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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

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.

November 15, 2022/0 Comments/by Jeff Bruss

Estate Planning

Who Should Be In Charge Of Your Children’s Money If You Pass?

A parent’s worst nightmare is leaving their children too soon. That makes planning for the unexpected an undeniably challenging task many don’t want to confront.

It’s our hope, however, that taking the time to build a plan now will help to protect your children in the unlikely event of your early passing. Facing these decisions while you’re still able to put you in control of how your children are to be cared for—rather than leaving difficult choices in the hands of a court.

Alongside a child’s care and schooling, parents should also consider how they’d like to structure the inheritance piece of the plan. Below we share a few key considerations to make when addressing these concerns.

Understanding Their Inheritance

Do you know how much your child stands to inherit? This is a good opportunity to take stock of your assets and how much they’re worth, including,

IRAs, 401(k)s, and other savings accounts
529 plans
Properties
Collectibles
Brokerage accounts

Once you have a good idea of what you have, decide how much you’ll leave to your kids. Is everything going to your children, or do you want a portion of your estate divided amongst other family members, friends, or charity?

Should You Keep Things Equal?

If you have multiple children, consider how much each child will inherit. Choosing to divvy everything up equally is perfectly fine. But some family dynamics are complex, and giving equally to every child might not always be the right decision. For example, parents in blended families sometimes choose to leave different amounts to children brought in from previous marriages.

Take some time to consider your options and what will, ultimately, be the right choice for your children and their future.

Consider the Actual Value of Your Assets

Don’t forget, not all assets carry the same value. Depending on tax liabilities or the potential for appreciation, some things might be worth more than others by the time your child has access to them.

A financial advisor or tax professional can help you sort through the estimated value of assets once your children inherit them—as this may differ from their current face value.

Consider the Timeline

Next, decide at what point your children can control the funds. Should a child have full access to a $1 million inheritance the day they turn 18? Some parents may not be comfortable granting their children a large sum of money without any direction or supervision.

Instead, there are things you can do to help bring structure to the wealth transfer process. A trust, for example, allows you to set parameters that throttle the inheritance.

Instead of receiving $1 million on their 18th birthday, perhaps your child receives $100,000 right away to cover college tuition and living expenses. From there, they receive 25 percent of their inheritance every five years or so. This might be an effective way to support your child financially while encouraging them to be responsible stewards of their wealth.

If you aren’t interested in creating a trust now, you can request in your will for a trust to be established after your passing. Again, this trust would state the terms and parameters for scheduling distributions of your estate to your children.

While we’ve given just a few examples of what you can do, this is a meaningful conversation to have with your significant other and your financial or legal team. They can help determine what’s going to be the best course of action for preserving wealth while caring financially for your children.

Select the Right Conservator for Your Family

Who in your family do you consider to be good with money? In other words, who do you trust to manage your assets after your passing?

Consider asking a like-minded family member with similar values to serve as conservator. Think about how they’ll handle certain situations compared to how you and your spouse would.

If you’re an avid saver who rarely splurges, you’ll likely be more comfortable putting your child’s inheritance under the leadership of someone with a similar mindset. Once you know who that person is, put it in your will.

No matter who you choose to serve as conservator, write down your final wishes with explicit instructions on how you want your children to be raised and their money managed. Make sure the person you choose is willing to work with the right people, like a financial advisor, tax professional, or attorney, to manage your money responsibly.

Get Professional Guidance With Legacy Wealth Advisors

Designing a plan for your children after your passing is a tricky situation. We always recommend working with a team of professionals who can help properly document your wishes and use the most effective vehicles to make them happen.

At Legacy Wealth Advisors, we help parents of young children develop a legacy plan that honors their intent, maximizes efficiency, and minimizes taxes. As you focus on raising your family, let us know how we can help. Feel free to reach out anytime to get started.

^{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.}

August 15, 2022/0 Comments/by Jeff Bruss

Estate Planning

The Top Estate Planning Must-Haves For Parents With Young Kids

One of the greatest fears many parents have is leaving their child too soon; even worse, a child left without either parent to care for them. It’s a nightmare no one wants to think about, but a scenario young couples should prepare for.

If you and your spouse were gone tomorrow, who would you trust to care for your child?
What about their financial well-being?

These are tough questions but ones you must ask to develop a sound estate plan. Below we’ve identified a few things to consider regarding estate planning for parents with young children.

Considering the Worst Case Scenario

To emphasize the importance of planning, here’s a possible scenario:

Tom and Stephanie are in their early 40s with two children.

If both Tom and Stephanie pass away suddenly with no estate plan in place, here’s what would happen:

Their estate would go into probate, and the probate court would determine who physically cares for the children. Since Tom and Stephanie did not leave any documentation behind to help make this decision, the court chooses the caregiver based on their closest living relatives, likely their parents or siblings.

In some cases, this arrangement would work out fine. But leaving the future care of your children up to someone else may not always provide the outcome you’d want. Instead, it’s necessary to plan and prepare ahead of time to ensure your children are cared for in a way that you’re comfortable with.

Thinking Through a Family Disaster

Consider creating a family disaster provision. This document should highlight the next steps if something happens to your entire family. You might decide to leave your assets to charity or split them among remaining relatives and loved ones. This provision would tell your remaining heirs how to proceed, no matter what you choose.

The Benefits of Planning Ahead

Planning ahead keeps you in control of what happens to your estate and children after your passing. It allows you to decide, in order, who will be the caretaker for your children. This is especially important for parents who do not want their closest relatives (like parents or siblings) to care for their children.

Outlining these wishes in a will should be a top estate planning priority, as it can be one of the most impactful on your family after your passing.

In addition, estate planning tools like your will and beneficiary designations can help the courts, your financial team, and your heirs understand your intent. Your intent allows others to see how your estate should be divided amongst remaining loved ones and how your children should be cared for.

Understanding Guardians and Conservatorship

In your will, dictate who should be guardians and conservators for your children. Below we’ve outlined the differences between these two.

Who Is a Guardian?

A guardian is a legal, physical caretaker of a child until that child turns 18. This person is who the child will live with. They will be in charge of raising your child, sending them to school, feeding them, and doing other day-to-day activities.

Of course, whoever you name as guardian should be someone you trust deeply. If possible, you may want to look for a guardian who has a similar value system regarding things like religion, impact goals, charitable giving, etc.

What Is a Conservatorship?

A conservatorship puts someone else in total control of your or your child’s financial assets. In terms of estate planning, this is the person who will be responsible for the money you leave to your children. A guardian can also act as a conservator, or you can choose to make the conservator a separate person.

Think About a Trust

If you’re concerned about the impact a significant financial windfall may have on your children, consider creating a trust. As an adult, it’s overwhelming to manage a considerable windfall. Imagine having to take on that responsibility at the age of 18.

Instead of putting a lump sum in your children’s hands, creating a trust helps you dictate how much access your child will have to their inheritance. If you don’t want them to receive the lump sum when they turn 18, you can work with a financial professional to put parameters in place. Doing so can help keep your child supported financially for a more extended period.

If you’ve identified a conservator, they may be a part of your child’s trust as well. For example, the conservator may have access to funds to cover large expenses like medical emergencies or education.

Trusts can be complex, and we recommend working with our team at Legacy Wealth Advisors to review your options carefully before establishing one.

Establishing Trust Provisions

If you’re considering creating a trust, think about what provisions to include. For example, you can create a distribution schedule that gives your child access to the funds throughout their lifetime.

Here’s an example of a distribution schedule:

$25,000 at age 25
Half of the remaining balance at 30
The remaining balance at 35

Staggering the windfall can help your child make intelligent financial decisions independently. They can prepare for how they’d like to preserve or spend their inheritance, making it a valuable part of their greater financial life.

Maintaining Life Insurance

As young parents, life insurance provides your surviving loved ones with a financial safety net should you die unexpectedly. Raising a child is expensive, and your designated guardian may not have the means to continue offering the same standard of living, even with access to your remaining assets.

Life insurance is something that every young family should have while hoping they never have to use it. We recommend that most families opt for term life insurance, as it tends to be a more cost-effective solution that can still provide a generous death benefit.

Estate Planning for Young Families

The chances of young parents passing away is slim, but tragedy does strike from time to time. It’s essential to have a plan in place should something happen to you and your partner while your kids are still young.

At Legacy Wealth Advisors, we help families develop a plan, work with other estate planning professionals, and feel confident with their decisions. If this is something you’re looking to accomplish, we’re happy to help.

Schedule time to talk with our team today.

Disclosure:

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.

April 15, 2022/0 Comments/by Jeff Bruss