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October 1, 2021 by Cava Faulkner

Estate planning is often considered something you only need to worry about once you get married. But the reality is every adult, regardless of age, income level, or marital status, needs to have some fundamental planning strategies in place if you want to keep the people you love out of court and out of conflict.

In fact, estate planning can be even more critical for unmarried couples. Regardless if you’ve been together for decades and act just like a married couple, you likely aren’t viewed as one in the eyes of the law. And in the event one of you becomes incapacitated or when one of you dies, not having any planning in place can have disastrous consequences.

If you’re in a committed relationship and have yet to get—or even have no plans to get—married, the following estate planning documents are an absolute must:

1. Wills and trusts

If you’re unmarried and die without planning, the assets you leave behind will be distributed according to your state’s intestate laws to your family members: parents, siblings, and possibly even other, more distant relatives if you have no living parents or siblings. The state’s laws would provide NO protection for your unmarried partner. Given this, if you want your partner to receive any of your assets upon your death, you need to—at the very least—create a will.

A will details how you want your assets distributed after you die, and you can name your unmarried partner, or even a friend, to inherit some or all of your assets. However, certain assets like life insurance, pensions, and 401(k)s, are not transferred through a will. Instead, those assets will go to the person named in the beneficiary designation, so be sure to name your partner as beneficiary if you’d like him or her to inherit those assets.

However, there could be an even better way.

Although wills and beneficiary designations offer one way for your unmarried partner to inherit your assets, they’re not always the best option. First and foremost, they do not operate in the event of your incapacity, which could occur before your death. In that case, your partner may not have access to needed assets to pay bills, or he or she could potentially even be kicked out of your home by a family member appointed as your guardian during your incapacity.

Moreover, a will requires, a court process that can take quite some time to navigate. And finally, assets passed by beneficiary designation go outright to your partner, with no protection from creditors or lawsuits. To protect those assets for your partner, you’ll need a different planning strategy.

A far better option would be to place the assets you want your partner to inherit in a living trust. First off, trusts can be used to transfer assets in the event of your incapacity, not just upon your death. Trusts also do not have to go through, saving your partner precious time and money.

What’s more, leaving your assets in a continued trust that your partner could control would ensure the assets are protected from creditors, future relationships, and/or unexpected lawsuits.

Consult with us for help deciding which option—a will or trust—is best suited for passing on your assets.

2. Durable power of attorney

When it comes to estate planning, most people focus only on what happens when they die. However, it’s just as important—if not even more so—to plan for your potential incapacity due to an accident or illness.

If you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. And this person could be a family member, who doesn’t care for or want to support your partner, or it could be a professional guardian who will charge hefty fees, possibly draining your estate.

Since it’s unlikely that your unmarried partner will be the court’s first choice, if you want your partner (or even a friend) to manage your finances in the event you become incapacitated, you would grant your partner (or friend) a durable power of attorney.

Durable power of attorney is an estate planning tool that will give your partner immediate authority to manage your financial matters in the event of your incapacity. He or she will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting government benefits, selling your home, as well as managing your banking and investment accounts.

Granting a durable power of attorney to your partner is especially important if you live together, because without it, the person who is named by the court could legally force your partner out with little to no notice, leaving your partner homeless.

We can guide you to make informed, educated, and empowered choices to protect yourself and the ones you love most.

Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.

September 30, 2021 by Cava Faulkner

Many people come to us curious (or confused) about trusts and taxes. So today’s article is going to sort it out and clarify things for you.

There are two types of trusts, and each have different tax consequences.

Revocable trusts, which are the far more commonly used trusts, have no tax consequences whatsoever. A revocable trust has your social security number as it’s tax identifier, and is not a separate entity from you for tax purposes. It is a separate entity from you for purposes of, meaning if you become incapacitated or die your Trustee can take over without a court order, keeping your family out of court. But, until your death, it’s treated as invisible from a tax perspective. At the time of your death, if your revocable trust provides for the creation of irrevocable trusts, then the tax implications will shift.

When you have an irrevocable trust, either created during life, at death through a revocable living trust, or through a will that creates a trust, that trust has its own EIN, or employer identification number (also called a TIN or taxpayer identification number). Generally, it pays income taxes on income earned by the trust, as if it’s a separate tax paying entity.

Trust income is taxed at the highest tax bracket applicable to individuals as soon as there is over $12,950 of income, so in some cases a trust can be drafted to provide that the tax consequences pass through to the beneficiary and are taxes at his or her rates. We will often do this when creating a Lifetime Asset Protection Trust for a beneficiary, so that the trust can provide the benefits of credit protection from lawsuits, divorce, or even bankruptcy, but not have the negative tax consequence of the highest tax rates on very little income.

Of course, if you have a trust, and you want us to review it for the income tax consequences to your loved ones after your death, please contact us.

Now, let’s talk about estate taxes. Currently, if you die with assets over $11.58M, then your estate will be subject to estate tax on all amounts over that $11.58M at the rate of 40%. Yep, 40% will go to the government. You can mitigate these taxes, or even eliminate them by using various planning methods, most of which are fairly complex, but worth it if you can save your family that 40% estate tax.

If you are trying to figure out whether an irrevocable trust, or a revocable trust or even a Lifetime Asset Protection Trust is best for you and your beneficiaries we can help you weigh that decision and make the right choice for yourself and the people you love.

September 28, 2021 by Cava Faulkner

When you come into a cash surplus from a company bonus, a tax refund, an inheritance or something similar, you might find yourself having to decide what to do with the money you receive. So, what do you do when you’re faced with this difficult question: What to do with surplus cash: pay down debt, spend or invest?

Did you know that most people who win the lottery lose their winnings within 5 years? In fact, 70% end up bankrupt.

Why would that be?

Well, it’s because they don’t know how to answer the question asked here regarding what to do with surplus cash. As a result, they make their investment and spending and gifting choices on their own with no guidance at all, and are surprised to discover how quickly millions can disappear.

So, let’s start there. Depending on the amount of your cash surplus, consider consulting with one or more trusted advisors on what to do with the extra money. We often act as objective counsel for our clients, so feel free to call to discuss options.

If it’s not a large sum, but you still want to make sure you are doing the right thing with the extra cash, consider these factors:

If you have debt that is higher interest than what you could earn with a fairly straight-forward investment, paying off your debt could be the highest leverage use of your funds. Be sure to be tracking each of your debts on a credit tracking worksheet so you can see at a glance whether to allocate extra cash to pay down debt OR if you should keep that money in play because the cost of your interest is low relative to what you can be earning with other investments.
If you have a business that has additional capacity, and you know how to drive more sales with additional investments, you may want to put the money back into your business and ramp up revenue. Be careful though that you are not driving more sales without the capacity to deliver OR that you are not putting money into marketing when you don’t know how to convert your leads into buyers. If that’s the case, you may want to invest in developing sales systems in your business, which always pay off once you get it right. If you do have a business, you may want to inquire with us about a LIFT Your Life and Business Planning Session, if we have not looked at your business together yet.
If you don’t have debt, and you don’t have a business, you may want to consider investing in a business that you can run on the side (if you have extra time) as an additional source of revenue, diversifying your income and reliance on a job controlled by someone else. Side hustles are a great way to use your downtime to create more income for your family.
If you’re out of debt, don’t have a business, and don’t need a side hustle, consider maxing out your retirement account. And looking into turning your retirement account into a self-directed account, so you can use the funds in your retirement account to invest in things like real estate, or cryptocurrency, and use your extra cash + some of your time to start to get interested in the best ways to activate your retirement account rather than just having it invested in an ETF that you are totally disconnected from.

Finally, if you’ve got all that handled, consider a trip with your family of origin or your chosen family that will build and strengthen family bonds. Before you go, be sure to come in and meet with us for a Family Wealth Planning Session to ensure all of your ducks are in a row, in case anything happens while away.

If you are ready to plan for your future wealth, start by sitting down with us. We can walk you step by step through creating a legal plan that will help you make great decisions during life by looking at what happens in the event of your death. Schedule online.

September 26, 2021 by Cava Faulkner

When you create your estate plan, the idea that one of your adult children would ever use their inheritance to bankroll a cult is probably something you’d never dream of, much less anticipate.

Yet that’s exactly what 40-year-old Clare Bronfman, heiress to the multi-billion-dollar Seagram’s fortune, did with hers.

In the end, with her inheritance—and the power that came with it—she was led her down a dark path that seems almost too outlandish to be true.

In May, Clare pled guilty to felony charges of harboring an illegal alien and fraudulent use of a deceased person’s identity as part of a plea deal with federal prosecutors. The charges stem from her role as an executive board member of Nxivm (pronounced NEX-ee-um), a group that prosecutors described as a “deeply manipulative pyramid scheme” that forced some of its members to endure slave-like conditions and even have sex with the group’s leader and founder, Keith Raniere.

Had she gone to trial for her involvement with Nxivm, Clare would have faced up to 25 years in prison. But given her plea, she’ll likely serve just over two years. Her sentencing is scheduled for July 25.

Following Clare’s plea, Raniere, 58, was found guilty in June on seven felony counts, including racketeering and sex trafficking. He faces up to life in prison when he’s sentenced on September 25. His conviction comes following a six-week trial that exposed the world to Nxivm’s sordid inner workings and put wealth’s dark side on full display.

Unforeseen threats

Clare’s sad story highlights just how risky it can be to leave money outright to your children. Indeed, bestowing significant wealth upon your children or grandchildren can turn out to be a blessing—or it can just as easily be a curse.

Fortunately, there are proactive estate planning solutions designed to safeguard your adult children from such scenarios. And these planning protections aren’t just for the extraordinarily rich like Clare’s family—inheriting even relatively modest amounts of wealth can lead to similar issues. Regardless of your asset profile, we can help you put the proper planning vehicles in place to help prevent your heirs from falling prey to wealth’s darkest temptations—or even losing their inheritance to simple mistakes.

Indeed, the planning strategies we describe here can safeguard your child’s inheritance from being depleted out by other, less devious events, such as a divorce, a catastrophic medical expense, or even a simple accident. You just never know what life has in store for your heirs, and the right planning protections can ensure their inheritance is protected from practically all potential threats—even those you could never possibly imagine.

From self-help to self-sabotage

Clare joined Nxivm, which was billed as a life-coaching program, in 2002 at age 23. She reportedly joined the group in hopes that its mentoring might help her fulfill her dream of making the U.S. Olympic equestrian team. In large part due to her substantial financial contributions, Clare quickly rose to the top ranks of the organization and became increasingly close with Raniere.

According to a recent Forbes article, Raniere took advantage of Clare’s estranged relationship with her elderly father, Edgar Bronfman Sr., and emotionally manipulated her into believing that her family’s money was “evil and that she had to purify it by spending it on ethical things like Nxivm.”

To help convince her, Raniere constantly reminded Clare that the Seagram’s fortune was made selling alcohol, and that her grandfather, Samuel Bronfman, earned millions by conveniently setting up his Canadian whiskey distillery directly on the U.S.-Canada border during Prohibition.

Under the spell of Raniere’s devious manipulation, Clare reportedly came to view her financial support of Nxivm as a way to make up for her family’s past. All total, Clare is said to have poured roughly $150 million into Nxivm. Much of the money was spent on funding Raniere’s failed investment schemes in real estate and commodities.

Another big chunk of Clare’s inheritance was spent suing Nxivm’s detractors. During her time with the group, Clare reportedly hired nearly 60 lawyers and spent approximately $50 million on lawsuits against journalists, ex-girlfriends of Raniere, and others who were critical of the group.

Big money can cause big problems

While we don’t know the exact age Clare came into her money or just how much of it she had access to, her total inheritance was valued at an estimated $200 million. The inheritance was reportedly held in a trust, but given that she funneled roughly three-fourths of that sum into Nxivm in just more than 15 years, it’s likely her money was disbursed outright with little or no direction on how it could be used.

Though her case is extreme, Clare is certainly not the first wealthy person to be negatively impacted by inheriting too much money at a young age—nor will she be the last. Similar cases occur quite often, and no matter how well adjusted your children or grandchildren may seem, there’s just no way to accurately predict how their inheritance will affect them.

One unique planning vehicle designed to prevent the potential perils of outright distributions is a Lifetime Asset Protection Trust (LAPT). These trusts last for the lifetime of their respective beneficiaries, and provide them with a unique and priceless gift. With an LAPT, for instance, the beneficiary can use and invest the trust assets, yet at the same time, the trust offers airtight asset protection from unexpected life events, such as divorce or serious debt, which have the potential to wipe out their inheritance.

Exercise your discretion

When drafted properly, an LAPT can be used to educate your beneficiary on how to handle their inheritance. This is done by allowing the beneficiary to become a co-trustee with someone you’ve named at a specific age or stage of life, and then the beneficiary can become the sole trustee later in life, once he or she has been properly educated and are ready to take over.

The LAPT is discretionary, which means that the trust would not only protect your heir from outside threats, like creditors and ex-spouses, but also from their own mistakes. The trustee you name holds the trust’s assets upon your death. This gives the person you choose the power to distribute its assets to the beneficiary at their discretion, rather than requiring him or her to release the assets in more structured ways, such as in staggered distributions at certain ages.

Your direction and guidance

Many of our clients choose to provide non-binding guidelines directing the trustee on how the client would choose to make distributions in up to 10 different scenarios, such as for the purchase of a home, a wedding, the start of a business, and/or travel. Some clients choose to provide guidelines around how they would make investment decisions, as well.

This ensures that future trustees will be aware of your values when determining whether to make distributions, as well as how to invest trust assets, rather than operating in a vacuum of information, which often leads to problems down the road. In many cases, the beneficiary may eventually become the trustee him or herself, and then resign and appoint an independent trustee, if needed, for asset-protection purposes.

Don’t take any chances

You might think that something as depraved as what happened to Clare Bronfman would never happen to your children or grandchildren—but don’t be so sure. It can, and does, happen to even the most successful and upstanding among us. Having too much money at a young age is a Pandora’s Box, so it’s best not to open it.

Yet even if your heirs never experience a threat as evil as Nxivm and Raniere, their inheritance is still vulnerable to more common threats like divorce, poor spending, and sudden accident or illness.

Meet with a trusted advisor to see if a Lifetime Asset Protection Trust is the right option for protecting your family wealth and loved ones from situations and circumstances (no matter what they may be), which are simply impossible to foresee.

September 22, 2021 by Cava Faulkner

One of the biggest appeals of cryptocurrency, like Bitcoin, is that it is decentralized, unregulated, and anonymous. There are no financial institutions controlling it, and unless you tell someone you own digital currency, it remains a secret. When it comes to estate planning, however, that kind of secrecy can be disastrous. In fact, without the appropriate planning protections in place, all of your crypto wealth will disappear the moment you die or become incapacitated, leaving your family with absolutely no way to recover it.

Indeed, we’re facing a potential crisis whereby millions—perhaps billions—of dollars’ worth of family wealth could potentially vanish into thin air unless you take action to protect your digital assets with estate planning. Fortunately, putting the appropriate safeguards in place is a fairly simple process if you’re experienced with cryptocurrency.

The first step in securing your crypto assets is to let your heirs know you own it. This can be done by including your digital currency in your net-worth statement listing all of your assets and liabilities. Along with the amount of cryptocurrency you own, you should also include detailed instructions about where it’s located and how to find the instructions to access it. But you want those instructions to be kept in an absolutely secure location because anyone who has them can take your cryptocurrency.

Even if your heirs know you own cryptocurrency, they won’t be able to access it unless they know the encrypted passcodes needed to unlock your account. Indeed, there are numerous stories of crypto owners losing their own passcodes and then being so desperate to recover or remember them that they dug through trash cans and even hired hypnotists.

The best way to secure your passcodes is by storing them in a digital wallet. The safest option is a “cold” wallet, or one that is not connected to the internet and thus cannot be hacked. Cold wallets include USB drives as well as “paper” wallets, which are simply the passcodes printed on paper—and ideally stored in a fireproof safe.

But as with the existence of your crypto assets, the only way these wallets are of any use to your heirs is for them to know where they are and how to access them in the event of your incapacity or death. So make sure these instructions are included in your estate plan and we know about the assets and where to locate the instructions on how to access them.

Just as it would be foolish to store your money in a secret safe and not tell anybody where it is or give them the combination to open it, it’s just as foolhardy not to take the appropriate steps to protect your cryptocurrency through proper estate planning.

Since digital currency is such a recent phenomenon, not all estate planning attorneys are familiar with it, but you can rest assured we have the knowledge and experience to help you safeguard your digital wealth just as effectively as all of your other assets. Schedule a meeting online.

September 22, 2021 by Cava Faulkner

Going through divorce can be an overwhelming experience that impacts nearly every facet of your life, including estate planning. Yet, with so much to deal with during the divorce process, many people forget to update their plan or put it off until it’s too late.

Failing to update your plan before, during, and after your divorce can have a number of potentially tragic consequences, some of which you’ve likely not considered—and in most cases, you can’t rely on your divorce lawyer to bring them up. If you are in the midst of a divorce, and your divorce lawyer has not brought up estate planning, there are several things you need to know. First off, you need to update your estate plan, not only after your divorce is final, but as soon as you know a split is inevitable.

Here’s why: until your divorce is final, your marriage is legally in full effect. This means if you die or become incapacitated while your divorce is ongoing and haven’t updated your estate plan, your soon-to-be ex-spouse could end up with complete control over your life and assets. And that’s generally not a good idea, nor what you would want.

Given that you’re ending the relationship, you probably wouldn’t want him or her having that much power, and if that’s the case, you must take action. While state laws can limit your ability to make certain changes to your estate plan once your divorce has been filed, there are a handful of important updates you should consider making as soon as divorce is on the horizon.

Last week in part one, we discussed the first two changes you should make to your plan: updating your beneficiary designations and power of attorney documents. Here in part two, we’ll cover the final updates to consider.

3. Create a new will

Creating a new will is not something that can wait until after your divorce. In fact, you should create a new will as soon as you decide to get divorced, since once divorce papers are filed, you may not be able to change your will. And because most married couples name each other as their executor and the beneficiary of their estate, it’s important to name a new person to fill these roles as well.

When creating a new will, rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. Keep in mind that some states have community-property laws that entitle your surviving spouse to a certain percentage of the marital estate upon your death, no matter what your will dictates. So if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will.

Yet, it’s almost certain you wouldn’t want him or her to get everything. With this in mind, you should create your new will as soon as possible once divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing.

Should you choose not to create a new will during the divorce process, don’t assume that your old will is automatically revoked once the divorce is final. State laws vary widely in regards to how divorce affects a will. In some states, your will is revoked by default upon divorce. In others, unless it’s officially revoked, your entire will —including all provisions benefiting your ex— remains valid even after the divorce is final.

With such diverse laws, it’s vital to consult with us as soon as you know divorce is coming. We can help you understand our state’s laws and how to best navigate them when creating your new will—whether you do so before or after your divorce is complete.

4. Amend your existing trust or create a new one

If you have a revocable living trust set up, you’ll want to review and update it, too. Like wills, the laws governing if, when, and how you can alter a trust during a divorce can vary, so you should consult us as soon as possible if you are considering divorce. In addition to reconsidering what assets your soon-to-be-ex spouse should receive through the trust, you’ll probably want to replace him or her as successor trustee, if they are so designated.

And if you don’t have a trust in place, you should seriously consider creating one, especially if you have minor children. Trusts provide a wide range of powers and benefits unavailable through a will, and they’re particularly well-suited for blended families. Given the likelihood that both you and your spouse will eventually get remarried—and perhaps have more children—trusts are an invaluable way to protect and manage the assets you want your children to inherit.

By using a trust, for example, should you die or become incapacitated while your kids are minors, you can name someone of your choosing to serve as successor trustee to manage their money until they reach adulthood, making it impossible for your ex to meddle with their inheritance.

Beyond this key benefit, trusts afford you several other levels of enhanced protection and control not possible with a will. For this reason, you should at least discuss creating a trust with an experienced lawyer like us before ruling out the option entirely.

Post-divorce planning

During the divorce process, your primary planning goal is limiting your soon-to-be ex’s control over your life and assets should you die or become incapacitated before divorce is final. In light of this, the individuals to whom you grant power of attorney, name as trustee, designate to receive your 401k, or add to your plan in any other way while the divorce is ongoing are often just temporary.

Once your divorce is final and your marital property has been divided up, you should revisit all of your planning documents and update them based on your new asset profile and living situation. From there, your plan should continuously evolve as your life changes, especially following major life events, such as getting remarried, having additional children, and when close family members pass away.

Get started now

Going through a divorce is never easy, but it’s vital that you make the time to update your estate plan during this trying time. Meet with us, as your Personal Family Lawyer®, to review your plan immediately upon realizing that divorce is unavoidable, and then schedule a follow-up visit once your divorce is finalized.

Putting off updating your plan, even for a few days, as you are in the process of a divorce can make it legally impossible to change certain parts of your plan, so act now. And if you’ve yet to create any estate plan at all, an upcoming divorce is the perfect time to finally take care of this vital responsibility. Contact us today to learn more.

4 Estate Planning Must-Haves for Unmarried Couples—Part 1