the subject again, this time with more intention and detail. Consider asking the host of your family gatherings, whether it’s your sibling, parent, or adult child when the best time would be to have an all-family conversation for 90 minutes. Schedule it and let everyone know that you’ve got something meaningful planned.

If the host pushes back against the idea, respond with curiosity about their experience, what they feel apprehensive about, and if there is a way that you could mitigate their apprehension perhaps by speaking with other family members in advance.

If you’ve already completed your own planning, use your experience as a springboard for the conversation.

02 | Set Aside a Time and Place to Talk

Be upfront with your family about the meeting’s purpose so no one is taken by surprise and so they come prepared for the discussion. Choose a setting that’s comfortable, quiet, and private. The more relaxed everyone is, the more likely they’ll be comfortable opening up.

Begin by sharing the context of why it’s important to you that your family begin having conversations about finances, life, and death. You may even want to share that the topic is uncomfortable for you, but that it’s important enough that you are willing to be uncomfortable because you know that these conversations can bring your family closer together, create more family resilience, and ensure you are all financially well-cared for.

Finally, as part of setting context, set a start and stop time for the conversation. Remember, the goal is to simply get the conversation started, not work out all of the details or dollar amounts, so don’t expect this to be the one and only conversation you have – it’s a start.

03 | Share Your Planning Experience

If you’ve already created your own plan, and it included an inventory of your assets, a look at what is enough, and what would happen to it all when something happens to you (which is what we do during our first Planning Session with you), you can start by explaining how you felt during the process, how easy it was, and how you feel now knowing that your assets and loved ones will be cared for the way you want if something happens to you.

If you’ve worked with us, describe how the process unfolded and how we supported you to create a plan designed for your unique wishes and needs.

Share any concerns or doubts you initially had about planning and how we worked with you to address them. If you have loved ones who’ve yet to do any planning and have doubts about its usefulness, empathize with them in a supportive and understanding way, and share your own journey learning the benefits of planning for your finances and your wishes.

If you haven’t created a plan yet, or have doubts about a plan you created with another attorney, be open about why you want to create a plan for your life and death, such as a desire to avoid family conflict, to ensure that a child, disabled relative, or senior parent is cared for in the future, or to build generational wealth and a legacy for your family. Focus on the benefits that planning will have for both your immediate family and your extended family as a whole.

Bringing Families Together

Speaking with loved ones about finances and estate planning can be difficult, but we can guide and support you in having these intimate discussions with your loved ones. When done right, planning can put your life and relationships into a much clearer focus and offer peace of mind knowing that your assets will be protected and that the people you love most will be provided for no matter what.

If you haven’t created your own estate plan, doing so before you talk with your family can help your loved ones be more open to the idea and can help them see the incredible benefit of planning from one of their own family members.

Schedule a complimentary call with us to learn more.

Tags Estate Plan, Estate Planning Attorney, Family Discussions, Family Finance, Holidays, Personal Family Lawyer®

Estate Planning

Transition to Adulthood: The Legal Impact of Your Child Turning 18

Post author By Sara Thomas
Post date November 14, 2023
No Comments on Transition to Adulthood: The Legal Impact of Your Child Turning 18

Soon after the challenges of puberty and the excitement of high school, an even larger milestone looms: the 18^th birthday. It marks your child’s transition from childhood to adulthood, and with it new responsibilities and rights. From a legal standpoint, this milestone also brings significant changes that every parent should be aware of.

In the eyes of the law, an individual is considered a legal adult at the age of 18. This means that your child gains certain rights and privileges, including the ability to enter into contracts, vote, buy property, and make medical decisions for themselves. While this newfound independence is a crucial part of growing up, it can also pose challenges for parents, especially when adult children need their parents’ help or need someone to make decisions on their behalf.

We’ll explore the legal impact of what happens when your child turns 18, what it means for your ability to make legal, financial, and healthcare decisions on their behalf, and what tools you’ll need for a smooth transition to adulthood.

How The Law Changes Your Role As A Parent

On the day your child turns 18, your ability to make legal, financial and healthcare decisions for them essentially disappears in a blink. To give you a sense of how impactful this can be, if your young adult child is hospitalized and unable to communicate their wishes, healthcare providers won’t even legally be able to share your child’s medical information with you. Similarly, financial institutions won’t permit you to access your child’s accounts or make financial decisions on their behalf without their consent – or unless you’re a co-owner of their accounts.

This shift in decision-making authority can feel unsettling and can be particularly challenging if your child is still financially dependent on you, is in a medical emergency, or requires assistance in managing their affairs due to a disability. Thankfully, there are legal tools that can help parents and young adults navigate these new challenges.

Have Their Back With Powers of Attorney

A Power of Attorney is a legal tool that allows your child to designate the person they choose to make legal or healthcare decisions on their behalf. There are two common types of Powers of Attorney that can be valuable in this situation: a General Durable Power of Attorney and a Power of Attorney for Healthcare.

A General Durable Power of Attorney allows your child to appoint someone to manage their financial affairs in the event they become incapacitated or if they just want help managing their finances. With this in place, you can continue to assist your child with financial matters, even after they turn 18.

The important thing to remember however is that not every financial institution will honor a Power of Attorney, so while every adult should have this legal tool, it’s important to check with your specific institution and possibly set up your child’s accounts in a different way to ensure you have immediate access to them if needed. We’d be happy to discuss which options are best for you and your adult child.

A Power of Attorney for Healthcare grants someone the authority to make medical decisions on your child’s behalf if they are unable to do so, such as medication and treatment options, nutritional needs, and life-support measures. This is crucial to ensure that your child receives the care they want, even if they cannot communicate their preferences.

Only your child can put these measures in place, but encouraging them to create these legal documents is a proactive step in maintaining your ability to assist them when they need it most.

Stay Informed With a HIPAA Waiver

The Health Insurance Portability and Accountability Act (HIPAA) is a federal law that protects the privacy of individuals’ medical records. Once your child turns 18, their medical information is protected under HIPAA, and healthcare providers are prohibited from disclosing it to anyone without the patient’s explicit consent – parents and family members included.

To maintain access to your child’s medical information, they must complete a HIPAA waiver. This document permits healthcare providers to share medical information with individuals specified in the waiver, such as parents or trusted family members.

Having a HIPAA waiver in place can be invaluable during medical emergencies when swift access to medical records is critical. It can also be a valuable tool for young adults who may simply appreciate a parent’s ability to speak to their doctors when they aren’t feeling well or are overwhelmed with the demands of work, college, or both.

Support Their Journey Into Adulthood Through Open Communication

Transitioning to adulthood is a significant step for both parents and children. While legal documents such as Powers of Attorney and a HIPAA Waiver are essential, it’s equally important to have open and honest conversations with your child about their wishes and the responsibilities that come with adulthood.

Discuss their healthcare preferences, financial decisions, and their expectations from you as a parent. Encourage them to consider creating these legal documents not only for your peace of mind but also for their own protection.

We invite you to reach out to our firm to ensure your child has the legal support and protection they need no matter what adulthood brings.

And if you aren’t sure how to talk with your adult child about these legal tools, we can help you start the conversation from a place of love, compassion, and collaboration.

Schedule a complimentary call today to get started.

Tags Estate Plan, Estate Planning Attorney, Health Care Directives, HIPAA Waiver, Power of Attorney, Young Adult, Young Adult Planning

Estate Planning

Naming Godparents Does Not Create Legal Guardians

Post author By Sara Thomas
Post date November 5, 2023
No Comments on Naming Godparents Does Not Create Legal Guardians

As a parent, your top priority is the well-being and future of your children. You plan for their education, health, and happiness, and often this planning includes the tradition of choosing godparents to guide and mentor your children if something happens to you.

While selecting godparents is a meaningful tradition in many cultures, it’s important to understand that naming a godparent is not the same thing as naming a legal guardian for your children.

To put it bluntly, even if you have named godparents, if something happens to you, your children could end up in the care of strangers or in the long-term care of someone you would never want raising your children.

We’ll explain the difference in roles of a godparent and legal guardian and how to ensure your kids are always cared for by the people you choose – no matter what.

Godparents

A godparent is traditionally someone you name to watch over your child and help them live according to your morals and values. Godparents are meant to be mentors and role models, guiding your child in matters of faith, morality, and character. The role of a godparent is deeply rooted in religious and cultural traditions, and they often participate in religious ceremonies such as baptisms or confirmations.

Whether your family is religious or not, godparents may also play a supportive role in your child’s life by offering emotional support, advice, and friendship. They can be someone your child can turn to for guidance and a listening ear, but their responsibilities are largely informal and non-legal.

Legal Guardians

In contrast, naming a legal guardian for your child is a formal, legal process. A legal guardian is someone who has the legal authority to make decisions on behalf of your child, especially if you, as the parent, are unable to do so. This could occur due to your passing, incapacity, or any situation in which you cannot provide care or make important legal, financial, healthcare or education decisions for your child.

The responsibilities of a legal guardian encompass every area of your child’s life that you would normally manage as a parent. This includes everything from feeding and clothing your child to deciding where they go to school, attending parent-teacher meetings and which extracurricular activities they participate in. Legal guardianship also includes the decisions about where your child lives and what medical treatment they should or should not receive.

A legal guardian may also help manage your child’s financial assets and resources, ensuring their financial well-being. In some cases, if you’ve planned ahead, you may choose to have a different person act as a financial Trustee of the assets you leave for your child, and your chosen Trustee will work alongside the legal guardian to ensure your child is financially supported. In some cases, your guardian and Trustee may be the same person. This is a decision we can help you make based on the specifics of your family dynamics.

Why Naming Godparents Isn’t Enough

While godparents may be deeply caring and involved in your child’s life, they have no legal authority to make decisions for your child unless they are officially appointed as a legal guardian by the court. That means that until that happens, (if it happens) your child’s godparents are not legally able to make any decisions for your children, including their basic care needs, education, and medical care.

If you become incapacitated or die, and have not legally nominated a guardian (and, ideally, more than one) there could be a complex and expensive custody dispute among your family members, who may assume you would want your children to live under their care rather than the people you named as godparents. This is especially likely if the people you’ve named as godparents are not related to you by blood or marriage.

Without a legal guardian designation in writing and signed with the formalities of a Will, godparents may find themselves in an expensive court battle over custody rights, and they may not even be named as the legal guardians of your children at all.

Life-long Legal Protection for Kids

Consider combining the roles of godparents and legal guardians into one. If you’ve already chosen people you trust to serve as lifelong role models and spiritual guardians for your children as their godparents, why not give those people the legal authority to truly perform those duties if something happens to you?

If you aren’t sure who the best guardian or godparent is for your children, we can help. We’ll walk you through a heart-centered process for choosing guardians who genuinely care for your child’s well-being and share your values. Plus, we’ll ensure they have the financial and legal tools needed to give your child the best life possible if you can’t be there.

The best way to keep your children safe and secure is to create a comprehensive Kids Protection Plan® that keeps your children in the care of the people you choose in any situation, out of the care of anyone you wouldn’t want, ensures your children can receive prompt medical care, and that the authorities know who to contact in an emergency so your children are never placed in protective custody.

To learn more and to get started today, schedule a complimentary call with my office.

Tags Estate Plan, Godparents, Kids Protection Plan®, Legal Guardians

Estate Planning Tax

8 Things To Do Now to Lower Your 2023 Taxes – Part 2

Post author By Sara Thomas
Post date October 28, 2023
22 Comments on 8 Things To Do Now to Lower Your 2023 Taxes – Part 2

Last week we looked at four different ways to lower your tax liability for 2023, from adjusting your tax withholding to strategically planning your medical procedures. In this week’s blog, we discuss four more tax-saving methods you can use right now to owe fewer taxes come April 2024.

If you missed part 1 of this series, be sure to read it here so you don’t miss out on these money-saving techniques.

Make Charitable Gifts

Giving back to your community or supporting causes you care about is not only rewarding but can also provide tax benefits if your family’s tax deductions are close to exceeding the standard tax deduction.

The standard deduction for 2023 is $12,950 for individuals and $25,900 for married couples filing jointly. Remember that the total of your itemized deductions, including charitable contributions, must exceed the standard deduction for your filing status to provide a tax benefit.

If you’re nearing the top of the standard deduction threshold, this year may be a great time to contribute to a charitable organization that is important to you. Doing so will help support a good cause and allow you to make itemized deductions for an extra reduction in your taxable income for the year.

If you make any charitable donations, keep detailed records of your donations, including receipts and acknowledgments from the charities. If you donate non-cash items (such as clothing or household goods), make sure to document their fair market value.

If you aren’t sure how to document your donations or aren’t sure if a charitable donation will be advantageous to you this year, be sure to discuss this with your tax professional.

Consider Tax-Loss Harvesting

Tax-loss harvesting is a strategy designed to offset capital gains by selling underperforming investments. This technique can help you minimize the taxes you owe on your investment gains.

The first step is to identify investments in your portfolio that have experienced losses and then sell those investments to realize the losses. After all, you haven’t actually lost or gained capital until the money enters or leaves your portfolio.

By selling underperforming investments, you can now use the lost capital to offset any capital gains from other investments that are doing well. Losses can be used to offset up to $1,500 for individuals filing separately or up to $3,000 for couples filing jointly.

It’s important to remember that there are rules and limitations when it comes to tax-loss harvesting. Consult with a financial advisor or tax professional to ensure you execute this strategy correctly and in a way that aligns with your overall financial goals.

Pay Your January Mortgage Payment in December

If you’re a homeowner with a mortgage, making your January mortgage payment in December can provide a valuable tax advantage. Mortgage interest is deductible on your income tax return, and prepaying your January mortgage payment in December gives you an extra month of interest to deduct on your 2023 taxes.

However, before implementing this strategy, check with your mortgage lender to ensure that they apply the payment correctly. Some lenders may automatically apply extra payments to your principal balance rather than counting them as interest for the next month.

Max Out Your IRA (Individual Retirement Account) or Roth IRA

Retirement planning is crucial for long-term financial security, and IRAs are excellent vehicles for saving for your golden years. For the 2023 tax year, the maximum contribution limit for both traditional and Roth IRAs is $6,500, with an additional $1,000 allowed for those aged 50 or older. It’s essential to understand the differences between these two types of IRAs to choose the one that suits your needs best.

Traditional IRA contributions may be tax-deductible, potentially reducing your taxable income for the year. However, withdrawals in retirement are subject to taxation.

Roth IRA contributions are made with after-tax dollars, so they don’t provide an immediate tax deduction. However, qualified withdrawals in retirement are entirely tax-free.

By maximizing your contributions to your IRA of choice, you can secure a more comfortable retirement and possibly reduce your tax liability for this year.

The Foundation of Life-Long Support and Security

Proactive year-end tax planning can significantly impact your financial well-being. By implementing these eight tax-saving strategies, you may be able to keep more money in the bank and take a step toward a brighter financial future.

But good money management is only one part of the equation for a life you love and a legacy that will guide and support your family for generations to come.

Making the best strategic decisions to protect your family’s health, finances, and happiness is equally, if not more, important. If you want to make sure that both your financial and personal life are in order today and structured to give your family the best support possible tomorrow, give us a call.

We would be honored to help you protect everything you own and everyone you love through our heart-centered estate planning services.

Tags 2023 Tax Planning, Estate Plan, Estate Planning, Income Taxes, IRS, Personal Family Lawyer®, Tax Savings

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