3 Deadly Sins of Retirement Planning

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Retirement planning is one of life’s most important financial goals. Indeed, funding retirement is one of the primary reasons many people put money aside in the first place. Yet many of us put more effort into planning for our vacations than we do to prepare for a time when we may no longer earn an income.

Whether you’ve put off planning for retirement altogether or failed to create a truly comprehensive plan, you’re putting yourself at risk for a future of poverty, penny pinching, and dependence. The stakes could hardly be higher.

When preparing for your final years, it’s not enough to simply hope for the best. You should treat retirement planning as if your life depended on it—because it does. To this end, even well-thought-out plans can contain fatal flaws you might not be aware of until it’s too late.

Have you committed any of the following three deadly sins of retirement planning?

1. Not having an actual plan
Even if you’ve been diligent about saving for retirement, without a detailed, goal-oriented plan, you’ll have no clear idea whether your savings strategies are working adequately or not. And such plans aren’t just about calculating a retirement savings number, funding your 401(k), and then setting things on auto-pilot.

Once you know how much you’ll need for retirement, you must plan for exactly how you’ll accumulate that money and monitor your success. The plan should include clear-cut methods for increasing income, reducing spending, maximizing tax savings, and managing investments when and where needed.

What’s more, you should regularly review and update your asset allocation, investment performance, and savings goals to ensure you’re still on track to hit your target figure. With each new decade of your life (at least), you should adjust your savings strategies to match the specific needs of your new income level and age.

Failing to plan, as they say, is planning to fail.

2. Not maximizing the use of tax-saving retirement accounts
One way or another, the money you put aside for retirement is going to be taxed. However, by investing in tax-saving retirement accounts, you can significantly reduce the amount of taxes you’ll pay.

Depending on your employment and financial situation, there are numerous different plans available. From traditional IRAs and 401(k)s to Roth IRAs and SEP Plans, you should consider using one or more of these investment vehicles to ensure you achieve the most tax savings possible.

What’s more, many employers will match your contributions to these accounts, which is basically free money. If your employer offers matching funds, you should not only use these accounts, but contribute the maximum amount allowed—and begin doing so as early as possible.

Since figuring out which of these plans will offer the most tax savings can be tricky—and because tax laws are constantly changing—you should consult with a professional financial advisor to find the one(s) best suited for your particular situation. Paying taxes is unavoidable, but there’s no reason you should pay any more than you absolutely must.

3. Underestimating health-care costs
It’s an inescapable fact that our health naturally declines with age, so one of the riskiest things you can do is not plan for increased health-care expenses.

With many employers eliminating retiree health-care coverage, Medicare premiums rising, and the extremely volatile nature of health insurance law, planning for your future health-care expenses is critical. And it’s even more important seeing that we’re now living longer than ever before.

Plus, these considerations are assuming that you don’t fall victim to a catastrophic illness or accident. The natural aging process is expensive enough to manage, but a serious health-care emergency can wipe out even the most financially well off.

Start preparing for retirement now
The best way to maximize your retirement funding is to start planning (and saving) as soon as possible. In fact, your retirement savings can be exponentially increased simply by starting to plan at an early age.

Let us know if we can help. We’ll be glad to review what you have in place now, advise you about what you need, introduce you to advisors you can trust, and ensure you and your family are well-protected and planned for, no matter what.

Dedicated to empowering your family, building your wealth and defining your legacy,

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Why Naming Legal Guardians for Children in a Will Isn’t Good Enough

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Template wills and other cheap legal documents are among the most dangerous choices you can make for the people you love. These plans can fail to keep your family out of court and out of conflict, and can leave the people you love most of all—your children—at risk.

The people you love most
It’s probably distressing to think that by using a cut-rate estate plan you could force your loved ones into court or conflict in the event of your incapacity or death. And if you’re like most parents, it’s probably downright unimaginable to contemplate your children’s care falling into the wrong hands.

Yet that’s exactly what could happen if you rely on free or low-cost fill-in-the-blank wills found online, or even if you hire a lawyer who isn’t equipped or trained to plan for the needs of parents with minor children.

Naming and legally documenting guardians entails a number of complexities that most people aren’t aware of. Even lawyers with decades of experience frequently make at least one of six common errors when naming long-term legal guardians.

If wills drafted with the help of a professional are likely to leave your children at risk, the chances that you’ll get things right on your own are much worse.

What could go wrong?
If your DIY will names legal guardians for your kids in the event of your death, that’s great. But does it include back-ups? And if you named a couple to serve, how is that handled? Do you still want one of them if the other is unavailable due to illness, injury, death, or divorce?

And what happens if you become incapacitated and are unable to care for your children? You might assume the guardians named in the DIY will would automatically get custody, but your will isn’t even operative in the event of your incapacity.

Or perhaps the guardians you named in the will live far from your home, so it would take them a few days to get there. If you haven’t made legally-binding arrangements for the immediate care of your children, it’s possible they will be placed with child protective services until those guardians arrive.

Even if you name family who live nearby as guardians, your kids are still at risk if those guardians are not immediately available if and when needed.

And do they even know where your will is or how to access it? There are simply far too many potential pitfalls when you go it alone.

Kids Legal Planning
To ensure your children are never raised by someone you don’t trust or taken into the custody of strangers (even temporarily), consider creating a comprehensive Kids Protection Plan®.

Protecting your family and assets in the event of your death or incapacity is such a monumentally important task you should never consider winging it with a DIY plan. No matter how busy you are or how little wealth you own, the potentially disastrous consequences are simply too great—and often they’re not even worth the paper they’re printed on.

Plus, proper estate planning doesn’t have to be a depressing, stressful, or morbid event. In fact, we work hard to ensure our planning process is as stress-free as possible.

What’s more, many of our clients actually find the process highly rewarding. Our proprietary systems provide the type of peace of mind that comes from knowing that you’ve not only checked estate planning off your to-do list, but you’ve done it using the most forethought, experience, and knowledge available.

Act now
If you’ve yet to do any planning, contact us to schedule a Family Estate Planning Session. This evaluation will allow us to determine your best option.

If you’ve already created a plan—whether it’s a DIY job or one created with another lawyer’s help—contact us to schedule an Estate Plan Review and Check-Up. We’ll ensure your plan is not only properly drafted and updated, but that it has all of the protections in place to prevent your children from ever being placed in the care of strangers or anyone you’d never want to raise them.

Dedicated to empowering your family, building your wealth and defining your legacy,

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When Something is NOT Better Than Nothing

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Go online, and you’ll find tons of websites offering do-it-yourself estate planning documents. Such forms are typically quite inexpensive. Simple wills, for example, are often priced under $50, and you can complete and print them out in a matter of minutes.

In our uber-busy lives and DIY culture, it’s no surprise that this kind of thing might seem like a good – if not great – deal. You know estate planning is important, and even though you may not be getting the highest quality plan, such documents can make you feel better for having checked this item off your life’s lengthy to-do list.

But this is one case in which SOMETHING is not better than nothing, and here’s why:

A false sense of security
Creating a DIY will online can lead you to believe that you no longer must worry about estate planning. You got it done, right?

Except that you didn’t. In fact, you thought you “got it done” because you went online, printed a form, and had it notarized, but you didn’t bother to investigate what would happen with that document in the event of your incapacity or death.

In the end, what seemed like a bargain could end up costing your family more money and heartache than if you’d never gotten around to doing anything at all.

Not just about filling out forms
Unfortunately, because many people don’t understand that estate planning entails much more than just filling out legal documents, they end up making serious mistakes with DIY plans. Worst of all, these mistakes are only discovered when you become incapacitated or die, and it’s too late. The people left to deal with your mistakes are often the very ones you were trying to do right by.

The primary purpose of wills and other estate planning tools is to keep your family out of court and out of conflict in the event of your death or incapacity. With the growing popularity of DIY wills, tens of thousands of families (and millions more to come) have learned the hard way that trying to handle estate planning alone can not only fail to fulfill this purpose, it can make the court cases and conflicts far worse and more expensive.

The hidden dangers of DIY wills
From the specific state you live in and the wording of the document to the required formalities for how it must be signed and witnessed, there are numerous potential dangers involved with DIY wills and other estate planning documents. Estate planning is most definitely not a one-size-fits-all deal. Even if you think you have a simple situation, that’s almost never the case.

The following scenarios are just a few of the most common complications that can result from attempting to go it alone with a DIY will:

  • Improper execution: For a will to be valid, it must be executed (i.e. signed and witnessed or notarized) following strict legal procedures. If your DIY will doesn’t specific guidance or you fail to follow this procedure precisely, your will can be worthless.
  • Court challenges: Creditors, heirs, and other interested parties will have the opportunity to contest your will or make claims against your estate. Though wills created with an attorney’s guidance can also be contested, DIY wills are not only far more likely to be challenged, but the chances of those challenges being successful are much greater than if you have an attorney-drafted will.
  • Thinking a will is enough: A will alone is almost never sufficient to handle all of your legal affairs. In the event of your incapacity, you would also need a health care directive, and/or a living will plus a durable financial power of attorney. In the event of your death, a will does nothing to keep your loved one’s out of court. And if you have minor children, having a will alone could leave your kids’ at risk of being taken out of your home and into the care of strangers, at least temporarily.

In many ways, DIY estate planning is the worst choice you can make for the people you love because you think you’ve got it covered, when you most certainly do not.

Dedicated to empowering your family, building your wealth and defining your legacy,

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Aretha Franklin Dies Without a Will and Leaves Her Family to Deal With Court and Conflict

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Aretha Franklin, heralded as the “Queen of Soul,” died from pancreatic cancer at age 76 on August 16th at her home in Detroit. Like Prince, who died in 2016, Franklin was one of the greatest musicians of our time. Also like Prince, she died without a will or trust to pass on her multimillion-dollar estate.

Franklin’s lack of estate planning was a huge mistake that will undoubtedly lead to lengthy court battles and major expenses for her family. What’s especially unfortunate is that all this trouble could have been easily prevented.

A common mistake
Such lack of estate planning is common. A 2017 poll by the senior-care referral service, Caring.com, revealed that more than 60 percent of U.S. adults currently do not have a will or trust in place. The most common excuse given for not creating these documents was simply “not getting around to it.”

Whether or not Franklin’s case involved similar procrastination is unclear, but what is clear is that her estimated $80-million estate will now have to go through the lengthy and expensive court process known as probate, her assets will be made public, and there could be a big battle brewing for her family.

Probate problems
Because Franklin was unmarried and died without a will, Michigan law stipulates that her assets are to be equally divided among her four adult children, one of whom has special needs and will need financial support for the rest of his life.

It’s also possible that probate proceedings could last for years due to the size of her estate. And all court proceedings will be public, including any disputes that arise along the way.

Such contentious court disputes are common with famous musicians. In Prince’s case, his estate has been subject to numerous family disputes since his death two years ago, even causing the revocation of a multimillion-dollar music contract. The same thing could happen to Franklin’s estate, as high-profile performers often have complex assets, like music rights.

Learn from Franklin’s mistakes
Although Franklin’s situation is unfortunate, you can learn from her mistakes by beginning the estate planning process now. It would’ve been ideal if Franklin had a will, but even with a will, her estate would still be subject to probate and open to the public. To keep everything private and out of court altogether, Franklin could’ve created a will and a trust. And, within a trust, she could have created a Special Needs Trust for her child who has special needs, thereby giving him full access to governmental support, plus supplemental support from her assets.

While trusts used to be available only to the mega wealthy, they’re now used by people of all incomes and asset values. Unlike wills, trusts keep your family out of the probate court, which can save time, money, and a huge amount of heartache. Plus, a properly funded trust (meaning all of your assets are titled in the name of the trust) keeps everything totally private.

Trusts also offer several protections for your assets and family that wills alone don’t. With a trust, for example, it’s possible to shield the inheritance you’re leaving behind from the creditors of your heirs or even a future divorce.

Don’t wait another day
Regardless of your financial status, estate planning is something that you should immediately address, especially if you have children. You never know when tragedy may strike, and by being properly prepared, you can save both yourself and your family massive expense and trauma.

Don’t follow in Franklin’s footsteps; use her death as a learning experience. 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, or need your plan reviewed, call us today.

Dedicated to empowering your family, building your wealth and defining your legacy,

 

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Why Not Just Go Online and Create Your Own Estate Planning Documents Cheaply?

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woman at computer 91024There are many software programs, as well as websites, that sell do-it-yourself estate planning documents. These websites and form creation tools seem to offer a convenient and cost-effective alternative to consulting with an estate planning attorney. But will they really meet your needs and protect your family? Is online, do-it-yourself estate planning worth the perceived upfront savings?

Penny Wise and Pound Foolish

In all but the simplest scenarios, do-it-yourself estate planning is risky at best and can become a costly substitute for comprehensive in-person planning with a professional legal advisor. Typically, these online programs and services have significant limitations when it comes to gathering the information needed to properly craft an estate plan. This can result in crucial defects that, sadly, won’t become apparent until the situation becomes a legal and financial mess for your loved ones.

Creating your own estate plan without professional advice can also have unintended consequences. Bad or thoughtless documents can be invalid and/or useless when they are needed. For example, you can create a plan that has no instructions for when a beneficiary passes away or when a specific asset left to a loved one no longer exists. You may create a trust on your own but fail to fund it, resulting in your assets being tied up in probate courts, potentially for years. Worse yet, what you leave behind may then pass to those you did not intend.

Your family situation, goals, and assets are unique. Plus, incapacity issues deserve more than the perfunctory attention offered by template documents. There are nuances which simply can’t be adequately addressed in an off-the-shelf document. In addition, non-traditional families, or those with a complicated family arrangement, require more thorough estate planning. The options available in a do-it-yourself system may not provide the solutions that are necessary. A computer program or website cannot replicate the intricate knowledge a qualified local estate planning attorney will have and use to apply to your particular circumstances.

If you’re a person of significant wealth, then concerns about income and estate taxes enter the picture too. An online estate planning website or program that prepares basic wills without taking into account the size of the estate can result in hundreds of thousands of dollars in increased (and usually completely avoidable) tax liability. A qualified estate planning attorney will know how to structure your legal affairs to properly manage – or, in many cases, even avoid – the burden of the death tax as well as minimize the impact of ongoing income taxes.

One important aspect of estate planning is protecting adult children from the negative financial consequences of divorce, bankruptcy, lawsuits, or illness. An online planning tool will not take these additional steps into account when putting together what is usually a basic estate plan. Similarly, parents who have children or adult loved ones with special needs must take extra caution when planning. There are complicated rules regarding government benefits that must be considered, so these valuable benefits are not lost due to an inheritance.

Consult an Estate Planning Attorney

No matter how good a do-it-yourself estate planning document may seem, it is no substitute for personalized advice. Estate planning is more than just document production. In many cases, the right legal solution to your situation will not be adequately addressed by these do-it-yourself products – affecting not just you, but generations to come.

Dedicated to empowering your family, building your wealth and defining your legacy,

Marc Garlett 91024

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Tips for Getting the Most Out of Working with a Law Firm

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estate planning 91024When you hire an attorney for estate planning, help administering a loved one’s estate, or any other legal matter, you want to make sure the work gets done as quickly as possible and at the best possible value.  Here are some tips to have the most useful and value-oriented law firm experience.

  • Get to know the lawyer and the law firm You’ll be working with the entire team, so it’s a good idea to know who to reach out to at the office. Paralegals and office assistants are employed by the lawyer to help you. Make sure you are comfortable with each person on the team.
  • The more organized you are, the easier and more efficient the entire process will be. Provide copies of documents as soon as possible when they are requested. This will save the lost time and delays caused when your lawyer must wait for documents before proceeding with your matter.
  • Keep your original documents in a secure place and only bring in copies (unless the original of a particular document is specifically requested). It’s always a good idea, however, to bring the original will to the first meeting when you need to probate a loved one’s estate or administer their trust. Your lawyer will also need an original death certificate in those situations.
  • Be brutally honest with your attorney about your situation. Give the whole story so that the advice you receive (and pay for) is information based on real facts and not a sanitized version of them. Your attorney is not there to judge, but rather to develop solutions to the issues you and your family are facing.
  • Bring a list of goals, concerns, and questions to each meeting so you can cover everything you want to discuss. Feel free to take notes during the meetings and ask your attorney to explain anything you don’t fully understand. Remember, it’s your meeting and your case – your satisfaction and peace of mind should always be a priority, both for your lawyer and for you.
  • Carefully review your fee agreement so you understand how you’ll be charged for services rendered. Ask about fees for phone calls, emails, plan reviews, amendments, or special circumstances. Where possible, avoid hourly billing as this inhibits attorney-client communication, gets in the way of trust, and doesn’t give you a clear picture of the total cost involved to work with the law firm.

In summary, when you hire a law firm, you gain access to a team of attorneys, legal support staff, and administrative professionals who are there to help you achieve your legal goals.  You should feel confident your entire legal team is working together on your behalf to provide the best client experience and the best value for the price. If you’re not sure that’s exactly what you’d be getting from a firm, walk away and find one that gives you that confidence. Trust and estate matters are far too important to settle for anything less.

Dedicated to empowering your family, building your wealth and securing your legacy,

Marc Garlett 91024

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3 Decidedly Dumb Ways to Leave an Inheritance for Your Children

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family estate planning 91024Estate planning offers many ways to leave your wealth to your children, but it’s just as important to know what not to do. The following ill-advised estate planning strategies can cause confusion, or even cost your children some – if not all – of their inheritance….

“Oral Wills”

If you feel you have a good rapport with your family or don’t have many assets, you might be tempted simply to tell your children or loved ones how to handle your estate when you’re gone. However, even if your family members wanted to follow your directions, it won’t be up to them. Without a written document, any assets you own individually must go through probate, and “oral wills” carry absolutely no weight in court. It would be up to a judge and the intestate laws written by the legislature, not you or your desired heirs, to decide who gets what. This strategy should be avoided at all costs.

Joint Tenancy

In lieu of setting up a trust, some people name their children as joint tenants on their properties. The appeal is that children should be able to assume full ownership when the parents pass on, while keeping the property out of probate. However, this does not mean that the property is protected; it doesn’t insulate the property from taxes or creditors, including your children’s creditors, if they run into financial difficulty. Their debt could even result in a forced sale of your property.

And there’s another big issue, too. Choosing this approach exposes your properties to otherwise avoidable capital gains taxes. Here’s why. When you sell certain assets, the government taxes you. But you can deduct your cost basis—a measure of how much you’ve invested—from the selling price. For example, if you and your spouse bought vacant land for $200,000 and later sell it for $500,000, your taxable gain would be $300,000 (the increase in value).

However, your heirs can get a break on these taxes. For instance, let’s say you die, and the fair market value of the land at that time was $500,000. If you use a trust rather than joint tenancy, your spouse’s cost basis is now $500,000 (the basis for the heirs gets “stepped-up” to its value at your death). So, if she then sells the property for $515,000, her taxable gain is only $15,000, rather than the $315,000 it would have been before your death! However, with joint tenancy, she does not receive the full step-up in basis, meaning she’ll pay more capital gains taxes.

Giving Away the Inheritance Early

Some parents choose to give children their inheritance early–either outright or incrementally over time. But this strategy also comes with several pitfalls. First, if you want to avoid hefty gift taxes, you are limited to giving each child $14,000 per year. You can give more, but you start to use up your gift tax exemption and must file a gift tax return as well. Second, a smaller yearly amount might be seen by your kids more like “free money” than the beginnings of your legacy, so they might squander it rather than invest. Third, if situations change that would have caused you to re-evaluate your allocations, it’s too late. You don’t want to be dependent on them giving the cash back if you ever need it for your own maintenance and support.

Shortcuts and ideas like these may look appealing on the surface, but they often do more harm than good. Consult with an estate planner to avoid these pitfalls and find the best strategies to prepare for your and your families’ future.

Dedicated to empowering your family, building your wealth and securing your legacy,

Marc Garlett 91024

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Learn From the Estate Planning Mistakes of Others

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estate planning 91024There is much to be learned from the mistakes of others and the celebrity world abounds with cautionary tales when it comes to estate planning. Even with all the financial resources available to them, celebrities can neglect the basics when it comes to protecting assets.

We come across sad tales all the time of “regular” people failing to take the proper steps to create an estate plan that assures their assets pass properly and that their heirs are spared from having to untangle costly legal messes.

Here are five important lessons you can learn from the mistakes of others:

  1. Don’t die without a will. Celebrities are the same as most people when it comes to thinking they will live forever – but they differ greatly in that they usually have a lot more money to leave behind. Actor Heath Ledger died without updating his will to include his daughter; all his assets went to his parents and siblings.
  2. Equal isn’t always the same. Thinking she was treating her two children equally in her bequest, one woman left her home to her son and her investment portfolio to her daughter. Unfortunately, when she died, there was a sizeable tax liability on the home, and the only assets available were from the portfolio, leaving the daughter shortchanged.
  3. Name the right executor. Naming a friend as executor is fine, but not always the best option. One woman named her best friend as her executor, but they happened to be the same age. When the woman died at age 86, her friend followed a few weeks later and no one was left to serve as executor since she hadn’t named a backup.
  4. Provide for your children from a prior marriage. A man with children from a first marriage left all his assets to his second wife; when she died, she left all of those assets to her children, leaving nothing for his children. Instead, he should have provided for them directly or placed his assets in a trust so they could pass to his children after her death.
  5. Promises don’t count. Before he died, Marlon Brando allegedly promised his house to his caregiver but did not record that promise in his will. She did not get the house. If you want to leave something to someone, you need to put it in writing in your will or a trust.

You can protect, provide for, and make things as easy on your family as possible. Learn from the mistakes of others. Don’t repeat them.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

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Hollywood Legend Lauren Bacall Leaves Large Estate (and Potentially Large Headaches) for Heirs

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lauren-bacallLegendary Hollywood actress Lauren Bacall died on August 12, 2014, leaving behind an estate worth an estimated $26.6 million. Her three children now face a couple of potentially serious problems that could have been avoided through effective estate planning.

Bacall, who was married to Humphrey Bogart and Sam Robards, passed away in her New York City apartment, which at a $10 million valuation constitutes a sizeable part of her estate. Because Bacall used a will as the governing document of her estate plan instead of a revocable living trust, the division of her estate is a matter of public record.

In fact, her will was made public a mere 10 days following her death because her children plan to auction off her artwork this fall. As a resident of New York, Bacall’s estate will be subject to both state and federal estate taxes. A trust left to her by Bogart will also be subject to tax based on its valuation.

Unfortunately, her estate only included about $100,000 in liquid assets at the time of her death, so her heirs face a potentially serious liquidity problem when it comes to paying these taxes. This is probably the reason behind the rush to auction her artwork. Her family has only nine months from the date of her death to pay estate taxes.

Although Bacall directed in her will that her apartment be sold, there is no guarantee that it could sell in time to pay the estate taxes. Life insurance is one of the most common ways to ensure there is sufficient liquidity to pay taxes and other expenses.

Besides the financial assets, Bacall left her children the rights to her likeness and other intellectual property associated with her illustrious career. (She did request that her children not sell her personal effects, letters and memorabilia in her will.) This could be of significant value in future years, and the IRS could come after the heirs for taxes based on that value.

There could also be issues that arise regarding the management of this intellectual property in the coming years, which could lead to litigation as it has in the cases of many other famous entertainers, like Michael Jackson. To help avoid this, the family should consider establishing a trust or other legal entity to manage these assets and make decisions on how they will be used in the future.

Even though most of us don’t have a $26.6 million dollar estate to worry about, we can still learn valuable and pertinent lessons from Bacall’s mistakes. With a little advanced planning our loved ones can be spared from a public court process, the high costs of probate and estate taxes, and the liquidity problems that can spring up and force them to sell family heirlooms and even the family home. And I promise you there’s nothing like the feeling that comes from knowing you’ve done right by your family and taken care of all that for them.

To you family’s health, wealth, and happiness,
Signature - Marc

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