This article was originally included in our email newsletter on August 21, 2009. It may have been edited somewhat from the version that was originally emailed, so be sure to sign up in the upper right corner of our website to make sure you are getting our email newsletter hot off the press!

With all of the health care talk–as well as the debacles left behind by recent celebrity deaths–we’re hearing a lot about these:

• Will
• Living Trust
• Guardianship
• Probate

While this is a great opportunity for the media to educate the public on these important legal issues, the truth is often getting mangled. Furthermore, for most of the public, the information is confusing, stressful and they would just rather not hear about it.

So let me clear up the confusion, as one who deals with this on a *daily* basis…

Let’s start with the basics. Typically, in North Carolina, when a person with assets over $20,000 ($30,000 in certain instances) passes away, their assets will be handled in one of three ways:

(1) If they had no will, their assets will be distributed as mandated by the state statutory law through a court proceeding called probate,

(2) If the person had a valid will, the estate will still have to go through the probate process, but the court will carry out their wishes as stated in their will,

(3) If the person had a valid living trust (and their assets were re-titled in the name of their living trust–this is called “funding”), their wishes would be carried out in private, without the court’s involvement.

So … why does it matter to you?

The answer to this question depends on how much you care about what your loved ones will have to deal with after you are gone and how much control you want to have as to who gets what, and when and how they get it.

If you do nothing, you get no input on any of these questions and the court and one of your eager family members/friend/creditor who petitions the court will make these decisions on your behalf through a process called probate. Why do you care about probate? Often, the probate process can take 9-18 months and can be extremely costly. Your loved ones may have limited control and access to assets, it’s stressful for your family, and the process is completely public. The probate process can often lead to squabbling between family members and airing of the family’s dirty laundry.

If a person leaves a valid will, it will still have to go through the probate process described above and the headaches that go along therewith, but the court will have the benefit of knowing how you want your affairs handled. Instead of relying on the laws of intestate succession (which is the law that distributes your assets to your family members in the order of their relation to you–you can read more here), the court will pass on your assets to the specific people you have identified in your will.

Through a valid will, you can control WHO gets your assets, but you will have no control as to HOW and WHEN they get it.

A living trust (that has been properly funded!), on the other hand, gives you more control and offers significant protection to your family. If you are working with an attorney who has expertise in this field, you can control WHO gets your assets, WHEN and HOW they get it without the court’s involvement. Even better–with a living trust, it is a private administration and can generally be handled in a short period of time. Furthermore, a living trust can incorporate a lot of other great protections including protection from taxes, creditors, predators, medical catastrophe, divorce, remarriage and more.

You may be asking yourself: why would someone ever do a will instead of a living trust? Typically, a person will choose a will over a living trust for one of two reasons:

(1) they don’t know the difference between the two or
(2) the perceived “cost” of doing a living trust.

There are some obvious advantages to doing a living trust over a will, but starting with anything is better than ending up with nothing. If you are not yet ready to make a leap into the world of living trusts, a basic, will-based estate plan is a starting point. In addition to giving the court direction about how you want your assets distributed, every estate plan should also include:

(1) an advance health care directive, which identifies the person(s) that will make health care decisions for you, if you’re incapacitated, and expresses your wishes regarding health care treatments;

(2) a durable power of attorney, which identifies the person(s) that will make financial and legal decisions, when you can’t; and

(3) if you have children, it should also include a Children’s Safeguard Plan, naming both short and long term guardians to care for your children in the event of an emergency, as well as clear and specific directions to those guardians about how you would wish your children to be raised in your absence.

While we all care about what happens to our assets, every person over the age of 18 needs to have an advance health care directive and durable power of attorney (this includes adult children heading off to college!).

I hope this clears up the confusion…

If you’d like to read a little more about these documents, here are some links to past blog articles that go more in depth:

What Is A Trust?

Parents: 13 Reasons Why Trusts Aren’t Just For The Wealthy

What Happens If I Die Without A Will?

Problems With Intestacy

What Is A Will? Introduction to North Carolina Wills

What Is Estate Planning?

Two Legal Documents Every Adult Needs: Part 1

Two Legal Documents Ever Adult Needs: Part 2

We’re here to help!

Details of Michael Jackson’s Family Trust were leaked to the media recently. My take? Michael Jackson would have benefited from working with an estate planning lawyer that would have taken the time to educate Michael about available techniques to better protect his children. This is just another example of poor estate planning from a celebrity.

Under the terms of the trust, Michael Jackson’s children are in line to receive $33 million each. Michael’s mother, Katherine Jackson, will receive her share of the estate immediately, and any portion remaining when she passes, will be split between Prince, Paris and Blanket. The children will receive allowances until they are 21 and then at age 30, they’ll receive access to one-third of their trust fund, another third at age 35 and the remainder at age 40.

My guess is that if you have a trust, you may have the same exact distribution terms. How do I know this? Because it’s the “standard” that a majority of lawyers use when they don’t take the time to educate their clients about available options and protections that are available.

So what would I have done differently?

For starters, Michael should have been advised to use a living trust to hold his assets and ensure that all assets were properly titled. This could have kept his family out of the probate court. In short, probate generally costs too much, takes too long, and is totally public. It will be interesting to see how long the probate attorneys manage to keep things tied up in court and how much of the estate is eaten away by legal fees and related probate expenses.

Second, I would have taken the time to educate Michael about how he could have protected both Katherine and the children from a myriad of life risks, including catastrophic illness, lawsuits and creditors, divorce, and more.  Once Michael’s children receive their inheritances outright, the funds will be totally unprotected. What if they have creditor problems? It seems to be a pretty common occurrence for the rich and famous, and let’s face it, MJ didn’t exactly set a great example. If the children are sued or file for bankruptcy, the inheritance is going to be totally unprotected once it hits their bank accounts.

Instead, I would have suggested placing the funds in a lifetime asset protection trust. An asset protection trust can be set up in such a way that the children would still be able to receive allowances from the trust for their living expenses, but because the money is held in trust rather than owned by the children outright, it would be protected from lawsuits, creditors and other life risks.

What if one of the children receives their share outright and later gets divorced? There’s a good chance that part of the inheritance will be lost to the ex in the divorce proceeding? Is that really what Michael would have wanted? Most families I work with want to keep the inheritance within the bloodline.

If the trust had included asset protection, Michael could have had the peace of mind that his children would be well provided for, but also protected from life risks and that the assets could have continued to grow and accumulate for future generations.

Want to learn more? Then visit our website and download our new e-book, The 12 Most Common Threats to Your Estate and Your Family’s Future.

Parents spend so much time agonizing over who they will leave their kids with when they go to work or when they go out on a Friday night, and yet the majority don’t even have a Will–and even those who do often make 1 of 6 common mistakes!

Discover how to easily name guardians for your kids. Avoid the common mistakes most parents make that leave their kids at risk, and make sure your kids will always be raised the way you want. While the kids eat pizza and play, we’ll discuss the easy steps parents need to take to ensure their children are protected.

This FREE workshop makes legal planning super easy!

Wednesday, May 19th, 2010, 5 P.M. TO 7 P.M
MONKEY JOE’S
1747 Walnut Street, Cary, NC

Space is limited to just 10 families, register NOW!

Full details and registration available at www.CarolinaFEP.com/KidsEvent or complete the form below:

Presented by Attorney and Counselor at Law, Jackie Bedard.  Member of the National Network of Estate Planning Attorneys.

We’ve launched several new tools at the firm over the past few months and I wanted to make sure to get the word out to blog readers, starting with the Kids Protection Planning Guide.

This FREE guide reveals the Nine Insider Secrets to Guarantee Your Kids’ Future Is Never Left in the Hands of a Judge Who Doesn’t Know Who You Are or What’s Important to YOU!

Many of the parents I advise are shocked to discover that in nine out of ten cases, children are not REALLY protected if something happens to their parents—EVEN IF the parents have a will or have previously planned their estate with a lawyer.

That’s why I’ve put together an urgent and important Kids Protection Planning Guide that every parent with minor children must read!

In this FREE Kids Protection Planning Guide, I reveal:

• The 9 simple steps you can take immediately to ensure the safety and care of your children… and why the police might have to take your kids out of your house if you were in a serious accident while you were out, if you don’t plan the right way.

• A 3-step process for choosing the right person to raise your kids… and the 6 common mistakes parents make when choosing guardians for their children.

• How you can make sure everything you leave your kids stays in your family forever… and isn’t lost to divorce, lawsuits, or estate taxes, ever!

• Why these 9 simple steps aren’t something you can just ‘set and forget’ without updating… and the rock bottom, bare minimum review you need to do to ensure the safety and security of your kids.

• How failing to plan could cost your family hundreds of thousands of dollars unnecessarily. (Hint: Did you know that estate taxes and probate taxes can be totally voluntary?)

To get your FREE Kids Protection Planning Guide rushed to you by first class mail, fill out form below!

(Hurry! Guides available while supplies last.)

In light of the turmoil in the banking industry over the past year, we’ve received questions about how much FDIC insurance coverage is available for accounts held in the name of a living trust.

In late 2008, the FDIC coverage was increased to $250,000 per depositor unless you own your account in the name of your living trust. Accounts held in the name of a living trust receive an additional coverage of $250,000 per beneficiary of the trust. Thus, if husband and wife, Bill and Mary, own a bank account in the name of Bill’s living trust which lists both Mary and their two children as beneficiaries upon Bill’s death, then Bill’s trust would be entitled to $750,000 of FDIC coverage (i.e., 3 beneficiaries times $250,000). This extension of coverage is capped, not to exceed $1,125,000. One should also note that the beneficiary must be qualified as an ‘eligible beneficiary.’  To be eligible, a beneficiary must be a person, charity or another non-profit organization (as recognized by the Internal Revenue Service).

The increase in FDIC insurance coverage has been extended through December 31, 2013. Unless further legislation takes place, on January 1, 2014 the amount of FDIC insurance coverage will return to the original amount of $100,000.

Before hiring a wills & trusts lawyer to guide you, your family or your business, ask these questions to ensure that you don’t end up paying a whole lot of money for services that are not what you need, expect or want. Hiring an attorney does not have to be a fearful experience. Instead, it can be the most empowered decision you ever make for yourself.

1.  What will happen during an initial meeting with your office and how much will it cost?

When you begin to consider getting your legal and financial affairs in order, the first thing to do is call the offices of lawyers who you will meet with to handle your planning.

This is a great opportunity for a first level screening to find the right lawyer for you, your family and your business. Pay attention to how the phones are answered by the office team. You want to find a lawyer who has a live person answering the phones who can answer quick questions for you when you are a client.

When you do talk with someone on the phone, be sure to ask what will happen at the initial meeting and whether there will be a charge for the meeting.

Look for an educational initial meeting. Ideally, the purpose of the first meeting with your lawyer is not just to get to know him or her, but to provide you with specific guidance and information that will benefit you, your family and your business.

You want to leave this meeting with a clear action plan for what your next steps are to ensure your financial and legal affairs and business are set up the best possible way for your family.

Now, it may be that you have to pay for this guidance so don’t be afraid to do that because it can be a hugely valuable education. The key is, you want to know what the cost is going to be upfront so there are no surprises.

Don’t expect to get valuable information that will help your family during a free initial consultation. When a lawyer routinely gives away their time for a free initial consultation it’s not to give you an education, it’s so you can meet the lawyer and decide whether you want to work with him or her. Don’t expect free legal guidance.

2.  Are all of your fees flat fees? What is included in the flat fee? What is NOT included in the flat fee.

You want to be sure that you avoid a nasty surprise down the road. Some attorneys will indicate that they use flat fees, but then may tack on additional charges such a photocopying, telephone, courier, postage, recording fees and other expenses.  While it may be reasonable in some instances to add on such fees, you want to make sure that you set the proper expectations up front so you don’t end up with a surprise bill in the mail.

3.  Does my planning fee include a regular review of my legal documents? What if I want to make changes later? What about on-going work after completion of my initial plan?

Far too often today, families put in place legal documents and think “great, that’s done”, now I don’t have to think about that anymore. Then, the end of their life comes or a crisis pops up and their family finds out that the documents are out of date and the assets aren’t owned properly anyway. Then, the plan fails. Or, business owners set up an entity to shield their personal assets from their business, but then fail to operate the business properly and keep their entity in compliance. Then, the business plan fails.

I blame these failures on lawyers who don’t set the right expectations for their clients.

The truth of the matter is, with estate planning, you can’t set it and forget it. Your wills and trusts and your business documents are living documents that need to be reviewed and updated throughout your personal or business life. And you want to find a lawyer who will keep everything up to date for you, review your documents regularly, and offer a program to provide you with continuing guidance on an ongoing basis without hourly fees.

Look for a lawyer who has a membership program or ongoing service program so you can reach out to your lawyer on an ongoing basis for legal, financial and business consultation without worrying about being nickled and dimed. Oh, and be sure your lawyer isn’t going to charge you for photocopies and faxes!

4.  Do you make sure my assets are titled in the right way and my business stays in compliance?

You can have the best business structure and the best legal plan set up for your family, but if your assets are not titled and structured properly and if your business does not stay in compliance, it’s all a false sense of security because when push comes to shove and a crisis happens, those legal documents won’t work.

Make absolutely sure that the lawyer you are working with is not only going to put legal documents in place for you, but is also going to finish the job by ensuring your assets are structured properly and your business stays in full compliance.

5.  Can you help me make smart choices about things like buying insurance, saving for college, and retirement planning?

Your personal lawyer can and should help you make decisions not only about things like legal documents, but also about things like buying insurance, saving for college, planning for retirement and all the other challenging decisions that will come up along the way of your life and your business. Your business lawyer should be keeping you informed about things like hiring and firing, trademarking and copyrighting, and growing your business.

This doesn’t mean your lawyer needs to be licensed to sell insurance or financial products or practice employment law or intellectual property, just that they have a big enough breadth of experience and knowledge and access to the appropriate resources that they can be a trusted advisor to you on these issues helping you avoid expensive mistakes.

6.  Do you have a process for helping me capture and pass on my intangible wealth, such as my intellectual, spiritual and human assets or who I am and what’s important to me or do you primarily focus on financial assets?

There’s a movement happening in the world in which we are finally beginning to realize that our wealth is far greater than the sum total of the dollars in our bank, brokerage and retirement accounts. In fact, many of us are becoming aware that our intangible assets are much more valuable.

When you are working with a personal lawyer, be sure to find a lawyer who will help you to capture, document and pass on not just your financial assets, but ALL of your assets, including the most often overlooked intangible assets, like who you are and what’s important to you.

Your lawyer should have in place an actual process so that when your planning is complete, you have created either written or recorded messages to your loved ones that pass on your values, stories, insights and experience.

7.  How are you able to be responsive to my needs on an ongoing basis?

One of the biggest complaints people have about working with a lawyer is that lawyers are notorious for not being responsive. In fact, I’ve heard of situations in which clients have gone weeks without getting a call back from their lawyer.

This generally happens when a lawyer does not have enough administrative support in his or her office. Far too many lawyers believe they can take care of everything in and around their office themselves, from paperwork to client meetings to calendaring to returning phone calls to connecting with their clients other advisors, the list goes on and on. Truth is, a lawyer who is a true solo practitioner without administrative support or in a firm without adequate support will become overwhelmed and non-responsive to your needs.

You can and should ask your lawyer how he or she will respond to your ongoing needs, how quickly calls are returned in the office, if there is someone on hand to answer quick questions and if you should expect to get right through to your lawyer when you call the office.

A great way to test this is to call your prospective lawyer’s office and ask for him or her. If you get put right through or even worse sent to a voicemail, think twice about hiring this lawyer because it means they do not have effective systems in place for managing and responding to calls or answering your quick questions. Instead, what you want is for the person answering the phone or another team member to offer to help you and if he or she cannot then to schedule a call for you to talk with your lawyer at a future date and time when he or she will be ready to focus on your matter.

Your lawyer cannot be effective and efficient if he or she is taking every call that comes through to him or her – all calls should be pre-scheduled when you are both ready and your lawyer can focus on your specific needs.

8.  How will you proactively communicate with me on an ongoing basis?

Unfortunately, most lawyers do a horrible job of proactively communicating with their clients on an ongoing basis. The general thinking in the legal industry is that legal work is transactional in nature and clients will call when something changes. But, this is faulty thinking and in my opinion just pure laziness on the part of lawyers.

You want to look for a lawyer who will proactively communicate with you at least quarterly by mail via an informative, easy to read newsletter and monthly by email. I prefer to hear from the professionals I work with monthly by mail and weekly by email, but progress can only happen so fast.

If you are considering hiring a lawyer who does not proactively communicate with his or her clients, think again. This lawyer might be stuck in an old, outdated mindset that won’t serve your needs in the best possible way.

Don’t be afraid to ask these questions for you hire a lawyer to work with your family on your personal and business legal planning. You need to be satisfied by the answers you receive to these questions, as they often sneak up on families after-the-fact, and can be a major drain on your family’s cashflow.

The following article, written by national legal expert, Alexis Martin Neely, originated from Chris Brogan’s Dad-O-Matic blog.  Alexis was featured in an interview on Good Morning America this morning, where shared some important information that all parents need to hear:

***Featured on Good Morning America***

Here’s the segment on 5 Legal Documents Everyone Should Have

with Chris Cuomo & Alexis Neely

Becoming a dad is the ultimate step into adulthood.  It simply doesn’t get more real than that, does it?  That little face looking up at you makes you realize that life isn’t just about you anymore.  Suddenly, you are responsible for the well-being and care of a little person who is totally reliant on you.  And in some ways, this new “mini-you” that has come into the world makes you feel immortal.

On the flip side though is the lurking thought “what will happen to mini-me if something happens?”  If you are like most people (69%), you push away the thought because it’s too scary to contemplate your child being raised by anyone besides you.

But, here’s the thing … if you aren’t willing to take the time and invest the energy in setting things up for your little one (and her mom) the right way, you will leave your family with a world of hurt if something happens to you.

The good news is that setting things up the right way and doing the right thing by your family doesn’t have to be as painful as you think it will be.  If you are in the know about what you need and how to get it taken care of, getting your personal affairs in order can even be downright enlightening.

Let’s start with the bare minimum of what every dad needs to have in place to make life as easy for his kids and their mom if anything happens.

Document Set #1: Kids Protection Plan
Regardless of the size of your bank account, if you’ve got a child at home who depends on you, you need to have a comprehensive Kids Protection Plan® (KPP) in place to ensure her well-being and care in case you can’t be there.

A KPP begins with naming legal guardians to raise your children if anything happens to you and their mother.  But, that’s just the beginning. A comprehensive KPP will also name local friends or family as guardians for the immediate/short-term care of your children so that the authorities never have to take your children out of your home and into the care of strangers.  With a KPP in place, you’ll carry an ID card in your wallet listing the names and addresses of your immediate/short-term guardians as well as provide written instructions to all of the people who care for your children, such as babysitters and schools.  Finally, a KPP will confidentially exclude anyone you know you would never want to serve as guardian of your children to ensure there are no court-room battles over your child’s care and will also provide detailed instructions about things like health care, education, discipline and your values, so your children are raised the way you want, no matter what.

To get started with your Kids Protection Plan® by naming long-term guardians (which EVERY parent must do), go here and be guided through a process of first choosing the right people to raise your kids if you can’t and then easily document your choices … legally.

Document Set #2: Financial Durable Power of Attorney

A financial durable power of attorney is something every adult needs, even if you don’t have little kids at home.  This document is what will let your family access your bank accounts, pay your bills, and make financial and legal decisions for you if you are hospitalized or otherwise incapacitated.

This story should bring home the importance of having a durable power of attorney in place:

My law firm was contacted by a young woman after her father was hurt at his janitorial job, hospitalized and unable to communicate.  This man thought he didn’t need estate planning because his income was very low and he had less than $10,000 in the bank.

Unfortunately though, his failure to plan left his family in a lurch. They needed the little bit of money he had in the bank, but couldn’t access it without going to Court because the account was in his name and he didn’t have a durable power of attorney naming anyone to act for him legally.

The cost of going to Court was going to cost their family more than the money that was in the bank!

Don’t leave your family in this kind of a painful situation unable to access the limited resources you have because you didn’t do what you need to do.  Be sure you have a financial durable power of attorney in place and make sure it’s comprehensive and will work when your family needs it.

Document Set #3:  Health Care Directive (Living Will)

A Health Care Directive (also known as a Living Will or Health Care Power of Attorney) is another document set that every adult needs, even if you don’t have little ones at home counting on you.

These set of documents do two important things:

1. Appoint the person you want to make health care decisions for you, if you cannot make them for yourself; and
2. Tell your appointed decision-maker how you want those decisions to be made.

Each state has its own rules for how these documents should be prepared.  In some cases, your instructions can be all in one document and in others they need to be two separate documents.  The most important thing is that you get something down in writing.

And, once again, make sure you’ve got something that will really work when your family needs it.  I recommend giving broad discretion to someone you trust to make decisions about all of your health care decisions, including not only life-saving medical care, such as respiration, but continued nutrition and hydration in case you are incapacitated.  If you recall the Terry Schiavo case from several years ago, in which her husband and her parents fought over whether she should be kept alive or not and the case was brought all the way to the Florida Supreme Court, the issue was not whether to continue to keep her lungs pumping, but whether to continue to provide nutrition and hydration – be sure your medical directive addresses these issues.

Document Set #4:  Will:

When it comes to estate planning, most people think of having a Will.  Unfortunately, having a Will often provides a false sense of security to people who think “I have a Will, therefore, I’ve taken care of everything.”  That’s a myth. In fact, your Will is the least important of the 5 legal documents every dad must know about.

A Will sets forth what you want to happen to your assets at the time of your death.  But, here’s the thing, where there’s a Will and your assets are owned in your name, the Will merely acts as instructions to the Court as to what to do with your assets. That means your family is stuck dealing with the Court after you are gone.  Nobody wants that, trust me.

The Court process for handling your assets after your death is called probate.  It’s typically expensive, time-consuming, and always totally public, which means anyone in town can find out how much you’ve left behind, who it went to and when they get it.  That puts your loved ones on the radar of every con artist in the neighborhood.

A Will alone is really only appropriate for dad’s who have no (or very limited) assets titled in their name.  If you have assets, such as a home, bank accounts, life insurance, and retirement accounts, you need to have a Living Trust to keep everything out of court, totally private and make it super easy for your loved ones.
You may have heard that if you only have life insurance and retirement accounts that you could simply name beneficiaries on those assets and avoid probate.  That’s true, but not going to work if you have minor children because they are too young to be the beneficiaries of your assets and would end up in Court with a guardian appointed to handle them.  Not what you want.

Document Set #5:  Trust

If you have financial assets or real estate, you want to have a Living Trust.  A Living Trust is the single best way to make things as easy as possible for the people you love, bar none.

But, and it’s a big BUT, most people who have a Living Trust in place have one that won’t work when their family needs it.
It’s the same for each of these documents I’ve talked about; they are only going to work the way they were designed to work if the law stays the same and your life stays the same.

As your life changes, the documents need to change.
As the law changes, the documents need to change.

And, for your Living Trust, it won’t work unless all of your assets are titled in the name of it, not just once, but every time you acquire an asset in the future.

I’ve met with loads of people who thought they had everything taken care of because they had prepared these 5 documents or had them prepared by a lawyer, but because they had not been kept up to date or their assets were not owned properly, the documents didn’t work!

In fact, that happened in my own family when my father in law died.  He had spent thousands of dollars to work with a lawyer who put in place a set of documents for him and then didn’t keep them up to date and didn’t make sure his assets were owned properly on an ongoing basis.  What that meant is at the end of his life, we were stuck dealing with the one thing he thought he was protecting us against – the probate court and a fight with his ex-wife.

Even Michael Jackson, who no doubt spent hundreds of thousands of dollars with his lawyers, had a trust-based estate plan that he was probably told would keep his family out of court.  As we now know, it must have failed because his family has been dragged into court already multiple times since his death with everything open to the public.

So, yes, these 5 documents are absolutely vital because they will make life as easy as possible for your family, keep your loved ones out of court and get them easy access to your assets in the midst of a crisis, but only if they are kept up to date and your assets are owned properly.

Most people do not have the time, knowledge and discipline to do this for themselves the right way.  If you do, great.  But, who is going to guide your family to make the right decisions and carry things out the right way after you are gone?

Because when all is said and done, that’s really what this about, isn’t?

There’s nothing more important to you than your family.  They are why you do everything you do, right?  So, for them, find a lawyer who will guide you right during your lifetime and be there for your loved ones when you can’t be.  It’s far easier for you to take care of things now, while you are living and able than it will be for them to take care of things after you are gone.  Legal planning is not about the money; it’s about making life as easy as possible for the people you love … no matter what.

Alexis Martin Neely is America’s Personal Family Lawyer, author of the bestselling book “Wear Clean Underwear! A Fast, Fun, Friendly – and Essential – Guide to Legal Planning for Busy Parents” and the nation’s leading legal expert guiding you to smart financial and legal decisions for your family. Subscribe to Alexis’ free online magazine, Family Wealth Secrets, and have wealth advice delivered right to your inbox each week.

Special Update!

In honor of the Dad-o-Matic article and her appearance on Good Morning America, Alexis has convinced her publisher to give her vital book on legal planning for parents (Wear Clean Underwear, Morgan James Publishing 2008) away on Kindle for just .99.  Get your copy today right here.

Thanks to Portland, Oregon, estate planning attorney and fellow Personal Family Lawyer Candice Aiston for the following post which appeared in her Oregon Estate Planning Blog this week:

Stacey L. Bradford has put out “The Wall Street Journal Financial Guide for Parents.” In it, she talks about how many parents should be setting up trusts. The only thing I would add is that when you seek out an attorney to do this, you should make sure that you are working with one who is going to keep up with you throughout your lifetime, so that you can be sure that your trust is always going to work for you. Ask the attorney whether they offer a free plan review (at least every 3 years) and whether they have a membership program for ongoing legal needs. We see many trusts fail because of little issues that could have been prevented with better client service and communication. (Actually, here is a good article about choosing an estate planning attorney.)

You can read the WSJ article here.

And here is the video interview of the author:

A great video clip from CNBC featuring estate planning attorney, Alexis Martin Neely.  Alexis discusses the importance of estate planning and leaving a legacy to future generations.

Many people believe trusts are only for the wealthy, but trusts are about more than just the size of your estate.  Trusts are an effective tool to protect your children and know they will be taken care of when you are no longer able to be there for them.  Here are some of the reasons parents may wish to consider including one or more trusts in their estate plan:

1. Privacy. A will is subject to the probate process and is therefore a matter of public record.  Anyone with prying eyes can learn the details of the size and recipients of your estate.  By comparison, a trust is a private document that is not subject to probate, so you don’t have to worry about nosy people snooping in your family’s personal affairs.
2. Simplicity. Spending a little time with your attorney now can save your family time and aggravation after your death.  The probate process can be expensive, time consuming and an administrative headache.  A trust, on the other hand, can be a cost-effective solution that saves your family from unnecessary aggravation in their time of mourning.
3. Access. If something happens to you, your family’s access to funds for necessary living expenses could be limited.  A properly drafted trust can ensure that the funds will be available when you family needs them.
4. Divorce. Let’s say you execute a will while your children are young, put it in the safe, and forget about it.  Several years down the road, you die and your assets pass to your adult son who is married.  A few months later, your son’s wife files for divorce and as part of the divorce settlement, she walks away with a substantial share of your son’s inheritance.  This situation could have been avoided if a trust had been used instead of just a will.
5. Lawsuits, bankruptcy or creditors. Similarly, if a trust is carefully drafted it can offer your family protection from losing the trust assets to bankruptcy, creditors or in a lawsuit.
6. Control. No one knows your family better than you.  A trust can give you more control over how your assets are distributed to family members.  This can be especially important for younger or less financially responsible children.  For some, receiving a large inheritance brings the temptation to spend it on luxury items or brings the risk of long-lost family and “friends” asking for handouts.  Statistics show that regardless of a child’s age or the size of the inheritance, most inheritances are spent within 18 months of their receipt.  A trust allows you to appoint a responsible trustee to manage the assets of the trust and ensure that assets are not frivolously wasted.  A trust also gives you power to control the timing of distributions and the circumstances under which distributions will be permitted.
7. Continuity. Especially for estates that include real estate, business interests or stock portfolios, a trust can provide continuity of the management of the asset without disruption or risk of sale in the probate process.
8. Taxes. For larger estates, trusts have the additional benefit of permitting planning to reduce or eliminate potential estate tax liability, thereby preserving more of your hard-earned assets for your family.  When estimating the value of your estate, it is important to remember that real estate, bank accounts, stock portfolios,  life insurance policies, retirement accounts, business interests and all personal property are included in determining the value of your estate for tax purposes.  When you factor in items such as large insurance policies, the size of your estate may be larger than you realize.
9. Ease of creation, use and amendment. Trusts are easy to set up and can easily be updated from time to time.  Trusts are also legal in all states, making them highly portable if you move out of state.
10. Reduced likelihood of attack. Due to their private nature and the law, trusts are less likely to be challenged in court, and if they are challenge, the lawsuit is unlikely to succeed.
11. Asset management. For family members that are less astute at managing finances, a trust allows you to appoint a trust to manage the assets on behalf of your family.  This can also be useful for managing assets located in a state different from the state in which your family resides, such as real estate or business interests located out of state.
12. Subsequent marriages. If you have children from a prior marriage, a trust can ensure that your current spouse will be provided for adequately through regular distributions, but that the trustee will preserve the remaining assets so that they pass to your children rather than your spouse’s family.  Similarly, in the event that your spouse remarries after your death, a trust can be used to ensure that your assets are passed to your children rather than the new spouse.
13. Take Care of Yourself. By setting up a trust during your life time, you can also arrange for your own well-being if you become incapacitated or incapable of managing your affairs.