Tag Archives: estate planning

Estate Planning Considerations for Religious Leaders

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Your noble calling is to help others grow in their faith and help them navigate the difficult circumstances that life may throw their way. It is important that you also take care of your affairs, however. A financial and estate planning team can help you create a plan that will protect you today and tomorrow so you can better serve your community and provide for those who count on you. Below are some important considerations for you to be aware of as you begin your planning journey

Retirement Accounts

If your benefits package includes a retirement account, this valuable and sometimes complex account must be planned and managed properly. One thing that makes a retirement account attractive is that you can name a beneficiary to receive ownership of the account when you pass away without court involvement. However, for this to work, you must complete the appropriate beneficiary designation forms. If you do not list a beneficiary, you risk the account having to go through the time-consuming and costly process known as probate and being given to the person that the state designates, not the person you would have chosen. Depending on your circumstances, the state’s choice could be the last person you would want to receive such a potentially large account.

If you had already designated someone as the beneficiary of your account when was the last time you reviewed the designation? Is this still the same person you would like to leave the account to? There are several reasons why you might reconsider your beneficiary designation. It is possible that the individual has passed away, has become disabled and needs to maintain eligibility for government assistance (in which receiving a large retirement account could disqualify them), or is someone with whom you have had a falling out. Or there may be some other individual or charitable entity that you would rather leave the account to now. As with many steps in the estate planning process, completing the beneficiary designation is not just a one-and-done task.

As with so many other areas of life, it is always good to have a backup plan. Your retirement account is no exception. After you have decided on a beneficiary or reviewed your beneficiary designation, you must name a backup beneficiary (also known as a contingent beneficiary). This will ensure that your account goes to the person you have chosen and not someone the state has chosen if your original beneficiary is deceased or decides that they do not want the retirement account.

If you find that deciding on a beneficiary or backup beneficiary for your retirement account is difficult, we can assist you. Due to recent changes in the rules governing retirement accounts, some beneficiaries may benefit more from receiving a retirement account than others. We can help you navigate the sometimes complex rules and design a plan that leaves the account to who you want, the way you want.

Choosing Beneficiaries

Just like with a retirement account, if you do not have an estate plan, your money and property will be given to those individuals that the state dictates in its intestacy laws. The exact amounts and order of who will receive your money and property are determined by these state laws. Still, in general, your money and property will go first to your surviving spouse, then to your descendants (children or grandchildren), then to your parents, then to your siblings, and then to your siblings’ children, depending on who survives you. If you are not close to these individuals, this could be the last thing you want to happen.

Choosing beneficiaries can be a major roadblock for many people, but it does not have to be for you. As part of the estate planning process, we can work with you to do some soul searching to determine the legacy that you want to leave behind. Are there individuals you are particularly close to, regardless of blood relationship, that could benefit from additional money or property from you? Do you have a pet that needs to be provided for at your passing? (No one said your beneficiary had to be human.) Is there a cause important to you that you would like to see furthered by a charitable contribution? No matter your answer, proper estate planning must be in place to get your money and property into someone else’s hands.

Charitable Giving

If you are considering donating money to your favorite charitable organization either during your lifetime or at death, here are a couple of questions you need to ask yourself before moving forward.

  • If you plan to make gifts during your lifetime, can you afford to donate? It is important to spend your money wisely, especially if you are nearing retirement, have already retired, or are on a fixed income. While a cause or organization may be near and dear to your heart, you still need to have money available to meet your living expenses. Consider making smaller donations during your lifetime and including the charitable organization in your estate plan as a beneficiary, allowing you to give a larger amount of money when you no longer need it.
  • How much should you donate? This is a great opportunity for you to identify your charitable goals and work with us to craft a plan that will leave a lasting legacy. Is there a specific project you want to help fund (e.g., the construction of a new library) where a large lump sum might be more useful to the charitable organization? Or would you rather provide continuous financial support to an organization? That decision would make a stream of income a better option. The choice is yours.
  • Are there any tax benefits to donating? While not all giving is motivated by tax considerations, you may want to check with your tax professional to see if your good deed can also generate a tax deduction for you.

Once you consider these questions and decide to move forward with making a charitable gift, there are a variety of ways you can do so during your lifetime and at your death.

During your lifetime:

  • Lump-sum. If there is a specific project that you would like your money to go towards, providing the charitable organization with a lump sum may be the best option. Hence, money is readily available to complete the project.
  • Over a period of time. If there is an ongoing cause that you would like to help fund, smaller gifts over time may help you better accomplish this—for instance, if you would like to provide a certain amount each year to fund a scholarship or sponsor a young adult on a mission trip.

At your death:

  • Last will and testament. Also known as a will, you can use this document to leave money or property to your desired charitable organization. With a will, you can determine which organization receives the money, how much the organization will receive, and how the organization will receive it (one lump sum or several gifts over a period of time). An important thing to remember is that by using a will, your loved ones will have to go through the probate process to get the money and property to the charitable organization at your death. If you want the charitable organization to receive money over a period of time, court oversight may continue until the last amounts are paid to the charitable organization.
  • Revocable living trust. This document also allows you to determine which organization receives the money, how much the organization will receive, and how the organization will receive it (one lump sum or several gifts over a period of time); however, this can all be handled privately without the involvement of the probate court.

Choosing Trusted Decision Makers

Another important estate planning consideration is who you should choose to make important decisions on your behalf. These are people that will either communicate or make decisions for you when you cannot due to incapacity or death. The following are some important roles that will need to be filled:

  • Personal representative. This trusted individual is appointed in your last will and testament and is responsible for collecting all of your accounts and property, paying your outstanding debts, and distributing your money and property to those you have named. This person is tasked with “winding up” your affairs.
  • This trusted individual has similar duties and responsibilities as the personal representative but without the close supervision of the probate court. The trustee must follow the instructions set forth in your revocable living trust document, collecting and protecting property, identifying and paying creditors, filing and paying any taxes due, and, finally, distributing the trust’s money and property to the beneficiaries you have chosen.
  • An agent under a financial power of attorney. This individual carries out financial transactions (such as signing a check or opening a bank account) on your behalf. The duration and scope of the agent’s authority is laid out in the financial power of attorney.
  • An agent under a medical power of attorney. If you cannot communicate or make medical decisions, someone else will have to do it for you. By properly naming this person, you retain control over who is making medical decisions on your behalf instead of allowing a judge to make those decisions.

We Are Here to Serve You

These can be very overwhelming decisions to make on your own, but you are not alone. We are here to walk you through the process, answer your questions, and help you design a plan that protects you and your loved ones and leaves a lasting legacy you can be proud of. We are available for in-person and virtual consultations, whichever is more convenient for you. Contact us today.

Estate Planning Considerations for Incarcerated Individuals

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If you are preparing for or are currently incarcerated, the future may be uncertain right now. Proper estate planning may ease some of the worries you are facing. Regardless of how long your incarceration is for, we are here to help you address your concerns and develop a plan that will protect you and your family for many years to come.

How will my bills get paid while I am away?

A helpful tool to manage your money and property, regardless of the reason, is an immediate durable financial power of attorney. A financial power of attorney allows you to choose a trusted person (an agent) to handle your financial matters for you. Your agent can handle a wide variety of transactions, from signing checks to opening a new bank account, depending on the authority you give that person. Because it is an immediate power of attorney, your agent will have the authority to act on your behalf as soon as you sign the document (or the agent signs an acceptance form acknowledging their responsibilities, if your state requires it). Although your agent can immediately act on your behalf, you will still have the ability to conduct your own business—you just have the benefit of an additional person being able to act for you. Lastly, by making your financial power of attorney durable, your agent’s authority will continue even if you become incapacitated (unable to communicate or make decisions for yourself).

A revocable living trust (RLT) can also be a helpful solution to manage your money and property while you are away. An RLT is a trust you create during your lifetime that can be changed until your incapacity or death. This planning tool enables you to name yourself as the current trustee (the person or entity charged with managing, investing, and handing out the money and property) and to designate a co-trustee or alternate trustee if you are unable, for whatever reason, to act as the trustee. An RLT also allows you to continue enjoying the money and property during your lifetime, as well as designate what will happen to that money and property upon your death, protecting it for your chosen recipients.

An added benefit of an RLT is that any accounts and property owned by the trust will not have to go through the probate process. Probate is the court-supervised process that must take place to distribute accounts and property you own at your death to your loved ones. By avoiding probate, you can keep your private family matters out of court and save your loved ones’ time and money.

If you have a minor child, an RLT may be especially useful for you. You can include provisions in an RLT that specify when and how the funds should be used for your minor child’s benefit while you are present. You can also provide instructions to your alternate trustee for certain expenses to be paid while you are away to ensure that your minor child is provided for in the same way you would provide for your child. Similar provisions can also be included for other individuals in your family who may depend upon you for care.

Should you pass away without proper planning, any money or property that would go to your minor child according to state law will be managed by a court-appointed individual, who could be a stranger. Also, once your minor child reaches the age of majority (eighteen or twenty-one depending on your state law), the court will give your child the remainder of the money and property in one lump sum. This means your newly-minted adult could spend everything on a wild weekend in Vegas or be taken advantage of by someone wanting your child’s money.

One caveat, however: This type of trust will not protect your money and property from your creditors, including fines, costs, restitution, and other charges associated with your incarceration.

Who will take care of my minor child?

Another critical concern during incarceration is the care of any minor children you may have. If your minor child’s other legal parent is still alive and able to care for your child, the other parent will continue to provide care or will assume caregiver responsibilities. Nevertheless, it is a good idea to plan for what will happen if both of you are unable to care for the minor child, just in case. If you are the only living parent or the other legal parent is unfit to care for your child, however, you must make the proper arrangements. While most people are familiar with the idea of naming a guardian for a minor child in a Last Will and Testament, this document does not become effective until your death. Therefore, to properly plan for your minor child’s care during your absence, you must name a guardian in a separate writing that meets state law requirements. We can discuss the planning options available to you under our specific state law.

Failing to plan can have dire consequences for your minor child. Without instruction from you, the court will use its discretion in deciding who is best suited to care for or make decisions for your child should you be unable. We all know of individuals who appear one way in public but are completely different in private. Because you know your family best, you need to be the one making this decision, not a judge.

Why do I need other estate planning documents?

The above-mentioned estate planning documents can offer you and your family critical support during this time of transition. However, to make sure that you and your loved ones are protected to the fullest extent, there are a few other documents that are worth mentioning.

Medical Power of Attorney

This document allows you to name a trusted decision-maker to communicate your healthcare wishes if you cannot do so. Regardless of where you may be, someone must be able to make these decisions for you if you cannot. If you do not formally choose a medical decision-maker, your loved ones will face going to court to have someone appointed by a judge to make these medical decisions. This person may not be the one you would have chosen. Additionally, this court process takes additional time and money during an already stressful time.

Living Will or Advanced Directive

Known by either name depending on your state, this document allows you to convey your wishes regarding end-of-life decisions. Because these can be very sensitive topics, it is important that you carefully consider your wishes. This may take some soul-searching, but you must know what you want to happen in certain situations so that your wishes can be properly documented and communicated to your chosen medical decision-maker. Absent specific instructions from you, your medical decision-maker will be left trying to figure out what you would have wanted. Not only can this can cause additional grief in a difficult situation, but it could also breed disagreements among your loved ones if there is a differing opinion on how to best care for you.

HIPAA Authorization Form

This form allows you to grant specific individuals access to your medical information (e.g., to get a status update on your condition or receive your test results) without giving those individuals the authority to make decisions on your behalf. By at least providing medical information to your loved ones, you can help quiet the anxieties and uncertainties that often arise during times of emergency. This can also help alleviate tensions between your medical decision-maker and the rest of your loved ones. Although only one person will be making medical decisions, the rest of your loved ones will at least understand why those decisions were made.

Last Will and Testament

A Last Will and Testament, also referred to as a will, is a document where you can name a personal representative or executor (the person in charge of collecting all of your accounts and property, paying your outstanding debts, and distributing your money and property to those you have named), specify who will receive your accounts and property, and name a guardian for your minor child, if necessary. Although this document is only useful at your death, it provides a way for you to officially express your wishes. If you fail to have a will, the probate court will determine who gets your money and property according to state law.

Let us help you

We understand that you may be going through a difficult time, but we want you to know that we are here to help. Protecting you and your family is our priority. If you have any questions or would like to discuss ways we can best serve you and your family, please give us a call today. We are available for in-person and virtual consultations, whichever is most convenient for you.

Protecting a Loved one Who Is, Will Be, or Has Been Incarcerated

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It is natural to want to protect our loved ones no matter what. However, you may be finding it difficult to provide a prosperous future for your loved one if that person will be, is, or has been incarcerated. Unfortunately, this event will forever change your loved one’s life, but with the right planning, you may still be able to provide the kind of future you envision for your loved one.

 What You Should Not Do

When crafting an estate plan for you and your loved one, it is important to do it properly. The most important thing to remember is that you should not leave any money or property outright (directly to) your loved one. If money or property is given directly to your loved one, those accounts or pieces of property will be deemed to be owned by your loved one and may be subject to any outstanding fines, costs, restitution, or other charges associated with your loved one’s incarceration. If your goal is to make sure that your money and property are used for the benefit of your loved one and not for expenses incurred due to the incarceration, you need to do the proper planning.

What You Should Do

To adequately protect yourself, your accounts and property, and your loved one, the first thing you need to do is put an estate plan in place. If you do not create an estate plan, the probate court will use its default estate plan. This means that your accounts and property will be distributed according to state law, not your wishes. The state law will dictate

  • who will receive your money and property (usually your spouse and children, or your parents if you do not have a spouse or child),
  • how much the individuals will receive, and
  • when those individuals will receive the money and property (typically as soon as the probate proceeding is done).

If you have a minor child, this distribution plan can be exceptionally harmful because the money or property left to your child will have to be managed by a court-appointed adult (possibly a stranger), and the child will receive the balance of any money and property when the child reaches the age of majority (eighteen or twenty-one years old depending on state law) with no strings attached. After receiving the money, your new adult could spend the entirety of your hard-earned money and property on a wild trip to Atlantic City or could be swindled out of it by a malicious predator.

Secondly, when creating your estate planning, work with an experienced estate planning attorney. While it may seem easier to use a DIY solution found online, an experienced estate planning attorney will ask you specific questions and follow-up questions to best understand your true wishes and family dynamics, explain the available planning options, answer any additional questions you may have, and be a trusted advisor through all stages of your life (and possibly those of your loved ones).

One legal strategy that may be beneficial is using a discretionary trust for any money or property you would like to leave to your incarcerated loved one. A discretionary trust is a trust in which the trustee (the person or entity you have chosen to be in charge of managing, investing, and handing out the money and property) uses the trustee’s discretion as to when distributions of money or property are made to or for the benefit of your chosen beneficiary (your incarcerated loved one). Because your loved one will not be guaranteed a specific amount of money or piece of property, the funds will be better protected from any creditors, predators, or a divorcing spouse that your loved one may have.

A discretionary trust can be set up as its own separate legal entity, or it can be used as part of your revocable living trust, whichever makes the most sense for your planning needs. It is important to work with an experienced estate planning attorney to ensure that the trust is structured in a way that best protects the accounts and property owned by the trust from the specific costs, fees, and orders associated with your loved one’s incarceration. Because state laws can vary regarding the payment of fines, costs, restitution, and other charges associated with your loved one’s incarceration, an experienced attorney can help make sure you use the right strategy for your unique situation. Choosing the right trustee for the discretionary trust is important and must be done carefully. Consider the person’s ability and availability to carry out the responsibilities of being a trustee and make sure to provide clear guidelines for the trustee to consider when looking to use the trust funds for the benefit of your loved one.

Additional Considerations for Your Estate Plan

A comprehensive estate plan can include several different documents: last will and testament, revocable living trust, financial power of attorney, medical power of attorney, living will or advanced directive, and HIPAA authorization form. As part of these documents, you will need to name several different trusted individuals to act on your behalf. Depending on your relationship with your loved one and the length of your loved one’s incarceration, you may be tempted to appoint your loved one to one of the following important roles in your estate plan. Before doing so, you need to carefully consider the duties and responsibilities for each role and inform your estate planning attorney of your loved one’s status, as it may impact your loved one’s ability to serve in that role.

Personal representative: This trusted individual is appointed in your last will and testament and is responsible for collecting all of your accounts and property, paying your outstanding debts, and distributing your money and property to those you have named upon your death. This person is tasked with winding up your affairs, which can be a time-consuming role. It is important to note that some states prohibit a felon from serving in this position, so you will want to determine whether or not your loved one would even be allowed to serve before you make such an appointment. This is also a good reason to make sure that you name a backup personal representative in case your first choice is not able to serve, for whatever reason.

The agent under a financial power of attorney: This is the individual chosen to carry out financial transactions (such as signing a check or opening a bank account) on your behalf. The duration and scope of the agent’s authority are specified in the financial power of attorney. Depending on your state’s laws, you may be free to choose someone with a criminal record to act on your behalf, but depending upon the nature of the individual’s crime, you may want to consider whether your loved one is the appropriate choice. Can you trust this individual to make financial decisions that are in your best interest? Will choosing this individual cause fighting among your loved ones and unnecessary court challenges if you become incapacitated and your agent is now making decisions on your behalf without your oversight? When choosing someone to serve in a role such as this, it is important not to let stereotypical notions, such as always picking the oldest child, deter you from choosing the right person for the job.

Guardian for your minor child: If your minor child’s other legal parent is still alive and can care for your child, the other parent will continue to provide care or will assume the caregiver’s day-to-day responsibilities. However, if you are the only living parent, or if the other legal parent is unfit to care for your minor child, a guardian will be needed. Because your designation of a guardian in a will or separate writing is a nomination, a judge will still need to determine whether the person you have chosen is fit to care for your minor child. Depending on state law, someone with a criminal background might not be automatically disqualified, but a judge could weigh this factor heavily if other family members are opposing the nomination of your loved one with a criminal background. Ultimately, the judge will make a decision that is deemed to be in the child’s best interest.

The agent under a medical power of attorney: If you cannot communicate or make medical decisions, someone else will have to do it for you. By naming an agent under a medical power of attorney, you are able to dictate who has the authority to do so instead of having a judge make that decision. Although someone with a criminal background can serve as your medical decision-maker, you will want to make sure that this individual will be available to make those decisions on your behalf whenever the need may arise. If your loved one’s ability to travel is restricted, could these limitations impact your loved one’s ability to be by your side and be your medical advocate?

Protecting Your Family As You Wish

Having a loved one in trouble with the law is never easy. We are here to help you protect yourself, your money, and your property, and to provide the type of future you want for your loved one. If you have any questions or would like to discuss next steps for crafting an estate plan that meets your family’s unique needs, please give us a call. We are available for in-person or virtual consultations, whichever is more convenient for you.

Athletes: Your Game Is Not the Only Thing That Needs a Winning Strategy

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In sports, success frequently brings significant monetary compensation. While this is a dream come true for most individuals, it is important to take the right steps to safeguard this hard-earned money. Most people assume that the biggest challenge is spending beyond one’s means. While this can cause many problems, it is not the only issue that athletes need to be aware of and plan for.

Your Off-Court or Off-Field Penalty: Taxes

There are several types of taxes that may impact you as an athlete if you play in the United States.

Gift tax

As you make more money, it is natural to want to give gifts to or support your loved ones. But be careful, as those gifts could generate a tax. According to the Internal Revenue Service (IRS), the gift tax is a tax on the transfer of property from one person to another when nothing, or less than full value, is received in return. Luckily, not all gifts are subject to the tax. Each person has an annual gift tax exclusion amount ($15,000 in 2020). This cap is the amount or value someone can give another person during the calendar year without the IRS assessing the gift tax. This amount is per person, meaning you can give up to $15,000 to as many people as you want in 2020. An easy way to avoid the gift tax is to make sure you are not giving a friend or loved one more than the annual exclusion amount each year.

Alternatively, if you want to make a larger gift, keep in mind that every US citizen has a lifetime estate and gift tax exclusion of $10 million adjusted for inflation ($11.58 million in 2020). However, this is the maximum aggregate amount you can give during your lifetime; it is not per person like the annual gift tax exclusion. Be aware that this exclusion amount is set to sunset back to $5 million (adjusted for inflation) on December 31, 2025, so if you wish to make large gifts, it is better to do so now while the exemption is high. Although you should file paperwork with the IRS, there should be no gift tax due as long as you have your exclusion. We can discuss your gifting desires and offer ways to make gifts, save taxes, and protect the gift recipient from wasting the money.

Income Tax

Depending on your team’s location, it is quite possible that you permanently reside in one state but play for a team in another state (or even country). Because you are earning income in one state (or country) but are residing in another, you may owe taxes in both jurisdictions. It is important that you work with an experienced tax professional to make sure that you are paying the right income taxes at the right time. The last thing you want is to owe more because of penalties and interest.

Estate Tax

Although estate tax is not assessed until you die, it is vital to think about it now. As previously mentioned, the lifetime estate and gift tax exclusion is currently high but will sunset. Because no one has a crystal ball to determine when you are going to die and what the estate tax exclusion amount will be at that time, we always need to be mindful. Given your career as an athlete, your income potential is great and will most likely come in large lump sums. Invested properly, those large lump sums can grow even larger.

Guarding Your Money and Property

As a high-earning individual, your first line of defense is having the proper insurance. This includes homeowners, automobile, long-term care, disability, and life insurance. In the event money is needed to pay a claim or satisfy a judgment, these policies will be available first before looking to the rest of your money and property. You should periodically review these policies with an experienced insurance professional to ensure that you are adequately covered. As your income increases, so should the amount of your life insurance. As you acquire more accounts and property, you should also adjust your other policies’ value to reflect these increases.

As a further step, there are sophisticated asset protection planning tools we can use to provide you with more protection. A domestic asset protection trust (DAPT) is an irrevocable (unable to change) trust into which you (in your role as the grantor or trustmaker) permanently gift your accounts and property such as your home, cash, stocks, or other investments. Once transferred into the DAPT, the accounts and property are legally protected from future lawsuits, divorcing spouses, bankruptcies, and similar threats. The trustee (the person or entity you have chosen to manage, invest, and use the accounts and property) can then make distributions to you as the grantor, thereby allowing you to continue enjoying some benefits of the property in the trust. In most cases, the trustee must be an independent trustee (someone who is not related or subordinate to you or any other beneficiary and will not inherit anything from the trust) to preserve the trust’s asset protection nature. It is important to remember that DAPT laws can vary significantly by state. Residency requirements for the grantor or trustee of a DAPT vary from state to state, as does the required connection of the grantor with the DAPT state. It is crucial that you work with an experienced attorney when designing a DAPT to make sure that it is not considered a fraudulent transfer meant to defraud an existing creditor, which could land you in hot water.

Another valuable strategy, which protects the financial well-being of your loved ones, is an irrevocable life insurance trust (ILIT). An ILIT is an irrevocable trust created by transferring an existing life insurance policy into the trust or by the trust purchasing a new policy. Using your annual gift tax exclusion, you make cash gifts to the trust in order to pay the premiums on the insurance policy. Upon your death, the death benefit is paid to the trust, and the money is distributed according to the instructions you have left in the trust document. Not only does this strategy allow you to utilize your annual gift tax exclusion and remove the value of the life insurance policy and death benefit from your estate, but it also allows you to direct and protect the money you are leaving for your surviving loved ones. You can also use an ILIT to provide cash to your loved ones without increasing the value of your accounts and property that are subject to estate tax.

Next Player Up: Managing Your Money and Property If You Cannot

While you may currently manage your money and property yourself or with a professional’s help, have you considered what would happen if you were unable to continue managing your money and property? You may be injured on the job or afflicted with a condition that renders you incapacitated (unable to communicate or make decisions for yourself), or if you play for a team in a state or country other than where you permanently reside, you may be out of town and unavailable to handle necessary transactions.

A revocable living trust (RLT) is a trust you create during your lifetime and can change at any time prior to your incapacity or death. This planning tool enables you to name yourself as the current trustee (the person or entity charged with managing, investing, and handing out the money and property) and to designate a co-trustee or alternate trustee if you are unable to act as the trustee. An RLT also allows you to continue enjoying the money and property during your life and while you are incapacitated, as well as designate what will happen to that money and property upon your death, protecting it for your chosen recipients.

For this strategy to work as intended, however, any accounts or property meant to be owned by the trust must be properly funded into the trust. Funding the trust involves changing the ownership of the accounts or pieces of property from yourself as an individual to yourself as the trustee of the trust. If the trust does not own a particular account or property, the trust terms will not control what happens to it.

Lastly, not only does an RLT allow for continued management of your accounts and property if you become unable to act for yourself, but a properly funded RLT also allows those accounts and property to avoid the probate process. This means that upon your incapacity or death, your financial matters can be handled privately by those you have chosen, and the details will be kept out of court records and the media. One caveat, however: an RLT will not protect your money and property from your creditors or judgments.

An additional tool that can help manage your money and property is a financial power of attorney. This document allows you to choose a trusted person (your agent) to handle your financial matters on your behalf. Your agent can handle a wide variety of transactions, from signing checks to opening a bank account, depending on the authority you give that person. If you wish your agent to act only in certain instances or transactions, then a limited financial power of attorney can be drafted for those circumstances. Alternatively, if you would like to grant your agent the authority to conduct all the financial transactions that you would be able to do yourself, then we can prepare a general financial power of attorney. Another consideration is when you want your agent to act. If you want to limit when your agent can act, a springing financial power of attorney allows your agent to step in only when a determination has been made that you are no longer able to handle your financial affairs. On the other hand, if you would like your agent to be able to act right away, the immediate financial power of attorney can be created. Even though your agent can act on your behalf as soon as the document is signed, it does not impact your ability to continue carrying on the business for yourself. Your agent is just an additional person who has the authority to act. This can be a useful tool if you routinely travel for work. Lastly, if you want your agent to be able to act when you are no longer able to handle your affairs, it is important that the financial power of attorney be durable. This means that the document and your agent’s authority will not be affected if you are later determined to be unable to make financial decisions for yourself. When the agent can act and what the agent can do are all things that can be customized to your unique situation.

Caring for Your Physical Well-Being If You Have Been Benched

Due to the risk of injury that comes with such a physically demanding occupation, having proper healthcare documents is crucial. These include a durable medical power of attorney, living will or advance directive and a HIPAA authorization form.

A medical power of attorney allows you to name a trusted healthcare decision-maker to communicate your medical wishes in the event you are unable to do so. It is important that you name someone who will respect your wishes and carry them out when you are unable to communicate them to the appropriate medical professional. However, this person will only be able to make medical decisions on your behalf if you cannot. If you can make decisions and communicate them, you remain in control.

A living will or advance directive allows you to clearly convey your wishes regarding end-of-life decisions. Because these can be very sensitive topics, it is important that you carefully consider your wishes. This may take some soul-searching, but it is necessary that you know what you would like to have happened in certain situations so that your wishes can be properly documented and communicated to your chosen medical decision-maker. Absent specific instructions from you, your medical decision-maker is going to be left trying to figure out what you would have wanted. This can cause additional grief in a difficult situation, as well as potential fighting among your loved ones.

A HIPAA authorization form allows you to grant certain individuals access to your medical information (e.g., to get a status update on your condition or receive your test results) without giving those individuals the authority to make any decisions on your behalf. By at least providing the medical information to your loved ones, you can help quiet the anxieties and uncertainties that often arise during times of emergency. This can also help alleviate tensions between your medical decision-maker and the rest of your loved ones. Although only one person will be making the decisions, the rest of your loved ones will at least understand why those decisions were made.

Let Us Be Your Team Off the Court or Field

Proper estate planning is a must for everyone, but especially for you as an athlete. Not only do you have to address and manage tax, asset protection, and other financial concerns, you also need to protect yourself and your family in the event you are injured on the job. We welcome the opportunity to work with you and any other financial professionals on your team to help craft a winning game plan that will have you and your loved ones scoring for years to come. To accommodate your busy schedule, we are available for both in-person and virtual meetings.

How Trusts Have Helped Athletes

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Estate planning is not just about what happens when you die. Proper estate planning takes into consideration all aspects of your life and how to protect your accounts and property so that you can receive the maximum use and enjoyment during your life as well as protect whatever you choose to leave to your loved ones upon your death.

A trust is an important planning tool used to provide this protection. In its basic form, a trust is a formal relationship in which someone (the trustmaker) appoints someone else (the trustee) to hold title to and manage the trust accounts and property for the benefit of one or more people (the beneficiaries). In most cases, when people refer to a trust, they are usually referring to the document that outlines the trust details. Depending upon the type of trust that is created, it can be used for many purposes, such as protecting the trustmaker’s accounts and property from the trustmaker’s creditors, divorcing spouses, and lawsuits, as well as providing for the trustmaker’s family if the trust maker passes away

Everyone needs estate planning and could possibly benefit from the use of a trust as part of that planning—even famous athletes. The following are some notable athletes whose use of trusts to protect themselves and their loved ones offers important lessons.

Allen Iverson

Allen Iverson, also known as “The Answer,” played professional basketball from 1996 until his official retirement in 2013. During his career, he played for a number of professional teams such as the Philadelphia 76ers, the Denver Nuggets, the Detroit Pistons, and the Memphis Grizzlies. Over the course of his career, it is estimated that he made over $200 million (including contracts and endorsements). However, in 2012, it was rumored that Iverson was experiencing financial troubles due to an outstanding creditor issue.

But there was a saving grace. As part of a deal he signed with Reebok in 2001, Iverson currently receives $800,000 per year and had a lump sum of $32 million placed into a trust, which will become accessible to him when he turns fifty-five years old (which will be in 2030). Although the specific terms of the trust have not been disclosed, and his ex-wife may be entitled to half of the trust, this strategic planning has protected a large part of the Reebok contract for Iverson’s future use and enjoyment.

Lesson: Saving for a rainy day is an excellent strategy, and a trust can be a great way to set aside money or property for a future date. Additionally, it is never too late to get a proper estate plan in place. Depending upon his current legal situation and the terms of the existing trust with Reebok, Iverson should meet with an experienced estate planning attorney and financial advisor to develop an asset protection strategy for this money before the first disbursement is made. Through proper investment and management, this money should be able to go a long way toward ensuring a happy retirement.

Michael Carter-Williams

Currently playing for the Orlando Magic, Michael Carter-Williams made headlines in 2013 when he decided to put the salary he received from the Philadelphia 76ers into an irrevocable trust to be managed by his mother and a close family friend. Instead of his salary, he lived off his endorsement deals. Per the terms of the trust, Carter-Williams would not have access to the money for three years

Using a trust in this manner was a unique move because Carter-Williams was relatively young, did not have a family of his own to support, and did not have any creditor issues. This strategy was a thoughtful financial decision in light of what was happening in the industry at the time. While not much is known about the status of the trust, with the proper oversight by his trusted advisors, this trust can offer him a source of income whenever he may need it

Lesson: An estate plan is not a one-size-fits-all product. With the multitude of planning strategies available, an experienced estate planning attorney can craft a plan that will provide what you need for today and tomorrow. During the estate planning process, it is important to consider your priorities. Are you looking to avoid a potentially large tax burden; protect your accounts and property from lawsuits, creditors, or a future divorcing spouse; or protect the inheritance you are leaving your loved ones after you have died?

Kobe Bryant

The legendary professional basketball player Kobe Bryant died on January 26, 2020, in a tragic helicopter accident that also claimed the life of his daughter and other passengers. With an estate worth over $600 million, proper estate planning was crucial in making sure that his wife and children were cared for.

There are few details about the extent of his estate planning for one very good reason: he had an estate plan. The only misstep in the estate planning process was Bryant’s failure to update the Kobe Bryant Trust upon the birth of his youngest child. According to court documents, the trust had been amended each time one of his children was born, but because his youngest child was born in June 2019, he had not amended his documents as he had done in the past prior to his death.

Lesson: Estate planning is not a one-and-done task. To ensure that your wishes are carried out in the best possible way, the documentation must be up to date. Once you have signed your estate planning documents, we encourage you to review them each year. Ask yourself the following questions:

  • Have there been any marriages, divorces, births, or deaths that might affect my estate plan?
  • Are the individuals I have chosen as my trustee, guardian for my minor child, agent under a power of attorney, or healthcare decision-maker still the individuals I want?
  • Do I want to change the types of items or amount of money that I am leaving to my beneficiaries?

We Are Here to Help

Estate planning can be difficult. It forces you to evaluate aspects of your life that may not be ideal. However, by diving in and addressing these concerns, we can help you craft a unique estate plan that will protect you during your lifetime and provide for your loved ones upon your death. Give us a call today to schedule your in-person or virtual consultation.

Understanding Life Insurance

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The current events of our world have made many of us think about our mortality and how to make sure our loved ones are taken care of especially if we die unexpectedly. Life insurance can be an affordable way to provide for our children, a spouse, a sibling, aging parents, and other loved ones. Life insurance can provide heirs numerous benefits: extra income to help pay ongoing household bills; funds to pay off a mortgage, credit cards and other debt; money to pay for college, or money to pay funeral costs and other final expenses. For business owners, life insurance also plays a vital role in business succession planning.

How Much Life Insurance Do I need?

A simple way to determine the amount of life insurance needed for income replacement purposes is to multiply the annual income to be replaced by the number of years it will be needed. If the insured is earning income, use the amount contributed to the household (after personal expenses and taxes). If the insured does not have income (perhaps a stay-at-home parent or caregiver), determine how much will be needed to pay someone to take over those responsibilities. For example, a dad who wants enough life insurance to replace his income for 20 years (until his children have completed college) would take the amount of annual income he wants to replace and multiply that by 20. He may want to add enough to pay for college and other expenses. The total amount is how much life insurance he needs. This is called the “face value” or “death benefit.”

Term Life Insurance VS. Permanent Life Insurance

Generally, there are two kinds of life insurance: term and permanent. Other “hybrid” life insurance policies can provide additional benefits, like long term care, however, this article will focus on general life insurance policies.

Term life insurance provides coverage for a set number of years or term. It can be a good choice when coverage is needed for a certain number of years; for example, until the kids are out of college or the mortgage is paid off. It is also less expensive than permanent life insurance and is least expensive when the insured is young and healthy. For these reasons, term life insurance is often a popular choice for young families.

Permanent life insurance, on the other hand, does not expire at the end of a specified term as long as the premiums are paid. Generally, the coverage stays in effect during the insured’s lifetime. The premium can either stay the same or fluctuate based upon the financial performance of the policy. Permanent policies also build cash value over time that can be borrowed from the policy can be used to help pay the premiums, or can be refunded if the policy is canceled. Any money borrowed will be charged against the proceeds paid at the insured’s death.

The amount a family pays for life insurance must be a reasonable and manageable expense. The cost will depend on the amount, kind (term vs. permanent), and the age and health of the person to be insured. If the cost to replace income for 20 or 30 years is too much for the family budget, one option is to cover five to seven years of expenses, which will give the family time to cope and adjust after the loss.

Incorporating life insurance into an estate plan can be vital to making sure family and loved ones are taken care of. We welcome the opportunity to help you with your planning, and to help you achieve peace of mind for you and your family contact our office by calling us at (405) 241-5994.

Considerations Before Heading South for the Winter

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For many snowbirds, cooler weather means it is time to head south. If you are thinking about heading for warmer weather this winter, there are a few things you should consider before hitting the road.

What is happening in your destination state?

Because we are still in the midst of a pandemic, it would be prudent to do some research about your winter destination. How many COVID-19 cases has the state had? Are these numbers trending upward? Upon your arrival, will the local or state government require that you quarantine for a period of time? Lastly, are there any additional local orders that you should be aware of, such as a requirement that masks be worn indoors or restrictions on dining in restaurants?

Which state do you consider your home?

Your state of domicile impacts your estate planning, family law matters, and taxes. Due to differences in state tests for determining residency, you can be considered a resident of more than one state; however, you can only be domiciled in one state. Although state laws differ as to determining domiciliary status, the common elements are that your domicile is where you permanently live and where you intend to remain or return. 

Because you are spending time in two (or more) states, you should meet with your tax advisor to confirm that you are filing the appropriate tax returns and have a plan in place to maximize the potential differences in tax laws. For example, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not have any personal income tax. You should also consider meeting with us to discuss the estate planning implications of owning properties in multiple states, especially if you own properties in both community and separate property states

Have you reviewed your estate plan lately?

Before you depart, locate and review your estate planning documents. Life changes are common and sometimes occur without warning. Having an up-to-date estate plan helps ensure that your wishes are carried out during your lifetime and upon your death. The following questions can help determine if your documents still meet your needs.

  • Do you still want your named fiduciaries (i.e., the trustee, personal representative, guardian for a minor child, and agents under a financial power of attorney or medical power of attorney) to act on your behalf, and are they still able to serve in that role?
  • Are your named beneficiaries still alive? Are there any additional individuals or charities you would like to leave something to? Do you want to make any adjustments to the amount of an inheritance or the manner in which you are leaving an inheritance to a beneficiary?
  • Do your beneficiary designations for retirement accounts and life insurance policies match the rest of your estate plan?
  • If you need to move for health reasons but cannot make the decision for yourself, does your agent have the authority to relocate you to another state?

Additionally, you may require assistance with financial matters or transactions while you are away. For this reason, you should review your financial power of attorney to determine if it is springing or immediate. A springing power of attorney allows your agent to act only when you are no longer able to act on your own (as determined by a physician or, in some instances, a judge). By contrast, an immediate power of attorney allows your chosen agent to act on your behalf right away, regardless of your current ability to act for yourself. 

While reviewing your existing estate plan, you should evaluate whether it includes all of the necessary documents. If you currently have a will-based estate plan, it may be time to add a revocable living trust to your estate planning portfolio. This is especially important if you own property in more than one state. Without a trust to consolidate ownership and administration, your loved ones may end up going through multiple probate administrations in different states. This can increase the time and cost of settling your affairs at your death. 

Are your estate planning documents compliant in both states?

Estate planning laws are state specific and for certain documents, such as the financial power of attorney and healthcare directive, each state may have its own statutory forms. While it is possible for one state to honor a document that was validly executed in another state, it will be faster for medical personnel to honor your wishes in an emergency if your instructions are in a familiar form. We suggest that you have an attorney licensed in your second state review your estate planning documents for compliance, and if necessary, prepare a second financial power of attorney and healthcare directive.

As you prepare for your upcoming travel, please do not hesitate to give us a call. We are here to answer any questions and to make sure you are properly protected no matter where you may roam. We are available to meet with you in person or via video conference. 

What a Personal Property Memorandum Can Do for Your Will or Trust

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Avoid family feuds over heirlooms. Family members often end up arguing over mom or dad’s favorite items when that parent dies. Arguments can take place over things like a coffee mug, a piece of jewelry or a painting. These types of arguments can be eliminated by filling out a personal property memorandum and keeping it with your will or trust.

A personal property memorandum is designed to cover who should receive items owned that don’t have an official title record. Personal property includes furniture, jewelry, art, and other collections, as well as household items like china and silverware. Personal property memoranda may not include real estate or business interests, money and bank accounts, stocks or bonds, copyrights, and IOUs.

When writing your memorandum, it is best to keep things simple. Personal property memoranda generally resemble a list of items with the attached names of the inheritors. It can be handwritten or typed but should always be signed and dated.

All items should contain sufficient detail so that argument and confusion can be avoided. Complete contact information including address, phone, email, and a backup contact if possible should be included. Do not include items that you have already explicitly left in your will or trust.

The beauty of a separate list of personal items and their planned distribution is that if you later decide to change who receives what, you simply update your current list, or replace the list altogether. You can destroy an old record or maintain signature and dates on each of your personal property memoranda so that it is easy to identify your most current set of wishes.

A personal property memorandum for your tangible personal effects is a simple way to address how you want your personal property to be distributed. We would be happy to help you create a legal personal property memorandum along with any other estate planning documents you may need. Please do not hesitate to contact our office by calling us at (405) 241-5994.

 

The New Age of Long-Term Care Insurance

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Nursing-home care can be extremely expensive if you become seriously ill or injured. You might also know that Medicare would cover only a minimal amount of those costs. Private insurance doesn’t seem like a good bet either, if you’ve heard horror stories about skyrocketing premium costs and difficulties in even obtaining long-term care (LTC) insurance in the first place.

There may be a better way. “Hybrid” policies essentially combine life insurance or an annuity with LTC coverage. (The benefits can be known as “accelerated death benefits” or “living benefits,” or the coverage can be called “life/long term care,” “linked benefits,” or a “combo” policy.)

This type of policy will pay if you need nursing care, but, if you never need that, then the policy functions like standard whole-life coverage. It’s a win-win. Say, for example, you buy a hybrid policy with a $100,000 death benefit. You eventually need $50,000 of that coverage to pay for LTC. Then, when you pass, your beneficiary would receive a $50,000 payout from what’s left of the original $100,000 coverage.

Some plans offer tax-free death benefits to your heirs if your LTC benefits are not fully used or needed. They may return your premiums if you change your mind down the road. Premiums can be locked in from the initial purchase date, with a guarantee that they will never increase. Those who already hold a legacy policy with a large cash value may be able to roll that value over, tax free, into a new hybrid policy.

For those who can afford to pay premiums in a lump sum in advance, LTC coverage could amount to as much as twice the face value of the policy. Compare that with simply setting money aside for LTC expenses at a rate of five percent interest. It could take as long as thirty years to save for what this policy offered on its face.

There is a wide range of coverage, depending on the policies. They may cover different services, delivered at-home, in a facility, or both. The monthly or daily benefits can vary. Some policies require an elimination period (a delay between the time a doctor qualifies you for coverage, and actual payment); some do not. Some provide inflation protection. Some provide adjustable rates, depending on how much the insured might need LTC as against the death benefit.

Always also remember that the carrier must have the long-term financial stability to pay claims, and to remain in business, for decades to come.

To sort through all these intricacies, the National Association of Insurance Commissioners has issued a free and comprehensive Shopper’s Guide to LTC Insurance. It provides especially helpful shopping tips at pp. 31-36. Find the publication here https://www.naic.org/documents/prod_serv_consumer_ltc_lp.pdf

We can create a long-term care plan that incorporates a hybrid plan like this with an irrevocable trust that will protect all of your bank accounts and real property (like your home) in the event you need long term care. If you are interested in protecting your savings and your home, we would welcome the opportunity to discuss a plan that works for you. Please do not hesitate to contact our office by calling us at (405) 241-5994.

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