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If you are engaged to be married, divorce is probably the last thing you and your fiancé want to be thinking about. Yet you might be rightfully concerned about what would happen to your assets should your marriage end in divorce or in the event of your death. One option you might be considering for protecting your assets from these events is a prenuptial agreement.

However, even bringing up a prenup can be a romance killer that creates friction and distrust before the marriage even begins. And if it’s not properly created and executed, a divorce court can invalidate the asset protections offered by a prenup, so such agreements don’t exactly provide airtight protection.

Plus, a prenup would do nothing to keep your family out of court and out of conflict should you become incapacitated or when you die, which is something everyone who gets married needs to consider.

That said, prenups aren’t your only option. With proactive estate planning, for example, you can structure your assets in such a way that not only protects them from being lost to divorce, but also provides for both your future spouse and any children you may have from a previous marriage in the event of your death or incapacity.

Last week in part one, we discussed some of the benefits and drawbacks associated with using prenuptial agreements. Here, we’ll look at different estate planning vehicles that could provide similar—or even better—protection than prenups.

By setting up a revocable living trust and funding it with your separate assets before getting married, those assets would likely be considered non-marital property and not subject to division by the court upon divorce—as long as you never commingle any of those assets with your spouse after your marriage. To ensure your separate property assets stay separate, it’s vital that you create and fund the trust with your assets before the marriage and never add any assets acquired or created during the marriage.

If you commingle assets acquired during the marriage in a trust containing your separate non-marital assets, a court could declare all of those assets as marital property subject to claim as part of a divorce settlement. To this end, a revocable trust only protects your separate assets from divorce if they remain separate from marital property throughout the whole length of your marriage.

You can also use a revocable living trust to provide for your surviving spouse and children from a previous marriage in the event of your death or incapacity. Unlike a will, assets held by a trust are not subject to the court process, so those assets would be immediately available to your spouse and kids, sparing your family the time, expense, and potential conflict.

Note that since a revocable trust is “revocable” by definition, there is no asset protection for assets in your revocable trust, meaning that a revocable living trust will not protect your assets from creditors during your lifetime. If you want to achieve protection from both a future divorce and future creditors, you may want to consider one of the irrevocable trusts below.

You can protect your assets from divorce by having your parents (or another loved one) establish an irrevocable trust for you before your marriage. Then, the Investment Trustee of the irrevocable trust (who could be you) could purchase all of your existing assets in an arms-length transaction and manage those assets inside of the trust, where they are totally protected from a future divorce and any future creditors.

Note that this strategy does require special provisions to ensure you cannot make distributions to yourself from the trust without the approval of an “independent trustee.” This trustee could be a best friend or a professional trustee, but cannot be anyone related or subordinate to you.

Your parents or grandparents could also leave any future inheritance you are to receive to this irrevocable trust, ensuring that your inheritance would also be protected. If this irrevocable trust is properly established and the terms are well-counseled and well-drafted, all assets the trust owns—and any assets left to you in the future—will be fully protected from a future divorce, future creditors, and even from estate taxes upon your death. Yes, we like these trusts a lot.

It’s also possible for you to establish an irrevocable trust for yourself and gift your assets into the trust to keep them safe from divorce. However, this strategy is not as airtight as having a parent or grandparents establish the trust for you.

When you gift assets to an irrevocable trust, there’s a risk that a spouse or future creditor can claim fraudulent conveyance, if you gift those assets within a certain number of years (the exact time frame depends on the state) of the trust being set up. That said, if you are looking for asset protection and an alternative to a prenuptial agreement, and do not have a parent or grandparent available, a self-settled irrevocable trust can be a great second-best alternative.

If you are getting ready to tie the knot and would like to ensure that assets you bring into the marriage don’t end up being lost in a future divorce settlement or are protected for your kids from a prior marriage, meet with us for trusted counsel and guidance on all of your options well before your marriage. Once you are married, many planning options are off the table.

And regardless of your concerns about divorce, you definitely need to create or update your estate plan to protect and provide for your soon-to-spouse and any children you have in the event of your death or incapacity. Schedule a Family Wealth Planning Session™ today to get this planning started.

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.

This is the third in an ongoing series of NLBM articles discussing the true costs and consequences of failed estate planning. The series highlights a few of the most common—and costly—planning mistakes we encounter with clients. If the series exposes any potential gaps or weak spots in your plan, meet with a lawyer to learn how to properly address them.

When it comes to putting off or refusing to create an estate plan, your mind can concoct all sorts of rationalizations: “I won’t care because I’ll be dead,” “I’m too young,” “That won’t happen to me,” or “My family will know what to do.”

But these thoughts all come from a mix of egoic pride, denial, and above all, we imagine, a lack of real education about estate planning and the consequences to your family. Once you understand exactly what planning is designed to prevent and support, you’ll realize there really is no acceptable excuse for not having a plan, provided you are able to plan and truly care about your family’s experience after you die or if you become incapacitated.

Indeed, the first step in creating a proper plan is to thoroughly understand the potential consequences of going without one. In the event of your death or incapacity, not having a plan could be incredibly traumatic and costly for your family, who will be left to deal with the mess you’ve left behind.

While each estate and family are unique, here are some of the things most likely to happen to you and your loved ones if you fail to create any estate plan at all.

If you don’t have a plan, or only have a will (yes, even with a will), you’re forcing your family to go through upon your death. The legal process for settling your estate, and even if you have a will, it’s notoriously slow, costly, and public. But with no plan at all, can be a true nightmare for your loved ones.

Depending on the complexity of your estate, can take months or even years to complete. And like most court proceedings, can be expensive. In fact, once all of your debts, taxes, and court fees have been paid, there might be nothing left for anyone to inherit. And if there are any assets left, your family will likely have to pay hefty attorney’s fees and court costs in order to claim them.

Yet the most burdensome part of  the frustration and anxiety it can cause your loved ones. In addition to grieving your death, planning your funeral, and contacting everyone you’re close with, your family will be stuck dealing with a crowded court system that can be challenging to navigate even in the best of circumstances. Plus, the entire affair is open to the public, which can make things exponentially more arduous for those you leave behind, especially if the wrong people take an interest in your family’s affairs.

The expense and drama of the court system can be almost totally avoided with proper planning. Using a trust, for example, we can ensure that your assets pass directly to your family upon your death, without the need for any court intervention. Instead, so long as you have planned properly, just about everything can happen in the privacy of our office and on your family’s time.

If you die without a plan, the court will decide who inherits your assets, and this can lead to all sorts of problems. Who is entitled to your property is determined by our state’s intestate succession laws, which hinge largely upon on whether you are married and if you have children.

Spouses and children are given top priority, followed by your other closest living family members. If you’re single with no children, your assets typically go to your parents and siblings, and then more distant relatives if you have no living parents or siblings. If no living relatives can be located, your assets go to the state.

But you can change all of this with a plan and ensure your assets pass the way you want.

It’s important to note that state intestacy laws only apply to blood relatives, so unmarried partners and/or close friends would get nothing. If you want someone outside of your family to inherit your property, having a plan is an absolute must.

If you’re married with children and die with no plan, it might seem like things would go fairly smoothly, but that’s not always the case. If you’re married but have children from a previous relationship, for example, the court could give everything to your spouse and leave your children out. In another instance, you might be estranged from your kids or not trust them with money, but without a plan, state law controls who gets your assets, not you.

Moreover, dying without a plan could also cause your surviving family members to get into an ugly court battle over who has the most right to your property. Or if you become incapacitated, your loved ones could even get into conflict around your medical care. You may think this would never happen to your loved ones, but we see families torn apart by it all the time, even when there’s not significant financial wealth involved.

You can create a plan that handles your assets and your care in the exact manner you wish, taking into account all of your family dynamics, so your death or incapacity won’t be any more painful or expensive for your family than it needs to be.

Most people assume estate planning only comes into play when they die, but that’s dead wrong. Yes, pun intended.

Indeed, though planning for your eventual death is a big part of the process, it’s just as important—if not even more so—to plan for your potential incapacity due to accident or illness.

If you become incapacitated and have no plan in place, your family would have to petition the court to appoint a guardian or conservator to manage your affairs. This process can be extremely costly, time consuming, and traumatic for everyone involved. In fact, incapacity can be a much greater burden for your loved ones than your death. The first article in this series offers an in-depth look at the consequences of failing to plan for incapacity.

You can put planning vehicles in place that grant the person(s) of your choice the immediate authority to make your medical, financial, and legal decisions for you in the event of your incapacity. You can also implement planning strategies that provide specific guidelines detailing how you want your medical care to be managed, including critical end-of-life decisions.

If you’re the parent of minor children, the most devastating consequence of having no estate plan is what could happen to your kids in the event of your death or incapacity. Without a plan in place naming legal guardians for your kids, it will be left for a judge to decide who cares for your children. And this could cause major heartbreak not only for your children, but for your entire family.

You’d like to think that a judge would select the best person to care for your kids, but it doesn’t always work out that way. Indeed, the judge could pick someone from your family you’d never want to raise them to adulthood. And if you don’t have any family, or the family you do have is deemed unfit, your children could be raised by total strangers.

What’s more, if you have several relatives who want to care for your kids, they could end up fighting one another in court over who gets custody. This can get extremely ugly, as otherwise well-meaning family members fight one another for years, making their lawyers wealthy, while your kids are stuck in the middle.

If you have minor children, your number-one planning priority should be naming legal guardians to care for your children if anything should happen to you.

Naming legal guardians won’t keep your family out of court, as a judge is always required to finalize the legal naming of guardians in the event of death or incapacity of parents. But if it’s important to you who raises your kids if you can’t, you need to give the judge clear direction.

On top of that, you need to take action to keep your kids out of the care of strangers over the immediate term, while the authorities figure out what to do if something happens to you.

Given the potentially dire consequences for both you and your family, you can’t afford to put off creating your estate plan any longer. We’ll guide you step-by-step through the planning process to ensure you’ve taken all the proper precautions to spare your loved ones from needless frustration, conflict, and expense.

But the biggest benefit you stand to gain from putting a plan in place is the peace of mind that comes from knowing that your loved ones will be provided and cared for no matter what happens to you.

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.

With more and more Baby Boomers reaching retirement age each year, our country is undergoing an unprecedented demographic transformation that’s sure to challenge our society in many ways. There’s been lots of talk about whether Baby Boomers will have enough savings for retirement and the strains the generation will put on Social Security and Medicare.

But there’s another issue that’s getting far less attention—the coinciding increase in the prevalence of dementia.

Along with swelling senior population, the nation is expected to see a corresponding rise in those suffering from age-related dementia—cases of Alzheimer’s alone are expected to double by 2050. While the cognitive decline from dementia affects nearly every mental function, many people aren’t aware that one of the first abilities to go is one’s “financial capacity.”

Financial capacity refers to the ability to manage money and make wise financial decisions. A decline in financial capacity not only makes seniors more likely to mismanage their money, but it also makes them easy targets for financial exploitation, fraud, and abuse.

Taking steps to reduce the risks of diminished financial capacity is vital, but stepping in to help manage an aging parent’s money without threatening their sense of independence and privacy can be a real challenge. Even if they’re aware of their own impairment, many are reluctant to ask for help, and some may even deny there’s a problem.

Ideally, you should address the potential for dementia and other forms of incapacity with your senior family members well before any signs of cognitive decline appear. Waiting until they start showing signs of dementia will only exacerbate the complications and could even invalidate planning efforts.

Start by having a heart-to-heart conversation with your loved ones about the risks involved with incapacity, and how estate planning can help protect them. Approach the subject with care and compassion. Reassure them that your goal is to make certain they retain as much control over their lives as possible—and talking about the issue early on is the best way to do that.

For example, you should let your aging parents know that if they become incapacitated without proper planning, you’ll have to go to court and petition to become their legal guardian. This process is not only quite costly and emotionally taxing, but there’s a possibility that the court could appoint a professional guardian, rather than a loved one such as yourself.

A court-appointed guardianship would mean that a total stranger would control all of their affairs—financial and otherwise—which is something they likely wouldn’t want. Professional guardianships also open the door for potential exploitation and abuse by unscrupulous guardians, which is something that’s on the rise given the sharp uptick in the senior population.

However, unless you have the legal authority to make your parents’ financial decisions, your ability to manage their money will be seriously limited. You might be able to work together with them for a while without such authority, but at some point, their cognitive impairment will likely reach a stage where you’ll need to assume full control—and that’s where estate planning comes in.

The best option would be for your aging loved ones to put in place a comprehensive plan for incapacity as soon as possible. This way, they can choose exactly who they want making their financial, medical, and legal decisions for them if and when they’re no longer able to do on their own.

There are a number of planning tools that can be used in an incapacity plan, but a will alone is sufficient. A will only goes into effect upon death, so it would do nothing should your elderly parents become incapacitated by dementia.

While a will is important in planning for death, your parents should also put in place planning tools specially designed for incapacity. One such tool is durable financial power of attorney. This document would give you (or another person of their choosing) the immediate authority to make decisions related to the management of their financial and legal affairs in the event of their incapacity.

The downside of financial durable power of attorney is that it sometimes is not accepted by banks and other financial institutions, and you might still end up needing to go to court to get control of your parents’ affairs.

A revocable living trust is a MUCH better estate planning tool to transfer control of your parents’ financial assets to you without court intervention should they become incapacitated. A revocable living trust, created while your parents have capacity, can plan for the transition of their assets to your care and control in a way that feels safe and secure to them. Bring your parents to meet with us for a Family Wealth Planning Session to learn more about how this would work.

Yet having the legal authority to make your parents’ financial and legal decisions is just part of an overall incapacity plan. They’ll also need to put in place planning strategies designed to address their healthcare decisions and medical treatment like medical power of attorney and a living will.

We can help your aging parents and other senior family members develop a comprehensive incapacity plan, customized with the specific planning vehicles to match their unique needs and life situation.

While incapacity from dementia is most common in the elderly, debilitating injury and illness can strike at any point in life. For this reason, all adults age 18 and older should have an incapacity plan. Moreover, such planning must be addressed well before cognitive decline begins, as you must be able to clearly express your wishes and consent for the documents to be valid.

Given this urgency, you should discuss incapacity planning with your aging parents right away, and schedule a Family Wealth Planning Session with us to get a plan started. If your senior family members already have an incapacity plan, we can review it to make sure it’s been properly set up, maintained, and updated.

Of course, if you notice any signs of diminished financial capacity or other suspect behaviors, you should immediately contact us to address the issue. While there’s no way to prevent age-related dementia and other forms of cognitive decline, make sure your parents and other senior relatives know that they can use estate planning to have control over how their lives and assets will be managed if it does occur.

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.

As we head towards the end of the year, we’re fast approaching the deadline to implement your family’s tax strategies for 2019. The Tax Cut and Jobs Act (TCJA) completely overhauled the tax code, and if you’ve yet to take full advantage of the benefits offered by the new tax law, now is the time to do so.

To qualify for some TCJA tax benefits, you’ll need to act by December 31, so don’t wait to get started. The following 4 tips could save your family big money on your 2019 tax bill. That said, there may be other strategic opportunities for savings, so contact us to be certain you haven’t missed any.

Under the new tax law, itemizing your deductions might no longer make sense. That’s because the TCJA increased the standard deduction up to $12,200 for individuals and $24,400 for married couples filing jointly. So, if you’re filing a joint return, you need more than $24,400 in itemized deductions to make itemization worth it.

The law also places new limits on itemized deductions, including a $10,000 cap on property taxes, and the elimination of state and local income-tax deductions.

Given these changes, taking the standard deduction might be the best option, but other factors, such as your health expenses and charitable giving, could affect your decision, so consult with us and/or your CPA to make sure.

By maximizing your contributions to tax-deferred retirement accounts like IRAs and 401(ks), you can not only save for retirement, but also reduce your taxable income for 2019.

In 2019, you can contribute up to $6,000 to an IRA and up to $19,000 to a 401(k) if you’re under 50, and up to $7,000 to an IRA and $25,000 to a 401(k) for those 50 and older. If you can’t afford the maximum amount, try to contribute at least the amount matched by your employer, since that’s basically free money

You have until December 31, 2019 to contribute to a 401(k) plan and until April 15, 2020, to contribute to an IRA for the 2019 tax year.

If you’re expecting to make significantly more income this year than in 2020, try to defer as much income into next year as possible. However, this strategy only makes sense if you’ll be in the same or a lower tax bracket next year.

This might mean asking your boss to delay paying a year-end bonus until after Jan. 1, 2020, or if you’re self-employed, waiting to invoice some clients until the new year. And whether you’re an employee or self-employed, you can also defer income by taking capital gains in 2020 instead of in 2019.

On the other hand, if you think you’ll be in a higher tax bracket in 2020, you may want to do the opposite and accelerate income into 2019 to take advantage of a lower tax bracket. Contact us to find out what’s best for your situation.

The child tax credit now offers up to $2,000 per qualifying dependent child. To qualify, your child must be 16 or younger at the end of 2019. The first $1,400 of the credit is refundable, so the credit could reduce your tax liability to zero, and you’d still receive a refund.

The cut-off for the tax credit is $400,000 for married couples filing jointly, and $200,000 for everyone else.

Implementing these—and other—year-end tax-saving strategies could save your family thousands of dollars on your 2019 tax bill. But if you don’t act soon, these opportunities may vanish for good, so meet with us today to lock in your savings.

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.

In many families, money still is not a typical dinner table discussion, but we think it should be. Surprisingly, this is especially true when it comes to affluent parents. And, we hope to change it because one of the most important things you can do is talk to your kids (and your parents) about money.

According to the Spectrem Millionaire Corner, a market research group, only 17% of affluent parents said they would disclose their income or net worth to their kids by the time they turned 18. A nearly equal amount, 18% said they would never disclose these numbers to their kids. 32% of the rich parents surveyed by Spectrem said “it’s none of their business” when asked why they would not talk to their kids about money.

But, that’s just faulty thinking, wouldn’t you agree?! We hope so! But, if not, read on …

The amount of money generated by your family, and what will happen to it when you or your parents become incapacitated or die is definitely your business. In fact, we believe it may be the most important business you have. And whether your parents talk with you about it now, or you figure it all out after they die, your parent’s money has a huge impact on you.

And, of course your money has a huge impact on your kids.

If your parents are not talking to you about money, it could be because they are afraid that if you know how much money there is, it will make you lazy, unmotivated, or change the course of your life decisions in a negative manner. Maybe you have the same fears of talking about money with your own kids.

But the truth is that whether you know exactly what there is or not, you have a general sense of your family’s affluence and it’s already impacted your decisions in a myriad of ways. And the best way for your family’s money to impact your decisions in a positive manner is to get into open conversation about it all.

If you are a child of affluent parents who are not talking to you about money, consider that your job is to learn to communicate with your parents in a way that will have them trust you, and the decisions you will make if you know just how much there is.

Perhaps consider that when money has come up in the past, you behaved immaturely, and that caused your parents not to trust you, but you can change that now. And consider the possibility that your parents would love it if they saw evidence of your maturity in this arena.

If you are a parent yourself, you probably already know, or can imagine, that the most important wish you have for your children is that they learn to handle money well, and that you want to influence them in the most positive way possible, when it comes to money.

Consider how you would want your children to approach you to have the money conversation, and how you can do exactly that with your parents?

We all have to learn about our family’s money eventually. And if that doesn’t happen until after our parents die, it can be a much bigger burden to deal with, and we can lose tremendous opportunities for passing on more than just money.

As an affluent parent, or the child of affluent parents, getting into conversation about money now is a huge opportunity to pass on values, insights, stories and experience that will be lost, if you wait until incapacity or death to start facing the truth together.

Helping you talk to your kids (or your parents) about money is one of the things we most love to do because we see it as a real opportunity for your family to come together and use your whole family wealth to create more connection from one generation to the next. If we can help you here, either with your kids, or your parents, please be in touch.

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.