A Reverse Black Friday
Black Friday, for a lot of people, is a day to score great deals, and it has been practically a holiday itself since the 1980s. The American Philatelist was the first magazine to use the term “Black Friday,” coining it in reference to dealing with the additional hours, extra long shifts, and traffic. The term was, at the time, negative, but it has since become standard for anyone talking about the day after Thanksgiving. It’s the busiest shopping day of the year.
The Black Friday we’re talking about is somewhat of a “Reverse Black Friday.” Instead of assets that you’re going to buy, this article is about assets you already own and want to protect from possible sources of liability. This article will serve as a guide to the different ways you can do that.
Source of Liability
There are many more sources of liability than those listed below, and there is only a brief definition provided for those listed. However, these are some of the most common: lawsuits, underinsurance or no insurance, divorce, callable loans, and debt. These can all result in your assets being taken from you—no matter how precious.
Lawsuits
You might think of a lawsuit as only something that happens to you when you do something wrong, but that’s not always the case. America is a very litigious society. Each year, over 40 million lawsuits are filed in the U.S. Businesses can be subject to employment discrimination, worker’s compensation, malpractice, breach of contract, and other lawsuits that can cost you, if not in judgment, in legal fees.
Uninsured or Underinsured
If you’re in an auto accident and you don’t have insurance (or you don’t have enough insurance), a lawsuit can go after your assets. States do have minimum liability requirements, but juries aren’t exactly opposed to handing out millions of dollars in awards.
Divorce
Your ex-spouse knows more about your finances than most creditors, and a divorce can hit you where it hurts, especially since you cannot usually discharge back child support or alimony in the case of bankruptcy. Things get even trickier if you and your ex own a business together—especially if the divorce is acrimonious.
Callable Loan
Lenders, in certain cases, can “call” a loan and demand you pay it back immediately. If you have the means, you can refinance the debt and hope that works. If not, your assets are going to be the first to go as a way to avoid bankruptcy.
Debt
Though federal law puts a limit on liability from the debt that is secured by your home, there are no restrictions like that on commercial loans. If you fall behind on your mortgage (one of the most common debt problems), commercial foreclosure can put other assets at risk; that is, unless you take steps before to contain the fallout.
Asset Protection from Liability
The above list has just some of the many sources of liability that can come as a shock. Below are some “Reverse Black Friday” ways to protect what you already own from people coming to collect, including use of business entities, insurance, retirement accounts, homestead exemptions, titling, annuities, and elimination.
Business Entities
Business entity types (such as sole proprietorships, partnerships, LLCs, and more) are a double-edged sword. For example, there is no limit to personal liability if you own a sole proprietorship. A partnership can leave you liable for your partner’s actions, even if you do nothing wrong.
Business entity types that can limit liability include LLCs—limited liability companies—and corporations. In some cases, a lawsuit can pierce the veil of this protection, but these types of business structures are generally very protective.
Insurance
You’ve heard it a million times—get insurance, and make sure you get the best type of insurance you can afford. If you can afford umbrella coverage, get it. Do not bet on the odds of something not happening. Homeowner’s insurance, commercial liability insurance, auto insurance, long term care insurance, and more are just some of the many ways you can safeguard yourself. Pay now or pay later.
Retirement Accounts
If you have an ERISA-qualified retirement plan, federal law provides you with unlimited asset protection. If you have an IRA, you are protected for up to $1 million if you go bankrupt. Some states have even more protection, though others have less because they opted out of the Bankruptcy Reform Act. Retirement accounts offer at least some asset protection.
Homestead Exemptions
Florida is a state that provides a certain amount in home equity if you go bankrupt. You might have to contribute extra to your mortgage payments, but it is worth it, as taking advantage of the homestead exemption is a must-do.
Titling
How is your home titled? For example, owning the home as tenants in the entirety with your spouse means that, if one of you gets sued, the creditors cannot force your spouse to sell their interest. The interest isn’t divisible—your home may be protected if your state doesn’t have a sufficient homestead exemption.
Annuities
Some states, including Florida, provide protection to assets in cash value life insurance and annuity balances. Florida statute §222.14 protects annuities and their proceeds from creditors. If you don’t have a life insurance policy, annuities protection is a good reason to get one.
Elimination
Last but not least, creditors cannot take what you don’t have. Consider transferring title of the asset to someone else—an heir, for example. You can give away (as of 2020) up to $15,000 in gifts without getting taxed.
This short guide should prove that there is hope for asset protection, but you need to act now before anything has happened (or could happen). The best time to protect your assets is before the source of liability strikes—after that, it is often too late.
Find out more about asset protection when you visit our website.
Thanksgiving: A Time to be Thankful & Responsible
Did you know that Thanksgiving dates back to 1621? In 1621, the Wampanoag Native Americans and Pilgrim colonizers shared a meal together at Plymouth Plantation. Contrary to popular belief, the meal didn’t exactly start as a sit-down dinner. The Plymouth Pilgrims were shooting off guns to celebrate an unknown occasion, and the nearby Wampanoag tribes went to investigate the sound. The groups met and cautiously ended up eating together.
It wasn’t until the 1860s that President Abraham Lincoln made Thanksgiving a national holiday, trying to further a narrative that would bring the country together during the Civil War.
Now, centuries later, we all sit down for a day of food, football, and family. Speaking of family, there’s no denying that they are probably the most important part of your life. When thinking about being thankful, there are ways to show that thankfulness all year ‘round—including after you’re gone.
What happens after you die?
This might sound like a heady philosophical question, but don’t worry; it’s not. We’re really just referring to what happens to your estate after you pass away. Do you have a will? Do you know what will happen to your property—cash, assets, real estate, etc.?
Asset Protection
If you die without a will, your assets will be unprotected. A probate court will divvy up what you own and use your assets to pay off creditors. Your family will get what’s left. Though a last will and testament is one way to provide instructions for asset protection, there are other means of doing so as well, including: trusts, gifts, and college funds. Picking your power(s) of attorney and legal guardians for your kids are two other important legal tools.
Trusts
One of the best things about trusts is how varied they are. A trust is a three-party relationship where the donor transfers legal title of an asset to a trustee, who holds the asset for the benefit of the beneficiary. At the donor’s specification (such as when he or she dies or when the beneficiary turns eighteen), the trustee will hand over legal title to the beneficiary.
Though this sounds simple, there are many different types of trusts. The most common include revocable, irrevocable, asset protection, charitable, construction, special needs, spendthrift, and tax bypass. And that list is by no means exhaustive. An estate planning attorney can help you determine which trust is best for your financial situation. Visit our website and learn more about estate plans and trusts.
Gifts
As of 2020, in America, you can give away $15,000 in gifts to as many people as you want without having to pay tax or report the giveaways. Once you hit the $15,000 threshold, you must file a tax return for the gift(s). Gifts can include money, real estate, property, or cars. Giving gifts of under $15,000 helps you legally avoid taxation on assets, while still benefitting your loved ones.
College Plans
The IRS allows people to save money in tax-advantaged college savings’ programs, called 529 plans. Depending on your state, this tuition money can be used for in- or out-of-state tuition or for private and public schools. Again, this depends on the state. 529 plans are a good way to get a head start on your kids’ future.
Powers of Attorney
Though it’s important to protect your assets and property for your family after you pass on, the postmortem protection isn’t the end of the story. Pre-mortem arrangements, such as picking a power of attorney, mean that you will have a trusted person in charge of your financial and medical decisions if you are too incapacitated to make them yourself. It might go without saying, but self-protection is just as important as asset protection.
Guardianship
Finally, if you have minor kids, you need to arrange legal guardianship for them in the event of a worst-case scenario. Talk to your proposed guardian and make sure they are on-board with your plan before drawing up the papers.
Though this list is by no means exhaustive, it hopefully helps provide the basics for keeping your family safe and secure, no matter what happens.
2020 Is (Finally) Wrapping Up
One thing 2020 has not been is boring—aside from the months spent in quarantine, that is. 2020 is coming to an end, which is something that pretty much everyone can be grateful for. There are loose ends to wrap up before January 1, 2021 dawns, and, when it comes to your family, these loose ends might include taxes: income, estate, and gift.
Income Tax
While we all know what income tax is, you might have a couple after-the-fact questions about the process itself, such as:
When do I get my refund?
Your tax refund usually comes within 21 days after you electronically file your tax return. If you file paper tax returns, your refund is issued within 42 days. The IRS has introduced a “Where’s my refund?” tool on its website that will help you track your refund status. Though you can call the IRS if your refund is late, note that the chances of getting to talk to a customer service representative are slim to none, as the IRS is very busy during this time.
The IRS suggests that you wait at least 21 or 42 days after electronic or paper filing to contact the 1-800-829-1954 hotline. Additionally, if you’re trying to find out where your refund is, there is an IRS2Go mobile app.
If your refund is delayed, there might be a few reasons. It’s possible that the check, if you received a paper one, was lost in the mail or even stolen. The IRS must confirm the check was lost or stolen before issuing a new one. If your refund was direct-deposited, there might be a problem with the bank information you put in. The IRS can contact your bank to try to help.
Before panicking, give it some time. Though mistakes with refunds happen, that’s not the case for the majority of delays. Usually, it comes down to the government moving slowly. It’s been a hectic year, and, as we all know, everything takes a little longer because of the pandemic. Also, it is an election year. The USPS is giving first priority to mail-in ballots. Other mail comes second.
What if I did my taxes wrong?
Visions of jail time might dance in your head, but that’s actually a very, very, very unlikely possibility, especially if the mistake was just that—an unintentional accident. The IRS catches and fixes most errors itself, alerting you about the mistake after they fix it and telling you what they did to rectify it.
If you catch it before they do, you can solve the error through the electronic filer, or you can use form 1040X to amend your tax return. Missing forms (two of the most common mistakes) is an example of an error that is not automatically solvable. The IRS will alert you of the problem, and you will have to send in the missing form.
You aren’t the first person to make a mistake on your taxes, nor will you be the last. A mistake is not that big of a deal. You won’t have to redo your entire return unless the whole thing is wrong.
Estate Tax
Next up, and slightly more complicated—if you can believe it—is estate tax. This is a tax on the right to transfer your property after you die, which means that your relatives or lawyer will be the one worrying about it if it’s your estate.
How does the IRS calculate estate tax?
The IRS calculates estate tax by taking an accounting of everything you own or in which you have interests at the date of your death, including trusts, insurance, annuities, real estate, cash, and more. The fair market value of the tallied items is used to compute the total, which is the “Gross Estate.” From the “Gross,” there are certain deductions you can take, depending on the estate. After that’s settled, the “Taxable Estate” is what’s left, and that is the total from which the IRS takes the tax.
Who must file?
The requirements for filing have increased. In 2021, if your estate is worth over $11.7 million, you must file an estate tax return. That number has been increased from $11.58 million in 2020, and the previous years have also been increased. For more information, you can look at the IRS’ Form 706 Instructions.
Gift Tax
Finally, there is a gift tax. Gift tax is a tax on the property or money that someone gives to someone else. You are legally required to report gifts over $15,000. Don’t bother trying to hide a gift, because if you get audited, you will end up paying not only the correct tax, but also likely a fine. The gift tax exclusion lets you give away $15,000 in assets or cash to as many people as you want. Gifts can include stocks, land, cash, cars, and more. Once you hit the limit, you must report and pay taxes on it.
This article is not the be-all, end-all of the many ways the government can tax you. As with everything in law, there are a million and one details and exceptions to these laws. However, this is a basic primer that might help you tie up any loose taxation ends that you might be facing. As always, it never hurts to hire a lawyer to help you with tax matters. It’s cheaper to do it right the first time than to fix costly mistakes. Visit our website to learn more.
Do You Trust Your Trust Administration?
A trust is a legal document that a grantor (also known as a trustmaker or settlor) creates. The grantor creates the trust for the benefit and use of a beneficiary. A trustee is a third party who is tasked with maintaining the trust assets and ensuring that they are handled properly.
“Trust administration” concerns the trustee’s job—namely, distributing and maintaining the trust. In this article, we’ll go through the basics of trust administration.
What is Trust Administration?
Trust administration is the last main stage of the trust. It goes into effect when the grantor is incapacitated, dies, or otherwise indicates that he or she wants the trust to be administrated. Trust administration is a process, and it is the trustee’s job to faithfully carry out the wishes of the grantor.
What Does a Trustee Do?
Once the grantor dies, the trustee becomes responsible for a myriad of tasks. These tasks include (but are certainly not limited to) providing copies of the trust and notice of the commencement of administration to all beneficiaries/heirs. State statute or the trust document will specify the format to which the copies and notice must adhere.
The trustee must notify the state of the grantor’s death, request a taxpayer ID from the IRS, file an estate tax return, and handle the process of distributing trust assets and/or proceeds to the proper beneficiaries. The process of trust administration is usually faster, more efficient, and less publicized than court-supervised probate.
However, many trustees are unfamiliar with these procedures. This is why it is important for a trustee to work with a lawyer, CPA, and/or financial advisor to ensure everything is done correctly. This collaboration is yet another important task for the trustee.
Advantages of a Trust
Trusts have many advantages; chief among them is avoiding probate court. According to CNN Business, the basic trust plan will cost between $1,600 to $3,000 (though this is just an estimate—costs can vary). In many states, the typical probate cost will be 5%-10% (again, estimated) of the total value of the estate.
In addition to being faster and more private, trusts are usually more cost-efficient than the probate court process. Depending on the type of trust, trusts can protect your property and assets from lawsuits and creditors.
Trusts can reduce gift and estate taxes. During trust creation, you can name your trust administrator and put conditions on your posthumous asset distribution. This level of personalization is a major benefit of trusts.
Disadvantages of a Trust
As with any legal document, trusts and trust administration have their disadvantages, including the loss of control over assets if you make the trust irrevocable (which means that the trust cannot be changed once the document is finalized).
If you make the trust revocable (which means that the trust can be changed, even after finalization), that revocability may have tax-related consequences. It might also have negative effects on stamp and estate duty and asset protection.
Lastly, bad trustees are out there. You might appoint someone that you think is trustworthy, only to find out that that was a miscalculation. Luckily, courts offer remedies to protect you in the event of trustee misconduct.
Trustee Misconduct
It is relatively rare, but it does happen. When a trustee commits misconduct, this is called a “breach of fiduciary duty.” In Florida, there are four main examples of a breach of fiduciary duty: self-dealing, excessive compensation, poor investment choices, and stealing assets.
The first is self-dealing. For example, a trustee who is selling property or using assets for personal gain is self-dealing by using trust assets to benefit his own wallet.
Secondly, a breach might involve excessive compensation. This occurs when the trustee is paying himself too much. Though trustees are legally permitted to accept payment for their efforts, said payment must be reasonable.
Third, a breach occurs if a trustee is making inappropriate or poor investment choices. These choices might be the result of impaired judgment, self-dealing, or both. For example, a trustee investing trust assets into his own underperforming, badly-managed business has engaged in both self-dealing and in improper investment.
Fourth, is just plain old theft. A trustee breaches his fiduciary duty (and may be susceptible to criminal penalties) for stealing assets from the trust. Pilfering assets usually requires intentionality.
The main defense to a breach of fiduciary duty is showing that the trustee was acting within the bounds of the trust document. This process—the allegations and the defense against them—will be handled in a court of law.
Remedies for Breach of Fiduciary Duty
The main defense to a breach of fiduciary duty is showing that the trustee was acting within the bounds of the trust document. This process—the allegations and the defense against them—will be handled in a court of law. The court will hear both sides and determine what relief, if any, is required by law.
There are legal and equitable remedies available to grantors if a trustee breaches his fiduciary duty. These remedies include appointment of a new trustee, damages, a constructive trust, injunctive relief, and even criminal penalties.
When deciding whether to set up a trust, you should consider all the advantages and disadvantages. Even in the event of misconduct, a court can still offer relief. Talk to an attorney about the best decision for you and your property, and learn more from our website.
What’s Scarier than Halloween? A Life Unprotected
Halloween is the season of pumpkins, ghosts, goblins, and more. You might like your Halloween frights tame and filled with corn mazes and G-rated movies, or you might be a hard-core horror movie and haunted house fan. Either way, there’s no denying that Halloween is one of the best holidays around.
However, it isn’t the scariest thing in the world. Halloween comes once a year, but the frights and scariness that come with not having an estate plan is year-round. Listed below are the basic things to know about estate plans, wills, and (eek!) probate court.
Requirements of a Last Will and Testament
The last will and testament is a legally-enforceable document that you create. It outlines your wishes for what you want to happen to your assets (property, personal possessions, money, etc.) after you die. In Florida, there are several requirements for a last will and testament. And, within some of those requirements, there are exceptions.
First, the testator (person who is making the will) must be eighteen or older and of “sound mind.” Sound mind isn’t overly complicated. It just means that you need “testamentary capacity.” You need to mentally understand the extent and nature of the property your will dispose of posthumously, and you need to understand your relation to those who will claim a benefit from your will. Essentially, you must know you’re writing a will, and you need to be cognizant of the property in your will and the people to whom you’re transferring the property.
Second, the will must be in the correct form of writing, i.e. non-holographic. It cannot be “holographic” (AKA “olographic”). A holographic will is a will that has been completely handwritten and signed by the writer/testator. It is an alternative to a lawyer-written will. Some states might allow holographic wills, but Florida does not.
Third, the testator must sign the will. If the testator is unable to sign it (quadriplegic paralysis is a common example of why a testator might be unable to sign his will), the testator may direct another person to sign it on his behalf. That person must sign the will at the direction of the testator and in the presence of the testator.
Fourth, the will must be signed at the bottom. The signature doesn’t have to be formal—it can even be a symbol or letter; so long as the testator uses that symbol as his signature, it is acceptable.
Fifth, two competent witnesses must be present at the signing. The witnesses must sign the will in the presence of the testator and one other person.
What is Probate Court?
Probate court is the court where last wills and testaments go to be authenticated (validated as real) and then executed. It is also where people who die intestate go. If someone dies intestate, that means that they die without a will.
In the case of intestacy, the probate court itself will divvy up the deceased’s property. Creditors will be the first recipients, followed by anyone else with a legal claim. Probate court is time-consuming, expensive, and, in the case of intestacy, it doesn’t always reflect what the deceased would have wanted.
How to Avoid Probate Court
Even if you don’t die intestate, you will likely have to go through probate court unless your estate is extremely small. A trust is another way to transfer assets without going through probate court. A trust goes into effect when you’re alive, not when you’re dead. You transfer legal title to an asset to a trustee, who holds it until you want the beneficiary to receive it. A trust can be created in a last will and testament.
The bottom line (and the most takeaway from this article) is that you must have a plan for your asset distribution after you die. Going to probate court for will authentication is far different than going there for intestacy. You don’t need to wait until your old or sick to make an estate plan. In fact, the best time to do it is when you are in good health and clear-headed.
Though not having an estate plan might not have the same fright-factor as Michael Myers chasing people with a knife, it’s still scary. Make sure you talk to an attorney to find out how you can protect yourself and your family from the real-life horror movie that is dying intestate. Learn more about probate.
Life’s All About Choices
Well, there’s no getting around it. Election day is fast approaching, and, in less than one month, we’ll all be making one of the most important choices of the year. No matter who you’re voting for, it’s important to get out there and make sure that your voice is heard. Many states have early and mail-in voting, and, of course, you can vote in person, too.
Elections aren’t the only events in life that require tough choices. Some of the most difficult phases of and events in our lives require serious decisions. The key is to make sure you always have a plan, no matter what. In this article, we’ll talk about three major life events and the legal documents they involve.
Death
Death is inevitable, and though you might not live on, your assets will. You have a few options when it comes to asset (money, property, possessions, etc.) distribution. Two of the main ones are last will and testaments and trusts.
A last will and testament is the estate planning tool with which most of the population is familiar. This document lays out how you want your assets distributed after you die. A will must be authenticated in probate court before the wishes enshrined in it can be executed.
For a will to be authentic in Florida, there are a few requirements. First, the testator (person writing the will) must be at least eighteen years old. Second, he or she must be of sound mind. Third, he or she must sign the will. Fourth, there must be two competent witnesses, and fifth, the will cannot be “holographic” (handwritten). There are certain exceptions/tweaks to the third and fourth requirements, but those five are the basic must-haves.
A trust, by contrast, goes into effect immediately, not just when you die. A trust is a three-party relationship. You (the grantor) sign title to your asset(s) over to a third party (the trustee). Then, upon your direction—or when you die—the trustee turns over the asset(s) to the person you intended as the recipient all along. This recipient is called the beneficiary.
Divorce
Divorce can shake up your estate plan. Revisit your estate plan after the divorce is finalized. There are certain documents, such as healthcare proxy, power of attorney, and any trust beneficiaries, that require updating if you are divorcing your spouse. Even if the divorce is amicable, you will need to make changes.
You might still want to leave your spouse something, which is your right, divorced or not. Check your prenuptial and/or postnuptial agreements, as well as your state’s laws, to see what can and cannot be altered in your estate plan.
There are some documents you might not be able to change during the divorce. In some states, you cannot change beneficiary designations for life insurance, 401(k) plans, pensions, and similar accounts until after the divorce has been finalized.
The bottom line is this: divorce means you have a lot to do to ensure that your estate plan reflects your wishes accurately.
Sickness
While divorce requires you to update and correct, sickness (and old age) require even more proactive action. It’s best to complete certain documents, like a living will, power of attorney, and guardianship papers before something happens.
A living will, in contrast to a last will and testament, goes into effect while you are still living. This legal document contains directions for your medical care. If you are too sick or incapacitated to tell doctors and nurses what you want, the medical staff can refer to this document for assistance. Examples of items included in a living will are preferences for pain management, DNR (Do Not Resuscitate), and organ donation. The living will tends to reflect the patient’s values and spiritual or religious views.
A power of attorney is a trusted individual that you appoint to manage your financial and/or medical affairs if you’re unable to do so yourself. This person is usually a spouse, family member, or trusted friend.
Guardianship papers are important for those with minor children. These documents designate who will take custody of your dependents in the event of your death or incapacitation.
Though life is always going to be fraught with surprises, some good and some bad, having a solid plan will alleviate stress and allow you to face difficulties head-on. Talk to an estate planning attorney today about how to safeguard yourself and your loved ones, and learn more about asset protection.
And don’t forget to vote!
What Is Personal Asset Protection?
We’ve all had someone tell us at some point, “Don’t take it personally.” Well, if there’s one thing you should take very personally, it’s personal asset protection. People are familiar with estate planning’s protection of assets after they die, but they might not be familiar with what estate planning can do for them while they are alive.
Especially in these uncertain times, it’s important to know about personal asset protection and do all you can to maximize your legal options and safeguards. Here is a brief overview of what we mean when we say, “personal asset protection.”
The Basic Definition
Let’s start with the basic definition of personal asset protection, including what does and does not qualify. Asset protection involves strategies and legal tools to guard your wealth from creditors, lawsuits, and similar agents looking to cash in. Asset protection is used by businesses and individuals to limit what their creditors can and can’t take to satisfy a debt. You don’t have to be a millionaire to engage in asset protection—it’s something that is just as suitable for the working class as it is for the 1%.
What Asset Protection is Not
There is no denying that asset protection has gotten somewhat of a bad reputation. Over the years, there have been highly-publicized cases of illegal offshore accounts and shady white-collar dealings. However, those cases are not examples of asset protection: they are crimes.
Asset protection operates within the bounds of the laws governing creditors and debtors. Concealment, fraudulent transfer, bankruptcy fraud, and contempt are all crimes—they are not legitimate ways to protect your assets, and you should never engage in them.
Assets to Protect
It is advised that you protect your assets before a claim/liability happens. After a claim or liability happens, it is often too late to protect your assets. Therefore, you must be prepared. Retirement accounts, homesteads, annuities, life insurance, and trusts are all assets that you may be able to protect from creditors in the event of a suit.
There are many methods of personal asset protection, but three of the most common include: asset protection trusts, family limited partnerships, and accounts-receivable financing.
Common Methods
An asset protection trust is subject to complex regulations and requirements. This trust is self-settled. The grantor (you) becomes the beneficiary and can access the trust account funds (your money). If structured correctly, the asset protection trust will not be reachable by creditors. It also offers certain tax savings, depending on your state.
Secondly, accounts receivable financing involves capital that is principle to a business’s “accounts receivable.” Accounts receivable refers to certain business assets, such as outstanding balances of customer invoices that are due but have not been paid yet. Accounts receivable financing is more suited for a business than an individual, though small businesses owners can certainly take advantage of this flexible funding.
Thirdly, a family limited partnership is another asset protection tool that is geared towards small businesses. An FLP lets a family pool its money together to run a company. Each member of the family purchases shares of the company, and they profit proportionately to those shares. This has been called a “powerful estate planning tool” for business owners.
Protecting Your Home
Though your home is not your only asset, it is perhaps your most valuable. The first way to protect your home from creditors is to take advantage of what is known as a “homestead” exemption. This exemption protects the value of your home from creditors. Forty-eight states have this homeowner protection, though they differ in terms of requirements and amounts. Also, twenty-one of those states require a homeowner to file paperwork to qualify for this exemption (i.e. it’s not automatic).
Implementation of an equity stripping plan, creation of a domestic asset protection trust, moving the title of your house to the low-risk spouse’s name, and buying umbrella insurance are other options to protecting your home from creditors.
If this is confusing to you, don’t be alarmed. You can contact an estate planning attorney to talk about your options. Though lawsuits seem like they won’t happen to you, they are remarkably common. America is a litigious society. There are forty million lawsuits filed every year in America. As the time-worn saying goes, it’s better to be safe than sorry.
Visit our website to learn more about asset protection.
Winds of Change and How to Deal with Them
If there’s one thing that has been true about 2020, it’s that things are changing rapidly. Whether it’s breaking news updates every day about the Coronavirus pandemic or tragic news about our favorite actors dying (#WakandaForever), this has been a tough year for us all.
So how do we cope? When it comes to constant change and a stressful environment, you can only affect what is under your control. In this article, we’ll talk about ways to cope with life changes by using the legal system to your advantage.
Living Will
If you don’t recognize the term “living will,” you might recognize this document as an “advance directive.” There’s no denying that the Coronavirus pandemic is here, perhaps to stay. And there’s also no denying that it is causing people to become sick (from mild symptoms to ventilation required), sometimes fatally. The numbers increase every day.
What doesn’t change is that you need to be prepared if you fall ill. A living will is a legally-enforceable, written document that lays out your wishes in the event that you are hospitalized and unable to communicate. These wishes include medical treatments that you do or don’t want, whether you want to be kept alive under any circumstances, and organ donation and pain management preferences.
These are all highly personal and contingent on your values and lifestyle. That’s why it is important to have your requests written; that way, they will be honored.
Power of Attorney
Along the same lines of a living will is a power of attorney. A power of attorney is a trusted individual who you appoint to manage your financial and/or medical affairs in the event that you are unable to do so yourself (incapacitation, illness, cognitive decline, etc.). By appointing a trustworthy power of attorney, you know that you are in good hands. And, if the power of attorney performs poorly, there are legal safeguards in place to remove him or her from the position.
Asset Protection
Estate planning works on both sides of the veil, so to speak. It allows you to control how your assets are distributed after you die, as well as how to protect them while you are alive. By setting up trusts (whether inter vivos or testamentary), you can ensure that your assets are safeguarded against potential lawsuits or challenges.
You can protect your assets so that your heirs get the most out of your estate after you die. In addition to those benefits, an estate planning attorney can also help you minimize tax obligations on your estate post-mortem.
Small Business Planning
Americans are very entrepreneurial, and a pandemic has not changed that cultural fact. Several businesses that were started during or immediately after economic collapse, recession, or serious global catastrophes include: General Motors, Hewlett-Packard, Burger King, Microsoft, Uber, Airbnb, and many more.
If you already have a business, then you know how precarious the times are. Having a business succession plan in the event of your death will protect what you have worked so hard for. If you’re just starting a new business, you should take protective steps as well. This includes purchasing top-notch insurance.
Taking Care of the Kids
Kids are resilient, but there is no denying that they, too, have gone through major changes in the past year. Kids are unable to go back to school, and they often see their in-person social lives shrink (if not disappear entirely). Though there is not much you can do about that, there are legal ways to take care of your kids’ future.
Guardianship
If your kids are under the age of eighteen and something happens to you, who will get them? Estate planning allows you to set up guardianship papers, putting your kids’ lives into the hands of trusted adults. Contact your proposed guardian before you appoint them into the position. Setting up guardianship is a “just in case” safeguard that, while unpleasant to think about, is still a must-do.
529 Plans
Pandemic or not, colleges will still exist in the future, and they will still likely be expensive. The IRS allows you to set up a 529 tax plan, which is a tax-advantaged program that allows you to save up for your kid’s college education. Each state is different, and every state has its own requirements, rules, and regulations for setting up such a plan. Contact an attorney to discuss your options.
Dealing with change can be scary and intimidating, particularly if you are not used to it. Fortunately, there are ways to manage the way we deal with these “winds of change.” Talk to an estate planning attorney to see how these legal safeguards can give you peace of mind.
Labor Day: Protect What You’ve Worked for Your Whole Life
Labor Day has been around since the late 1800s after it was deemed a federal holiday in 1894. Labor Day has pretty much always been observed the first week in September. The holiday celebrates the achievements of the American labor force, and citizens get a day off to reflect on how hard they have worked.
You’ve worked diligently to get where you are, and you need to ensure that you are protecting your assets and accomplishments. The legal system provides documents and tools to serve as asset safeguards. In this article, in honor of Labor Day, we’ll discuss the protections that estate planning offers your hard work.
Estate Planning 101
While estate planning is a way to prepare for the distribution of your assets after you die, that’s not all this legal field is about. There is another side to estate planning that is just as important: the protection and preservation of assets. This includes minimizing tax obligations on your assets so that your heirs get the most out of your estate after you’re gone.
Estate planning helps you protect your assets by providing a framework in the event that you’re incapacitated. Though estate planning is vital after death, it also is important during life.
Asset Protection
An estate planning attorney can help you minimize your tax obligations (legally) by navigating the tricky tax code. There are loopholes and maneuvers that a savvy attorney will recognize, but it takes a lot of experience to minimize taxes to the full.
Asset protection also comes in the form of protection against lawsuits. This does not mean protection against getting sued (lawsuits are common in a litigious society like America’s), but estate planning can help take your assets out of the reach of a lawsuit. There are legal vehicles (trusts, for example) that take the assets out of your name and protect them. Once that money or property is beyond reach, there is also a chance that someone’s motivation to sue you might drop.
Wills
Let’s start with one of the most common documents associated with estate planning: a will. A will is a legally enforceable document. This document spells out how you want your assets—whether personal or financial—distributed when you die. The will sets the parameters of and parties to which the property will transferred. This is the easiest and cheapest way to start an estate plan.
However, a will is, by no means, the be-all, end-all of estate planning. Even with a valid will, you still have to go through the drudgery and expense of probate court. A trust is one way to avoid probate court.
Trusts
Trusts are three-party fiduciary relationships that involve you (the donor), the person to whom you want to transfer property (the beneficiary), and a third party who holds the property/asset until you want the beneficiary to have it (known as the trustee). There are many, many different types of trusts, but two of the big ones to know are: inter vivos and testamentary.
Inter Vivos Trust
As you may have guessed (if you have a rudimentary knowledge of Latin), this trust is created while you are still living. You transfer your assets into the trust, and this protects your money while you’re alive. If you choose to make your inter vivos trust revocable, it can be changed, amended, or even cancelled. But, if protecting your assets is the #1 priority, you consider making the trust irrevocable. An estate planning attorney will help determine which is best.
Testamentary Trust
Conversely, a testamentary trust is created when you die. In a trust document, you express your wishes as to how you want your property distributed upon your death. When you die, those wishes are honored. A trust is not only a great way to protect assets from legal challenges, it also can help you avoid probate court.
This brief overview has hopefully helped you realize that estate planning and asset protection offer a lot of protections to conscientious workers looking to safeguard what they have worked their whole life to have.
Visit our website and learn more about estate planning.
Back to School…Kind Of
When it comes to the ongoing coronavirus pandemic, we never know how quickly things will change. Many states are still debating whether to send kids back to school, while others have already made the choice to reopen the schools, albeit with some precautions. Whatever the outcome, one thing is clear: you need to make sure your kids are protected for the upcoming school year and beyond.
There are several different ways in which estate planning and its related legal fields can help you plan for your child’s future and protect them from harm. This article will serve as a guide to the basic legal strategies for keeping your kids safe.
Trust Funds
When you think of trust funds, you might assume that they are just for the ultra-wealthy. Images of Ivy League schools and mansions may come to mind. However, that is a misconception, as trust funds are for everyone.
A trust fund involves three parties: the beneficiary (your kid[s]), the donor (you), and a neutral third party, called a trustee. The donor, which is also called a grantor in some states, will create a trust fund, which holds and manages the grantor’s assets on behalf of the beneficiary. The trustee oversees the fund. The grantor sets the terms and conditions for distribution of the trust fund, as well as how the assets are to be held or invested.
Trust funds can take the form of a simple bank account, where the grantor deposits money that is owned by the trust, as opposed to an individual person. Over time, the fund will grow. You don’t just have to place cash in the trust fund—you can also put other assets like real estate or stock into the fund.
In order to set up a trust fund, you will need to meet with an attorney. You and the attorney will set up stipulations and name beneficiaries. Examples of stipulations include monthly payments to beneficiaries or restrictions on how beneficiaries can spend the money. You, as the grantor, get to decide these parameters.
Guardianship
Next on our list is guardianship. If something happens to you while your kids are still young, the state will need to ensure that a guardian is chosen for the children. By setting up guardianship papers now, you can be the one to make this decision (as opposed to the government).
The kids’ guardian can be a relative or close friend. The guardian should, obviously, be someone responsible, who can attend to the kids’ day-to-day needs. Above all, make sure that you consult with your proposed guardian before naming them as such.
Tax-Advantaged College Savings Plans
It goes without saying that college is very expensive. Even scholarships don’t always cover every financial expense your child will run into while in college. The IRS offers tax-advantaged college savings plans (known as 529 plans or “qualified tuition plans”) that let you put aside money for your kids’ education.
These college saving plans often have a lower tax rate, which makes them preferable when compared to other means of saving money. These 529 plans are sponsored by educational institutions, state agencies, or state governments, so they will differ based on where you live and where your kids are planning to attend college.
Review Life Insurance
If you’re a new parent who has life insurance, make sure your life insurance policy allows your kids to be the beneficiaries if you die. Even if you’re not a new parent, you should check that your life insurance policy is structured in the most advantageous way possible. (And, of course, if you don’t have life insurance, you should absolutely consider buying it).
Again, this list is by no means the be-all, end-all of keeping your kids protected. When it comes to estate planning, there are a lot of ways that you can help your family’s specific situation. Contact an estate planning attorney today and find out more about our services.