Tag Archive for: estate planning

My Parents Didn’t Have an Estate Plan, Why Do I Need One?

No two people are the same, meaning no two estate plans will look the same, either. But when it comes to making your own, it’s natural to compare your needs with others. You may find yourself thinking:

  • “Our dad didn’t have a trust, so why would I need one?”
  • “My best friend’s mom got by with just a will, and everything turned out fine.”
  • “My grandma’s estate didn’t need to go to probate court, so why should I worry about it?”

The reality is your estate plan should reflect your individual needs—not others’. Remember, there are three core planning elements to keep in mind when establishing a tailored estate plan: honoring intent, maximizing efficiency, and minimizing taxes.

So, why are we saying you could benefit from a custom estate plan when others before you have skated by without one? Great question; let’s discuss.

You Might Not Realize How Much You Actually Have

One of the biggest reasons people don’t create estate plans is because they’re under the impression they don’t have or make enough to warrant one. But for most, that’s an oversimplification.

If you’re still doubtful about your need for an estate plan, make a list that includes the following:

  • Assets you own: Houses, cars, a business, boats, art, or other collectibles.
  • Your investments: Retirement accounts, brokerage accounts, real estate investment trusts, etc.
  • Life Insurance: This is often overlooked.
  • Any other income: Savings account, bank accounts, annuities, insurance policies, etc.

Once you get a clear picture of what you have, it may be easier to understand the benefits of a custom estate plan.

Estate Plans Aren’t As Simple As You Think

Just because your intent is simple doesn’t mean your estate plan will be simple.

Most people want to keep things easy from a distribution standpoint. For example, if you die first, the assets go to your surviving spouse before being split evenly among your children.

This is a relatively straightforward request, but the process of actually getting those assets to the right people efficiently may not be as easy as you might assume.

Why? 

Because there are several ways to achieve your distribution goals. Working with an estate planning attorney, tax professional, and financial professional is critical during the estate planning process. They’ll help review your options and find an appropriate path forward to help you meet your needs.

As you get started, ask yourself some questions like:

  • How can I make the process efficient and streamlined for my family?
  • How can I minimize the overall tax impact of the wealth transfer process?
  • Does using a trust to put parameters on an inheritance make sense?
  • Should I try to side-step probate as much as possible?

How you answer these questions can serve as a springboard for your estate plan.

Three Core Estate Planning Principles to Evaluate

Remember, your estate plan often hinges on three driving tenets: intent, assets, and circumstances.

Understanding each helps your estate planning attorney determine the type of wealth transfer vehicles that could be best for you, like a trust, beneficiary designations, joint ownership, etc. The combination of your intent, assets, and circumstances tends to dictate the extent to which you need to include the tools in your plan.

#1: Intent

As mentioned, your intent could be simple. Even so, it’s important to put your final wishes in writing. Will everything go to your spouse, or do you want to donate a portion of your assets to charity? If you have a blended family, will all children receive an equal share of your estate? 

Essentially, you must decide what you want to happen to your assets after your passing. To take it a step further, consider why your chosen action is important to you.

#2: Assets

Next, consider the assets themselves. What do you have in your possession, and how would you like each one accounted for in your estate plan? For example, you likely won’t handle the transfer of an IRA the same way you’ll manage a life insurance policy.

It can be helpful to divide your assets into two categories: easy money and hard money.

Easy money: This refers to assets with little or no tax consequences during the transfer process. Examples include real estate, savings accounts, and life insurance policies.

Hard money: These assets will likely have tax consequences when distributed after your passing. Examples of hard money include IRAs, annuities, and 401(ks).

In general, easy money may be most easily transferred through joint ownership or naming a trust as the beneficiary. On the other hand, hard assets tend to benefit from naming direct beneficiaries (like a spouse or child).

#3: Circumstances

Your estate plan should reflect your unique circumstances. Common examples of things that impact your final intent include the relationship you have with your children or step-children, if there’s a charity you’re passionate about, or if your grandchildren are under 18, etc.

This is why it’s imperative not to create an estate plan based on what you’ve seen others do in the past. Everyone’s unique, and to operate efficiently, your plan must reflect your final wishes.

Why Developing a Relationship With a Trusted Professional Can Help

All of this to say, estate planning isn’t necessarily an intuitive process. It’s hard to get all the information you need to make an informed decision, and that can cause anxiety for loved ones left behind.

At Legacy Wealth, we’re always here to serve as a resource for you and your surviving family. We understand the importance of having a trusted professional to prevent anxiety at a time when your family is already emotionally and financially overwhelmed. 

Wherever you are in the estate planning process, please don’t hesitate to give us a call. We can connect you with an estate planning attorney who can review your current state of affairs and provide tailored guidance.

Disclaimer

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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My Loved One’s Assets Are Going To Probate, Now What?

If you’ve perused the internet for estate planning articles, you’ve likely come across the term “probate.” Chances are, it probably wasn’t painted in the most flattering light.

Probate court has cultivated a somewhat negative reputation over the years. But when a loved one passes away, that may be where their assets end up. If that’s the case, try not to panic, and don’t believe everything you read online regarding the probate process. 

Here’s what we believe you need to know about this legal system and how it impacts your loved one’s assets.

What Is Probate?

Probate is a legal process used to “validate” your estate. It’s an administrative process dividing your assets as legally required and distributing them to the appropriate parties. 

For example, the probate court may evaluate your will and create a process to implement your final wishes as written. They will legally recognize your chosen executor, guardians, trustees, and heirs.

Probate court can also help remove loved ones’ names from property if needed. This situation can be common if the deceased hasn’t named beneficiaries, assigned joint ownership, or instructed that certain assets be payable to a trust. If that’s the case, the estate must go to probate to legally change ownership.

3 Probate Myths To Unlearn

There are several misconceptions about the probate process. While many families wish to structure their estate to minimize court involvement, a loved one’s estate may need to go through probate. Here’s what you need to know if that happens.

Myth #1: Will’s Must Always Go Through Probate

Yes, in most cases, your will must go through probate. But there are occasions where your estate can bypass probate, even when you have a will. 

Let’s look at an example. 

Remember, you have several estate planning tools at your disposal to help you carry out your wishes—a trust, beneficiary designations, joint ownership, etc. When applied appropriately, these tools may avoid probate. 

If you leverage tools like establishing beneficiaries on retirement accounts and insurance policies and making your executor a joint owner on bank accounts, your estate may not need to go through probate even if you have a will. 

In a case like this, the will’s primary function is to reconfirm your wishes that other tools, like beneficiary designations, help carry out. 

Myth #2: Probate Drags On For Years and Years

It’s a common misconception that the probate process always takes a long time to complete. But the only mandated delay is the period creditors have to file claims, which varies by state. 

Once that period ends, it’s up to the state’s executor to pay all debts, taxes, and gather assets for distribution. In many cases, people complete the probate process in under a year.

However, there are times when probate drags on. But this primarily occurs when family members challenge the will, if the estate is extensive and exceeds the federal estate tax exemption limit, or if the estate continues to receive income after a person’s passing (such as royalties or licensing agreements).

Myth #3: Probate Creates Contention

Going through probate doesn’t automatically mean you’ll go through a worst-case scenario. Too often, people think that the state will seize their assets, take the house, drain their bank accounts, or cause familial disagreements. 

But the probate process isn’t out to get you. It’s simply one way to execute an administrative process for assets after someone passes. 

Think about it this way. Your loved one could have a 1,000-page trust to avoid probate. Yet, the presence of that document doesn’t mean family members still won’t fight over who gets what. If there’s tension regarding a loved one’s estate, it doesn’t matter what legal process it goes through—family riffs can occur no matter what.

An effective way to diffuse tension amongst family members is by being honest and transparent during the estate planning process. Doing so can help family members understand and talk through the reasoning behind their decisions and give others time to process.

However, Probate Court Could Introduce Certain Inefficiencies

All of this is not to say that probate can’t be a pain. It can create some inefficiencies, involve the court, and incur unnecessary costs and delays.

Because the process tends to be paperwork heavy, it’s often on the executor, surviving family members, and legal team to provide all necessary documents and pay the fee to open everything up. After an initial 30- to 60-day process, expect probate to take between six months and a year.

In most cases, as soon as probate is open, you can start liquidating assets. You can’t, however, begin making distributions.

Here’s an example:

Say your loved one dies, and you want to sell the family house. You put it on the market and settle on an attractive offer. You then contact the estate planning attorney with the offer in hand. If there are no underlying issues, you can likely sell the house. However, you won’t be able to make distributions until you close probate, which, again, could take about a year.

Why Your Will Plays a Bigger Role Than You Might Think

While a will may not be your or your loved one’s only estate planning tool, it can play an important part in the wealth transfer process. A will indicates who is in charge of the estate and dependents after a person’s passing. You can use it to name an executor, guardian, trustee, and other essential roles.

Without a will, it’s up to the courts to decide how to distribute your estate based on local law. While this may work out fine in some cases, it doesn’t guarantee that the outcome will reflect your original intent. 

Your will lets everyone know and understand your intent for your estate.

If you have a question about your loved one’s will or the probate process, don’t hesitate to reach out. We’d be happy to connect you with an estate planning attorney who can help you create a personalized wealth transfer plan. 

Disclaimer:

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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What’s The Difference Between a Will and a Trust?

While sitting down with your spouse to prepare your estate plan, you’ll likely talk about two fundamental documents: a will and a trust. 

But before you get lost in a sea of internet search queries about which is right for you, let’s take a step back and help you create a strong foundation that may reveal your needs and clarify the answer.

Today, we’ll tackle the following:

  • The importance of building a tailored estate plan
  • How a will and/or trust could fit into that larger plan
  • Common misconceptions about wills and trusts and what to know instead

Put Your Plan Before The Documents

Your estate plan is just that—a plan. It’s a comprehensive, coordinated strategy that extends your wishes and legacy to the next generation (and beyond). 

Different documents, like a will and a trust, are simply tools to help express your plan optimally. How will you know what that means? We talk about sticking with these three core estate planning concepts:

  • Honor intent
  • Maximize efficiency
  • Minimize taxes

When you understand your intent, your estate planning attorney can help you leverage the appropriate documents to carry that plan out. 

While nearly everyone can benefit from a tailored estate plan, people don’t necessarily need every estate planning document available. 

Think about this concept like building a house. You probably wouldn’t use super glue to attach new roof shingles, but that doesn’t make super glue invaluable. In fact, it will probably come in handy when you’re unloading and accidentally ding a vase or other breakable item, far more than cap nails would. 

As with a house, there’s no magic wand you can wave to create an estate plan that works for you. Wills and trusts have their places in different people’s plans for various reasons. 

When it comes down to it, wills and trusts are simply documents and tools that help support your plan. Deciding which documents to use without context is like putting the cart before the horse—it can throw your plan off balance. 

So how will you know if a will or trust is the right vehicle to support your estate plan? You’ll start by determining what you want the administrative process to look like. 

Let’s dig into that a bit more below. 

Basic Mechanics Of Wills and Trusts

There’s a reason that wills and trusts are the most widely discussed estate planning topics—they have a core concept in common: 

Both a will and a trust allow you to express your intent. 

Since honoring your intent is often priority number one on people’s estate planning wish list, leveraging these tools effectively is a big deal. 

The difference between the two lies in how that intent is processed. 

If you’ve searched for information about wills and trusts before, you’ve likely come across this statement: wills go through probate, and trusts avoid probate. At this point, your mind might be racing with questions like:

  • My loved one had a will and didn’t need to go to probate, so why would I?
  • Is a trust the only way to avoid probate?
  • Do I have enough money to justify establishing a trust? 

Don’t worry; that’s hardly the end of the story.

Let’s bring some much-needed context to clear up these common misconceptions about using wills and trusts in estate planning.

Can You Use A Will And Avoid Probate?

Depending on the tools you use to support your intent, yes! 

Remember, your will is a document that enables you to express your intent regarding your assets after you pass. But you could leverage other vehicles to help facilitate the wealth transfer process, like beneficiary designations, joint ownership, deeds, and more.

When you use them appropriately, those designations avoid probate. So you could have a will that states you want to split your estate evenly among your children and use beneficiary designations and other tools to actually carry that wish out. 

Think about it like this: if a will is a map, the other vehicles are the car, streamlining your assets from point A to point B. 

Avoiding Probate With A Will and Other Documents: A Case Study

Here’s an example to put this idea in perspective. 

Bob and Carol Branch recently retired and are considering a formal estate plan. They’ve worked hard and accumulated the following assets: a house in Michigan, two retirement accounts, and a life insurance policy. 

Each of their three children gets along well, and the Branch’s want to split their assets evenly among their kids. This is one example of what they could do. 

  • Create a will that states the intent to distribute their entire estate evenly.
  • Put a ladybird deed on the house that has the house go to their three kids when they pass.
  • Name spouses as primary beneficiaries and each child as contingent beneficiaries on the retirement accounts and life insurance policy.

As you can see, this family isn’t using their will as their Plan A. Instead, it’s a vessel for communicating and validating their intent while other tools run in the background. 

Given this family’s relatively straightforward intent and assets, a will accompanied by these other tools makes sense and keeps their assets out of probate court. 

Do I Need A Certain Amount of Money To Use A Trust?

Perhaps the most prevailing misconception about trusts is that you need to have a certain net worth to make the most of it. 

But trusts and net worth aren’t one and the same. 

When deciding if a trust makes sense for you, consider this question:

Do you want to impose a separate administrative process for dividing your assets?

Trusts can be effective ways to bring additional structure and organization to the wealth transfer process. In several cases, the families that benefit from trusts are the ones who have specific hows, whens, or whys regarding their estate. 

Perhaps your children don’t get along, and you want more structure for paying bills and settling the estate tab before they get their share of the inheritance. In that case, you could allocate some assets (learn which assets make sense to put in a trust here) to go to the trust after you pass. Your trustee would use that money in the trust to pay for things like funeral costs, debts, taxes, etc., and then split the remaining balance per the trust’s terms. 

Let’s bring the Branch family back for a new example. 

Trusts Enable You To Set A Process: A Case Study

Welcome back, Bob and Carol Branch. Remember their three kids? In this scenario, they aren’t on friendly terms, and two of them can be rather careless about their finances. 

They still want to split their assets evenly. But, given the circumstances, Bob and Carol don’t believe that the children could achieve a fair, equitable, and fight-free split by inheriting the assets outright, so they’re looking into establishing a trust.

Assuming they have the same assets from above, here’s one example of what they could do differently. 

First, they could have the house and life insurance policy paid to the trust upon their deaths. Doing so avoids probate and brings more structure to the ongoing expenses. They could have the trust pay for things like the property tax, maintenance, upkeep, and more on the home without relying on the kids to split the payments among themselves. 

They may also decide to keep their three kids as primary beneficiaries on their retirement accounts, so that money would bypass probate outside the trust and go directly to the heirs. 

So while trusts may be advantageous when you have a more complex financial situation, they are also super beneficial for those with more complicated family dynamics. 

Remember, Keep Your Plan In Charge

It’s important to establish a strategy where your plan determines the administrative process, not the other way around.

When you understand your plan and your intent, your estate planning attorney can help you determine creative solutions that meet your needs. 

Wills and trusts are two estate planning documents that can validate your final wishes, but which you use depends on your intent, assets, family dynamics, and more. We’re proud to collaborate with an estate planning firm that can help you determine your needs and devise a plan. 

If you want to learn more about if a will or trust can best suit you, set up a call with us, and we can connect you with a law firm. 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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Why Roth IRAs Are Awesome Investment Vehicles

A Roth IRA is an unassuming powerhouse that brings a lot to the investment table.

With tax-advantaged growth, they may play an essential role in developing a well-rounded retirement income strategy. But what else makes these accounts so special?

Below we’re reviewing the basics of Roth IRAs and how you can make the most of them throughout your lifetime.

What’s a Roth IRA?

With a traditional IRA, the money you contribute is tax-deductible (unless you earn above the IRS thresholds or are covered by a workplace retirement plan), making it effective for reducing your annual taxable income. Plus, the funds in the account grow tax-deferred. However, your withdrawals in retirement are subject to ordinary income tax.

A Roth IRA works the opposite way. 

You contribute to a Roth IRA with after-tax dollars, which won’t lower your taxable income. The advantage of a Roth IRA is that money in the account grows tax-free, and eligible withdrawals are also tax-free. 

With a Roth IRA, you choose to pay taxes now to avoid paying them later. This is a significant benefit to those who expect to move into a higher tax bracket later in life.

Tax-Free Distribution Requirements

To avoid penalties when taking distributions, the account must be open for at least five years, and you must be 59.5 or older. You could face tax penalties if you don’t meet either of these requirements.

However, there are a few exemptions. You can withdraw from your Roth IRA penalty-free if you:

1  

  • Have a qualifying disability
  • Use the withdrawals to pay for qualifying higher ed costs
  • Are purchasing your first home
  • Use the withdrawals to pay for medical expenses that exceed 7.5% of your AGI

4 Big Reasons Why Roth IRAs Are Useful

Here are a few reasons why Roth IRAs may make an effective addition to your retirement income lineup.

Reason #1: You Can Withdraw Contributions At Any Time

With most retirement savings accounts, you can’t touch the funds without penalty unless you meet the age requirements.

What’s special about a Roth IRA is that you can withdraw the contributions you’ve made to the account at any point. Note that you cannot touch the earnings without incurring a tax penalty. This makes it especially important to track how much you contribute to your Roth IRA yearly.

While you won’t pay the penalty on contribution withdrawals, you are still responsible for paying income tax on the amount withdrawn.

Reason #2: Distributions in Retirement Are Tax-Free

Tax planning is critical for retirees, and amplifying your tax-free retirement income bucket gives you more freedom and flexibility in retirement. If you have a higher-income year, maybe with more realized gains or the sale of a home, drawing from that tax-free bucket supplements your income while keeping taxes at bay.

Remember, creating a tax-efficient plan for your retirement income helps extend the life of your investments. 

Reason #3: Roth IRAs Don’t Have RMDs

Roth IRAs are the only type of retirement account that doesn’t have required minimum distributions (RMDs).

For traditional IRAs and 401(k)s, the IRS determines a set amount that account holders must withdraw each year—the formula considers the account balance and life expectancy. The SECURE Act bumped the age for starting these RMDs from 70.5 to 72. 

Since the funds in these accounts are tax-deferred, RMDs are subject to ordinary income tax. But with a Roth IRA, you don’t have to worry about RMDs—you can withdraw your funds in retirement when you need to. 

Reason #4: They Make a Great Addition to Your Estate Plan

If you’re looking for a tax-efficient way to pass money to your loved ones, look no further than a Roth IRA.

Distributions from an inherited Roth IRA remain tax-free, and spouse beneficiaries can hold onto the account for as long as they like. If a non-spouse beneficiary inherits the account, they will need to withdraw all funds from the account within 10 years unless they are:

  • Disabled or chronically ill
  • Under the age of 18
  • Less than 10 years younger than the original account owner

But, Not Everyone Can Directly Contribute to a Roth IRA

For 2022, the contribution limits for Roth IRAs are $6,000 per person, or $7,000 per person over the age of 50.

Roth IRAs do have income limits. If your modified adjusted gross income falls within the income phase-out range, you’re eligible to contribute a lesser amount. If you earn above the phase-out ceiling limit, you are not eligible to contribute at all.

For 2022, the phase-out ranges are:2 

  • Single taxpayers and heads of household: $129,000 to $144,000 
  • Married, filing jointly: $204,000 to $214,000
  • Married, filing separately: $0 to $10,000

How to Bypass Roth IRA Income Limits

There are ways for high earners to bypass Roth IRA income limits. 

A backdoor Roth IRA and mega backdoor Roth IRA involve contributing to a traditional IRA or 401(k) before converting the funds into a Roth account. These can be fairly complex and may increase your tax liability in the year you make the conversion, so consult with a tax professional and financial advisor first.

Another option is to do an in-service rollover from your 401(k) to a Roth IRA. Not all plan providers allow in-service rollovers, however. Consult with your HR department or plan sponsor to determine if this is a viable option.

Make Your Roth IRA Work For You

Roth IRAs are effective tools for building wealth and growing your tax-free retirement income bucket. 

In most cases, it makes sense to contribute to a Roth account when you’re in a lower income tax bracket than you anticipate being in during retirement. Or, if you believe taxes overall will increase by the time you retire, paying them sooner rather than later makes a lot of sense. 

As you continue saving for retirement, don’t hesitate to reach out to our team. We’re here to help address all areas of your wealth, including your retirement savings strategies. 

Sources:

1Publication 590-B (2021), Distributions from Individual Retirement Arrangements (IRAs)

2IRS announces changes to retirement plans for 2022

Disclaimer: 

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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5 Items to Cross Off Your Estate Planning Checklist for 2022

The new year is an exciting time to start fresh and celebrate new beginnings. As you get to work putting your financial house in order, now’s an ideal time to run through your estate planning checklist.

If you haven’t started your own to-do list, that’s okay! Our team at Legacy Wealth Advisors has put together a quick, five-step list anyone can use to brush up their estate plan heading into 2022.

Item #1: Assess Your Assets

First things first, take stock of your assets. From family heirlooms to vacation properties, you need to account for everything of value in your estate plan.

This could include:

  • Houses
  • Rental properties
  • Cars
  • Boats
  • Artwork and collectibles
  • Jewelry
  • Electronics

It’s possible you may have accrued or lost assets since the last time you looked at your estate plan. Taking a few minutes to check can help ensure your assets are properly passed down to loved ones when the time comes.

Item #2: Review Your Insurance Policies

Once you’ve reassessed your assets, the natural next step is to review your current insurance coverage. Does your homeowner’s insurance adequately protect your belongings? Or do you need to add additional riders or endorsements to cover everything?

Another essential question to consider—what types of insurance do you need? Should you still be carrying a life insurance policy if you’re in retirement? If your children are grown, independent adults, it could be time to drop or reduce your policy.

If you’re concerned about your future care, perhaps you want to add a long-term care policy.

Estate planning is about protecting yourself, your belongings, and your loved ones when you become unable to care for yourself. Your insurance coverage should reflect your wishes, working in tandem with the rest of your estate plan to reduce the financial burden on you and your loved ones.

Item #3: Reflect on Past Changes

A lot can happen in 12 months, especially these past 12 months. Have you had any major life events that could affect your estate plan?

Impactful changes on your estate plan could include:

  • Marriage
  • Divorce
  • New in-laws
  • Grandchildren
  • Retirement
  • Large inheritance or windfall
  • Medical diagnosis

List out any changes you and your spouse have experienced over the past year, and we’ll help determine if you should make changes to your estate plan accordingly. 

Nobody wants to forget a grandchild in their will, and taking the time to check for these changes now can help prevent such blunders later down the line.

Item #4: Organize & Review Documents

Should something happen to you tomorrow, does your family know where your important documents live? Do you?

Establish a safe, secure location where you can organize and store the relevant documents your family will need during the transfer process. Create digital copies (if possible) and give select beneficiaries access.

While you’re sorting your documents, review your current power of attorney, patient advocate, and joint ownership on accounts. If you haven’t yet established these, add this to your to-do list. These are the individuals who can speak on your behalf and in your best interest should you become incapacitated.

Our team can help you and your loved ones determine these designations while keeping potential tax considerations in mind. For example, creating joint ownership on bank or investment accounts can keep your assets protected from certain estate or inheritance taxes during the transfer process.

Item #5: Update Beneficiaries

Similarly, take some time to review and update the beneficiaries to your accounts. This could include insurance policies, retirement accounts, mutual funds, annuities, and more.

If you’ve gone through a life event like marriage or divorce, your current beneficiary designations may be outdated. Having an up-to-date beneficiary designation is crucial, as this person will help execute your final wishes. It may be difficult (or impossible) to correct errors in designations after your passing, and trying to fight it could cost time, money, and heartache for your loved ones.

Having your beneficiaries established now can create a smoother transition process and help your estate avoid probate. Something that, again, could otherwise cost your heirs time and money.

Bonus Item: Build Your Estate Planning Team

One of the most impactful items you can check off your estate planning to-do list is building the right team of trusted financial professionals. Having a knowledgeable professional at the helm can help ensure your estate plan is staying the course.

Whether you’re building your team from scratch or looking to grow your support system, Legacy Wealth Advisors is happy to help. We work with individuals and couples in retirement who are focused on optimizing and protecting their hard-earned wealth.

Don’t hesitate to reach out to our team to see how we can help navigate you and your loved ones through the estate planning process.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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Why a Will Should Never Be Your Estate’s “Plan A”

If you’ve done your research on estate planning, you’ll know that many articles talk about the importance of a will. 

In fact, many have come to consider a will as the foundation or cornerstone of their estate plan. But is a will really as crucial as others make it out to be? 

You may be surprised to learn that a will may not be the most effective route to get your money where it needs to go. A will can possibly create some costly and time-consuming detours. 

Here are a few important considerations regarding wills and their role in your estate plan.

A Will Won’t Cover Everything.

Think of your family’s mudroom. When you walk through the door, it’s the catch-all spot to put shoes, coats, scarves, cleaning supplies, dog food—you name it. It’s your home’s go-to storage for things that don’t fit in anywhere else in the house. Is it exceptionally organized? No. Does it serve as the best home for all these items? Again, typically not.

Similarly, a will is not a catch-all for your financial life. It serves some specific purposes, but it is not designed to carry the full weight of your estate plan.

What Do Wills Cover?

Wills are a vehicle for documenting your intent, which the courts, via probate, will ensure is heard. It will dictate who receives what assets and how much after your passing. Assets could include real estate, cash, collectibles, treasured possessions, and more.

If you’re the caretaker to a minor or dependent, you can also name a new legal guardian in your will.

What Do Wills Not Cover?

There are specific policies and accounts that will already have designated beneficiaries named, such as life insurance policies and retirement savings accounts. If you own property jointly or property is held in a trust, these should not be included in your will either.

Additional considerations such as funeral arrangements should be documented elsewhere, as the estate will not be settled when these plans need to be made.

Wills & Probate

Probate refers to the legal process your estate goes through after your passing. During probate, the court system will work through distributing assets to your heirs based on your final wishes.

This process can be costly and time-consuming—not to mention a public affair.

Having a will does not mean your estate gets to skip probate. If you have a will, it legally must go through the court system. If bypassing probate is a priority in your estate planning, there are other tools to consider instead, such as a trust.

The Probate Process in Michigan

Luckily, Michigan offers a fairly streamlined probate process as compared to other states. This system uses something called the Uniform Probate Code. The UPC creates a more standardized probate process, which can help keep things moving along quickly.

In addition, those with an estate valued less than $15,000 will experience a simplified probate process, which is meant to minimize cost and time.

Are Trusts the Only Alternative? 

A trust can offer certain benefits that a will can not, but it’s not the only way to accomplish your estate planning goals. It is, however, a surprisingly suitable option for families of most sizes and net worth. Despite common misconceptions, you don’t have to be a multi-millionaire to benefit from a trust. 

Instead, your trust should work to help dictate your intent, provide efficiency during the transition process and minimize time and cost. A trust can be constructive when passing on real estate or after-tax brokerage accounts.

Is Establishing a Living Trust Expensive?

There are several ways to go about establishing a living trust in Michigan. You have the option to take a do-it-yourself approach by creating one online. This may range from $100 to $300, depending on complexity. While this is an initially cost-effective option, making your own trust may leave your estate vulnerable to mistakes or missed opportunities.

Hiring an attorney to help establish a trust will be more costly, but you gain the guidance of an experienced professional to address all complexities or concerns. Attorneys will have different rates and fee structures; some may be hourly while others may offer a flat rate for certain services.

How much should your estate plan cost?

It depends on the level of complexity and your situation, but many range from $2,000-$4,000. 

Creating Your Estate Planning Toolbox

A meaningful way to keep assets out of probate and minimize costs is to leverage the full power of your estate planning toolbox. Establishing beneficiary designations on applicable accounts now can make the transfer process smoother later down the line. In addition, consider joint ownership for things like property, cars, and bank accounts. This will allow the co-owner to access assets and funds immediately after your passing. Both of these tools can be used to pass assets directly to heirs without added time and hassle.

Establishing Your Estate Plan

While a will may be a good start, it shouldn’t serve as the catch-all tool in your estate planning toolbox. Legacy Wealth Advisors works with well-established individuals and families preparing for retirement and working through the estate planning process.

As you consider the best way to prepare your estate for your passing, feel free to reach out to our team anytime.

Disclaimer: Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. 

Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted. All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication or future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed.

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The 6 Tools of Estate Planning

Too often, wills and trusts are seen as the magic wand of estate planning. 

But no one tool can turn your pumpkin into a carriage (at least not for long). Instead, several tools work together to help make your estate plan the bell of the ball. Let’s take a look.

Your Estate Planning Toolbox

Building a proper estate plan can’t be done without the right tools. We’ve divided your toolbag into three sections: the foundation, the principal vehicles, and the designations. Review the information below carefully as you start to piece together your estate plan with the proper tools for the job.

Tools #1 & #2: Power of Attorney and Patient Advocate

Starting with the foundation of any estate plan, you’ll need to determine your Power of Attorney (PoA) and Patient Advocate (PA). Both designations plan an integral part in protecting your well-being, as they will allow someone to make decisions on your behalf should you become incapacitated.

The person (or people) you choose to be your PoA should have your best interest at heart, and they must be capable of making important decisions regarding your finances, assets, and medical care.

Power of Attorney

A Power of Attorney is a legally binding document that gives another person the power to act on your behalf. This person, known as your agent, can be your decision-maker when you’re incapable of making decisions yourself.

A PoA must be signed and executed while you are still of sound mind and body, making it an important foundational component of your estate plan. You don’t want to put off creating a PoA until something happens to you, as it may not be legally binding.

It’s important to note that your PoA will be considered null and void upon your passing. For estate planning purposes, this document is typically designed to assist in the event you are incapacitated.

Patient Advocate

A Patient Advocate is someone who will dictate medical decisions on your behalf. This person can serve as a singular point-of-contact while helping to manage your medical treatment. Essentially, this appointment gives you a voice by empowering someone you trust to speak for you.

Oftentimes, this person may be a family member or trusted friend. You may have the option to hire a professional Patient Advocate as well. Weigh your options carefully, as this person will play an essential role in the event of a medical emergency.

Tools #3 & #4: Will and Trust

A will and a trust are two vehicles that can help you effectively execute your final wishes. You may find that one benefits your situation better than the other, or a mix of both are needed to fully address your estate planning intents.

Will

A will issues an administrative process for the courts via probate to honor your intent. The more preparation you can do ahead of time, the easier it is to avoid a costly and lengthy probate process for your heirs.

Simply put, probate is the legal process necessary to pass the assets of a deceased person on to others. Depending on your state, it may be possible to avoid probate altogether—although this tends to be the exception, not the rule.

Trusts

A trust allows a third-party or person, known as a trustee, to access and direct assets after your passing.

Similar to wills, a trust can initiate the administrative process. A trust, however, can do so without putting your estate through probate. Because of this, beneficiaries may be able to access their inheritance sooner.

Trusts aren’t a blanket solution, but combining them with other tools can help maximize efficiency while reducing future tax obligations on your estate and heirs.

Tools #5 & #6: Joint Ownership and Beneficiaries

Two designations that can help maximize your legacy planning strategy are joint ownership and beneficiaries.

Both of these designations actually have the power to supersede what’s in your will, making them effective tools in your estate planning toolbox.

Joint Ownership

If someone is a joint owner on an account, they can access the account and its funds immediately after your passing. This designation would bypass probate, as the account is already in the inheritor or executor’s name.

Joint ownership shouldn’t be overlooked, as it can help your executor cover immediate costs like funeral expenses and legal fees.

Beneficiaries

Unlike a joint owner, a beneficiary cannot access or control funds in the owner’s account until after the owner’s passing. You can have as many beneficiaries as you’d like, and you can outline who gets how much during the estate planning process.

You’ll want to work with your financial advisor when selecting beneficiaries for specific accounts. There may be significant tax benefits to choosing your spouse as a beneficiary on things like your retirement accounts and life insurance policies.

A non-spousal beneficiary of an IRA, for example, may face certain tax obligations that a spouse wouldn’t.

Bonus Tool #7: Legacy Wealth Advisors

A trusted financial professional may be the most important of all the tools in your estate planning toolbox. With proper planning in place, you can protect your assets and your loved ones from excess taxes, costly legal fees, and emotional turmoil.

Legacy Wealth Advisors helps individuals and families navigate the legacy planning process from start to finish. If you’re looking to build out your custom estate planning toolkit, reach out and set up a 15-minute call with us today.

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The 3 Core Estate Planning Concepts To Take Your Strategy To The Next Level

Your estate plan should encapsulate the legacy you wish to pass along for generations. But successfully coordinating your assets, wishes, and family isn’t only a science; it’s also an art. 

At Legacy Wealth Advisors, we work closely with the estate planning attorneys at Stewart and Bruss, P.C. to help our clients build a comprehensive plan for managing and passing on their wealth.

Today, we’re going to explore the three core concepts that are used to construct a firm foundation for each client’s estate plan: honor intent, maximize efficiency, minimize cost and taxes. 

What do these elements mean, and how can you prioritize them to build an estate plan that best represents your legacy goals?

Let’s dive in. 

Honor Your Intent

The first element is perhaps the most straightforward. It seeks to help you determine what you want your plan to accomplish—uncovering your “why’. 

Ask yourself,

  • Do you want to divide your estate evenly among your heirs? 
  • Are there multiple marriages and blended families to consider?
  • Do you have family members whom you want to offer more help and financial support than others?
  • Are charitable contributions an important aspect of your legacy?
  • Who do you trust to help you carry out these wishes (executor, trustee, power of attorney, healthcare directive, etc.)?

Once you start looking, there are hundreds of questions that can help you understand exactly what you want your estate to look like. Perhaps you are comfortable leaving everything to your kids to divide evenly, or maybe you’re interested in donating some of your estate to a charity or cause that’s been instrumental in your life. 

Regardless of your route, your intent can give us a springboard to build the most efficient and effective strategy to support it.

There are several estate planning tools at your disposal like trusts, beneficiaries, designations, and more. We can best help you arrange and organize these tools when you’re clear on your “why.”

Maximize Your Estate’s Efficiency

Once you have a better idea of what you want your estate to look like, the next step is to gather the tools you need to make it happen as smoothly as possible. 

One of the most significant ways to maximize your estate’s efficiency is to avoid probate. Probate is a public proceeding that validates and distributes your assets. Avoiding probate is often desirable because it can be costly, time-consuming, and public.

Probate initiates an administrative process—it helps ensure that your assets get from point A to point B. But the process often never moves in a straight line. Since probate is court-mandated, there are several procedural formalities and red-tape to get through before your assets get where they need to go.

Instead of smoothly transferring hands, probate initiates another costly step.  

Maximizing efficiency in your estate involves using suitable vehicles to help you bypass this step, like trusts and beneficiary designations.

Take a bank account as an example. Say you wanted the funds in your account to go to your executor (your child) when you pass to cover immediate cash needs like funeral expenses. 

If you made your child a joint owner on the account, when you pass away, they automatically can access the account. On the other hand, if you didn’t have that designation, the account would go through probate before your child could access the funds.

Knowing your intent is a critical first step to building a seamless process.

Minimize Your Cost and Taxes

The final core estate planning consideration is all about minimizing costs and taxes. 

Estate planning can be expensive, but it doesn’t have to be out of reach. When you know what you want to achieve and the options available to you, your team of estate planning professionals can help you secure the most cost-effective options for your needs. 

Your team will help you answer the following questions:

  • What vehicles do you need to help you achieve your goals? Are there other creative strategies you can employ?
  • What are tax-efficient ways to pass down wealth? (giving more while alive, establishing the right trust, remaining cognizant of how different assets are taxed).
  • What assets work best in certain vehicles? 
  • How can you adequately fund a trust? 
  • Does it make sense to make your executor a joint owner on some accounts?
  • Are you leveraging your beneficiary designations? Naming the most qualified beneficiary can be a powerful and often underestimated estate planning tool.

Knowing what you want to accomplish helps us understand the right questions to ask and develop a plan that works for you. 

How Can You Prioritize Among The Three?

Everything in life involves balance, and your estate plan is no different. 

The way these three core concepts relate to each other depends on their importance. Start by understanding your goals and values. From there, you’ll be able to establish what’s most important to you.

Will your intent always be your first priority? If so, other areas like costs may be a bit higher, especially if you have complex needs. 

Each element can counterbalance the other. Sometimes intent may make the other two areas less efficient and vice versa. If keeping costs low is your highest priority, you may need to be willing to make compromises in other areas.  

But you don’t have to go through the process alone; the right estate planning attorney will help you work through each of those scenarios, and in conjunction with a financial planner like Legacy Wealth Advisors, you can create a well-coordinated plan to execute your legacy. 

Are you ready to take your legacy planning to the next level? Reach out for a 15-minute consultation with us today.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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How To Split Your Assets Without Dividing Your Family—An Estate Planning Guide

Estate planning stirs several emotions. 

The impacts of your estate plan travel far beyond the paperwork and legal designations to include your family, friends, and loved ones. The situation gets even more murky with multiple heirs. While you want to think that your loved ones will make rational choices when you’re gone, love, death, and money tend to be a hotbed of unpredictability. 

It’s essential to have a written plan to clearly document your wishes. A robust estate plan may not squelch family drama, but it will make your wishes clear and legally binding. 

Once that’s set, discuss the plan beforehand to snuff contentious embers before they spread like wildfire. How can you structure your assets and transfer wealth without tearing your family apart in the process? Let’s take a look.  

Let These Two Words Define The Wealth Transfer Process: Fair and Equitable 

Dividing your estate is certainly not a walk in the park and you are free to split your assets in any manner that you find most appropriate. That said, it’s important to consider the long-term impacts of unbalanced inheritances. 

It can lead to tension, arguments, and even legal battles between siblings and loved ones—not the way you’d envision your legacy to be sure. There are several elements to consider, but throughout the process try to keep the words fair and equitable in mind.

Option 1: Split Inheritance Fairly

Perhaps the most straightforward option is to divide your estate evenly among your children. That may mean ensuring that each child receives the same financial value even if it comes in different forms—IRA, insurance, property, trust, etc. Your advisor can help you determine your options for splitting your assets evenly. 

It gets a bit tricky when business funds and real estate are in the mix. Perhaps one sibling wants to take over the family business and the other doesn’t or you want to leave the house to your kids but neither lives in the area. Think through what will be best for you and them throughout this process. You want your assets to be passed with intention and care—that starts with the planning process.

Option 2: Split Inheritance Equitably  

You may decide that dividing your estate evenly doesn’t make the most sense for you and your family. The idea is certainly growing in popularity, but how can you go about it? Here are a few ideas.

  • Nail down your reasons 
    • Perhaps one family member requires more help/assistance than others whether it be special needs or a disability. Leaving more money to support that person isn’t likely to raise concerns. 
    • Maybe you gave more financial assistance to one person throughout their life—school, wedding, down payment on a house—and want to leave more to another person for who you didn’t do those things. 
    • You might not want to give the same amount of money to someone who has proven to be financially irresponsible. 
    • Perhaps your son was your caregiver and you want to leave him and his family a little more because of all the help they have provided you throughout retirement.
  • Decide on a method
    • Select the right inheritance vehicle for your family whether that be a special needs trust (or another type of trust), investment account, family property, etc. 
  • Communicate your intentions
    • It’s important to let your children or other beneficiaries know about your plans so that no one is blindsided. The last thing you want is for your daughter to expect that she’s getting the house only to know at the last minute that you took out a reverse mortgage and she has to sell the house to pay back the loan. 

It’s your estate and you have the right to divide your assets in any manner you choose. It is valuable to remember that being as fair and equitable as possible could go a long way to maintain family relationships.

Make Inheritances Intentional

Different financial vehicles offer different benefits. If you think that your beneficiaries need more structure and control, a trust could be a good choice as you can set the terms for distributions.

There’s a big difference between establishing a trust and simply naming a beneficiary on an investment account. A trust carries more structure for both income and taxable purposes. If someone inherits a brokerage account, they have access to the entire balance upfront, which might not be what you envisioned. 

Your assets can also be better served in different investment vehicles. Should you leave your granddaughter a Roth IRA to help pay for school? Which vehicles will be more tax-efficient for heirs? 

Make sure you work with professionals who can help you understand the pros and cons of all your options and help guide you to maximize your assets for the next generation. 

Be Thoughtful About Personal Property

Often what spurs disagreements isn’t the IRA, it’s the family jewels, prized artwork, collectibles, or mom and dad’s famous china set. It’s essential to create a structured plan for your personal property. 

While you may not be able to make a running list of every possession you own, start thinking about the items you have and who you would like to receive your personal assets. First, identify the items that have significant and sentimental value. This is an important distinction!

Take mom’s 5-carat diamond and great grandpa’s World War II watch. The diamond has a significant financial value and the watch, while not financially valuable, holds immense sentimental and family value.  

Make thoughtful choices with each value type and consider gifting some of these items away while you’re alive. It might be more fulfilling for you to see your granddaughter wear your diamond and ruby bracelet or discuss rare manuscripts with your bibliophile son.

Your property doesn’t simply have to be divided among family members. It’s easy to get tunnel vision when it comes to giving away items but think about the person who would get the most value from an item. Say that you have an extensive coin collection that your family doesn’t want but your best friend would love—give the coins to your best friend! 

You may even be able to gift some of your items (like historical artifacts) to a museum. There are several avenues to consider beyond gifting items to the family. Give your things away to people who will appreciate them the most. 

Involve Key Parties Early On

Your estate plan is comprised of several people from professionals like your attorney, financial planner, and CPA to your family and loved ones filling other roles like executor, power of attorney, or trustee. 

The people you elect to fill these roles should be familiar with your plan and ready to act when need be. The executor of your estate should probably have a sense of your estate plan and get to know your financial team, for example. 

It’s important to us that we form relationships with the people involved in your estate plan so that things run as smoothly and efficiently as possible. Your estate deserves a coordinated and efficient plan with your legacy goals in mind. It’s our job to help you craft a plan that speaks to you and your heirs. 

Do you have questions about leaving a meaningful inheritance? Schedule a 15-minute call with our team today.

Advisory services are offered through Legacy Wealth Advisors, LLC dba Legacy Wealth Advisors, an Investment Advisor in the State of Michigan. The information contained herein should in no way be construed or interpreted as a solicitation to sell or offer to sell advisory services to any residents of any State other than the State of Michigan or where otherwise legally permitted.

All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Nor is it intended to be a projection of current or future performance or indication of future results. Moreover, this material has been derived from sources believed to be reliable but is not guaranteed as to accuracy and completeness and does not purport to be a complete analysis of the materials discussed. Legacy Wealth Advisors does not offer tax planning or legal services but may provide references to tax services or legal providers. Legacy Wealth Advisors may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters.

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