Kansas & Missouri Estate Planning

Have “The Talk” With Your Children Now In Overland Park, KS

There are a number of “talks” you have with your kids, whether you live in Overland Park or elsewhere. We all are familiar with “the talk,” but here's one you may have forgotten - "the inheritance talk."

 So, how do you prepare and execute this too-important-to-avoid chat in Overland Park and elsewhere?

To be blunt, there is no easy answer. Why? Because so much of the talk depends on what you have to leave, who is going to manage it, who is going to inherit it, and how soon are they going to get it?

The Wall Street Journal recently offered a pep-talk of sorts for estate planning parents in a recent article aptly titled, “The Inheritance Conversation. Ugh.”

One of the key reasons for this essential intergenerational communication is to prepare the inheriting generation for their attending responsibilities. One challenge, of course, is that any “inheritance” carries the risk of robbing a developing person of their work ethic.

In short, what makes you, your assets, and your heirs unique? That is what needs to be understood and communicated. The sooner you have the inheritance talk, the better it will be for all concerned.

Remember: When making your financial, tax and estate plans, don't go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.

Reference: The Wall Street Journal (April 19, 2013) “The Inheritance Conversation. Ugh.”

“Fair Or Equal” Inheritance – It’s The Eye Of The Beholder In Overland Park, KS

If you are planning your estate, or already have inked your planning, how will your loved ones react to their inheritance. Are you providing a “fair” or an “equal” inheritance? While it is your estate, it may be helpful to communicate your wishes and rationale now to avoid misunderstandings (or worse) later on.

The Washington Post recently explored this subject in an article titled “Dividing up money can cause divisions in families.” The article tracks the case of a certain individual who can’t help feeling resentment over the estate plan his parents have created. He believes the basis for the estate plan is his chosen “lifestyle.”

He is gay and his married sister is not. He has no children and she does. The parents of these adult children have chosen to leave an inheritance “directly” to their grandchildren, instead of “through” their daughter. The grandchildren are set to each inherit one-sixth of the estate, with the children splitting the remaining two-thirds.

The author of the article concludes thusly regarding the inheritance planning of these parents: “And yet, this is their prerogative. It’s their money.”

What about your own family and heirs; will they understand? What can you do to make yourself understood? Then again, if instead you are the one inheriting, have you thought it through from everyone’s perspective?

Properly thinking through your estate planning objectives and then committing it to proper legal instruments can be an arduous task. That is why too few otherwise responsible adults actually follow through on their intentions. One of the most common estate plans in Overland Park is likely one that lies unsigned in a desk drawer.

When all is said and done, it is your estate and you may distribute it as you wish. Period. Nevertheless, family harmony long-term often hinges on communicating your wishes while you are alive and able to explain them. Surprise is only a good thing when it comes to birthdays and military maneuvers.

Remember: When making your financial, tax and estate plans, don't go it alone. Be sure to engage competent professional counsel.

For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.

Reference: The Washington Post (March 29, 2013) “Dividing up money can cause divisions in families”

Inherited IRA Gotchas In Overland Park, KS

Inheriting an IRA is a different kettle of fish entirely. Any missteps will be punished by the IRS, too. So, how should you handle IRA money? Very carefully.

The Slott Report considered this matter in a recent article titled "Moving Inherited IRA Money? Be Careful." If you inherit non-IRA money, plain and simple, then you could stick it in any bank account or investment and be done with it. Unfortunately, there are extra steps to consider when moving inherited IRAs.

For starters, you cannot move an inherited IRA into your own IRA if you are a non-spouse beneficiary. What if the financial institution the account is held charges too much or another institution has better investment options? How do you move the inherited non-spousal IRA? The direct approach, naturally.

In a direct IRA transfer the first bank cuts the check to the second bank, for your "benefit" as beneficiary but NOT in your "name." If the check is made payable to you, then it's already too late. The tax deferral advantage of the IRA will be lost and taxes due. Moreover, in the transfer the receiving IRA has to be of the same kind of IRA (i.e., from a traditional IRA to traditional IRA, or from Roth to Roth).

Indeed, there are lots of little details associated with inherited IRAs. It really pays to have competent legal and tax counsel before you make a move. Otherwise, there can be some hefty taxes to pay at ordinary income tax rates.

When making your financial, tax and estate plans, don't go it alone. 

For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.

Reference: The Slott Report (March 5, 2013) "Moving Inherited IRA Money? Be Careful"

Pssst! Decanting Isn’t Just For Wine In Overland Park, KS (But Irrevocable Trusts, Too)

Irrevocable trusts are powerful tools in the estate planner's tool belt. They have a life of their own (of sorts), running like a well-oiled machine from the start.

Unfortunately, the "irrevocable" nature of your irrevocable trust can be its Achilles heel, too. What happens if the original design of your irrevocable trust now runs contrary to your current objectives?

Enter "decanting."

A recent article in Barron’s explored this common dilemma in an article with a catchy title: "How to Bust a Trust."

The "irrevocability" of an irrevocable trust makes changing the trust a very difficult practice under normal circumstances. Normally, this is a good thing. Why have all of the time, effort, and money you invested to plan your estate be undone? Accordingly, the traditional process for changing the terms of an irrevocable trust has been rightfully onerous.

Unfortunately, it's not entirely uncommon that the machine needs some retooling, let alone re-lubricating. Perhaps the laws have change significantly, and your original goals for your loved ones have proven unworkable or even detrimental to them. In a worst case scenario, the inheritance could become a curse rather than a blessing.

In short, to "decant" the trust is to work around those harsh legal and people conditions, realigning the trust to conform to the new environment. The decanting process involves pouring the assets from one vessel to another – from one trust to a new form of the trust or an entirely different trust. Like a fine wine, decanting breathes new life into the assets once held in a trust that no longer suits its purposes.

This is not a do-it-yourself project, however. It can prove to be complex rather quickly. In fact, at present, decanting is only possible in 18 states. Consequently, the laws of your state will determine whether the process is available, as it matters where your trust exists.

For more on decanting and more obligatory wine references, be sure to read the original article. This is information worthy of your consideration whether you are establishing your family trust now, are a trustee, or a beneficiary.

For more information about estate planning in Overland Park, KS, and to download free tools to help you organize your estate, visit my estate planning website.

Cheers!

Reference: Barron’s (March 2, 2013) "How to Bust a Trust"

Will Your Estate Be A Blessing Or A Curse?

There are two sides to every coin. Will the inheritance you leave to loved ones be a blessing or a curse. In the end, it's up to you.

If you are looking for some guidance on this matter, then consider two intriguing articles by the same author. Each article reaches a different conclusion. The articles recently appeared in Forbes and are titled "Why Family Wealth Is A Curse" and "Why Family Wealth Is A Blessing." Interestingly, the author is a member of the family that founded the Georgia-Pacific Corporation.

Among the curses the author identifies are "too much too soon," "too much of a financial focus," and "ingratitude." In contrast, the author notes blessings that include "love," "choices," and "gratitude."

So, how does one help ensure that your own inheritors land safely on the "blessings" side? The author recommends family "open communication" and "teamwork" between and among family members, even intergenerationally.

While the article is written from the perspective of an "inheritor," there is much to glean from it when planning your own estate. One thing is certain: the failure to prepare your loved ones for their inheritance, then to protect them from it (and it from them) hazardous to your inheritors and to your wealth.

Reference:

Forbes (March 1, 2013) "Why Family Wealth Is A Curse"

Forbes (March 4, 2013) "Why Family Wealth Is A Blessing"

Disinheritance Difficulties

When it comes to estate planning, most people focus on the distribution of their assets to heirs ... but some are more concerned with not distributing assets to certain heirs.

If you are among them, be forewarned that disinheritance, for whatever reasons, can lead to hurt feelings and even contentious legal battles. No real surprises there, but read on.

A recent article from Reuters, "Disinheriting someone is not easy," illustrates some of the many reasons people choose not to leave assets to certain heirs. The reasons are as varied as the assets involved, and may include anything from hard feelings within a family to a desire to "equalize" wealth among adult children with differing degrees of financial success. 

If you choose to disinherit someone, realize that some classes of heirs have legal rights that cannot be violated, such as spouses and minor children. Reuters explains it well:

Just as you cannot tell a divorce judge that you refuse to split assets or pay alimony, you cannot leave your surviving spouse's house and all of the money to a child or some other family member. Using language to disavow and disinherit your spouse will not help ...  the spouse can waive the will and receive whatever he or she is entitled to under state law. Minor children are also protected by the courts. Whatever financial support the minor is entitled to receive, he or she will get, assuming the money is available.

Regardless of the reason(s) you may have to disinherit someone, be sure to discuss them with your estate planning attorney. Properly drafted legal documents can help ensure your wishes are followed, as well as prevent unintended consequences such as hurt feelings or court battles. Simply put, "disinheritance" is not necessarily an ugly word, but it can turn ugly even when you do it for the right reasons if not done properly.

Reference: Reuters (January 31, 2013) "Disinheriting someone is not easy"

How Much IS Enough (Or The Wealth Transfer Dilemma)?

So, what do you think about leaving a large inheritance to your progeny?

As you likely are well aware by now, the recently enacted American Taxpayer Relief Act of 2012 (ATRA) sets the unified estate and gift tax exemption at $5.25 million per taxpayer (with a nearly "automatic" $10.5 million per married couple). Using certain estate planning "tools" (e.g., to make "discounted" wealth transfers) you can do a great deal better than that, too. [For more on these tools, see my post from yesterday.]

By default in most jurisdictions, your children would inherit their inheritance outright without any restrictions, guidance or protection at age 18 (or immediately if already older than age 18). If that is not enough motivation to make proper estate plans now, then little may do the trick.

None other than the venerable Wall Street Journal explored this subject in an article appropriately titled "Can You Trust Your Kid With $5.25 Million?"

Proper estate planning means providing the legal means to both protect the inheritance "for" and "from" your decendants. Have you ever noticed that some children "grow up" and others just "get older"? Accordingly, your planning should reflect the unique needs of each of your children. While you are at it, perhaps you might want to make provision directly for your grandchildren. Many grandparents are heard to say that had they known how much fun grandchildren are, they would have had them first!

Bottom line: Only you can decide "how much is enough?" when it comes to the financial legacy you leave downstream to your loved ones. Only you can make the arrangements to help ensure such inheritance is a blessing and not a curse. Also, remember to leave an inheritance to your favorite charity or charities, as well.

So, what do you think about leaving a large inheritance to your progeny?

Reference: The Wall Street Journal (January 18, 2013) "Can You Trust Your Kid With $5.25 Million?"

“The Conversation”: Elderly Parents And Their Money

So what do you know about your parents' finances? Chances are good your assumptions are off target, especially if you've pegged them on the lower end.

According to a recent study and paper produced by Fidelity Investments, there is a "vast disconnect" between elderly parents and adult children on this very point. The disconnect usually is due to a failure to communicate.

Both Reuters and Forbes addressed this matter in time for Thanksgiving, a traditional time for family gatherings. In case you missed the articles, the Reuters article was titled "Please pass the gravy, and how much are you worth?", while the Forbes article was titled "Generations Apart: Talking Retirement And Estate Planning Over Turkey."

According to the Fidelity Study Investment study, the children of elderly parents tend to miscalculate their parents' wealth by an average of $100,000. While these same parents believe they'll be fine for the duration of retirement, fully one-in-four of their adult children believe they will need to come to the financial aid of their parents later in life.

In short, there truly is a "vast disconnect" between the generations on this fundamental matter.

But alas, with Thanksgiving gone, you may still have another opportunity to address this important matter with your elderly parents through a family gathering during one holiday or another before year's end. In preparation for "the conversation," however, you might want to consult these two timely articles to help you broach the subject in an adult, matter-of-fact manner.

Reference:  Reuters (November 21, 2012) "Please pass the gravy, and how much are you worth?"

            Forbes (November 21, 2012) "Generations Apart: Talking Retirement And Estate Planning Over Turkey"

Estate Planning: Transferring Your Values To Your Heirs

Whatever your religion, and even if you aren’t religious at all, it’s a truism that the Holidays aren’t just about the festivities, the food, or the gifts. This is especially the case when there is the younger generation to think about and to teach.

The Holidays are a perfect time to share and teach your values. Accordingly, it may be important to reflect and consider what values you might wish to impart to your heirs.

So, just how do you transfer your values and perhaps also religious belief to your heirs? This issue was taken up by MarketWatch in an article titled "Can you make your heirs honor your beliefs?"

Well, can you?

As a matter of fact, there are many ways to generate legally binding caveats to any inheritance or bequest. While you can use the force of law to require even religion-specific tests, should you?

Given that people are complex, maybe you (and they) would be better served if you seek to understand and respect that complexity whenever you consider conditioning an inheritance on certain attached strings. Not that hard and fast rules don't have their place, but more often than not it’s the lessons "caught" and not the lessons "taught" (or forced) that have enduring impact.

Be sure to seek competent legal counsel for advice regarding what can and, perhaps, what should be done to transfer your values successfully.

Reference: MarketWatch (November 13, 2012) "Can you make your heirs honor your beliefs?"

Estate Planning – Treat Each Child Uniquely

It's never easy to make sure your children are equally supported. After all, they have different interests and gifts. Unfortunately, this task is no easier with adult children, especially when it comes to your estate planning.

This subject was taken up by Business Insider in a recent article titled "Not Every Good Estate Plan Treats Its Heirs Equally."

Sometimes you can divide everything equally and everyone is happy. However, sometimes even-Steven approach may not be the best approach in every situation. For example, the recipients may have very different needs, some may be more deserving than others, or the estate assets may not be subject to easy division.

Have you ever marveled at how children who grew up under the same roof and eating at the same table can be so different. It can be as simple as the differences between two individuals: one adult child is wealthy while the other is a starving artist; one child is disabled or otherwise needs medical aid while the other is as healthy as a horse.

Then, there are the other kinds of inequities. For example, one child has received financial help from you over the years while the other toughed it out. The list of differences can go on and on, but it's worth a look at the selection pulled together in the original article before taking a good look at your own plans and family dynamics.

In so many words, life is complicated, and family can be complicated with it. When it comes to planning for your estate, there are bound to be any number of conditions you need to mull over. As a result, you might need to proportion and tailor the inheritances responsibly. When you do, be sure to engage competent legal counsel to guide you.

Reference: Business Insider (October 26, 2012) "Not Every Good Estate Plan Treats Its Heirs Equally"