The Tax "Deal" - the Forecast is Dark Clouds on the Horizon

My fellow member of WealthCounsel, Richard Wohltman of Alexandria, VA,  posted this relevant commentary on the Tax “Deal” currently being ushered through Congress. 

There has been a lot of talk this month about the "deal" to extend the Bush tax cuts. That "deal" also includes a substantial increase in the amount that can pass to your heirs without paying any federal estate tax. The 'exemption amount' will be increased to $5,000,000 per person.

The stated reason for that increased exemption amount is to help 'small' business owners and family farmers pass the business or farm to their heirs without having to pay estate taxes. It also means that all but a very limited number of multi-millionaires will have to file and pay federal estate tax.

Dark Clouds are Forecast.

There really are dark clouds on the horizon even if the "deal" is passed by Congress before the end of the month. The increase in the exemption is going to add billions of dollars to the federal deficit. The Treasury is going to have to borrow that money and we are all going to have to pay taxes or have benefits reduced just to pay the interest on those loans. And the day will come when the loan will have to be paid in full.

There is a more pressing problem, however, for estate planning. The "deal" only lasts two years! At the end of 2012 we will find ourselves right back where we are now -- facing a stupendous increase in the number of estate tax returns and tax payments when the exemption amount falls to just $1,000,000 starting January 1, 2013. The problems from the end of the Bush tax cuts (and the increased exemption amount from the "deal") return in 2o13. The uncertainty of how all of the estate and gift taxes will be interpreted once the large exemption disappears is the big grey cloud on the horizon for estate planners.

Estate planning attorneys have been hoping for some stability in estate tax policy so plans can be designed based on a clear expectation of how estate taxes will be calculated when death occurs. That stability disappeared with the Bush tax cuts. Estate planning attorneys all knew we were faced with the potential return to the 'old rules' with only a $1,000,000 exemption in 2011 and had to plan for the return of the middle class taxable estate. The same lack of stability continues since we can only look at what happens at the end of the next two years.

What does all this mean to you?

Don't think that the "deal" will make your estate planning easier just because you don't have Five or Ten Million Dollars. The vast majority of our clients require extra tax planning if the exemption returns to 1 Million Dollars.

Your estate planning lawyer must assume that the lower exemption will return and is forced to include options to address the substantial estate tax liability that will return in 2013. Your estate plan will continue to require more complication just to protect your family and your business with the automatic termination of the "deal" in 2013.

Where's the silver lining?

Just remember, if there is a silver lining in every grey cloud, that doesn't mean that the grey cloud is gone.  Don't let the proposed silver lining blind you to the limits inherent in any "deal" that lasts only two years!

NEWS FLASH: Yankees Beat the Miami Dolphins!

Yes I know, that's impossible. But the heirs of George Steinbrenner, who died recently at the age of 80, certainly came out ahead of the heirs of Joe Robbie, the former owner of the Miami Dolphins who died in 1990.

Steinbrenner's timing couldn't have been better. His heirs will inherit the team without having to pay any estate taxes on a $1.1 billion estate. See “How Steinbrenner Saved His Heirs a $600 Million Tax Bill” from the Wall Street Journal here.

Contrast this with Joe Robbie. When he died in 1990 the heirs had to sell the football team and the stadium at fire-sale prices in order to pay a whopping $47 million estate tax bill.

Unlike most owners Joe Robbie built his own stadium entirely with private capital. The stadium had to be sold along with the team and it no longer bears Joe Robbie’s name. For more details see “Yankees vs. Dolphins: Steinbrenner’s Final Victory”

You could say, "Yeah, but his heirs are still wealthy." True. But it really isn’t just about money. Robbie's intentions were defeated; his family was removed from the success he worked so hard to build from his very modest depression-era beginnings. Estate planning affects the heart as well as the pocket book.

(What happens to the ultra-wealthy can happen to any small business owner…often with more devastating results. I’m always available to share my experience and knowledge to create a better estate plan.)

 

My thanks to my associate Greg Turza who practices in the state of Illinois for this clever commentary on estate planning. 

 

Benjamin Franklin does estate Planning

Benjamin Franklin is largely known today for his key roles in the American Revolution, the formation of the United States, and his diplomacy with France.  But Franklin was also a very successful businessman.  Starting with absolutely nothing, he built a substantial fortune.  And he capped it off by demonstrating keen skills developing his estate plan.  His approach to estate planning is addressed in a posting by my WealthCounsel colleague, Suzann Beckett who practices in Connecticut.  I hope you enjoy this quasi history experience while admiring Ben Franklin’s adroit estate planning skills.

Estate planning, the Franklin way

The subject of Ben Franklin came up the other day in conversation. More specifically, the subject of Ben Franklin's visionary approach to estate planning, came up during a discussion of how the average person can make the most of their wealth for posterity.

Benjamin Franklin was many things. Born into humble circumstances, Mr. Franklin very literally ran away from home, then followed up his running away by working, innovating, persevering, and struggling to ultimately become one of young America's wealthiest and most respected citizens. He knew a thing or two about math and the compounding of interest, too.

For those who are truly curious, a version of Benjamin Franklin's Last Will and Testament is available online, from the Franklin Institute. Included is a codicil to the original Will, that should give anyone pause. Franklin's significant wealth is apparent, as is evidenced by the extraordinary number of homes, land, and valuables he details in his Will. But the relatively minor sum of one-thousand pounds sterling mentioned in the codicil, which would be equivalent to roughly $4,000 at the time – is particularly impressive for those of us who would like to make an impact on the generations to follow, even if we do not have the financial capacity to astound the neighbors at the moment.

Franklin specified that the money should be held in trust. Two trusts, actually. One-thousand pounds sterling was provided to the city of Boston, where Franklin was born, and one-thousand pounds sterling was given to Philadelphia, the city that is most commonly associated with Franklin as his home. Both funds were specified to be held and invested, in a specific manner, and maintained for two-hundred years. A significant amount of time, certainly. But Franklin wasn't looking for returns that could be looked down on as small potatoes. He was looking to shake the world. And he did. He has. He continues to, and will for years to come.

You see, Franklin's $4,000 investment has grown to millions of dollars in the interim. The funds he put away for posterity have done exactly what he hoped they would do. And through careful management, they have continued to grow, and expand in value through good times and bad.

Now admittedly, most of us don't think two-hundred years into the future – and most of us don't have massive estates like Mr. Franklin had. But almost all of us can find a way over the course of our working lives to put away a few dollars in the hopes that we can make the lives of our children and grandchildren more comfortable and satisfying than ours may have been.

If Franklin's Will proves anything, it is a tangible demonstration of how a well intentioned gift, well managed, well planned, and well executed, can change the lives of generations to follow.

It's something to think about, isn't it?

 

Benjamin Franklin exercised far more farsightedness in his estate plan than most of us feel the need for.  But Franklin did reveal the powerful benefits to be gained from well thought out plans.  His clever employment of the principal of compounding into his estate plan is admired to this day.  Bravo to Benjamin Franklin – for executing an estate plan that has spanned several centuries.  I am available to assist you with an estate plan to span a decade or two, and I would enjoy the challenge of assisting you with an estate plan for several centuries……if you wished to follow the lead of Benjamin Franklin.

Can a DIY Will cost you a bundle?

In this age where all the information you ever wanted can be found on the internet, it is no surprise to encounter articles like the one in Forbes magazine raising concerns for those who save now on a Do-It-Yourself Will only to leave an expensive nightmare for their heirs.  I enjoyed this brief commentary by my WealthCounsel associate, Suzann Beckett.  I hope you also enjoy it.

 

Punctuation is important. For instance, consider the difference between a period and a comma. Sure you might think of one as a point of ink, as opposed to a point of ink with a tail. But if you misplace that comma and insert a period instead – that little error of grammar could just cost your heirs a legal tussle like you never dreamed was possible.

It's true. I swear.

Then again, filling in the blanks can be a nightmare in disguise, too. Imagine using a DIY Will package that innocently asks you to, “Insert Name Here.” No problem, right? Well, no problem unless you attach a dollar figure to that line, and fail to include a name. You might just inadvertently have directed a substantial sum of money to, “Insert Name Here,” whomever that might be. If nobody catches the error, your heirs just might be stuck with a battle royal over what you meant to write, as opposed to what your Will actually says.

Deborah L. Jacobs outlines these two disasters of DIY estate planning, as well as some notable others, in an intriguing column featured on Forbes.com. You can find the full Forbes story here.

Jacobs makes some excellent points about the importance of taking estate planning seriously, whether you are wealthy or not, famous or anonymous, a DuPont or a Miller. We all suffer the same tendency to put off the inevitable – sometimes until the inevitable beats us to the punch.

Anyone who even dreams that estate planning doesn't matter should read Jacobs excellent article if for no other reason than to understand better how a rancher could have lost $3.5 million in estate taxes, as a result of an effort to economize on the cost of having a will drawn up. You may also be entertained, or horrified by the story of how a simple note from the late CBS reporter, Charles Kuralt, could have led to a legal battle that lasted 6 years.

It's a subjective question, to be sure. But it's one worth asking ourselves. Where is the real savings found, up front in the estate planning phase of life, or possibly later, assuming no legal wrangling results from using DIY legal forms and software packages?

The author of the Forbes article on DIY Wills is a lawyer who took a turn to writing and journalism.  The Forbes article is likely a precursor to her new book that is being released soon.  There are many horror stories of people who took a shortcut in their estate planning.  Rather than dwell on these wills gone bad, I’d rather talk about the wills done well where I assisted people to truly plan their estates in a way that met their objectives.  Call me if I can help you in pursuit of your estate planning objectives.

"Dragon Tattoo" Estate Drags On

A recent post by fellow estate planning attorney, Greg Turza offered an interesting commentary illustrating the need to clearly identify who your heirs are.  I hope you find this an interesting story about this famous author and his death without a will.  

Stieg Larsson, the author of the best selling novel “The Girl with the Dragon Tattoo” (now a movie), died in 2004 without a will. His heirs are still fighting it out with Larsson’s live-in girlfriend of 32 years. She and Larsson never married which leaves Larsson’s heirs as the sole beneficiaries of his estate.

Swedish law is the same as many states on this issue. If you die with no spouse and no children your heirs are your siblings and your parents. In Larsson’s case this means his father and his brother. Apparently, the basis for the girlfriend's claim is that she was involved in the editing of his novels. For more details see the story here.

You may be surprised to see who your “heirs” are if you died without a will. It depends on the relationships you have by blood or marriage who survive you. To determine who your heirs are under our state laws, you might want to spend a quick hour with me to get up to speed on this.

One other interesting aspect of the case is that all three of Larsson’s novels were published after he died so the value of his estate at the time of his death was probably nil. But as it turns out, even if he had great wealth at the time of his death Sweden repealed its estate tax in the same year of his death, 2004! If only the United States would follow suit.

If Steig Larsson had spent an afternoon with me, he would have avoided many of these problems.  And the lives of his heirs would have been considerably less stressful.  If you want to avoid Steig Larsson’s fate, please contact me, and let’s meet.  If you’d like to read Larsson’s trilogy, you can find it here:  Millennium Trilogy.

How to Avoid Vapor Lock

My golfing "friends" gave me this picture as a joke because I have so many worries and swing thoughts going through my head trying to swing that I often vapor lock and chunk the ball.  I'm the comic relief for my golf buddies because I can't seem to tackle the golf swing one step or thought at a time. 

Often clients are the same way when it comes to estate planning.  I had a married couple tell me they were "vapor locked" because they didn't know where to start, what's going to happen 5, 10, 20, 30 years from now, what will our kids be like, who can take care of us if we can't, what will the law be, what estate will we have, and on and on.  They admitted they had so many thoughts and worries and "what ifs" that it was just easier to do nothing.

I explained to them that estate planning is the proverbial “elephant” and the successful plan will address your estate plan much like the old “how to eat an elephant answer…….you take it one bite at a time.”  And as an attorney, it is my job to help turn the “elephant” into bite sized tasks, where to start and where to take the next bite.  To their question, “We just don’t know where to start”, I responded as I often do, "Let's start with what you would want right now if you became disabled or died, not 5, 10, 30 years from now, but right now". 

After discussing these concepts with my clients, they understood what it means to create a process where you can reduce the different elements of estate planning into bite sized pieces.  This allows them to take them on, one element at a time – dealing with those that were most pressing first.  After they understood it was “one bite at a time,” you could feel a huge “sigh of relief” instantly hit the room.  No longer were they vapor locked and in fact just moving past that first step opened up their minds and feelings to all kinds of ideas as we progressed. 

Just like an elephant, it might take a while to eat it one bite at a time.  But with the right plan and persistence, my clients eventually saw the successful (and less stressful) result.  The key is to approach it with a bite sized view of the challenge rather than facing a daunting elephant-sized single project.  There is a great article talking about the ways that businesses (as opposed to estate plans) use this approach to take on these types of elephant issues.  The article is by E-Myth, and you’ll find it at this location, "How to Eat an Elephant" - might give you some interesting perspectives on applying the “elephant eating solution” to your other business situations.  I just wish I could apply the same to my golf swing!! 

ILL WILL calls for a WILL with special terms

Not surprisingly situations occur that drive a person to disinherit a child or heir.  My colleague in Wealth Counsel, Greg Turza , offered the following comments, and I am sharing them with you. 

Has one of your children run off and joined a religious cult where he was taught to reject his parents? Or become a compulsive gambler--or even worse -- a criminal?

Disinheriting a child who has become estranged from his family is often understandable. Knowing how to do it right is critical if you want to avoid court battles over your estate when you are gone.

Generally, children have no right to inherit under a will or trust. In Illinois you can exclude a child from your will or trust simply by omitting the disinherited child’s name. But this can lead to costly litigation.

Suppose after you die the disinherited child claims that the omission was inadvertent? Or a product of “undue influence” by the children who were included? Costly litigation will erode their inheritance.

To avoid this calamity the best policy is to specifically mention the disinherited child and state explicitly your decision. For example: “I acknowledge the existence of my son Michael Smith but have decided to make no provision for him as beneficiary.”

Remember, sometimes children are disinherited simply because they are wealthy or because the other children need more help. In such a case consider as an alternative: “It is not for lack of love and affection that I have decided to make no provision for Michael Smith in this instrument.”

Not surprisingly, to disinherit a child or heir requires attention to detail.  Knowing how to do it right is critical to preserve your estate from expensive court battles when you are gone.  If this is a topic we should discuss, call me or leave a comment here.  

Include your Digital Assets in your Estate Planning

Before we leave the topic of Digital Assets, I have one more excerpt from an article by Dennis Kennedy, who is an information technology lawyer and legal technology writer who publishes a monthly column in the ABA Journal.  You can find the full text of the article at http://www.abanet.org/lpm/lpt/articles/ftr03103.shtml. The rapid explosion of digital information and accounts is making this a topic of interest to nearly everyone of us.

Inventory Your Digital Assets.

I spent a large part of my early legal career as an estate planning lawyer.  In the case of either death or incapacity, the first important step is to track down and identify all of the assets, liabilities and other concerns that must be addressed.  Once an inventory is created, you can move forward with marshalling and collecting assets, identifying outstanding liabilities and paying them in a timely fashion, and dealing with outstanding issues, such as turning off utilities, canceling credit cards, arranging for storage or disposal and the like.

In the real world, your family and designated successors (personal representative of your estate, trustee of your trust or attorney-in-fact under a durable power of attorney) will be aided immensely by any list of assets and liabilities that you can prepare for them and leave in a place that is easy for them to obtain.

In your digital world, you also want to help your successors by creating an inventory.  The more detailed and accurate the better, of course, but even a small start can be of help.  Here are some of the things I suggest that you inventory:

• Hardware.  Inventorying your hardware seems like an easier project that it actually will be.  I suggest that you create a list of your hardware with a summary overview of what is on it.  Creating the inventory is likely to be an eye-opener for you.  You are likely to find that you have important information not only on the computer system you use everyday, but also on multiple other computers.  Many of us have at least one laptop and one or more desktop computers.  Many people keep copies of vital information on their work computers.  Where do you back up information?  You might have many USB flash drives, USB hard drives, backup CDs or DVDs.  There might be important pictures still on digital cameras and even information on iPods or other devices.
• Software.  Do you use Quicken or another financial program?  What income tax preparation programs do you use?  Do you create spreadsheets or Word documents with important financial information?  If you blog, is there a program that someone would need to use to post news to your blog?
• File structures.  Your inventory should sketch out the main folders and places where you keep personal, financial and client files and documents.  For someone like me, I also have audio and video of presentations and podcasts that I’d want someone to be able to locate and deal with.  You might have important collections of family photos or videos or work in progress.
• Online presence.  Create a list of your Web site(s), blog(s), Facebook and other social media accounts, online backup sites, online sites where you store documents, photos or other files, and listservs, groups or other sites to which you belong.
• Online accounts.  Amazon and other shopping sites make it easy for you to create accounts and include credit card information.  You might also have online access to bank and investment accounts.  In fact, in many cases, you might no longer be receiving paper statements for accounts.  If you don’t identify these accounts, it will be difficult for your successors to even know that they exist because there simply will be no paper trail.  Also, make a list of all the e-mail accounts you have and use.  Many of us have several e-mail accounts these days.
• Work information.  Lawyers might have access to client sites, collaboration sites, online document repositories or other information that no one else knows about.  In addition, they might have access to software, online tools or online databases that someone taking over their work will need to have.  In some firms, lawyers might have important network passwords, backup media or other digital assets the existence or value of which is not realized until they are gone.

At this beginning point, you really want to gather and collect as much information as you can for your inventory.  You can work on organizing and prioritizing later.

This is a new area of estate planning, and this information is helpful to trigger our thinking about our digital lives…..and which parts of our internet interaction, our home computer, and our business computer have become our digital assets that should be part of our estate planning.  My suggestion is that digital assets are  well worth organizing and treating as assets of your estate. Your comments or suggestions are welcomed to this blog.  And I am available to discuss  steps for managing your digital assets beyond the above list…..if advisable, let’s talk.

Who takes care of your Estate's Digital Assets?

The following is an excerpt from an article by Dennis Kennedy, an information technology lawyer who authors a monthly  column in the American Bar Association Journal.  You can find the full text of the article at http://www.abanet.org/lpm/lpt/articles/ftr03103.shtml

Andy Olmsted was a rare individual, in no small part because he is one of the few who thought carefully about what would happen to his online presence if he were to die. A popular blogger, Olmsted wrote a post before he left for service in Iraq, along with instructions for his survivors to post it to his blog in the event he was killed in action. Unfortunately, it had to be posted. I read the post on the day it appeared in 2008, and I re-read it when I prepared to write this article. It remains for me one of the most moving posts in the history of blogging http://obsidianwings.blogs.com/obsidian_wings/2008/01/andy-olmsted.html.

Tips for Providing Digital Assistance After the Death of Another

It’s also possible that either as a survivor, you might find yourself in a position where you need to handle someone’s digital affairs. I have a few tips.

• Find knowledgeable technical and legal help.
• In the case of a death, try to get to contact lists, e-mail accounts and social media accounts to notify friends who the deceased would want to be notified.
• Change all passwords as soon as possible.
• Try to understand the totality of the person’s online presence and identify some of the people he or she has interacted with most for assistance, especially in the social media platforms.
• Do not start closing accounts, shutting down hosting and e-mail, or taking other drastic steps until you have a good sense of the individual’s presence and what you are ultimately going to do with it. Keeping a Web site up for a year or more will not be expensive. Shutting it down too early and losing valuable data could be quite expensive.
• Be slow to delete, but when you delete or dispose of computers and drives, delete in accordance with forensic standards so data cannot be retrieved by others.
• Spend $100 on an external USB hard drive and make a copy of all hard drives, flash drives and other data and keep them in one safe place. Once you start to go through the data, you can keep another drive with the “good stuff.”
• Make copies of Web sites and other online accounts.
• Locate all the financial information and client records as soon as possible and aggregate and isolate them.
• Remove credit card information from shopping accounts.
• Err on the side of keeping e-mail, documents and photographs for family members.

Resurrection of the Death Tax?

The absence of rules for the estate tax is concerning.  Greg Turza is a fellow estate planning attorney who practices in Skokie, IL.   He read a recent article on the estate tax situation, and what follows is his summary.  His post also includes a link to the more detailed article.  And you are welcome to contact me with any of your questions.   

The good news is the estate tax is repealed! The bad news is, not for long. Since Bush's 2001 tax cuts went into effect the exemption from estate taxes climbed year by year from $1 million to a high of $3.5 million in 2009.

This year, 2010, is the repeal year but the Bush administration could never garner the 60 votes he needed in the senate to make the repeal permanent.
The consequence is the so-called "sunset" rule. As of January 1, 2011 the law automatically goes back to the way it was in 2001. In the case of the estate tax that means only a $1 million exemption and a top 55% tax rate.

The Obama administration advocates extending the 2009 exemption of $3.5 million on a permanent basis. This appeared to be where the Senate was headed on May 18th when an agreement was reached that had the support of more than 60 senators.

But the deal fell apart when the Democratic leadership decided that it will not allow the legislation to come to the floor for a vote unless the legislation has the support of more than half of the Democrat's 59 votes. Since the Democrats lack 50% support within their party the legislation failed.

Regardless of what happens there will be an estate tax next year. The only question is whether the exemption will be $3.5 million or $1 million –and $ 2.5 million is a huge difference in the plans for millions of taxpayers.

For the full story click here.

The “up-in-the-air” situation with the estate tax is concerning.  It is best to have a plan of action that you can execute quickly once the direction is finally established.  If you’d like to discuss ways to assemble a plan in advance, either comment on this blog with your questions or call me to meet in person.     

 

Listening is Key with Aged Adults

Mary Lynn Pannen is one of the nation’s leading experts on Geriatric Care Management and Home Care for seniors. As President of Sound Options, she has built a very successful home care business in the Puget Sound region.  Mary Lynn recently described her company’s service this way: “Able to transform potentially stressful circumstances into readily manageable solutions, Sound Options works with clients with a wide range of needs and medical conditions.” I was struck with how similar her mission is to my mission in constructing comprehensive and well-thought-out estate plans.  For those of you wrestling with plans for your older adult parents, I thought you would benefit from this recent blog post by Mary Lynn.

One of the reasons that I am intrigued with working with older adults is their life stories. I really like listening to how a person summarizes their life or how they remember the simplest detail. Listening is a pleasure and it is so important while helping older adults live out the last chapters of their lives. One can learn so much by listening. As an adult child you may hear things you never knew before and that may allow you to see your parent in a different light. You may learn the very reason for why your parent made decisions – good or bad. I find listening creates for me more understanding and that at the end of the day we all have similar wishes and desires.

1. If possible have your older parent participate in planning their care
2. Create a safe environment for your parent
3. Provide quality of life- this will be different for each person.
4. Talk about the old times. Reminiscing can be very satisfying to both your parent and you.
5. Do not make promises you cannot keep
6. Make sure that their end of life desires are fulfilled
7. Do not forget that your parent is an adult – not a child
8. Provide ways for your parent to remain as safely independent as possible

Planning and sensitivity becomes even more important with age.  And it is even more important to address the personal as well as the factual elements of the situation.  If I can be of assistance in “transforming your potentially stressful circumstances into readily manageable solutions”, please, let’s talk.  Call me.

A word or two about ethics brings the comfort of confidentiality

Meet one of my fellow Wealth Counsel attorneys, Suzann Beckett. Suzann is a colleague who practices in Connecticut, and she recently posted to her blog this reminder of ethics guidelines as they apply to sharing confidential information.

Perhaps one of the least talked about aspects of working with a lawyer is the fear some of us have of exposing our personal lives to a total stranger. That reluctance takes a back seat in criminal law, where the process you are thrust into isn't voluntary. But when considering the larger decisions in life, opening the books on a lifetime of financial acquisitions, debts, and concerns to a total stranger can lead some people to avoid involving a lawyer when making long term plans.

Like most fears, the emotional reaction we have can be profoundly counter-productive. Sadly, it isn't all that unusual for costly, irreparable mistakes to be the result of our attempts to keep prying eyes out of our business.

The key is to be selective. When you plan for the future, you don't necessarily want to show the records of your financial holdings to your hairdresser, or the guy who mows your lawn. But it would be a good idea to come clean with the IRS on an annual basis. And although it may seem counter-intuitive, the best way to maintain control of your wealth and property over the long haul is to have an open, honest discussion of your plans with a legal professional who has your best interest at heart. Whether you are buying a home, building a business, filing for bankruptcy protection, or planning for the handling of your estate, you want to be the person in control - and you want the decisions you make to be based on solid legal grounds, not a gut feeling that may or may not stand up when you need it to. Keep in mind that you are the customer, and the law is in a very real sense, a service industry. So rest easy when you think about laying open your books, and your plans to a lawyer. The Bar Association holds lawyers to a very high ethical standard. Like your doctor, your lawyer is required by law to keep your confidence. A responsibility that we take very seriously, and one that I find comforting whenever I sit with a client who indicates the slightest concern for the security of their personal information.

When serving as your legal counsel, it is my responsibility to act with your best interests at heart. This posting by Suzann Beckett is a concise reminder that my counsel to you is for you and in your best interest. When offering counsel in my professional capacity, it is always confidential and it is specific to your needs. 

First String or Second String..They should all be good

Being a member of the Wealth Counsel organization gives me access to the first string across the country, and recently one of these colleagues addressed what is a concern for many of my clients.  So I’m passing along his thoughts. I think you will find them, as I did, to be very relevant and helpful.

“Typically a client builds a team of advisors to pull all the planning and implementation pieces together.  We all know that selecting this first team of advisors is very important. Many people are extra thorough in their approach.  Getting referrals, researching others experiences, and hopefully assembling a trusted group of advisors in the process. And in most cases, once they pick their advisors they typically stick with the team. Most people don’t like change, so a well chosen team avoids future stress and churn in the team’s makeup.  

One the First Team has been built.  Then comes the next most important task – choosing the Second String.  This is a critical next step, but often people don’t take this “second string” step. What do we mean by “second string”? Just as in sports, these are the “subs” or the ones that come into the game when something happens to the “first string” or starters. These are the ones waiting in the wings to take their place without a loss of momentum. 

The same situation occurs in working with your advisors for some of the most important aspects of your life – your wealth, your wills, your trusts, etc. We can all agree that no one is going to live forever. But few people take the next step to minimize their estate risks by picking “successors” to back-up each member of the first team. 

When it comes to managing personal risks, a succession plan should be implemented, especially for estate planning. It does take a bit of time, and it is a nominal investment.  But it is wise to have that second string in place sharing the “playbook” for your estate. It just helps lower your risks, lowers your stress and allows you to sleep better at night.”

Take your medicine...it's Good For You

Americans just do not like to discuss estate planning. Supposedly 7 out of 10 of us have no plan. Of the 3 who do, what are the chances that the plan is up to date? 

A friend of mine, Michael Stuart, just sent me this article in the NY Times, Estate Planning as Family Conversation, talking about talking. I wanted to share it with you as it paints the picture of what happens with no plan, and even how to open a conversation about one. 

When I think about the plans that I have helped clients create, many stories come to mind. One recurring theme is a senior couple who own some investments and real property, with one of their adult children serving full-time as a caretaker. Other kids are not too involved in things… and the caretaker daughter pretty much has her hands full with children of her own and helping out the folks. In this situation, the adult daughter has a full time job or two already… and no outside means of support. 

Many parents want to treat children "equally." But what do you do when there is only so much to go around, and the cost to one kid (the helper) is simply going to be too high for that to even remotely be fair? Parents must first plan for their care, then consider being "fair" rather than "equal" to those who follow. 

It's often the right thing to do… but without some conversation, and openness, it will likely have a huge cost in terms of relationships down the line. And ignoring this dynamic is unlikely to provide a better result. So start talking, it is a big first step to helping you with your estate planning today and well into the future.

 

Why Legalzoom.com is better than an attorney

A legal colleague of mine, Dennis Brislawn, wrote an interesting blog post about the use of LegalZoom.com compared with the services of an attorney, and I thought you might find his perspective interesting.

I recently had an opportunity to check out some LegalZoom documents.  One of my friends used the LegalZoom service to prepare some Wills for his kids.  They were simple trust planning documents.  Each spouse left the estate to the other, but if both were deceased, they had a Common Trust for all kids until they turned 21, then money would split into shares that each child would receive in equal installments at ages 24, 27, and 30.  These LegalZoom documents even had powers of attorney and all the trimmings.

The documents looked pretty "legal.”  My friend did the plan himself, in an hour or two on the weekend, and only spent a few hundred dollars.  He did this lieu of going to an attorney for budget reasons and scheduling difficulty with his activities.  At least he did something, which is far better than not covering this important issue – so kudos to my friend.

When he sought my opinion, my comments were that I thought the documents were good from a simplistic technical perspective.  I actually kind of liked them as they were well-written and clean.  How did that work compare to what I or one of my estate planning attorney colleagues would do?  They were simple, not elegant.  But the most important missing component is they did not demonstrate insight, personalization, or the awareness of core values important to my friends.  The document was clear for the kids after age 21, but there was no meaningful guidance into how a trust would be used by the guardians of children to raise them until age 21.  Guidelines create the comfort that their kids will become the adults their parents would be proud of.  What about asset protection for adult children to protect their inheritance against divorce or bankruptcy?  I think you get my point.

Result?  I was retained to do a comprehensive plan to address all the things that were not part of the simple LegalZoom plan. We also looked over their investments, retirement planning, insurance coverage, and the separate inheritances each was to get from their own grandparents and parents.  I reached out to my friend's advisers and got their help in relooking at all these things to make sure that they were properly handled too.

LegalZoom provides documents.  But I’m reminded by this experience that law is far more than the preparation of documents.  It is about listening, discerning, and identifying core values.  It is about understanding what can keep your clients awake at night.  It is about pulling together resources to resolve those concerns and to put a plan in place.  But, even more important, it is about working to keep that plan tuned up so that as things change, it changes.  Documents are simple.  Wisdom is harder to come by.

My experience is similar to this post by Dennis.  I help people with information that will lead to good decisions and workable plans.  The forms that I use are secondary part of my service. LegalZoom is better than doing nothing, and an attorney providing good advice offers more than just a set of forms. If you agree – or disagree – I’d welcome your comments. 

 

Top Areas of Focus - based on Client Needs

I mentioned in an earlier posting the Third Annual WealthCounsel Survey of Attorneys in Estate Planning and promised to share some of the more relevant nuggets with my readers. Here is another nugget...

Attorneys were asked what areas they were seeing as the highest growth areas for their clients over the next five years. Based on feedback from their clients and the increase in demand, here is a listing of the top areas most estate planning attorneys will most likely be focusing on in the next five years:

1. Business Entity Planning for Estate Planning Purposes
2. Beneficiary Inheritance Asset Protection Planning
3. Elder Law Planning
4. Post Mortem Administration
5. Business Succession Planning
6. Lifetime Planning
7. Tax Avoidance Strategies

Notice any patterns?  First, they are indicative of the aging population we will all be serving.  Second, there is a lot of "planning" that needs to take place.  Third, there are more "business" related issues than in the past.  Finally, and always on the list, how to I get to keep more of what I have and not pay as many taxes.

I'm seeing a very similar pattern in our geography as well and our clients are facing many of the same issues.  I guess the survey was pretty accurate.

When Grandma won't leave...

I met with some clients the other day and they described a problem that is not only very common but more and more of my clients are wrestling with the same issue.  So I thought I would share their story.

Grandma is a feisty, spirited personality who has been living in her same home for that past 40 years.  It is what she knows and it is where she raised her kids and where she spent her best years with her now deceased husband.  She wants to stay in her own home.

The problem isn't the house - it is being able to function in the house on her own now that all her kids have grown up and started their own lives.  She unfortunately doesn’t really have the ability to function safely on her own, day after day. She isn’t necessarily a danger to herself at this point but there are things that go on that make this a difficult situation.  There is the issue of physical security, getting around to the store for food and supplies, basic upkeep of the house and a host of other day to day issues.  Not overwhelming - yet - but she is headed in that direction.

She has several children including my clients, who are trying to grapple with grandma's situation. They came to me looking for an experienced voice to give them a heads up on how to deal with this very sensitive and personal issue - not to mention the accompanying financial issues. And as with many in this situation, it is a a first experience for both the adult children as well as the Grandma.  Sound familiar??

In this case, my clients were able to put together a plan over the next few years, include Grandma in the planning and allow her time to "get used to" the idea of not being in her home.  There were a lot of emotions and issues to deal with but eventually Grandma moved out, one of the children took over living in and caring for her house and it had a happy ending. 

  

The "Envelope" Please...

One of the largest and most respected attorney organizations  in the country is called WealthCounsel.  They just released their Third Annual Survey of Industry Trends and there were some "Ah-ha's" and interesting results that I thought you might be interested in hearing about.  Since this group is exclusively used "by attorneys" and "for attorneys" it isn't very often the general public gets to see this information.  Let's take a peak...

While many businesses are down, 40% of the attorney's said their business had increased - at least in the estate planning area.  Why?  More people were focused on updating and getting some plans in place to hold onto more of what they had after many had lost a bundle due to the economic crisis.  This was not only good for the attorney's but was very good for their clients to get an update and better plans in place.

Here is an "Ah-ha" from the study.  They asked the number one reason why clients plan - any guesses?  The number one reason was to "avoid probate" and minimize estate taxes.  Not the first response most would have thought.  Along the same lines, another major factor that motivates clients to do their planning is to answer the question, "What would happen if they don't plan?"  Most attorney's expect to see an increase in activity as the population of baby-boomers starts aging - which is happening right now.

Very interesting results from this years survey...I will share more in another post.

Special Forces or the whole Army?

I was in a meeting the other day with some clients and they asked me a very interesting question, “What should I tell my friend that is looking for an attorney and trying to decide between a smaller law firm and one of the larger, multi-state firms?” Good question and one that always makes you a bit nervous to answer. By the way, this is not the first time I have been asked this question.

Not knowing any of the circumstances around their friend, I decided the best way to answer it was to refer them to a blog post from a fellow Wealth Counsel attorney, Dennis Brislawn of Brislawn Lofton LLC. I thought Dennis had one of the best and simplest answers to this question I have seen in a long time. His post was titled, Special Forces or the whole Army. I would encourage you to click on the title and read his description.

What more can I say – this is perfect. We are the “Special Forces” group and whether we are Rangers or any other Special Forces team, we are all about “expediency”, and “efficiency” in getting done what our clients need. We aren’t encumbered by red tape and politics or a host of other barriers that exist in larger firms. We just simply get it done. Thanks Dennis, well said.

Where's the Personality in the Yellow Pages?

When the Yellow Pages first came out it was really great an innovative – and really the only place that was easy to go to find something you needed. And we usually made our purchases based off the size of the ad the business had placed. Why? We figured if they could dump a ton of money into something like an ad in the Yellow Pages they must be stable enough and reputable.

Then came the internet and the world changed. Today, who needs the Yellow Pages? Who cares about the size of your ad? Who actually goes to it and looks anything up anymore? For most, it goes from doorstep to recycle bin. Why? Because it is faster and more informative to do a Google search and get a list of options for anything and everything we need.

Now, we have an even stronger way to accomplish this – social media. Social media takes the internet and websites to a whole new level – again – just like the move from Yellow Pages to the website. Now, we don’t just want information, we want to know what others are saying about the law firm or business and what “experiences” have others had with them. Then, based on what others have experienced, we can make a much more informed and accurate buying decision.

This is awesome for attorneys. Now, through the use of simple blog, I can share with you my thoughts, ideas, issues and stories to help you both “learn” and “experience” what we do for our clients and how we solve their problems. So no longer do you need to pick the biggest ad in the Yellow Pages and hope they meet your need. Now you get to “hear” what others “experienced” and can decide (with a ton more information) whether we are right for you and you are right for us. The world just got easier and better.

Would you choose an Attorney for their CROSSWORD PUZZLES?

One of my colleagues, Dennis Brislawn of Brislawn Lofton LLC, wrote a very timely and “spot on” post in his blog the other day that I wanted to share with you. It was so perfect for exactly what we deal with all the time in deciding the best way to bring value to our clients.

In Dennis’s posting, Would you choose an attorney for his RECIPE’s?, Dennis described a universal dilemma all attorney’s have in how to best communicate and provide information to their clients and prospective clients. We tend to focus on the “newsletter” and as such have spent countless time and dollars on producing these “works of art.” Dennis found the real truth behind the “attorney newsletter” and I wanted to share his story with all of you.

Suffice it to say we have the same experience – only we use Crossword Puzzles in ours – how appropriate. I am now on a quest to find out if what Dennis and his firm experienced is what our clients feel as well. If you are willing, we would love to hear from you and see if one of the main reasons you read or like our newsletter is because of the crossword puzzles instead of the content. Don’t worry, we won’t offended – in fact, we will be very appreciative. Thank you in advance for your comments and/or e-mails letting us know how you feel.

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