Thank Congress if You Made Big Gifts in 2012

Am Tax Rel Act

Hank Wittenberg has a great article on on why those of you who did year end planning in 2012 made the right choice, even though Congress extended the generous gift and estate tax exclusions with the American Taxpayer Relief Act.

The tax act signed into law by President Obama last week provided some very good estate planning provisions. Surprisingly, I have already read and heard complaints from other estate planning attorneys that this new tax act renders the 2012 year end gifting a “waste of time.” This is absurd; quit your whining! These are the same folks who complain that their clients would not make any significant gifts in spite the significant benefits that go with it, tax and otherwise. The one good thing about the “fiscal cliff threat” is that it convinced some to implement plans that should have been implemented already.

He also adds his top 10 estate tax and gift tax benefits of the new law:

1. Predictability: Taxpayers now have some reasonable estate tax expectations for the foreseeable future so they won’t be paralyzed by “what Congress might do in the future.”

2. Unified Gift and Estate Tax: Since the exemption amount for an estate is now permanent there was no need to split the gift tax exemption and the estate tax exemption like it was in the 2001 law. This structure is easier to understand and planning can be more straight-forward.

3. Generation-Skipping Transfer Tax: Having the same levels makes planning for multiple generations simpler (but still not without traps for the unwary).

4. Indexing: The exemption amounts are indexed for inflation, providing even longer term clarity in planning that is aligned with real economic effect.

5. Rate: The current maximum estate tax rate for estates with more than $5,250,000 in 2013 is 40%. Yes, I see this as beneficial. Perhaps it’s my age but is seems like it was only yesterday that the maximum estate tax rate was 55% (actually 60% for estate between approximately $10 and $20 million).

6. Portability: Portability permits a surviving spouse to use a deceased spouse’s unused exemption amount. Caution! To take advantage of this benefit, an estate tax return must be filed for the deceased spouse. This is a simple concept but tedious to complete. In other words, easier said than done.

7. Grantor Trusts: Plans can be designed that require the grantor to pay income tax on a trust that is not included in their estate upon death. In effect, each year that the Grantor pays taxes for the trust, the trust is growing tax-free for the beneficiaries. Over the long run this is an enormous benefit. Note: President Obama has proposed that this strategy be eliminated.

8. Perpetual Trusts: Many states like New Hampshire provide ways to create a trust that will last as long as the assets survive. In the days of olde, all trusts were required to terminate at a specific time in the future, most often measured by “lives in being.” If this notion intrigues you I encourage you to pick up a copy of Loring and Rounds, A Trustee’s Handbook (2013). No, I do not get paid for the product placement! Note: President Obama has proposed that perpetual trusts be eliminated.

9. Tax Leveraging Trusts: Without getting into a technical explanation, we can still use two year rolling GRATs (Grantor Retained Annuity Trusts – call us if you would like to learn about GRATs). In the right situation these are very powerful wealth transfer tools. Note: President Obama has proposed that a minimum term for GRATs be 10 years which eliminates much of the benefit from them.

10. Predictability: Not because I have run out of things to say but because it’s worth stating twice. OK, if you want something new: we still have the step-up in basis – that’s a huge benefit from a capital gain tax standpoint and from an administrative standpoint.



How the Lifetime Bypass Trust Works: Attention CPAs

Cutting taxes

Many of my clients are interested in the Lifetime Bypass Trust. And some are vetting the concept through their CPAs. Here is an email (with the names removed) I have sent to several CPAs to clarify this amazing but simple planning strategy.

The structure we are proposing is a lifetime bypass trust. The concept is the same as used with an A/B trust, or bypass trust.

When a bypass trust is created upon the death of a spouse, it is funded with the deceased spouse’s share of property up to the then death tax exclusion amount. The surviving spouse is usually the trustee and the primary beneficiary of the bypass trust.

The benefits of the bypass trust are:

1) Assets in it (and all future growth) will not be subject to the death tax at the deceased spouse’s death or at the surviving spouse’s death because the trust was funded using the deceased spouse’s death tax exclusion, and

2) Assets in it will be significantly protected from lawsuits and divorce claims against the surviving spouse.

The use of a bypass (A/B) trust is a tried and true estate planning strategy.

The Lifetime Bypass Trust is based on the same principal, except that we are creating and funding it now, to take advantage of the $5.12M gift exclusion available this year, rather than waiting until a spouse dies. One of my client’s calls it an “early bypass trust.”

Just like the at-death bypass trust, the lifetime bypass trust would name spouse as trustee and spouse and children as beneficiaries.

Just like the at-death bypass trust, the assets in the lifetime bypass trust would be exempt from estate tax when the grantor spouse dies, when the surviving spouse dies and, if generation skip exemption is used, even when their children die – two generations of no estate tax on the gifted asset and future appreciation.

Just like the at-death bypass trust , we can give the surviving spouse a limited power of appointment to change the remainder beneficiaries, limited to a certain class of people, like descendants. However, with the lifetime bypass trust, we could also include the grantor spouse as a permissible beneficiary. (Can’t do this with bypass trust created at death b/c the grantor spouse is dead.)

The grantor spouse, after the creation of the trust, can be named a remainder beneficiary if done correctly. This will not cause estate tax inclusion unless there is an implied understanding between grantor and trustee at the time the trust is created.

We recommend drafting the lifetime bypass trust to give an independent third party/trust advisor the authority to add and remove the grantor spouse as beneficiary.

The lifetime bypass trust uses the tried and true principles of a standard at-death bypass trust, but it uses the gift exemption now, while it is $5.12M, rather than at death, when the death tax exclusion is scheduled for a big drop (under current law $1M).

The downside to the lifetime bypass trust is the loss of step up in basis at death. But since the estate tax rate (35%-55%) has historically been a much higher rate than the capital gains tax rate (15%-20%) , most people would rather avoid the estate tax. In addition, the Democrats and the President have expressed their intent to do away with the step up in basis for inherited assets. So losing the step up in basis may happen anyway.

Finally, we may look back and realize 2012 was the best and easiest time in history to reduce or eliminate estate tax. If the estate and gift tax exclusions drop as scheduled on January 1, planning will get much more complicated and much more expensive.

Gift Now Before It’s Too Late


One of my clients send me a terrific article from Concannon Miller about the urgency to make gifts and how to make gifts before December 31. It is so good, I’m posting the whole article.

When it comes to making a decision about gifts and protecting assets, the main message is that, if appropriate for you, make gifts before the law changes in 2013; however there are many important nuances to the message that the media and many of the announcements for consumers have ignored.  A key message is that many people, not just the ultra-high net worth families, should consider the valuable 2012 planning options.

If you’ve tuned out these messages because you don’t believe your financial position justifies planning, reconsider and be certain. 

A critical issue that has been left out of the media blitz is that the large gifts that are being made should almost always be in trust. These trusts raise a host of issues, many of which have special implications to 2012 planning. This Alert will simply convey key points and hopefully you’ll be motivated to act now, act prudently and call your advisor.

Uncertainty: Uncertainty should not be the basis for inaction. Uncertainty may also mean opportunity. If you don’t act now, 2013 is scheduled to bring a $1 million gift, estate, and GST exemption and 55 percent tax rate. President Obama has continued to propose estate and gift tax changes that will undermine much of the planning arsenal, making his proposed 45 percent rate and $3.5 million exemption far more costly than most imagine.

True, the future is uncertain no matter who wins the election. At worst, if you don’t act and top rates go into effect, you and your heirs may lose out on tremendous opportunities. At best, you’ve wasted the cost of the planning, but have you? The trust planning that should be at the heart of 2012 planning will serve your estate planning needs and will provide asset protection benefits, divorce protection for your heirs, and better control and management of your assets. So the planning in the best tax case scenario (estate tax repeal) won’t be for naught, you’ll just have one less benefit. Even if the estate tax is repealed (which few if any believe likely at this point) the gift tax may remain intact with a $1 million exemption. Most simply don’t realize the importance of the gift tax is an integral backstop for the income tax, not only for the estate tax. If that occurred, transferring assets to protect them from lawsuits and claims would become incredibly difficult.

Planning Is for Many People, Not Only the Ultra-Wealthy: Planning is not only for the very wealthy. If you have a non-married partner, a $1 million gift exemption in 2013 will make it costly to shuffle ownership of assets between you and your partner. Everyone, not just surgeons, should be concerned about asset protection. Nothing anyone in Washington does will change the litigious nature of our society. About a score of states have decoupled from the federal estate tax system so that much lower amounts of wealth may trigger a state estate tax. A simple gift today might be all it takes in many situations to reduce or eliminate state estate tax. Use the current favorable tax environment to shift assets into protective structures before the ability to do so is sharply curtailed. A $1 million gift exemption will render much of this planning costly, impractical, or impossible.

Financial Planning Is Key: Start with a financial plan since that must be the foundation of any major 2012 wealth transfer. How much can you afford to give away and be really assured that you won’t have financial difficulties in the future? Which assets can or should you give away? Do you need additional life insurance for coverage in light of components of the plan? Might you need access in the future to the money you give away and if so how much? This analysis will support your position that you’re left with more than adequate assets for your lifestyle after the transfers. This can deflect an IRS challenge that you had an implied understanding with the trustees of a trust to which you make a gift to receive distributions, loans or other access to the assets you purportedly gave away. It can also make it harder for a creditor to prove at a later date that your transfers constituted a fraudulent conveyance, since you will have appropriate financial backing for your decisions.

Use Trusts: Make gifts to trusts not to heirs. Whatever amount you determine to give away, give it to one or more trusts, not directly to an heir. Trusts provide asset protection, divorce protection, preserve generation-skipping transfer (GST) tax benefits (i.e., they can keep the assets out of the transfer tax system forever). Trusts can be structured as grantor trusts so you can sell assets to them without triggering capital gains. When a trust is established to be a grantor trust you can pay the income tax on trust income thereby growing the value of the assets inside the trust faster while shrinking the assets left in your name to reduce assets reachable by creditors or subject to estate tax. Many of these benefits are on President Obama’s list of loopholes he hopes to close. So, these are benefits you might want to try to secure now, so that they will be respected even if the law changes in the future (they may be “grandfathered”). Perhaps the biggest benefit of gifting assets to a trust is that you can retain the ability to benefit from the assets in trust in the discretion of an independent (e.g., bank) trustee. For example, you can establish a trust for your spouse/partner and your descendants so long as your spouse/partner is a beneficiary you can indirectly benefit. But what if your spouse/partner dies before you? Instead, for more financial security, you can set up a domestic asset protection trust (DAPT) and be a beneficiary of your own trust. Even if you are wealthy, but much of your wealth is concentrated in a business, be very cautious about cutting off your access to trust assets. Don’t forget the harsh economic lessons of 2008-2009. You need to be assured of adequate resources even under adverse future economic conditions. If you simply make large gifts to your intended heir (e.g., child) it will be inexpensive and simple, but the many benefits that will be lost are substantial.

Consider Sales to Trusts: Depending on the size of your estate, the type of trust you might opt to use, your matrimonial considerations, and a host of other factors, it may be beneficial for you to sell some assets to a trust, instead of merely giving them to the trust. While so many people have focused on the importance of making gifts to use the $5 million exemption, the special 2012 planning opportunities go far beyond that. This is especially important for those wealthy enough that the $5 million exemption is not sufficient to address all of their tax exposure. Sales of assets to trusts that can provide a potentially substantial gift and GST benefit now, may disappear with changes in the law. This can be illustrated with a simple example. If you sell 45 percent of your interest in a family business to a trust, interest may be valued with a discount or reduction in value to reflect the reality that a 40 percent interest is not readily marketable, and it also lacks control. Discounts provide great leverage and there have been more than several proposals to restrict or eliminate them. So selling assets to the appropriate trust may lock in these significant discounts before the law changes and help leverage wealth out of your estate. Since few trusts will have sufficient cash to pay for these purchases they are typically structured as sales for an installment note. Since interest rates are at historic lows the interest payments on these notes will be modest. This note sale technique might permit you to transfer well beyond the $5.12 million in value.

Plan the Trusts to Achieve Your Goals: The trust or trusts you’ll use should not be the simple children’s trust commonly used in estate planning. Some of the issues to consider include:

  • Should you be a beneficiary? If yes, there are precautions to take and only certain states in which the trust can be established.
  • Is there any reason the trust should not be a grantor trust? Unlikely, but ask your adviser. If it is a grantor trust, what happens if there is a large taxable gain you would have to report on your personal return even though the proceeds will remain in the trust? For example, assume you transfer your family business to the trust and five years from now sell out to a public company. You have to pay the gain but the proceeds are held in the trust. You might include a tax reimbursement clause in the trust. This would permit the trustee to reimburse you for the tax cost. But caution is in order. These clauses have to be handled correctly and the trust must be in a state with appropriate laws. What is worrisome is that if the trustee just so happens to reimburse you, the IRS might argue that you had an implied agreement with the trustee to reimburse you for the capital gains on a significant sale. There may be better approaches.
  • If you and your spouse/partner both set up trusts, the trusts need to be sufficiently different to avoid the IRS arguing what is called the “reciprocal trust doctrine” – that they are so identical that they should be “uncrossed” so that the trusts are included back in your respective estates. That would entirely negate the planning. Differentiate the trusts using different powers, different distribution standards, set them up in different states, sign them on different dates, etc.
  • If you own all the assets to be given, you can set up a trust and gift $10.24 million and have your spouse treat the gift as if it is ½ his thereby using up his exemption. While spouses can gift split, if your spouse is a beneficiary of the trust which is the recipient of the gift, that may negate the ability to gift split.
  • What if you gift $5.12 million to your spouse, and he then gifts it to his trust to avoid the gift-splitting issue? The IRS could attack that approach using the “step-transaction doctrine.” If the IRS wins this challenge they might treat your gift to your spouse and his gift to the trust, as really an indirect gift by you to his trust. Thus, you’d be treated as making two $5.12 million gifts and owe about $1.8 million in gift tax. If there was GST tax due as well, the bill would be even larger.
  • There has never been a time in history when so many taxpayers may feel so compelled to make so many large transfers in such a short time period. This is indicative of the tremendous planning opportunities that exist, but which may soon disappear. The IRS is keenly aware of this as well, so more caution then ever before should be exercised.
  • If you want to fund a family limited partnership (FLP) or a family limited liability company (LLC) with assets that make gifts and thereby secure discounts. Time is short. If the assets are not inside the entity long enough the IRS will argue that the gifts were of the underlying assets, not the FLP/LLC – no valuation discount would be permitted.

Operate the Plan and Trusts Right:  Signing a trust and consummating a transfer is only the beginning of the process. You need to administer and monitor the plan and trust in future years meeting not less than annually with all your advisers to assure that all formalities are adhered to. Be certain the administrative requirements of how the trusts are to be operated are adhered to. If differences were created to reduce the risk of the reciprocal trust doctrine applying, monitor to be sure they are not circumvented. Be sure the advisers are clear as to prepare the gift and income tax returns to report the planning transactions. You may have to revise asset allocation models to better coordinate asset location decisions. Be sure property, casualty, and liability coverage reflect the realities of trusts owning interest in entities or assets.

Act Now: Time is fleeting. Everyone should review planning options for themselves and their family/loved ones to ascertain what might be beneficial and how to expedite the process so planning is completed in advance of year end, preferably before the election.


9. Other Documents You Need

This is part 9 in my series, Estate Planning – What You Need to Know.

Part 9 – Other Documents You Need.

Pour-Over Will

When you create a revocable living trust as the central piece of your estate plan, you should also include a pour-over will.

A revocable living trust only controls property that you have transferred to it. If you die without transferring your property to the trust, such as real property, bank accounts or investment accounts, the omitted assets will not be owned by the trust.

This is where the pour-over will comes in The pour-over will instructs your personal representative to literally pour-over the omitted assets into the trust and distribute those assets as if they were part of your revocable living trust.

This is an effective tool for getting your assets to the right person. But I don’t recommend you rely on the pour-over will.

The better approach is to take the steps to formally transfer your assets to your trust. Assets distributed to your trust after your death via the pour-over will be subject to probate. And if your assets have to go through probate, you will have defeated one of your primary objectives of creating your revocable living trust, AVOIDING PROBATE.

The better approach is to consider the pour-over will as a safety net, which insures your assets get to the right person. But be diligent in funding your trust.

Health Care Documents

Your estate plan should include an Advance Health Care Directive, also referred to as a Power of Attorney for Health Care.

The Advance Health Care Directive accomplishes two objectives. First, it authorizes your spouse, children or close friend (referred to in the document as your “agent”) to make health care decisions on your behalf if you are unable to do so.

The Directive gives your health care agent the right to, among other matters:

  • Consent or refuse consent to medical care or services
  • Choose or reject your physician
  • Consent to the release of medical information
  • Donate organs, authorize an autopsy and dispose of your body.

Second, the Advance Health Care Directive includes a provision for you to state your intent regarding life support if you are seriously ill.

We generally use the following provision by the California Medical Association:

I request that all treatments other than those needed to keep me comfortable be discontinued or withheld and my physician allows me to die as gently as possible.

Most of my clients are comfortable with this language and include it in their Advance Health Care Directive.

In addition to the Advance Health Care Directive is the HIPAA (medical privacy act authorization).

The HIPAA authorizes your doctors and hospital staff to talk to your health care agents about your medical condition. Without a HIPAA, hospital red tape could kick in and delay vital communications with your health care agents.

Durable Power of Attorney

The Durable Power of Attorney authorizes the agent you name to manage your assets for you if you become incapacitated.

This is an important document if you have a revocable living trust, but a vital document if you don’t have a living trust.

If you become incapacitated and you don’t have a Durable Power of Attorney, no one will have the authority to get to your accounts or other assets. So your family would have to go to court to have a judge appoint someone as your conservator.   This is not something you want. A conservatorship can be worse than a probate.

With a conservatorship, someone, hopefully someone that knows and cares about you, would be appointed by the court to manage your affairs.

A conservatorship is expensive and becomes a hardship on the person the court chooses to manage your affairs.

Bottom line. When you do your estate planning, make sure you get all the important documents.


8. You Can Give Your Children Divorce and Asset Protection

This is part 8 in my series, Estate Planning – What You Need to Know.

Part 8 – You Can Give Your Children Divorce and Asset Protection.

Of the thousands of clients I’ve worked with, most know how they want to distribute their assets when they die:

 For married couples, it’s usually to the surviving spouse and then in equal shares to their children.

 For a divorced client or widow, it’s usually in equal shares to his or her children.

Is that enough planning? Does that protect your children?

Determining who gets what is only half the task of good estate planning. Equally, if not more important, is determining how your loved ones will receive their inheritance.

Divorcing Spouses and Plaintiffs

If your child receives his or her share of your estate outright, it will be subject to claims of divorcing spouses, creditors and plaintiff’s attorneys.

If your child is married and receives an inheritance, nine times out of ten, he or she will place the inherited assets (say a check) in a joint account with his or her spouse.

California is a community property state which means all property acquired during marriage is considered owned one-half by each spouse subject to a few exceptions. One of these exceptions is an inheritance.

Inherited property is separate property. However, the separate property is transmuted to community property when your son or daughter transfers it to an account owned jointly with the spouse.

No problem as long as the marriage is solid.

But if the marriage ends, the spouse will claim half of the inherited property as his or her share.

Most parents would not choose to leave half of their child’s inheritance to a divorcing spouse.

If your child receives the inheritance while single and subsequently gets engaged, does he or she write a prenuptial agreement to maintain the inherited property as separate property?

Without a prenuptial agreement, your son or daughter will have to keep the property in a separate account and field questions from his or her fiancé and then spouse about why it’s not in a joint account. (Question: “Why do you keep your inheritance in a separate account?” Answer: “Don’t worry honey, it’s just in case we get divorced.” I wouldn’t wish that conversation on anyone.)

In my experience, the only couples that sign prenuptial agreements are those that are on their third or forth marriage.

Another matter to consider is lawsuits. When your son or daughter receives an inheritance outright, the property is in his or her name. If he or she is ever sued, the inheritance is subject to the claims of the plaintiff. It’s fair game in a lawsuit.

Solution – Lifetime Inheritance Trusts

Instead of distributing your estate to your children outright, you should consider leaving their share to them in a lifetime protection trust.

Lifetime inheritance trusts are created with special provisions in your revocable living trust.

Your revocable living trust will include instructions for your trustee to create separate trusts (we call them “lifetime protection trusts”) for each of your children when you pass away.

The trustee will then allocate the inheritance to those separate trusts for each child, rather than outright to each child.

If your child is old enough, she can be the trustee of her own trust. The trust, rather than the child, will own the property.

The significance of this is truly amazing.

Divorcing Spouse. Let’s say your son has a rocky marriage. You were savvy enough to include lifetime protection trust provisions in your living trust. When you pass away, your son receives his inheritance in trust, not outright. So his divorcing wife will have a real tough time getting her claws on it.

The trust can also be drafted to distribute the trust property in separate trusts for your grandchildren upon the death of your child in a way that will avoid further estate taxes. This protects the original inheritance from more estate taxes and from a divorcing spouse, and it provides a legacy for the grandchildren.

To Prenup or Not to Prenup. If your daughter is engaged and receives her inheritance in trust, there will be less need for a prenuptial agreement with her fiancé. The inheritance is already set aside and significantly protected in the trust. Your daughter may not even have to address the issue.

Keep the Attorneys Away. The lifetime protection trust will also serve as a deterrent to plaintiff’s attorneys.

Your child does not really own the trust property – the trust does. If your son is sued, be it a professional business claim or a vehicle accident or you name it, the trust property will be significantly protected.

Your son has a right to receive trust distributions at the discretion of the trustee, but during a lawsuit, the trustee will make no distributions, so there will be nothing for the plaintiff to attach.

The trust substantially removes the inheritance from your son’s attachable assets.

Unless the estate is very small with no life insurance, I usually recommend my clients include provisions to create lifetime protection trusts for their children in their revocable living trust.

Bottom line. If you’re going to do your estate planning, why not take the extra step to protect the inheritance?

6. Revocable Living Trust

This is part 6 in my series, Estate Planning – What You Need to Know.

Part 6 – Revocable Living Trust.

The solution for probate is a revocable living trust. A revocable living trust is a legal contract you make with yourself, or, if you are married in a community property state like California, with your spouse. The trust is a set of instructions on how you want your assets to be managed if you become incapacitated and how you want them distributed when you pass away.

You, or if it is a joint trust with your spouse, you and your spouse, are the managers, or trustees, of your trust. As trustee, you have full authority over the trust assets: you can buy, sell and spend assets as you see fit, just like you would do without the trust. The difference is that the assets owned by the trust can be managed by your successor trustee if you become incapacitated or pass away.

Because there is someone already appointed and authorized to manage your affairs, there is no need for the probate court.

Here’s the example I use with my clients to make the point.

You and your wife own your home. The deed to your home names both of you as owners. When you sell your home, you will have to sign a new deed to transfer the home to the buyer.

What if you both pass away and your children need to sell your house? You and your spouse are still listed on the deed as the owners. If your children find a buyer, how will you sign the transfer deed? You’re no longer alive – you can’t sign the closing documents.

That’s when the court gets involved. For the title company to complete the sale of your house, it needs an order from the court stating that someone (the executor) has the authority to sign the deed on your behalf. This is done in probate court.

In other words, your children can’t sell your house without going through the court and getting an order from the judge. That is a real hassle.

However, if you’ve established a living trust, and you’ve transferred title of your home to your trust, then the trust owns your home. It owns your home not only when you are alive, but also when you die. Therefore, your family will not need the court order to sell your house. Instead, the person you named in your trust as your successor trustee can sign the new deed on behalf of the trust to sell your home.

Bottom line: The main benefit of a living trust is it allows your family to manage your affairs “in-house” without court approval and the costs and delays of the probate.

Next is Part 7, Funding Your Trust.


5. What If I Only Have a Will?

This is part 5 in my series, Estate Planning – What You Need to Know.

5 – What If You Have Only a Will?

So maybe you’ve done some planning. You’ve executed a will. Is that enough? Maybe not.

The will states who gets your assets, and if you have young children, it names the guardians to raise your children. That’s good and it’s certainly better than no plan. However, the downside to a will is your family or friends may have to take your estate through probate, and they probably won’t be happy about it.

Probate is a court procedure where an attorney will file your will in the court’s public records, notify any existing and potential creditors and heirs to make a claim against your property, and when the time for making a claim has expired, seek the court’s permission to distribute your remaining assets. The process takes about nine months to a year for a small estate and much longer for a large estate.

Probate Attorney Fees

The attorney and the executor are each entitled to statutory probate fees. In California, the fees are significant. California Probate Code establishes the fees for the attorney and the executor as follows:

Estate Value

Attorney Fees

Executor Fees






























These are the statutory fees. Family members can negotiate with the attorney for a different amount, but this is the standard used in most cases.

Public Record

In addition to the delay and costs, probate also makes a public record of your will and the probate proceedings. Anyone can look up your public record and see what you owned, what you owed, the name, age and address of your children and who gets your assets.

Did you ever notice that when certain celebrities die, within days, the media reports what the celebrity owned and who will inherit the assets? Over the last few years, we learned about the estate of Jacqueline Onassis, James Brown, Michael Jackson and Whitney Houston. You’re probably not a celebrity, but do you want your very personal information made a public record?

Next is Part 6, Revocable Living Trust.

4. Why You Need Guardians If You Have Young Children.

This is part 4 in my series, Estate Planning – What You Need to Know.

Why You Need Guardians if You Have Young Children.

If you have young children, the most important part of your estate plan is naming the guardians to raise your children if something happens to you and your spouse.

Typically, the guardians are named in the will. If the estate plan has a revocable living trust, the guardians are named in the pour-over will.

Naming guardians is not easy.  But if you have young children, you have to do it. If you don’t name guardians and something happens to you and your spouse, the court will have to decide who will raise your children.

Some of my clients have an easy time naming guardians. They have parents or siblings who are well qualified.

But many of my clients aren’t so lucky. They have a hard time deciding on the right people.

Here’s what I tell my clients who can’t decide on a guardian.

First. No one will be as good as you. No one is perfect (except you of course). If you are gone, someone you choose is better than the court choosing.

Second. The only people you can really choose from are those already in your personal network. Your network consists of your family and close friends. Some good. Some bad. Be realistic. Make the best choice of those in your network. That’s all you can do.

Third. You can always change your mind later. Most of my clients change their guardians every few years as their situation changes. You may meet someone with similar nurturing skills or your relatives may have matured into better parents.

Just know your choice is not permanent. Every decision we make today can only be made based on what we know today. If tomorrow changes, you can change your plan.

Knowing you can change your choice of guardians should take the pressure off. Your choice doesn’t have to be perfect, but you do need to choose.

Next up – Part 5. What if You Only Have a Will?

2. Who Needs an Estate Plan?

Here is part 2 my series entitled, Estate Planning – What You Need to Know.

Who Needs an Estate Plan?

If you have a family, a house or a business or you have assets you would like to pass down to certain people or charities, then you absolutely need an estate plan.

An estate plan will make sure there are enough funds to take care of your spouse and young children, often with life insurance, and it will name guardians to raise your young children if you and your spouse are no longer around.

An estate plan will make sure your hard-earned assets will stay in the family and will not be left for the state and federal government to tax and the court to distribute.

An estate plan will make sure your assets go to the people or charities you want to receive them.

An estate plan will include a strategy to manage your business if something happens to you.

An estate plan will make sure the person you want is authorized to manage your assets and affairs if you become incapacitated.

Next is part 3 – What if You Don’t Have an Estate Plan.