3 of the Worst Things Your Kids Can Do with Their Inheritance

If you are considering estate planning, one of the important aspects of the future that is probably on your mind is how to make sure your children do not squander what you are leaving them.  At the Law Office of David Knecht, we have extensive experience in estate planning and can help you think through many of the important issues, and especially a plan to help your heirs utilize their inheritance effectively. 

Business Insider highlighted a few of the worst things that can be done with an inheritance, and this article will summarize a few of those topics to help you begin to strategize the best estate plan for your family. See https://www.businessinsider.com/personal-finance/worst-things-inheritance-financial-planner-2021-1.

Sitting on the money—often better to invest the money.  

There are a few risks of sitting on the money:  inflation, opportunity cost, and the temptation to spend.  A quote attributed to Warren Buffett is “The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Cash is going to become worthless over time. But good businesses are going to become worth more over time.”  See Warren Buffet quotes at https://www.insightssuccess.com/a-compilation-of-warren-buffett-quotes-that-will-add-perspective-to-your-investorlife/?gclid=Cj0KCQjwqKuKBhCxARIsACf4XuH2NAAwThinvlMnBvwSJIYXWAcNoskp5xpFzFZjtQWMq7SrlSmTRfkaAnu5EALw_wcB

Cash is an excellent asset for heirs to receive in an inheritance because it is so flexible, so it is not a negative in an estate plan.  However, you may consider providing your children with instructions, education or just simply helpful advice on how to invest after you are gone so that they can make the most of what you are leaving them. 

 

  • Holding onto an inherited property that the heirs can’t afford – often better to sell or rent. 

 

If an heir inherits a property, they may not want to sell or rent it for sentimental reasons.  For some, the desire to keep it “as is” can prevent the best financial utilization of the property.  There can be maintenance costs, taxes, and other expenses that the heirs may not have the funds readily available to cover.  One strategy for estate planning is to anticipate in advance how the property will be used and maintained and to leave sufficient cash to cover the potential expenses the heirs may face in keeping the property.  This is just one plan, but there are many other choices here as well to make the transition smooth and effective.  

 

  • Putting all of your money in one place – often better to diversify. 

 

Your heirs may not be as experienced in money management as you are and one common mistake with inherited assets is to put the money all in one place.  Many financial planners recommend diversification rather than putting all your eggs in one basket, and this holds true for inherited assets as well as assets that are obtained other ways.  The idea behind diversification is that a variety of investments will yield a higher return and investors may face a lower risk by investing in different vehicles.  See https://www.investopedia.com/articles/03/072303.asp.

Consult with the Law Office of David Knecht

At the Law Office of David Knecht, at 707-451-4502, we have extensive experience in estate planning in California.  We can help you create a plan that is right for you and can help make the transition smooth for your heirs.  Contact us today!

 

Equal or Equitable:  Should Each Child Get the Same in a California Estate Plan?

Dividing assets among your children is not always an easy question.  Should each get an equal share or should you look at the totality of the circumstances to create something not equal, but in fact fair and equitable?  This article references an Investopedia analysis of this topic and highlights questions to consider:  https://www.investopedia.com/articles/personal-finance/102215/advice-wills-should-each-child-get-same.asp

  1. Equal Division.  

In many cases, and equal division of assets is conventional and seems to be the most logical choice.  Such is the case when each child has similar needs.  This often happens if they are similar in age, in earning capacity, in responsibility, in mental and emotional maturity, etc.  One advantage of an equal division is that it typically appears fair on it’s face to outside observers and perhaps the heirs themselves. If you want to leave children different assets, but to give them equal value, then it makes sense to assign values to each of the assets and to ensure equality in the overall monetary division.  

 

  • Equitable but not Equal Division. 

 

There are many situations in which you feel more comfortable or fair by giving children unequal but equitable divisions.  For example, if one child has been a caregiver, then perhaps you want to reward that child for his or her sacrifice during your lifetime with additional assets in the inheritance.  Or perhaps you have given certain children more financial assistance during your lifetime and want to even out the distributions after your death. If you have a family member who cannot care for themselves, then you may want to leave the bulk of your estate for the care of that heir. You may have a blended family and want disparate amounts to go to children depending on which children have a biological connection to you.

Consult with the Law Office of David Knecht

Whether you are leaning to an equal distribution or an equitable plan, the Law Office of David Knecht, at 707-451-4502, can help. We have extensive experience in estate planning and can help you create a plan that addresses the needs of you and your family and accomplishes your goals.  

 

Estate Planning for Blended Families in California

Blended families are very common, but estate planning for a blended family can come with a set of challenges to consider.  This article will summarize 5 blended family mistakes to avoid, with content referenced from:  https://www.aarp.org/retirement/planning-for-retirement/info-2021/blended-family-estate-planning-mistakes-to-avoid.html

Not Changing Beneficiaries.  

One of the most common mistakes is failing to update wills or beneficiary designations.  It’s not unusual that the ex-spouse may be inadvertently left as a beneficiary.  Make sure that you have properly updated the beneficiary on all stock accounts, life insurance, bank accounts, and all other type of account with a beneficiary designation. 

  • Treating All Heirs Equally. 

It’s important to give extensive thought to the needs of each of the children and the assets that you have.  For example, you may have some children with different ages, earning capacities, or lifestyles.  You can treat heirs equitably without treating them all equally. You may see that one possible heir might have special needs or disabilities.  One spouse may have greater assets going into the marriage than the other and want some of those proceeds to go to certain heirs.  Every person’s situation is different, but careful consideration of your heirs and their needs will help you plan wisely. 

  • Waiting Until You Are Gone to Give. 

You may want to give your heirs a gift when you are alive to see them enjoy it.  You can gift up to $15,000 a year (in 2021) without a tax consequence.  See https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes

Skipping the Lawyer

If you are older and on your second marriage, it’s likely that your estate plan may be somewhat complicated.  Ex-spouses, blended families and comingled assets can add to the complexity.  For this reason, investing the time and money in getting a thorough estate plan may give you the comfort of knowing that the plan you have is sound and solid.  

Consult with the Law Office of David Knecht

At the Law Office of David Knecht, at 707-451-4502, we have extensive experience in estate planning and can help you create a plan that addresses the needs of you and your family and accomplishes your goals.

 

Estate Planning Tax Advantages for Married Couples in California

Estate planning is a hot topic in 2021, and creating a plan with taxes in mind is especially important.  Taxes are a very important part of estate planning and this article will focus on a narrow slice of that large pie from a legal point of view as we discuss the estate planning tax advantages for married couples.  Of course, these advantages apply to both same sex and different sex couples, and understanding how they work can be helpful background information for you as you consider your overall estate plan.  If you are interested in learning more from an investor’s perspective, this article on Investopedia may also be a helpful resource.  https://www.investopedia.com/terms/u/unlimited-marital-deduction.asp   

  1. Unlimited Marital Deduction.  As per federal law, you can give assets by gift of inheritance to your spouse, and the taxes on that transfer are deferred until the death of the second spouse.  This is a powerful tool because there is not a limit on the amount that qualifies for the marital deduction.  
  2.  U.S. Citizen Requirement.  It is important to be aware that the unlimited marital deduction only applies when both people are U.S. Citizens.  If the survivor is a non-citizen, then federal estate taxes must be paid on an estate that is above the federal estate tax exemption. 
  3. Qualified Domestic Trust (QDOT).  If you are a U. S citizen wanting to pass assets to a non-U. S. Citizen spouse to defer federal estate taxes, a QDOT may be the right mechanism for you.  A QDOT allows the spouse who dies first to defer all federal estate taxes until both spouses have died and also allows that spouse to retain control over where his or her estate will be distributed after both die. 
  4. Qualified Terminable Interest Property Trust (QTIP Trust).  A Qualified Terminable Interest Property Trust (QTIP trust) allows a person to create a trust upon his or her death that grants a life estate for the spouse that survives.  The advantage here is that it can be done without incurring federal estate taxes.  This trust will be included in the surviving spouse’s estate for federal estate taxes, but it is distributed according to the wishes of the spouse that died first.  The surviving spouse cannot change the QTIP Trust.  

 

Consult with the Law Office of David Knecht

There are many ways to effectively utilize estate planning to effectuate your wishes with tax advantaged methods. For a thorough discussion of issues relating to estate planning and taxes, please contact the attorneys at the Law Office of David Knecht, at 707-451-4502.  

 

3 Simple Steps to Get Started on Estate Planning

If you are a senior, you may be feeling the urgency to get your affairs in order, but you may not have the time or the energy to take big steps.  This article will provide a small checklist on ways you can get started that do not require a lot of time or preparation. 

 

  • Beneficiaries

One relatively easy first step to take is to get your beneficiaries updated and designated.  If you have had these accounts for a long time, you may not have the right people or all the people that you want on these records. 

  • Checking and savings accounts at each bank 
  • IRA accounts
  • 401K accounts
  • Life insurance policies

 

  •  Advance Healthcare Directive

 

You have the right to give instructions about your own healthcare or to name someone else to make healthcare decisions for you.  You can also express your wishes regarding donation of organs.  The Office of the Attorney General for California has provided a form as a helpful resource to help you.  You can find the Advance Healthcare Directive form here:  https://oag.ca.gov/sites/all/files/agweb/pdfs/consumers/ProbateCodeAdvancedHealthCareDirectiveForm-fillable.pdf

 

  •   Consult with an Attorney

 

If you are serious about estate planning, an effective step would be to set up an initial consultation with an attorney who has experience in estate planning.  You can go in without any preparation and your attorney can guide you in what you need to think about and do.  These are some areas of estate planning that may be discussed:

  • A Living Trust
  • Powers of Attorney for Property and Healthcare
  • HIPAA Authorization
  • A Living Will/Advance Healthcare Directive
  • A Pour-Over Will
  • Deeds to Your Properties
  • Beneficiary Designations
  • Guardian Nominations for Minor Children

Consult with the Law Office of David Knecht

For a consult with a knowledgeable and professional attorney about your questions relating to estate planning, do not hesitate to reach out tot he attorneys at the Law Office of David Knecht.  We have extensive experience in estate planning and we will help you understand what needs to be done and how to do it.  Contact us at 707-451-4502 for more information.  

 

What is a California Estate Plan?

A comprehensive California estate plan should be specific and customized to fit your personal circumstances.  It  generally includes a Living Trust, Powers of Attorney for Property and Healthcare, a “HIPAA” authorization, a Living Will/Advance Healthcare Directive,  a Pour-Over Will, Deeds to your properties, Beneficiary Designations on life insurance, annuities, IRAs, 401 (k)s, Guardian Nominations for minor children and perhaps more.  Sounds like a lot?  Well, there can be many advantages to getting everything in order while you are in good health and capacity to make the many decisions involved in preparing these documents.  This article will give you an overview what each of the pieces of the Estate Planning puzzle are and how they can help you.  

What is a California Living Trust?

A California Living Trust protects you while you are alive.  During your lifetime, you have complete control over the Living Trust to change it, and you will have the right to use the property during your lifetime with no restrictions.  However, upon incapacity or death, the Living Trust puts the power into the hands of your heirs, generally with no requirement to go to court.  It can have advantages for tax planning and avoiding creditors.  You can find more information on Living Trusts here:  https://www.scscourt.org/self_help/probate/medical/living_trust.shtml#what

What is a Living Will/Healthcare Directive?

A California Living Will is more commonly knowns as an Advanced Healthcare Directive, and it helps your loved ones know how to carry out your wishes when you are no longer able to make your own decisions.  It can direct them on tough decisions such as breathing and feeding tubes and other end of life dilemmas.  You can find more information here: https://oag.ca.gov/consumers/general/care#advance

What is a California Durable Power of Attorney for Property and Healthcare?

A Power of Attorney is a document that authorizes someone to represent you.  A Power of Attorney can authorize another person to make bank transactions, trade stocks, pay your bills, buy or sell your property, file your tax returns, hire people to take care of you, apply for benefits on your behalf and more. You can find more information here:  https://www.scscourt.org/self_help/probate/medical/poa.shtml#what

How do I designate a guardian for my children in California?

If you have minor children, it is likely a great concern for you to determine who will take care of your children if you pass away or become incapacitated. When both parents are dead, the court will decide who the guardian will be as per what is the best interest of your children.  The court will ask the children what they want and consider your guardianship wishes.  Alternatively, while you are alive, if you have legal custody, you can obtain a joint guardianship, and then when you pass away, the legal custody will transfer to the other joint guardian usually without additional hearings.   You can find more information here: https://www.courts.ca.gov/1215.htm?rdeLocaleAttr=en

What is a California Pour-Over Will?

A Pour-Over Will works hand-in-hand with our Living Trust.  It  covers everything that may not be in your Living Trust at death to your trust.  For example, if you took your home out of your trust to refinance and forgot to put it back into the trust, you Pour-Over Will would make sure that the home is distributed under the terms of the trust.  You can find more information here: https://www.scscourt.org/self_help/probate/medical/living_trust.shtml

What is a HIPAA Authorization?

A HIPAA authorization allows the people you designate to have access to your healthcare documents.  This can be important for your family members to get updates on your condition, view diagnostics such as lab reports or test results, and to make more informed healthcare decisions on your behalf. You can find a HIPAA form here:  https://www.dhcs.ca.gov/services/Documents/Authorization%20for%20Release%20of%20Protected%20Health%20Information%20DHCS%206247.pdf

How can the Law Office of David Knecht help you personalize your estate plan?

Depending on your specific circumstances, you may need other documents.  If you are anticipating bankruptcy, divorce, or certain types of lawsuit, you may need strategic planning to protect your beneficiaries.  An estate plan goes further than a checklist of documents, but should be approached with a unique plan just for you that provides the best tax strategies and plans to carry out your wishes with exactness. The attorneys at the Law Office of David Knecht, have extensive experience in all aspects of estate planning and can help you create a plan that is complete and advantageous.  Contact us at 707-451-4502 for more information.  

3 Important Reasons Why a HIPAA Authorization Should be in Your Estate Plan

For a many people, when they hear “estate planning,” they think simply of a will, but a complete California estate plan is much more than that.  This article will explain what a HIPAA Authorization is and three important reasons why it is an important part of your estate plan. 

What is HIPAA?

The Health Insurance Portability and Accountability Act, or HIPAA, is a law relating to the privacy of health care records.  Having a HIPAA authorization in your estate plan is important to make sure that the people who are important to you have access to your health care records and can communicate with your medical care providers.  Your doctor and other health care providers are not able to talk to your loved ones on the phone about your condition, share lab or diagnostic reports, or release other medical information with family members or friends unless you have prepared a HIPAA Authorization. 

What are the 3 important reasons you need a HIPAA Authorization?

The HIPAA  Authorization has these advantages:

  • Allows your family access to medical records.
  • Gives family members ability to receive updates about your condition.
  • Enable loved ones to access your medical bills to ensure they are paid.  

What is the difference between a HIPAA Authorization and a Living Will/Healthcare Directive?

A HIPAA authorization provides certain people with the right to give and receive medical information about you that would otherwise be protected as private.  For example, they can ask the doctor what medications you are taking or let the doctor know about side effects you may be experiencing.  They can receive information about test results, etc.  They can also talk to the provider about billing issues on your behalf.  The Advance Healthcare Directive goes further as it is more encompassing than the HIPAA Authorization.  The Advance Directive can give the person you select the right to talk with medical personnel but beyond just hearing about your condition, this document gives them the right to make medical decisions on your behalf if you are incapacitated.  For example, if you were in a coma, the Advance Directive would give that person the decision-making power to allow or give up on certain treatments. 

How do I create a HIPAA Authorization?

The easiest way to create HIPAA authorization is to contact an attorney who is experienced in estate planning and include it in a comprehensive estate plan.  A HIPAA Authorization will generally meet these requirements:

  • State that it is a HIPAA Privacy Authorization Form
  • Include your name
  • Define the scope of authorization – for example authorize all medial information or contain exceptions
  • Include the effective date it goes into effect as well as the date of expiration of the Authorization

What attorney can help me create a HIPAA Authorization and an estate plan?

The attorneys at the Law Office of David Knecht, have extensive experience in all aspects of estate planning and can help you create a HIPAA Authorization and all other documents necessary for a complete and customized estate plan.  Contact us at 707-451-4502 for more information.  

Estate Planning:  The Next Normal for Millenials?

The pandemic has brought a seismic shift in culture in a myriad ways, and one recent change is an increased focus on estate planning.  This post shares some ideas from a Yahoo! Finance article which suggests how Millennials can broach the perhaps awkward topic of estate planning with family members.  And for Millenials themselves, recent research published by Trust and Will shows that Millennials (spurred on by Covid-19 concerns) are increasingly focused on creating an estate plan for themselves as well with trends toward creating guardianship plans for their pets and charitable contributions to causes that Millenials care about.  See https://finance.yahoo.com/news/millennials-time-talk-estate-planning-150019404.html and https://www.prnewswire.com/news-releases/first-study-on-millennial-estate-planning-finds-surge-in-wills-due-to-the-pandemic-301221748.html

Get Started on Estate Planning with David Knecht Law Consultation

Whether you need estate planning advice for yourself or loved ones, at David Knecht Law, we are here to guide you and help create the right plan for our needs.  If you are wondering how to bring up the topic with your spouse, parents, or children, here are a few helpful suggestions from “Millenials:  It’s Time to Talk Estate Planning with Your Parents.”  

  1. The “Asking for Advice” approach.

One potential approach for bringing up the perhaps awkward topic of estate planning is the “asking for advice” approach.  For example, if you are married, you could approach your parents and ask how they decided power of attorney or health care proxy.  This could open the topic for further discussion and follow up. 

  1. The “Due Diligence” approach. 

Another method for opening a discussion about estate planning is to make a list of documents that you do have and bring that list to the loved one for discussion to highlight where you are strong and where you need to dedicate more due diligence.  Perhaps some estate planning was completed long ago but needs to be updated or perhaps you have yet to begin.  An organized and methodical discussion may be appropriate to spur action. 

  1. The “Direct” approach.

The direct approach may be the most effective for some loved ones, where you begin by sharing your concerns with the goal to persuade but not bulldoze.  Here, and offer to set up a consultation with an attorney may be well-received, as you would be taking the initiative to set it up but allow the loved one to ask questions and consider the information presented by the professional before they have to decide whether to move forward with establishing an estate plan. 

Regardless of how you present the estate plan idea to loved ones, the Law Office of David Knecht, at 707-451-4502, is here to provide accurate information in a respectful manner.  Give us a call today for a consultation on how to create the right estate plan for you.