Family Security Law Group, APC

Advice for Blended Families and Estate Planning

Blended families have an opportunity to launch new relationships and traditions, but they often face pitfalls where finances are concerned.

Did you know that about 1,300 new stepfamilies are created every day? That’s from the Stepfamily Foundation, and the Pew Research Center says 41% of all Americans have at least one step-relative.

The Miami (OK) New-Record’s recent article, “4 tips to resolve financial concerns in stepfamilies,” provides some tips and answers for issues within stepfamilies.

1. Types of accounts should be defined. A major issue for stepfamilies can be how to split finances into “yours,” “mine” or “ours.” Any combination of accounts can be just fine, but spouses should clarify the rules at the start to avoid confusion. Financial circumstances can change, so couples should review their program regularly to make sure that they have the best approach for their situation.
2. Keep documents up-to-date. After remarrying, review the beneficiaries of life insurance, pensions, and other financial accounts. It is also important to create or update a durable power of attorney, living will or a healthcare proxy to name a person to make decisions, in case of incapacity.
3. Modify your will. Inheritance issues can make children and spouses concerned about their financial futures. With that reality, a newly remarried couple should draft wills and revise any existing wills to address important estate planning issues. Wills must state, as specifically as possible, what each beneficiary will inherit. This helps minimize potential squabbles among siblings and also between the surviving spouse and children from an earlier marriage. Step-children aren’t usually considered your legal heirs, so they may not inherit if you pass away without a will containing specific provisions for them.
4. Speak to professionals. A CPA and an experienced estate planning attorney can show you the best options for your circumstances. This may include life insurance or a trust to ensure that the needs of all beneficiaries are met.

We are here to assist you.  Contact a Thousand Oaks estate planning attorney at Family Security Law Group, APC for a complimentary consultation.

Reference: Miami (OK) New-Record (May 20, 2017) “4 tips to resolve financial concerns in stepfamilies”

529 Saving Plans for Your Grandkids’ College

“If you use a 529 plan to save for a grandchild, here's what you need to know.”

A recent nj.com post says that a 529 College Savings Plan is a great gift for a grandchild. The article, “529 plan funding for a grandchild,” explains that opening a 529 plan gives you the ability to save for your grandchild's higher education in an account that has tax-free earnings, as long as the funds are ultimately used for education. When you contribute to a 529 plan, you retain ownership and control over the account—even though the money is a gift.

The recipient grandchild won’t have control over the account or when distributions are made, and the owner can change the beneficiary of the account to a different member of the beneficiary's family at any time. This can be crucial if the account’s overfunded or not used by the grandchild. The definition of family member is quite broad and includes cousins and spouses of family members. In the event that you need the funds yourself, you could take a distribution.

If you did take a distribution, there’d be a tax owed and a 10% penalty on the earnings portion of the withdrawal, since it wouldn’t be used for qualified education expenses. This gives grandparents some safety, if they need access to those funds.

The grandparent owner can also use 529 plan contributions as part of his or her estate plan, because it removes funds from the grandparent’s taxable estate. The contribution is considered a gift subject to the federal gift tax, but there’s an annual gift tax exclusion. It’s currently $14,000 per beneficiary per year, which is not subject to the gift tax.

Some grandparents will also front-load a lump sum of up to five times the annual exclusion amount to each beneficiary. They must then wait five years before any gifts to that same beneficiary would be eligible for the exclusion. Even if the gifts go over the exclusion amount, there is a lifetime exemption amount, which is currently $5.49 million dollars.

Some states don’t have a gift tax on lifetime transfers, but there are those that have an estate tax on estates valued in excess of a specific amount (usually less that the federal limit), which should be taken into account when estate planning.

It is important to be aware that you may already have estate planning in effect using the annual gift tax exclusion, with a life insurance trust or family limited partnership as part of your plan. If you’re thinking that someday you may need Medicaid assistance, your state will probably deem any 529 accounts you own to be your own assets. As a result, you’d have to deplete them before qualifying. Some colleges also look at 529 assets—even those owned by grandparents—when deciding to offer a grant or other award to the grandchild. Make sure that your adult children—the grandchild’s parents—know about your intentions for the 529, so they are not surprised when they apply for student loans, grants or work study programs.

Reference: nj.com (May 12, 2017) “529 plan funding for a grandchild”

How to Tap into Your Ex’s Social Security Benefits

“Even though you and your ex-spouse may no longer be in love with each other, you may still have the ability to tap into his or her Social Security benefits. Think of it as a going-away gift from your ex.”

You may be eligible for Social Security based on your own employment record, but tapping into benefits based on your ex’s work history may provide you with greater income.

An Aitken (SC) Standard’s recent article asks, “What can you expect from your ex's Social Security?”

The article reminds us that benefits for a divorced person and the qualifications for those benefits aren’t mentioned on your online Social Security statement. As a result, many of these benefits go unclaimed. Therefore, to obtain benefits based on your ex’s work record, your ex must qualify for Social Security benefits. There are these additional requirements:

• The marriage lasted at least 10 years;
• You’re 62 or older;
• You’re currently unmarried; and
• The benefit you’re entitled to receive based on your own work is less than your ex-spouse's.

If you remarry, you typically can’t collect benefits on your former spouse's record, unless your later marriage ends.

The benefits you can get as a divorced spouse are half the benefits he/she would receive at full retirement age. You can start collecting your ex's Social Security at 62. If you start at that age, you’ll permanently lower your benefits. That’s because you're not waiting to claim until your full retirement age, which for most current retirees is age 66. If your ex-spouse hasn’t applied for retirement benefits but can qualify—you can receive benefits on their record, if you’ve been divorced for at least two years.

Let’s say that you were born in 1955, and you opt to file at 62 for your ex-spouse's benefit. Your benefit will be 70% of the amount you’d otherwise be eligible for at your age 66. If you were born before January 2, 1954 and have already reached full retirement age, you have the option to receive only the divorced spouse benefit and you can delay receiving your retirement benefits until as late as age 70. But if you were born after January 2, 1954, that option’s no longer available. Thus, if you file for one benefit, you’ll be effectively filing for the greater of yours or that amount based on your ex’s record.

If you’ve yet to reach your full retirement age and continue to work while receiving benefits, your divorced spouse benefit will be reduced by $1 for every $2 you earn above the annual limit. The 2017 limit is $16,920.

If you will also receive a pension based on work not covered by Social Security, like a government position, your Social Security benefit on your ex-spouse's record will most likely be reduced.

Reference: Aitken (SC) Standard (May 20, 2017) “What can you expect from your ex's Social Security?”

The Family Fight Begins over Alan Thicke’s Estate

“Five months after actor Alan Thicke died, he’s the subject of what’s shaping up to be a bitter family feud over the remainder of his estate.”

Alan Thicke’s two eldest sons, Brennan and Robin, filed a petition in Los Angeles County Superior Court over claims that their father’s widow is disputing the terms of the prenuptial agreement she signed in 2005, according to a story from Fox News.

The story, “Alan Thicke's sons in legal battle with his widow over his estate,” reminds us that the actor died unexpectedly at age 69, when a major artery ruptured while he was playing hockey with his younger son, Carter.

A month before his death, the latest version of his living trust was drafted, offering control of his assets to his brother, Todd Thicke. But he had the option to decline, which gave co-trustees Brennan and Robin Thicke control.

Thicke allegedly left his three children equal shares of a Carpinteria ranch, 75% of his personal effects and 60% of his remaining estate. He left his wife Tanya Callau the ranch’s furnishings, 25% of his personal effects, $500,000 in a life insurance policy, all benefits from his various pensions and union memberships, along with 40% of his remaining estate. Alan also allowed for her to continue to live on the ranch, provided she’s able to reasonably maintain the property.

But Tanya is now claiming this agreement violates the terms of their initial prenuptial agreement.

The sons say Tanya didn’t dispute the terms in February, but now she has changed her posture with Alan gone. She claims the prenup she signed won’t be held valid. Instead, she’s seeking an arrangement that looks more like that to which she previously thought she was entitled.

In the petition, the sons’ attorney even suggested that Callau threatened to share details of this family squabble with the press, but her lawyer denies that claim.

“Tanya did not threaten to go to the press,” attorney Adam Streisand told Variety. “To the contrary, she said a court battle would attract the tabloid media, which she did not want, and so she encouraged everyone to get together for a family mediation to figure it all out. They refused. Repeatedly. So, ask yourself, who is it that is planting stories in the press and filing lawsuits, and that’s where you’ll find the real culprits.”

Reference: Fox News (May 17, 2017) “Alan Thicke's sons in legal battle with his widow over his estate”

Five Challenges to Retirement

“The road to retirement is pretty straightforward—until you start getting close.”

If you’re heading toward retirement, you need to address five challenges. That is according to Kiplinger’s recent article, “Near Retirement? 5 Plans You MUST Have in Place.”

You may be ready to move from accumulating money to protecting what you already have. At this point, there are some important decisions that need to be made. For example, you will need to decide when to take Social Security, how to take your pension (if you have one), how to structure your savings to be sure you don’t run out of money and how to plan for taxes, inflation and long-term care costs.

Here’s the five “must haves” to help you with your retirement challenges:

• Income plan: the top goal in retirement planning is creating a strategy that ensures you don’t run out of money.
• Protection plan: unanticipated events like the death of your spouse or serious illness, can wreak havoc with retirement goals.
• Growth plan: examine your glide path when you’re near or in retirement to reduce the risk in your portfolio and to hedge against inflation.
• Tax plan: taxes can impact a hard-earned nest egg without proper planning.
• Estate plan: be certain that your family, friends, and favorite charities are addressed and that you document your wishes. Create and regularly review your plan with an experienced estate planning attorney so you don’t burden your loved ones with those decisions and possible issues.

Assemble an experienced team that can give you the guidance you’ll need to get to and through retirement without problems.

Reference: Kiplinger (May 2017) “Near Retirement? 5 Plans You MUST Have in Place”

Protecting Trust Assets from Child’s Divorce (or Divorces)

“If you don’t want money you’ve worked hard for to pass down to your son’s or daughter’s ex, then consider a trust.”

The federal estate tax exemption in 2017 is about $5.5 million per person or $11 million for married couples. As a result, creating a trust to save on taxes for your family when you pass away doesn’t have the attraction that it once did.

On the other hand, now more folks are considering a trust. This is because they’re concerned about their adult child losing their inheritance due to a failed marriage. When you establish a trust as part of a will or revocable living trust, you can help protect your child’s inheritance in a divorce settlement.

A recent Kiplinger’s article, “A Trust Can Protect Your Adult Child’s Assets from a Failed Marriage, takes a look at how this works.

It’s not uncommon for a child to get an inheritance and to combine it with assets he or she owns jointly with their spouse, like a bank account, car or house. Depending upon the state in where they reside, the inheritance may become marital property subject to division in the event of a divorce.

If the child’s inheritance stays in a trust account, the inherited wealth can be shielded from a divorce. Some people will leave their children’s inheritance in a trust after a first divorce, because of concerns that their hard-earned dollars might end up in the wrong pockets if he or she remarries. If a child marries again and it doesn’t work, the second ex-spouse will not get those trust assets.

 It is true that creating a trust can be more complicated and more expensive than an outright distribution. However, many people are willing to pay for peace of mind when protecting their child’s wealth. Consider the following alternatives regarding the parents’ decision to leave assets in trust for their children:

1. Children under age 18. If your child is under 18, you’re probably not considering his or her marriage or divorce. However, leaving assets in trust for a child may be a good plan. This is because a trustee will oversee the child’s assets and guide them in their decision-making with the funds. The trustee can also deny any financial requests. This is a valuable power, if a child is immature or easily influenced.
2. A newly married child. After the honeymoon, the journey can get bumpy as life becomes more stressful and complex. They may have to deal with issues such as a job lay-off, health issues, financial worries or the stress of rearing children. Rather than creating a trust soon after your child’s marriage, maybe see how the marriage progresses over the next few years.
3. Marriage status. As mentioned above, after five years or more, you should determine your comfort level with your child’s relationship and how you feel about your son-or daughter-in-law. If you see acrimony or you just have a “gut feeling” about the union’s future, it may be smart to create a trust for your child’s inheritance.

You should look at estate plans as five-year plans, and review your will, trusts and other documents at least that often. You may not need to change them, but a periodic review can help you carefully evaluate relationships, finances and the emotional dynamics of your family.

Working with a Thousand Oaks estate planning attorney, you can change the trust during your life, if family circumstances make it necessary. Give us a call if your family circumstance have changed.

Reference: Kiplinger (March 2017) “A Trust Can Protect Your Adult Child’s Assets from a Failed Marriage”

Why Does a First Responder Need a Living Will?

“It is not easy to speak about living wills. But for every first responder, it’s a conversation worth having.”

Although first responders experience illness, injuries and death every day, they still can be hesitant to create a living will for themselves. Nonetheless, it’s important.

EMS1.com recently posted a story, “Why EMS providers need living wills.” It explains that a living will—contrary to most other estate planning documents—has no authority after the creator of the document passes away. A living will or advance directive provides instructions about your end-of-life care. It can include as much or as little direction as you want, such as the use of pain-relieving treatments, do not resuscitate (DNR) orders, life support and organ donation.

A living will helps your family members carry out your wishes.  However, it often doesn’t cover everything. For instance, if you don’t specify whether you’d want certain life-saving treatments like emergency surgery in the living will, you should have a trusted agent to act in your best interests and help you to carry out your wishes.

First responders need both a health care power of attorney and a living will. Due to the high risk of serious injury that comes with a first responders’ duties, it is even more imperative to have this advanced planning in place. In many states, the health care power of attorney is part of the living will. The agent or the “health care proxy” has the authority to act on behalf of the incapacitated first responder, if the first responder is incapable of making decisions on his or her own.

But why do I need a living will?

Be in control of your end-of-life decisions. Without a living will, the decisions to carry out your last wishes could be made by the court. In this situation, state law takes effect and dictates who will have a say in your well-being. A living will lets you control how decisions are made and who will make them.

Protect your life partner. Without a living will, the law will place the health care power of attorney in the hands of your spouse, and then your family. If you have a long-time partner, but are unmarried, your partner would have no say in any end-of-life decisions.

Select one of your children to assist. With a health care power of attorney, you eliminate confusion as to which of your children will make the decisions to enforce your living will and decisions on end-of-life care.

Peace of mind. A living will gives you and your loved ones comfort and peace of mind. This is a stressful time, and a living will helps smooth out the logistics and questions that will arise.

Organ donation. You can state your instructions for organ donations in a living will.

Without a living will, decisions can become difficult for family when a loved one is in a terminal state. Families are left wondering whether they made the right decision. Your living will lets you approve and announce your health care decisions beforehand, avoiding confusion and fighting.

Family Security Law Group, APC estate planning attorneys want you to have peace of mind. Call our firm for a complimentary consultation.

Reference: EMS1.com (May 6, 2017) “Why EMS providers need living wills”

Planning Ahead with Long-Term Care

“The experiences of people we care about often deeply affect us.”

As we think of our parents aging, we may also start to think about our own aging. Sometimes it takes a negative experience with a parent’s estate planning to motivate us to start planning for our own long-term care and end-of-life decisions.

WTOP’s recent article, “Preparing for old age: Long-term care, insurance and estate planning,” says the first step is to mirror the kind of conversations you held with your parents and have the same conversation with yourself.

Take a look at your vision for how you want to age and how you want to address your end-of-life issues, before you make any moves with your estate plan or insurance coverage. If you have a partner, first work independently on your own wishes, and then have a conversation together.

Working with aging parents can also make you think about your planning for long-term care insurance. Start the process when you’re in your 50s. The older you get, the greater chance you have of running out of time to save or of becoming uninsurable. Recent statistics published by AARP show that 52% of  those individuals who turn 65 today, will develop some form of severe disability requiring long-term care support. The average lifetime cost of long-term care in retirement tops $250,000.

 The next step is to review your current estate plan in light of your goals. Many individuals or couples who have a plan in place will forget about them, letting their documents become out-of-date. If you don’t have an estate plan yet, getting it completed should be a top priority. Your estate planning attorney is experienced at working with clients to understand their wishes and to create a plan that reflects those intentions.

Before executing a plan, you’ll need to calculate your total level of wealth, create a list of intended heirs and charitable organization names, as well as a divorce decree, if applicable. If you have minor children, you’ll need to designate guardians to act in your absence.  It is also necessary to decide whether those same people will manage the inheritance for your children or whether you want someone else to assume that responsibility.

Planning for aging means taking careful consideration of many components of your financial plan. Look at how your retirement lifestyle and legacy plan could be impacted by a long-term care need.

Reference: WTOP (May 3, 2017) “Preparing for old age: Long-term care, insurance and estate planning”

Here’s What an Estate Plan Can Do for You

“It’s common for people to consider how they will eventually like their assets to be distributed among loved ones and ministry organizations. But perhaps you have not developed a comprehensive estate plan because you think that is only necessary for the extremely wealthy.”

The need for an estate plan applies to everyone, says Trust Advisor’s recent article, “Why An Estate Plan Is Beneficial.” 

With a small estate, you should be even more careful to avoid unnecessary expenses and to retain the most resources for fulfilling your personal, financial, and charitable goals. The article cites four key reasons why you should have an estate plan:

1. Stipulating Care for Yourself. This includes a healthcare proxy, power of attorney and living will that states how you want to be cared for, if you become incapacitated.
2. Financial Security. Your will or trust lets you specify the way that you want your assets distributed and to whom. Without a will, state probate law will determine who receives your assets.
3. Designating Guardians. If you have minor children, it’s critical to make written arrangements for their care. A will is the only legal way to do so in most states (e.g., California is an exception). You must designate a person that you want to be entrusted with the care of your children.
4. Designating Beneficiaries. Your estate plan will include completing beneficiary forms for insurance policies and retirement accounts. It’s a good idea to review your designated beneficiaries after any major life event, like marriage, divorce, a death in the family or the birth or adoption of a child. Remember, you can also name a charity as a primary beneficiary or contingent beneficiary in your plan.

Reference: Trust Advisor (April 29, 2017) “Why An Estate Plan Is Beneficial”

Oops, She Did It Again: Britney Spears and Pet Trusts for Her Furry Family

“Onetime child star Britney Spears’ five dogs live better than a lot of human families—and should anything happen to her, their golden meal ticket would get mighty precarious.”

Trust Advisor notes that pet trusts for the rich are becoming extremely popular. Pets are expanding their financial and emotional footprint without a corresponding increase in legal status or protection. The article, “Britney Spears Pet Fetish Feeds New Estate Planning Craze,” contends that Britney’s loosely-controlled dog budget is in need of someone to structure the costs to keep them comfortable for life.

Any animal lover who wants to protect his or her pets must create a pet trust to gain any sense of peace of mind regarding their care.

While most of us want to ensure that are pets have loving care, rumors of the expense of Britney’s dogs gives us a view of some of the upper limits—or lack thereof—of how much modern pet pampering can cost. Britney spends about $30,000 a year on her dogs. This is enough to support over 100 typical American pets. One haircut for one of her dogs would feed an average animal for a year.

While the amount that Americans spend on our pets has skyrocketed 73% over the past 10 years, a real animal lover really must push hard to spend what Britney does on her young, healthy dogs. But if something were to happen to her, there would be no certainty that her furry kids would receive any of her millions. That money would likely go to her human children. Guardianship and custody arrangements aren’t binding, when the “pet parent” passes away. Britney’s will could bequeath the dogs to a friend or relative, but there’s no assurance they’d care for them in the same way she did. That is why a pet trust can be vital.

Like a trust for human beneficiaries, the goal of a pet trust is to create a structure that can continue after the original pet parent or owner dies. Pet trusts typically are revocable. The money would transfer into the trustee’s control, in the event of death or disability.

A pet trust should provide for the appointment of successor trustees and designated caretakers for the animals. This may not always be a concern because we will usually outlive even puppies and kittens. Nonetheless, it’s always good to be thorough. Britney will probably survive all of her current dog pack. But to make sure nobody gets left out, she should define the beneficiaries for all of her pets when she dies. Dogs won’t likely outlive the trust wherever it’s set up, but horses, birds, and reptiles can live for several decades.

New Jersey, Michigan, Montana, and Alaska will terminate the trust after 21 years, even if the pets are still alive. Otherwise, Britney’s pups would continue to enjoy their lavish lifestyle until the funds run dry. In Britney’s case, if she dies a day after adopting a newborn puppy, with a 30-year lifespan, the luxury would cost about $1 million by the time the trust term ends.

Chances are good that even the most affluent Americans aren’t spending $30,000 a year on their dogs and cats.  Therefore, the size of a normal pet trust will likely be pretty modest. Speak with a qualified estate planning attorney at Family Security Law Group, APC about how a pet trust would work for your furry babies. 

Reference: Trust Advisor (May 1, 2017) “Britney Spears Pet Fetish Feeds New Estate Planning Craze”