Actively Addressing Life’s Major Events
Life is full of significant events. Estate planning can provide peace of mind and help your family through a number of important milestones.
Birth of a child
As we’ve often observed, most people tend to think of estate planning as only something the elderly need to think about. Yet, of all the estate planning issues that arise, there’s nothing more important than making sure your kids are raised by people you trust. Your Will is the document in which you nominate guardians and conservators for your loved children.
You may also want to consider whether having your children receive all of your assets upon reaching the age of majority is in their best interests, or if it might be better to stage the assets out to them over time. Even for parents of young adults, a common concern is that the immediate transfer of wealth may undermine their children’s development into free-standing, self-reliant individuals. Thus, parents often establish trusts for their children – whether in their Will or through a revocable trust (a/k/a “living trust”).
Buying a home, a cabin or other real estate
Owning real estate – whether a home, a cabin, or other property – is a goal for many people, but at death, it can necessitate a probate proceeding. Owning property in multiple states can require probate proceedings in each state. Many jurisdictions, including Minnesota and Wisconsin, allow transfer-on-death deeds (TODDs) to transfer real estate outside of probate, but some (such as Florida) do not. Another strategy is ownership through a revocable trust: you die, but ownership continues through entity you created, thus avoiding probate. Your estate planner can help identify the right approach to help avoid probate, expedite the transfer of property to your loved ones, and possibly avoid taxes.
Another common issue is how to maintain and enjoy a family cabin as the parents (i.e., the original cabin owners) get older and after they pass. We recently posted a separate discussion on this issue.
Sending your children to college
Parents should have their college-bound children sign health care directives, HIPAA releases and financial powers of attorney. These documents erase any questions as to (1) your ability to speak for an incapacitated child in the event of an accident, (2) your access to medical records, and (3) your ability to handle the child’s financial accounts.
Making a loan to family members
Parents often want to help their adult children by extending loans to them. If not done properly, this can cause unwanted tax headaches for the parents and embroil their children in unnecessary (and potentially costly) disputes with each other. Your estate planner can help you document a loan to your child that can charge an interest rate well below commercial bank rates.
There are a lot of misconceptions about the gift tax and when (if ever) you need to worry about it. Your estate planner can answer your questions.
Transitioning a family business
If you’ve built a successful business and want to keep it in the family, planning issues abound. Among many others: Will the transition take place immediately or over time? Do the parents want a continued role in management or would they rather retire? Are there tax-friendly ways of handling the transfer for both parents and their kids? How do you treat all you children fairly if only some receive shares in the company? Similarly, in selling a family business to a third party, tax and planning issues arise.
At Eckberg Lammers, our estate planning is bolstered by experienced corporate counsel.
In the event of a divorce, statutes in both Minnesota and Wisconsin automatically revoke provisions in your estate plan that benefit your ex-spouse. While these laws are helpful, individuals completing a divorce are well-advised to take a second look at their estate documents. Does the will or revocable trust still reflect your wishes as to who will benefit from your estate? Do you need to consider identifying new people (perhaps to take the place of your former spouse) to serve as personal representative, trustee, financial attorney-in-fact, or health care agent?
Other areas of concern arise from parents of an adult child who is (or may soon be) divorcing their spouse. It is normal for parents to want to ensure their assets pass to their descendants. This objective is jeopardized if they die before their child completes the divorce. Similarly, if both the parents and the child dies before the divorce, the wayward in-law may inherit the assets ahead of the descendants. There are estate planning strategies to avoid these unfortunate outcomes.
As we’ve emphasized throughout the week, estate planning does not just involve planning for death; planning for incapacity can be just as important. Financial powers of attorney, health care directives and HIPAA releases are critical components to any estate plan.
It’s the inexorable event that awaits us all. It’s also a focal point for estate planning. A well-ordered estate plan does not just direct the disposition of assets at death, it removes some of the anxieties about how your family will carry on after you’re gone. Having an estate plan provides important peace of mind for you and your family at the most critical times of your life.
Questions About This Topic?
Contact us today if you have questions about this topic or if we can assist you with your Estate Planning needs.