Kansas and Missouri Estate Planning

What are Some Perilous Pitfalls in Business Succession Planning?

Businesses require careful succession planning.

Do you have a business?

If yes, do you have a plan in place for the challenges life throws at you?

According to a recent Kenosha News article titled “Five events that can ruin a succession plan” your business will not survive without a plan.

Your business likely is your financial security and your retirement plan.

You need to protect it.

How do you do this?

Address the five D’s of succession planning.

Death.

Your death does not mean your business needs to die with you.

You need to select and train a successor.

Create a plan for transitioning leadership.

Purchase business interruption insurance and life insurance to support the business through the transition.

An experienced estate planning attorney can help you create a plan and coordinate with the appropriate insurance professionals to meet the needs of your business.

Disability or Disease.

Some surprises in life are unpleasant.

No one wants to believe an illness or disability will take them away from work.

It can happen.

You should make plans in the event, for whatever reason, you become unable to work or make decisions for the business.

Without safeguards in place, your business could lose value or go under completely.

Divorce.

The love of your life could become your worst nightmare.

Your ex-spouse could take more than your heart.

He or she could take your livelihood.

If you are in the planning stages of your wedding, add "create a prenuptial agreement" to your checklist to protect the business in the event of divorce.

Drama.

Business are comprised of humans.

Where humans exist, drama and conflict may follow.

With no plan in place, your employees will begin to worry about their security.

They may look for other jobs.

They may frighten vendors.

Having a plan in place and communicating this to your employees will help keep drama from starting.

Drive.

You may have many people with great big-picture ideas.

Not everyone works in details, however.

Your success plan should include details and directions for implementation so important operations will not fall through the cracks.

Creating a succession plan protects more than you.

It provides security for your employees and the customers you serve.

Reference: Kenosha News (August 25, 2019) “Five events that can ruin a succession plan”

When Should I Update My Will?

Changes in life require changes to estate plans.

You have an estate plan.

Your affairs are in order according to your wishes.

You can now sit back satisfied until you die.

Think again.

According to a recent Thrive Global article titled “7 Reasons Why You Need to Review your Will Right Now,” your estate plan is not a fix-it-and-forget-it part of life.

How so?

Life brings many changes.

Some of these changes demand an updated estate plan.

What are they?

The addition of people to your life.

New people enter our lives all the time.

Loved ones get married.

Children and grandchildren are born.

As the love in your life grows to cover new people, be sure your estate plan covers them as well.

The death of people in your life.

The death of a spouse or other beneficiary or agent named in your estate plan requires updates.

You cannot leave assets to someone already deceased.

Similarly, someone who has passed away will not be able to make decisions for you if you are incapacitated.

Visit your estate planning attorney to fix this without delay.

Divorce in the family.

If you and your spouse get divorced, you will likely want to keep your ex from getting your assets.

[Big assumption on my part, I know.]

Similarly, if your child divorces his or her spouse, you will want to protect your assets from nasty divorce proceedings if at all possible.

[Another big assumption on my part.]

Children reaching adulthood.

The rules regarding how children and adults inherit is quite different.

The legal dependency of a child and the actual financial maturity of a young adult should be carefully considered and updates should be made accordingly.

After all, some folks have children who become economic adults and others have children who just keep having more birthdays.

Financial situation changes.

You could get a raise and suddenly have more money.

This could require a different structure for tax purposes.

If you suddenly lose money, you may need to reconsider how to protect your family in the case of sudden loss.

Be sure to review your life and disability insurance, too.

You change your mind.

Sometimes your ideas and goals change.

When this happens, you will want to make your legal documents reflect your new wishes.

Whether the reasons be personal like those listed above or external like revised tax and estate law, you will want to review your estate plan regularly with an experienced estate planning attorney.

Reference: Thrive Global (June 17, 2019) “7 Reasons Why You Need to Review your Will Right Now”

Should My Intended and I Have a "Money Talk" Before We Wed?

Money is an important premarital conversation.

You are getting married.

Your life has become a flurry of planning for venue, food, florists, and clothing.

Certainly, the plans are important to the wedding.

However, it is also important to prepare for your marriage beyond the big day.

According to a recent Wealth Advisor article titled “How to Protect Your Assets Without a Prenup,” discussing finances is key to preparing for your marriage.

Marriage involves building a life together.

Unless you are getting married right out of high school or college, you probably will be building off of two distinct lives.

You may have assets saved.

Your spouse may have student debt.

If either of you were previously married, alimony and child support may be a reality.

In merging two separate lives into one, you may consider a prenuptial agreement.

You are not planning on divorce.

You are merely protecting what you have.

For example, keeping certain assets separate could protect at least one of your incomes from creditors.

It becomes a safety net for your life together.

If a prenuptial agreement is not an option, there are still ways to protect your assets.

How?

Keep separate accounts.

The money you brought can remain your money.

You can open a joint account together after marriage as your household "operating" account.

Any money you make after marriage can go to this account and be used for your life together.

Title property separately.

If the home is yours and you choose to keep it under your name, it should be your responsibility.

Any improvements and payments should be paid from your separate account.

Keep organized records.

This can help protect the property as your own.

Record Everything.

If you make acquisitions with your separate account, you should keep records.

This shows the acquisitions are yours alone.

Also do this with gifts or inheritances.

Showing separation of moneys and assets via a detailed paper trail will help establish and confirm ownership should it be required at a later date.

It should be noted that some appreciated assets could be deemed marital property.

How is this determined?

If the property appreciated passively such as a public stock, it is separate if under your name.

If the property appreciates actively, the appreciation could be considered marital property.

A house would be one example of active appreciation.

It is helpful to include others in your financial planning as a couple.

An experienced estate planning attorney or financial advisor can educate you on your options.

Reference: Wealth Advisor (May 19) “How to Protect Your Assets Without a Prenup”

What Beneficiary Designation Mistakes Should I Avoid?

Beneficiary designations are dangerous to forget.

You have a retirement plan.

You have a life insurance policy.

You even have a few investment accounts.

You can let them go and grow, while you forget them.

Wrong.

According to a recent Kiplinger article titled “Beneficiary Designations: 5 Critical Mistakes to Avoid,” you cannot afford to forget the beneficiary designations.

When opening the account, you should have provided primary and contingent beneficiaries.

By naming a beneficiary, these assets will pass directly to the designated individuals when you die rather than moving through probate.

Sounds simple enough.

Maybe.

There some common yet costly mistakes to avoid.

What are they?

Not naming a beneficiary.

People do this?

Yes.

Maybe they thought they would revisit it later.

Maybe they just overlooked it.

Either way, this complicates things for your heirs.

Instead of having the assets readily available, the money will be paid out according to the rules of the account.

In many cases, this means passing through probate.

This will cost both money and time.

If this is a retirement account, it will need to be paid out in five years creating a hefty tax for your heirs.

Ignoring family circumstances.

Without considering consequences, you may have named a relative with special needs.

This could disqualify your loved one from government benefits.

In this case, you will need to include a special needs trust.

Leaving money to minors also requires greater planning, either with a conservator until they reach age 18 or with a trust to provide rules to protect the money until they are able to manage it responsibly.

Naming the wrong person.

If your family includes Seniors and Juniors be sure to identify the correct individual.

Also, if someone’s name has been changed through marriage or divorce, be sure it is updated.

Otherwise, you will have delays or the wrong person will receive the sum.

Not updating beneficiaries.

If you have major life changes such as marriages, remarriages, divorces, or deaths in the family, update your beneficiary designations accordingly.

Otherwise your ex may receive all of your money!

Keeping your estate planning attorney in the dark.

Beneficiary designations are a part of your whole estate plan.

Your beneficiary designations have an impact on your estate planning goals.

It is important to be fully open and thorough with your experienced estate planning attorney to ensure that your estate plan is comprehensive.

Reference: Kiplinger (April 5, 2019) “Beneficiary Designations: 5 Critical Mistakes to Avoid”

What Estate Planning Changes are Necessary Post-Divorce?

Divorce is a life change requiring estate planning updates.

The papers have been signed.

It is official.

You are divorced.

You can start the next chapter.

According to a recent Journal Enterprise article titled “5 Estate Planning Moves If You Are Getting Divorced,” this new start involves updating your estate plan.

What should you include?

Start with your medical and your financial power of attorney.

Did you name your ex-spouse as your acting agent on one or both of these?

If yes, you will want to select someone else sooner rather than later.

If you were to become incapacitated, would you really want your ex to make your healthcare and financial decisions.

In short, your life is in the hands of your ex and he has access to your finances and accounts if you are incapacitated.

Yikes!

Next change any beneficiary designations or accounts.

You may not be able to do this before the divorce is finalized.

What accounts should you consider?

Review and change life insurance policies, retirement accounts, and pension designations.

Doing so will ensure these pass to someone other than your ex.

Does the rest of your estate probably passes either through a will or a trust?

If yes, then you will want to change these to protect assets passing through them from your ex.

A will is especially important to update if you have sole custody of your children, so you can name another individual as a guardian should you die while they are minors.

Do not delay these updates.

If you do, your ex could make out like a bandit.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

Should I Review My Estate Plan?

Life change usually means estate plan updates.

You have an estate plan.

Maybe you created one when you turned 18 to ensure you were covered as you stepped into your future.

Perhaps you did not create your estate plan until you were married or had a baby.

The fact is you took the steps to create a legally binding estate plan.

Congratulations!

According to a recent Bankrate article titled “Estate planning triggers: When to re-evaluate your estate planning strategy,” keeping your estate plan current is as important as its initial creation.

This means you should be reviewing your estate plan with your estate planning attorney every few years.

You also need to review your plan after certain life triggers.

What are they?

Marriage.

Finances and future plans are important discussions to have before you tie the knot.

As you merge your lives, you need to update your estate plan to account for your spouse.

If you decide to keep things fairly separate, you may want to set up a prenuptial agreement.

Working with an experienced estate planning attorney will help you create a plan to satisfy both of you.

Remember, you need to be represented by separate attorneys for the prenup to be good to go.

Children.

If you have children, you need to plan for their care should the be orphaned.

Do they receive any of your assets?

If yes, how much, when, and how?

Does the inheritance need to be protected "from" or "for" them ... or perhaps both?

What happens if you and your spouse both die?

Who will rear your children?

Nominating guardians in a last will and testament ensures your children are reardd by a person of your choice rather than someone appointed by the court.

Divorce.

Divorces are not pleasant and can often be messy.

Not updating your estate plan certainly can make this even messier.

For example, if you do not update your beneficiary designations on a life insurance plan, your ex-spouse could receive these funds.

Yikes!

Retirement.

Retirement may be the first time you look at your 401k or your Roth IRA accounts in years.

Chances are much has changed.

Be sure to review and update beneficiary designation on the accounts.

By the way, the same thing goes as with life insurance and an ex-spouse inheriting.

Was this an exhaustive list?

No.

It named but a few major life events.

There are plenty more.

You should also review your assets if you move, have a significant increase or decrease in wealth, someone named in your plan dies or becomes disabled, tax laws are reformed, or your number of living children change.

Set up a time to meet with your estate planning attorney to ensure your plan meets your current situation.

Reference: Bankrate (March 4, 2019) “Estate planning triggers: When to re-evaluate your estate planning strategy”

What do I Need to Know About Social Security and Divorce?

Social Security benefits may survive divorce.

Are you divorced?

Whether this is old news or relatively recent, money is a major concern.

This is especially true in retirement.

According to a recent Yahoo! Finance article titled “3 Things to Know About Social Security if You’re Divorced,” Social Security is an important part of retirement.

How much so?

Nearly 50 percent of married retired Americans and about 70 percent of those unmarried rely on Social Security for at least half of their retirement income.

How does Social Security work if you are divorced?

This depends on your circumstances.

Were you married to the same person for more than 10 years?

Did you not remarry?

If you did not, then you may be eligible to receive spousal benefits from the work record of your ex-spouse.

To be eligible, your ex-spouse must be eligible for Social Security and you must be at least 62 years old.

Just because you are 62, however, does not mean you should immediately begin collecting Social Security.

Why?

If you delay, you could receive about eight percent more per month for every year you delay through age 70.

If you have a longer life expectancy, this would be a wise move.

You should also know full-retirement age has changed.

If you were born in 1937 or earlier, your full retirement age is 65.

If you were born in 1960 or later, your full retirement age is 67.

There are incremental adjustments for those born in between, like yours truly.

Do you need to wait for your ex-spouse to take benefits before you can?

No.

Your ex-spouse merely needs to be eligible to take benefits.

What if he is remarried, divorced, or widowed?

Does this effect your eligibility?

Not one whit.

It also will not impact the benefits for your ex-spouse or his new spouse.

You should know that if your ex-spouse has not yet applied for Social Security, you must be divorced for at least two years before you can receive the spousal benefits.

I highly recommend that you click over to the full article for the full skinny on this important subject.

Reference: Yahoo! Finance (February 16, 2019) “3 Things to Know About Social Security if You’re Divorced”

Do I Need a Prenup if Remarrying After Age 50?

If you are older, you have more to lose.

You are older than 50.

Maybe you have been married before.

Maybe this marriage is your first.

Whatever your situation, you are have devoted decades to working and building your own assets.

According to a recent Forbes article titled “All About Prenups For Second Marriages,” this fact means a prenuptial agreement is a wise decision.

You have more to loose and more to consider than an individual who marries in his or her 20s.

When Gretchen and I married at age 22, I was headed into law school and she for her graduate degree in accounting.

We had no assets, together or individually.

Things were pretty simple

On the other hand, you likely have retirement funds, a home, pensions, or even children from a prior marriage.

This is a lot to consider.

What should you and your new spouse discuss and include in a prenuptial agreement?

First, you need to distinguish between separate property and marital property.

Separate property usually includes what was brought into the marriage as well as any future inherited property.

Marital property is what the spouses build together.

This can become more complicated if you are both retired.

What if one of you does not have the assets to support yourself individually in retirement should something happen?

A prenuptial agreement can help you discuss these issues and come up with a mutually beneficial solution.

A prenuptial agreement can help you set expectations and create a plan to leave an inheritance to both your children and your current spouse.

A prenuptial agreement can also be critical in the case of divorce.

It can protect both of you from draining income in divorce battles, as well as provide security for your separate assets.

A prenup protects for more situations than divorce.

Work with an experienced attorney when creating a prenuptial agreement to set you and your family up for success.

Reference: Forbes (February 13, 2019) “All About Prenups For Second Marriages”

How do I Avoid "Disinheriting" My Own Children when I Remarry?

Remarriage can complicate life.

You were married before.

You have children from that marriage.

You love and adore them.

You also are getting remarried.

You love and adore this person as well.

Can your assets, like your love, be there for all of them?

According to a recent CBNC article titled “Remarried after having kids? Here are tips to avoid accidentally disinheriting them,” this is not impossible.

It will not, however, happen by accident.

You will need to be intentional in your estate planning.

If you do not have a will, even a basic will, you are risking disinheriting your children.

Yikes!

If you are getting remarried and are older, you are likely bringing plenty of your own assets into the new union.

Your estate plan must be prioritized as part of the planning for your wedding.

What steps do you need to take?

Review beneficiaries.

Not all assets pass through a will.

Retirement accounts, life insurance policies, and other accounts pass through beneficiary designations.

This means the individual named as the beneficiary on the asset will receive the asset even if your will indicates someone else.

Consider your home.

Will you and your new spouse be jointly owning your new home?

If yes, you may be unable to leave your share to your children.

This is contingent on state law and the titling of the property.

Usually, “tenancy by the entirety” or “joint tenancy with right of survivorship” will pass ownership directly to the other owner.

If your home is owned in “tenancy in common,” you could leave your share to your children.

Pass personal property.

Are there certain family heirlooms or sentimental items you want to leave with your children?

If yes, you should create a detailed list that is "incorporated by reference" in your will.

This leaves no room for interpretation or confusion, especially when emotions can run high.

Create a Power of Attorney.

What happens if you become incapacitated?

Who will pay your bills and file tax returns on your behalf?

Who will make medical decisions?

A durable power of attorney is essential in these situations.

You can even appoint different people for health care and for financial decisions to divide responsibilities.

Write a Health Care Treatment Directive.

Do you have strong opinions on the level and duration of any life sustaining care you would like to receive?

If yes, do not leave these decisions to your loved ones.

You can provide written directions yourself in a health care treatment directive.

Doing so can remove stress and decrease tensions within a blended family.

Care for all of your loved ones.

Do your estate planning now.

Reference: CBNC (January 17, 2019) “Remarried after having kids? Here are tips to avoid accidentally disinheriting them”

What Estate Planning is Needed Post-Divorce?

Divorce may seem like a simple solution.

Many marriages crumble.

In addition to your dearest relationship, your financial security can disintegrate before your eyes.

According to a recent Forbes article titled “9 Things You Need To Know About Estate Planning After Divorce,” if you divorced last year, you need to update your estate plan.

Yes, you are probably tired of working with an attorney.

Divorce proceedings and mediation are no fun.

The last thing you want to do is work with an estate planning attorney.

I get that.

The truth?

It will be worse if you do not.

Your divorce decree may have stipulations regarding your responsibilities when you die.

Your attorney will be able to navigate these to create a new plan to fit your circumstances.

What are other things you need to consider?

Advance Health Care Directive.

If you had one before you will likely need to update it.

An advance health care directive appoints someone of your own selection to have authority over your health care decisions should you be unable to communicate them yourselves.

It is highly likely that you appointed your former spouse as this someone.

Chances are you do not want to leave your life in the hands of your now ex-spouse.

By the way, in our practice the advance health care directive consists of the health care treatment directive, durable power of attorney for health care decisions, and even an anatomical gift declaration.

Durable Power of Attorney (Financial).

The kissing cousin to the advance health care directive is the general durable power of attorney for financial decisions.

So, should you become incapacitated, who will continue operating your financial life from paying bills to filing tax returns to making investment decisions and more?

Unless you execute a new DPOA, that someone will continue to be your former spouse.

Your Will and Trust.

To avoid unnecessary confusion, execute a new last will and testament.

Not only could unnecessary confusion reign at your passing, why leave behind any unintended consequences regarding the fiduciaries you appoint and the inheritance you leave.

Guardianship.

Do you have minor children?

If yes, chances are your ex will be named as the guardian if you die.

Did you divorce your spouse because of his or her personal issues, maybe even physical or emotional abuse?

There is a possibility a judge would see your ex as an unfit guardian.

You can select another individual to rear your children should this be the case.

If yes, you should leave enough money in a joint bank account with your appointed guardian so she has funds to fight for custody in the courts and prove your ex is unfit to rear your children.

A trust for your minor children.

Do you want to leave an inheritance for your minor children that is protected from your ex?

You should set up a trust.

This allows you to have someone besides your ex control and manage the inheritance for your children.

Life insurance.

Oftentimes you must maintain life insurance as part of a divorce decree.

Work with your attorney to see what your responsibilities are.

Make sure you follow the requirements of the divorce decree to the letter.

Beneficiary designations.

Your 401K and IRA beneficiary designations must be consistent with your divorce decree.

Update your beneficiary designations accordingly.

Note: when it comes to ERISA retirement plans (think 401K), whoever is named as the beneficiary upon your passing will inherit that retirement plan.

That includes your ex, even if "disinherited" under state law!

See the United States Supreme Court decision of Egelhoff v. Egelhoff for more on this.

Prenuptial agreement.

Are you planning to get remarried?

Be sure to ink a prenuptial agreement to protect your assets, as well as your children from your previous marriage.

Although you may be sick of attorneys, now is the best time to update your estate plan.

Reference: Forbes (January 8, 2019) “9 Things You Need To Know About Estate Planning After Divorce”