trusts http://www.wisebread.com/taxonomy/term/8565/all en-US 8 Money Moves to Make Before You Remarry http://www.wisebread.com/8-money-moves-to-make-before-you-remarry <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/8-money-moves-to-make-before-you-remarry" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-158851087.jpg" alt="Making money moves before remarrying" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>Every year, about three per 1,000 Americans <a href="https://www.cdc.gov/nchs/fastats/marriage-divorce.htm" target="_blank">divorce from their spouse</a>. Since about seven per 1,000 Americans marry every year, there is a chance that some divorcees will eventually tie the knot again with a new partner.</p> <p>But before you remarry, you should evaluate your finances. Let's review eight money moves that will set you both up for financial safety and success.</p> <h2>1. Make Amendments to Your Will (or Make One!)</h2> <p>The joy of finding love again can make you look at everything through a rosy filter. While no one likes thinking about their mortality, especially close to a big wedding day, the reality is that not updating your will could leave your new partner (and potential dependents) with a messy court battle for your estate. Review your current will and update it as necessary. For example, you may redistribute your estate to include your new dependents and choose a different executor &mdash; a person who will manage your estate and carry out the orders in your will.</p> <p>If you don't have a will, then setting one up should become the top priority of all money moves before you remarry. In the absence of a will, a judge will appoint an administrator who will execute your estate according to your state's probate laws. What is legal may not be the ideal situation for your loved ones, so plan ahead. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-about-writing-a-will?ref=seealso" target="_blank">What You Need to Know About Writing a Will</a>)</p> <h2>2. Update Beneficiaries Listed on Your Retirement Accounts</h2> <p>Even after setting up or updating your will, you still need to update the list of beneficiaries listed for your retirement accounts. This is particularly important for 401K plan holders. The Employee Retirement Security Act (ERISA) stipulates that a defined contribution plan, such as a 401K, must provide a <a href="https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/qdro-drafting" target="_blank">death benefit to the spouse</a> of the plan holder.</p> <p>Your beneficiary form is so important that it can supersede your will under many circumstances. When updating your beneficiary form before you remarry, there are three best practices to follow:</p> <ul> <li>Get written consent from your previous spouse, if applicable, to make changes;<br /> &nbsp;</li> <li>Second, designate only children who are of legal age so they can actually carry out their wishes;<br /> &nbsp;</li> <li>Third, find out the tax implications for beneficiaries other than your spouse as a large windfall could unintentionally create a financial burden.</li> </ul> <h2>3. Consider Setting Up a Trust</h2> <p>Since we're talking about potential financial burdens, many of them could come out of an estate with lots of valuable assets being divided among many beneficiaries, many of them very young.</p> <p>When you have accumulated a lot of wealth over the years, you could be better served by a trust than by a will for several reasons, including keeping your estate out of a court-supervised probate, maintaining the privacy of your records, and allowing you to customize estate distribution. While the cost of setting up a trust can be up to three times that of setting up a will, it can be a worthwhile investment to prevent costly legal battles. (See also: <a href="http://www.wisebread.com/should-you-set-up-a-trust-for-your-child?ref=seealso" target="_blank">Should You Set Up a Trust for Your Child?</a>)</p> <h2>4. Be Aware of Potential Spousal Benefits From Social Security</h2> <p>If your previous marriage ended on very unfriendly terms, you and your spouse may feel that you don't want to leave a penny to each other. Regardless of how you feel, the Social Security Administration (SSA) may still legally entitle your ex-spouse some benefits under certain circumstances.</p> <p>If your former marriage lasted at least 10 years, your previous spouse can receive benefits on your SSA's record as long as he or she:</p> <ul> <li><a href="https://www.ssa.gov/planners/retire/divspouse.html" target="_blank">Remains unmarried</a>;</li> <li>Is age 62 or older;</li> <li>Is entitled to Social Security retirement or disability benefits; and</li> <li>Has an entitled benefit based on his or her own work that is less than the one that he or she would receive based on your work history.</li> </ul> <p>Even when you have remarried, your ex-spouse could receive a check from the SSA based on your record. This is a conversation that you should have with your new partner before you tie the knot so that you're both on the same financial page.</p> <h2>5. Set Up Mail Forwarding With USPS</h2> <p>Depending on how long ago you got divorced and whether or not you kept the same home from your previous marriage, you could still receive some correspondence addressed to your ex's name. While getting a letter from an aunt isn't a big deal, receiving a large monetary gift, important bill, or legal notice could create discussions that you don't want to have.</p> <p>To avoid such issues, spend $1 to set up <a href="https://www.usps.com/manage/forward.htm" target="_blank">mail forward</a> with the USPS so that all correspondence under your married name (and maiden name, if applicable) is forwarded to a new address. Chances are that your ex-spouse already did this, but it's better to be safe than sorry. This service costs $1 per name, so you would need to spend $1 for a married name, and another $1 for a maiden name.</p> <h2>6. Put Your Debts on the Table</h2> <p>Transparency is a pillar in any relationship. No matter how large your financial obligations may be, your new spouse will truly appreciate finding out now rather than when you're struggling to cover monthly bills, applying for a mortgage, or trying to finance a new car.</p> <p>Sit down with your soon-to-be spouse and go through your debt payments, such as student loans, credit card balances, mortgages, car loans, and installment plans. Going over your debts will allow you to have an idea of where the money is going every month, start talking about the potential commingling of finances, and be aware of each other's liabilities. (See also: <a href="http://www.wisebread.com/what-happens-to-your-debt-after-you-die?ref=seealso" target="_blank">What Happens to Your Debt After You Die?</a>)</p> <h2>7. Disclose Any Alimony and Child Care Payments</h2> <p>Whether you're the issuer or recipient of court-mandated spousal support, spousal maintenance, or child care, make sure to disclose those moneys to your spouse and the corresponding expenses that they cover. Failing to help cover certain expenses while making large payments somewhere else could cause tensions between you and your new partner when not previously discussed.</p> <p>Be upfront with your partner and tell the whole story. It helps you establish clear expectations about your joint financial future.</p> <h2>8. Evaluate a Prenuptial</h2> <p>Depending on your own financial plans, you may want to fully combine your finances &mdash; or not at all. For example, you may have accumulated some serious joint credit card debts from your previous marriage and you wouldn't want to transfer that responsibility to your new spouse or start a new string of similar debts. Evaluating a prenup before tying the knot is a necessary conversation for any couple with large differences in individual net worths, levels of retirement savings, and stakes in businesses. (See also: <a href="http://www.wisebread.com/5-ways-to-protect-your-business-during-a-divorce?ref=seealso" target="_blank">5 Ways to Protect Your Business During a Divorce</a>)</p> <p>While thinking that your second marriage may fail like your first one did may sound a bit pessimistic, the reality is that it does happen. In 2013, four out of 10 new marriages <a href="http://www.pewsocialtrends.org/2014/11/14/four-in-ten-couples-are-saying-i-do-again/" target="_blank">involved remarriage</a>.</p> <p>Consult with your financial adviser, lawyer, or accountant about your unique financial situation and determine whether or not you need to present a prenup agreement to your soon-to-be spouse. Keep a positive attitude, and remember that this is a time for celebration. Once you've done your homework, you'll be able to fully enjoy your marriage without any financial worries holding you back.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/8-money-moves-to-make-before-you-remarry">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-set-up-a-trust-for-your-child">Should You Set Up a Trust for Your Child?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-critical-money-mistakes-people-make-in-their-40s">7 Critical Money Mistakes People Make in Their 40s</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-things-youll-encounter-when-taking-over-a-loved-ones-finances">6 Things You&#039;ll Encounter When Taking Over a Loved One&#039;s Finances</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-mistakes-you-need-to-stop-making-by-30">5 Financial Mistakes You Need to Stop Making by 30</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-money-moves-to-make-as-soon-as-the-kids-move-out">7 Money Moves to Make as Soon as the Kids Move Out</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance beneficiaries dependents estate planning money moves prenup remarried retirement Second Marriage social security trusts will Wed, 15 Mar 2017 11:00:15 +0000 Damian Davila 1906387 at http://www.wisebread.com Should You Set Up a Trust for Your Child? http://www.wisebread.com/should-you-set-up-a-trust-for-your-child <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-you-set-up-a-trust-for-your-child" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/mother_daughter_hugging_000076004239.jpg" alt="Woman wondering if she should set up a trust for her child" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>When you think of trust funds, what comes to mind? Spoiled rich kids, living off the money set aside for them by their uber-wealthy parents? If so, you may be surprised to learn that you don't need to be a gazillionaire to benefit from a trust.</p> <p>Read on to see if a trust might be right for your kids.</p> <h2>Estate Planning</h2> <p>Estate planning runs the gamut, from the basic to the complex, depending on your wealth and the complexity of your life. To put various estate planning documents, such as wills and trusts, into context &mdash; and to determine which ones you may need &mdash; consider the following three levels of estate planning.</p> <h2>Titles and Beneficiary Designations</h2> <p>For some of your assets, making sure they end up where you'd like them to requires very little effort on your part. You just need to make sure they are titled correctly or that you've designated the right beneficiaries. A will is generally not required. Even if you have a will, <a href="https://www.soundmindinvesting.com/articles/view/are-you-sure-your-beneficiaries-will-benefit-as-you-intend">titles and beneficiary designations</a> take precedence.</p> <p>If you're married and want property to go to the surviving spouse should the other spouse die, simply titling the property in both of your names &quot;with rights of survivorship&quot; will accomplish that. This includes your home and car. For other assets, all it takes to transfer ownership as you'd like upon your death is to name the right people as beneficiaries. This includes life insurance, individual retirement accounts (IRAs), 401K accounts, and bank accounts. These are relatively simple steps with important implications, so make sure you've made the right choices on titles and beneficiary forms.</p> <h2>A Will</h2> <p>For everything not specifically earmarked via title or beneficiary designation &mdash; property titled in your name only, and everything that doesn't come with a beneficiary designation form (jewelry, art, a baseball card collection, your prized parakeet) &mdash; <a href="http://www.wisebread.com/6-things-i-learned-about-money-from-famous-peoples-wills">you'll need a will</a> to get it where you want it to go. Otherwise your state's &quot;intestate&quot; laws will dictate who gets what. (Trust me, your state probably isn't interested in finding the best home for your bird.)</p> <p>It is all the more important to have wills once you have children. This is the document in which you name a legal guardian for your kids in the event that you and your spouse both die, and you specify who will manage money for your children until they turn 18 (or 21 in some states).</p> <h2>Why Try a Trust?</h2> <p>For many people, a will is enough, especially if they don't own a lot of assets and don't have a very complicated financial life. For others, a will isn't enough; they also need a trust.</p> <p>Once you accumulate more wealth, or if your life becomes more complicated (you have kids from a prior marriage, have property in another state, own a business), a trust may be in order. A trust does not replace a will; it is used in addition to a will. Here are some of its main benefits.</p> <h3>It Gives You More Control</h3> <p>Leaving a lot of money to an adult child can do more harm than good. With a trust, you can create a distribution schedule, perhaps giving them a quarter of the balance starting at age 25, and then another quarter every five years until it is all distributed. You can also name someone to manage the money while it is still owned by the trust and approve any early distribution decisions (perhaps you'd allow money to be accessed early for education or other purposes).</p> <h3>It Keeps Your Estate Out of Probate</h3> <p>Probate is a court-supervised process of validating your will, inventorying your assets, having property appraised, making sure assets are distributed according to the terms of the will, paying the bills of the deceased, and more. It is required if you have a will only, can take a year or longer, and can end up costing 2%&ndash;8% of the total value of the estate once you're done paying attorney's fees and court costs. A trust enables your heirs to bypass probate, freeing the trustee to wind down the estate without court supervision.&nbsp;</p> <h3>It Keeps Information Private</h3> <p>Your will becomes public record upon your death. By contrast, the terms of a trust are not required to be made public.</p> <h3>It Helps Customize Estate Distribution</h3> <p>Depending on the complexity of your situation, a trust may help you customize the distribution of your estate more easily than a will. For example, you may want to leave more to an adult child in a low-income profession than another who works in a high-income profession. Or, you may want to keep a tight rein on how inherited money is used by a beneficiary known for his or her free-spending ways.</p> <p>There are many types of trusts, but the most common type is a revocable living trust, which simply means you can make alterations if your circumstances change. Creating a trust requires the help of an attorney and could cost up to $3,000 to set up versus less than $1,000 for a will. However, the money-saving benefits of avoiding probate, and the added controls available for complex situations, may ultimately make a trust less expensive.</p> <p>There are many variables involved in determining whether you need a trust. If, after reading this article, you suspect you may, talk with an experienced estate-planning attorney to further weigh the pros and cons.&nbsp;</p> <p><em>Have you considered a trust for your heirs?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/should-you-set-up-a-trust-for-your-child">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-financial-moves-to-make-when-a-loved-one-dies">12 Financial Moves to Make When a Loved One Dies</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-fair-way-to-split-up-your-familys-estate">The Fair Way to Split Up Your Family&#039;s Estate</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-to-make-before-you-remarry">8 Money Moves to Make Before You Remarry</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance beneficiaries estate planning heirs inheritance probate trusts wills Thu, 25 Feb 2016 11:00:09 +0000 Matt Bell 1660232 at http://www.wisebread.com Wills: The Basics http://www.wisebread.com/wills-the-basics <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/wills-the-basics" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/wills.JPG" alt="mourning" title="mourning" class="imagecache imagecache-250w" width="250" height="180" /></a> </div> </div> </div> <p class="MsoPlainText"><span>As indicated in a <a href="/estate-planning-why-me" target="_blank">previous article</a>, planning for the future (even if the future means you&#39;re dead) is a necessary evil. Here are some of the basics of a will and what you need to know. </span></p> <p class="MsoPlainText"><span> </span></p> <h2><span>BASIC TERMINOLOGY</span></h2> <h3><u><strong><span>Will</span></strong></u></h3> <p class="MsoPlainText"><span>This is a legal document which outlines how your assets and belongings are to be distributed when you die. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Executor</span></u></strong></h3> <p class="MsoPlainText"><span>Your executor (also known as &quot;administrator&quot;) is the person you designate in your will to carry out your wishes. </span></p> <p class="MsoPlainText"><span>Since they have to follow your will to the letter, it is best to meet with your chosen executor, gain their approval for such a responsibility (it&#39;s a big one), and then describe your wishes to them as outlined in the will. They should also ideally know where to find the will and other key documents if and when they need to. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Beneficiary</span></u></strong></h3> <p class="MsoPlainText"><span>Beneficiaries are the people who receive your assets when you die. You designate them as you see fit in your will, and you can have as many beneficiaries as you wish. Beneficiaries can also include companies, charities, and other organizations. (If you designate an organization or charity as your beneficiary, it is best to consult with them first to determine how specifically to do so). </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Intestate</span></u></strong></h3> <p class="MsoPlainText"><span>If you die without a will, you are considered to be intestate. This is when the government steps in, and over a tiresome period will attempt to contact anybody who might be a family member with a right to receive any of your assets. They first need to find the most appropriate executor, since nobody will be allowed to touch anything you owned until one is appointed. All accounts without designated beneficiaries (and even some that are) will be frozen and assets locked up.</span></p> <p class="MsoPlainText"><span>If there are competing interests for who should be the executor, then intestate succession can become ugly, costly, and chaotic. </span></p> <p class="MsoPlainText"><span>And if somebody dies intestate, even joint accounts can be frozen (not always, but in some cases), so spouses who think their estate situations are simple and not in need of wills can sometimes be in for a nasty surprise. </span></p> <p class="MsoPlainText"><span> </span></p> <h2><span>BASIC BENEFITS</span></h2> <h3><strong><u><span>Guardian for Children</span></u></strong></h3> <p class="MsoPlainText"><span>In your will, you designate a guardian for your minor children. You can also specify certain elements of how they are to be raised, and arrange how they will be financially cared for. </span></p> <p class="MsoPlainText"><span>If no guardian is selected, your kids don&#39;t get to pick, and sometimes the most logical guardian (for example a close friend who has been involved with the family since the beginning and would love to care for the kids) won&#39;t be respected - it goes by the book (worse case scenario: think &quot;wicked Aunt who hates kids and never went to a family picnic if you paid her&quot;). </span></p> <p> <span> </span></p> <h3><strong><u><span>Income Tax Savings</span></u></strong></h3> <p class="MsoPlainText"><span>Depending on where you live, there is usually a tax-friendly provision for the rollover of assets between spouses on death if it is properly specified in the will. Otherwise, there is a &quot;deemed disposition&quot; of assets often resulting in a tax bite before the spouse gains access to these funds. (General financial prudence dictates that you put off paying taxes until the last possible minute, in order to achieve greater overall gains using compound growth). </span></p> <p> <span> </span></p> <h3><strong><u><span>Trusts for Children</span></u></strong></h3> <p class="MsoPlainText"><span>If you die and your kids are the age of majority, they will have full access to the assets you bequest to them. Not to challenge your parenting skills in raising a responsible child, but really - what 18 year old (or 21 year old for that matter) is going to responsibly accept a financial windfall? Heck - many seasoned <em>adults</em> can&#39;t handle financial windfalls; young adults won&#39;t fare any better. Your hard-earned estate that you hoped would provide financial security for your kids could end up being spent in record time with very little to show for it. </span></p> <p class="MsoPlainText"><span>So in your will, consider setting up a trust. There are a few types of trusts (which go beyond the scope of this article), but basically you can set the terms as you wish. You can specify when and how your kids receive the money, and even how it is to be used or invested. Beware of setting too many restrictions: resentment can become a factor if the kids feel they have been unrightfully challenged, but most will eventually respect a decision to hold off divesting the funds until a later age. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Family Law Protection</span></u></strong></h3> <p class="MsoPlainText"><span>Once again we trust our kids to make all the right choices in life, including their choice of spouse. However life happens, and sometimes marriages break down. If your hard-earned estate is left to your child and their partner (be they a husband or wife, or just a common-law partner), half of it could well disappear along with that marriage when it breaks down. </span></p> <p class="MsoPlainText"><span>In your will, you can insert clauses and terms to prevent this from happening. </span></p> <p> <span> </span></p> <h3><strong><u><span>Common Disaster Clause</span></u></strong></h3> <p class="MsoPlainText"><span>The best way to demonstrate the effectiveness of a Common Disaster Clause is by example: </span></p> <p class="MsoPlainText"><span>John &amp; Jane are married, with no children. They are both in a serious car accident, hospitalized in critical care. John passes away first, but Jane hangs on. However two weeks later, Jane too dies. </span></p> <p class="MsoPlainText"><span>Without a common disaster clause, John&#39;s assets would go to Jane, the surviving spouse. When Jane dies, her entire estate (which includes everything John brought to the marriage) would go to her side of the family (or whoever her contingent beneficiaries are if she had a will). John&#39;s entire family would be denied any inheritance (including heirlooms or other prized family items - it&#39;s not all about money). </span></p> <p class="MsoPlainText"><span>A common disaster clause diverts this problem by stating that if both spouses die within a certain amount of time (eg: a 30-day period) as a result of a common disaster, then their estates are split in half and distributed to their respective families accordingly. </span></p> <p> <span> </span></p> <h3><strong><u><span>Liability Clause</span></u></strong></h3> <p class="MsoPlainText"><span>This is inserted to protect the executor from being sued, for example in the case of an investment loss. This is particularly important if they are managing trust accounts. </span></p> <p> <span> </span></p> <h3><strong><u><span>Expert Clause</span></u></strong></h3> <p class="MsoPlainText"><span>This allows your executor to retain the services of an accountant or lawyer with regards to processing the estate or receiving estate-specific advice, and the estate can pay for it. Otherwise, the fees could come directly out of the executor&#39;s pocket. And although they may be a great brother or good friend, nobody appreciates a legal bill - much less an unexpected one!</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span> </span></p> <p> <span>As I said earlier, it’s not all about money and cash grabs when you plan your will and estate. You are looking out for the best interests of yourself, your loved ones, and their loved ones too. Nobody likes to plan for the future in this respect, but once it&#39;s done it can be put to bed, and everybody can rest easily knowing that the future is taken care of. </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/wills-the-basics">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-set-up-a-trust-for-your-child">Should You Set Up a Trust for Your Child?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-to-make-before-you-remarry">8 Money Moves to Make Before You Remarry</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Is it Time to Talk with your Parents?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance beneficiary estate planning executor family law intestate trusts wills Tue, 22 Jan 2008 08:45:49 +0000 Nora Dunn 1659 at http://www.wisebread.com Debunking Common Estate Planning Myths http://www.wisebread.com/debunking-common-estate-planning-myths <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/debunking-common-estate-planning-myths" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/Will.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Given the tens of millions of Americans nearing the Golden Years, the fields of retirement and estate planning are expanding by leaps and bounds. Along with the growth of work for financial advisors and estate planning attorneys, has come the advent of self-planning. From managing your entire investment portfolio from your home computer, to preparing your own Wills, Trusts and advanced-directives using an online document-preparation service, the &quot;do-it-yourself&quot; sector of financial and estate planning is enjoying huge growth. </p> <p> As more and more Americans rely on websites like LegalZoom to help them prepare pre- and post-mortem documents, it is important to understand the several &quot;myths&quot; of estate planning, and how these online sites fail to convey the risks involved with self-prepared documents.</p> <p><strong>Myth #1: You Need a Will</strong><br />This is an absolute lie, perpetrated by online companies and sometimes unethical attorneys looking to generate business. Don&#39;t get me wrong, most people could benefit from a Will, but not everyone needs a Will. If you have minor children, you will want to prepare a basic Will as soon as possible to ensure guardianship of your children passes to a trusted family member or friend in the event of your premature demise. However, if you have no minor children, there are other ways to assure the meaningful disposition of your assets when you pass other then a Will.</p> <p>For example, let&#39;s say Robert Jones is a widower with two adult children. Robert owns his personal residence that he&#39;s lived in for several years, has a life insurance policy, a small bank account and a rather large IRA account that pays him income on a quarterly basis. Robert also has a pension and receives income from Social Security. My advice here is that, in the absence of extreme family matters, i.e. his children are divorced, he is expecting to inherit a large sum of money from a relative, etc., there is no pressing need for Robert to have a Will. The personal residence can be re-titled (in most states) to give Robert a Life-Estate and pass the home to his two children when he passes away (outside of probate). Also, Robert&#39;s life insurance, bank and IRA accounts can all pass to his children by either naming them as Beneficiaries (in terms of the insurance and IRA) and also making the bank account payable to his children on death. Now, if we were to mix in several equity accounts, multiple pieces of real estate and different gifting ideas, Robert&#39;s planning becomes more complicated. But, for now, you can see that the idea that everyone needs a Will is simply misleading. </p> <p><strong>Myth</strong> <strong>#2: A Trust Automatically Avoids Probate</strong><br />Trust planning is becoming more and more popular in the U.S., mainly because it is a creative way to meaningfully pass along large assets to your descendants while hopefully avoiding a probate proceeding. Without getting into too detailed a discussion about the different kinds of trusts available (they vary by state) it&#39;s important to note that having trust will not automatically avoid a probate proceeding when you pass. The first step after you execute your trust is to re-title your assets that you wish the trust, vis-a-vis the trustee to manage. If you pass away without re-titling all of your trust assets, then those assets which remain outside the trust will be subject to disposition according to your Will, and a probate proceeding will be likely. </p> <p><strong>Myth #3: Everyone Needs A Trust</strong><br />This is nothing more than a ploy for business. Playing on the example from Myth #1, Robert Jones does not need trust-planning at all. While it is true Robert could have some type of trust to ensure the proceeds from his IRA account are managed/distributed according to his wishes, the truth is most of Robert&#39;s assets will pass to his descendants by operation of his beneficiary designations. Trust planning is advantageous in several situations, including second marriages, families who wish to provide for adult/minor children, including a child with a disability, high net worth individuals and those who hold certain types of assets, i.e. large investment funds, several pieces of real estate, etc. However, for most Americans trust planning will do little beyond cost you a chunk of money annually (trustees are entitled to annual commissions for managing your property in most states) and create more of a paperwork shuffle in managing and distributing your assets. </p> <p><strong>Myth #4: Giving Away My Money Is The Only Way I&#39;ll Qualify for Medicaid</strong><br />Many online sites and attorneys advise elderly clients to actively give away their money in order to lower the available resources and qualify for Medicaid (to defer the cost of nursing care or placement in an assisted-living facility). The truth is, most baby-boomers are very independent when it comes to managing their finances, so while this type of strategy may have worked in the 1980s and 90s with the Depression-era babies, it will serve little utility as the baby boomers reach retirement age. There are several different ways to qualify for Medicaid without giving up total control to your money, and if anyone tells you otherwise they are flat-out lying. However, based on new federal regulations placed into effect almost two years ago, Medicaid will now require you to provide financial history account statements for five years prior to your Medicaid application. The lesson for those who feel they may need nursing-care and placement within the next decade, purchase long-term care insurance, and start keeping accurate details and records of your finances. </p> <p><strong>Myth #5: I Should Name My Estate As Beneficiary of My IRA/Life Insurance</strong><br />Don&#39;t do this. I cannot think of any benefit here, especially because estates generally pay higher taxes than individuals, this type of planning will have serious tax consequences for your estate. The reality is a lot of people name their estate (i.e. Estate of Robert Jones) as the primary beneficiary of their IRA/life insurance/annuities, etc. This is bad for tax-planning purposes, and also because now those assets are forced to pass through your estate (rather then directly to your intendend beneficiaries) and will be subject to probate. This is a bad idea all around. </p> <p>I hope you enjoyed my first post, and will look forward to many more posts which intersect the areas of personal finance, taxes and estate planning. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/anthony-marrone">Anthony Marrone</a> of <a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-set-up-a-trust-for-your-child">Should You Set Up a Trust for Your Child?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-money-moves-to-make-before-you-remarry">8 Money Moves to Make Before You Remarry</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-financial-moves-to-make-when-a-loved-one-dies">12 Financial Moves to Make When a Loved One Dies</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">What Happens to Your Online Stuff After You Die?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance estate planning myths trusts wills Sat, 19 Jan 2008 18:51:58 +0000 Anthony Marrone 1650 at http://www.wisebread.com