 On one of our co-parenting family vacations in St. Augustine, FL Ok, we’re going to get really forward thinking here this week! With societal attitudes about love, marriage, and parenting constantly evolving, our perception of what constitutes “family” is becoming more and more flexible. As family structures become more varied, we’re learning that when it comes to raising children, the marital status, gender, and even relationship status of the parents matters less and less to society. I, personally, am so happy to see this trend but we still have a long way to go.
One new child-rearing trend that highlights this notion is platonic parenting. Also known as co-parenting, platonic parenting involves two or more people who agree to raise children together without a romantic connection. And we are discovering this nontraditional style of parenting can produce children who are just as well adjusted as those raised in a happily married household. What children need most are parents who are committed to loving and supporting them - of course we know this. Whether or not the parents have a romantic relationship with one another is immaterial to their ability to raise healthy and happy kids, so long as their co-parenting relationship is solid. This can look like so many different things. This can be two biological parents that are no longer romantically involved, it can be a family where there are more than two co-parents romantically involved, or it can look like conscious, platonic co-parenting by more than one set of parents, like we do in our family. For me and my family personally, we know it takes a village and we have created our own. We have benefited greatly from platonic co-parenting with our best friends and their kids. Some of my favorite clients have been families that have these unique parenting styles because I get to enjoy the creativity that comes with creating estate plans for these unique situations. I also find these are often times some of the the happiest parents I work with because they have this additional emotional and organizational support from multiple adults splitting the workload. An Alternative Arrangement Platonic parenting was pioneered within the LGBTQ community, where until recently same-gender couples couldn’t legally marry and didn’t have the court system to make up rules for them about post-breakup parenting. Following a romantic split, these families were forced to create innovative, outside-the-box parenting arrangements on their own. More recently, platonic parenting has spread to married couples looking to more effectively raise their children following divorce. By maintaining an amicable and cooperative relationship—sometimes even cohabitating—a couple whose romantic connection has dissolved can not only spare their children the trauma of divorce, but they may also find the arrangement is much healthier for them. Indeed, couples who stay unhappily married for the children’s sake often find the arrangement can be even more harmful to the whole family than a clean divorce. And now, more and more people are choosing to raise children together using platonic parenting, without ever having a romantic relationship to begin with, or where there is a third or fourth adult in the relationship. Indeed, with today’s legal structures, people of all genders and sexual orientation are entering into a variety of platonic parenting relationships, putting a new spin on the notion of a blended family. Parenting Partnerships While platonic parenting might seem highly atypical and even controversial, given all of the work that goes into loving and raising children, it only makes sense that some would want to make parenting a team effort. Platonic parenting is particularly enticing for those who find themselves moving through their prime child-rearing years in the absence of a romantic relationship. Did you know there are even “matchmaking” sites specifically to find platonic co-parents now?? How interesting is that?! Just like any parenting arrangement, platonic parenting requires massive levels of trust, communication, and planning. The first step of the new partnership is for all parties to come up with a solid legal agreement governing the financial commitments and living situation. Other issues to work out include how to handle new romantic relationships, if/how to incorporate platonic partners into family gatherings, along with all sorts of other basic ground rules. You’ll also need to talk about how to discuss the arrangement with any existing children and other family members, so everyone understands exactly what this new life will entail. This is, of course, if there is a shared custody or guardianship of the children, whether or not there is a marriage involved in the dynamic. In the alternative, our family co-parents with another family that also has two children. We do not share any legal custody of each other’s children and we live in separate homes very close to each other. We carry the burden for each other of scheduling for the kids, doctor’s appointments, and feeding the family as a whole. This often looks like one mom taking all the kids to the dentist at once while the other mom is at home cooking dinner for everyone. It is truly amazing! Creating a Legal Foundation With so many important agreements to be made, those seeking to create a platonic parenting arrangement should seek legal counsel at the outset of the relationship. I love to help families navigate these types of non-traditional partnerships, and I offer a wide array of estate planning tools to help define the legal rights and responsibilities of each individual involved. If you choose a more informal relationship like our family’s then we address the guardianship choices you have - to make sure your co-parenting adults are included in whatever capacity you choose. We use both your will and Guardian Guide to document what role you would want the non-biological or adoptive co-parents to take if you were gone. If you would want a family member to be the guardian for your children if you are gone, but don’t want to exclude your platonic or non-platonic co-parents in your children’s lives, we have legal documentation to address that! Whether you’re seeking advice on planning a platonic parenting relationship, or you need me to draft legally binding co-parenting agreements, or even just to get your own estate plan going, you know you can always schedule a consult to discuss the options and schedule your Family Wealth Planning Session to go over options for creating the proper legal foundation for your family. Here’s to a new year and an organized you! I also want to share my gratitude for all of you. You make my practice possible and I am wishing you a happy and productive month!
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 As we head towards the end of the year, we’re fast approaching the deadline to implement your family’s tax strategies for 2019. The Tax Cut and Jobs Act (TCJA) completely overhauled the tax code, and if you’ve yet to take full advantage of the benefits offered by the new tax law, now is the time to do so. To qualify for some TCJA tax benefits, you’ll need to act by December 31, so don’t wait to get started. The following 4 tips could save your family big money on your 2019 tax bill. 1. Rethink itemization Under the new tax law, itemizing your deductions might no longer make sense. That’s because the TCJA increased the standard deduction up to $12,200 for individuals and $24,400 for married couples filing jointly. So, if you're filing a joint return, you need more than $24,400 in itemized deductions to make itemization worth it. The law also places new limits on itemized deductions, including a $10,000 cap on property taxes, and the elimination of state and local income-tax deductions. Given these changes, taking the standard deduction might be the best option, but other factors, such as your health expenses and charitable giving, could affect your decision, so consult with your CPA to make sure. 2. Maximize contributions to retirement accounts By maximizing your contributions to tax-deferred retirement accounts like IRAs and 401(ks), you can not only save for retirement, but also reduce your taxable income for 2019. In 2019, you can contribute up to $6,000 to an IRA and up to $19,000 to a 401(k) if you're under 50, and up to $7,000 to an IRA and $25,000 to a 401(k) for those 50 and older. If you can’t afford the maximum amount, try to contribute at least the amount matched by your employer, since that’s basically free money. You have until December 31, 2019 to contribute to a 401(k) plan and until April 15, 2020, to contribute to an IRA for the 2019 tax year. 3. Defer your income if you'll make less next year If you’re expecting to make significantly more income this year than in 2020, try to defer as much income into next year as possible. However, this strategy only makes sense if you’ll be in the same or a lower tax bracket next year. This might mean asking your boss to delay paying a year-end bonus until after January 1, 2020, or if you’re self-employed, waiting to invoice some clients until the new year. And whether you’re an employee or self-employed, you can also defer income by taking capital gains in 2020 instead of in 2019. On the other hand, if you think you’ll be in a higher tax bracket in 2020, you may want to do the opposite and accelerate income into 2019 to take advantage of a lower tax bracket. Contact us to find out what’s best for your situation.4. Save on the child tax credit The child tax credit now offers up to $2,000 per qualifying dependent child. To qualify, your child must be 16 or younger at the end of 2019. The first $1,400 of the credit is refundable, so the credit could reduce your tax liability to zero, and you’d still receive a refund.The cut-off for the tax credit is $400,000 for married couples filing jointly, and $200,000 for everyone else. Don’t miss out on 2019 tax savings Implementing these—and other—year-end tax-saving strategies could save your family thousands of dollars on your 2019 tax bill. But if you don’t act soon, these opportunities may vanish for good, so meet with your CPA as soon as possible. If you need references for trusted advisors, just let me know. Haven't checked out the planning + productivity Mama Mastermind? Watch the video chat here Listen to the audio of this week's video instead here.  Many families choose to spend their Thanksgiving Holiday volunteering at soup kitchens, food pantries, or other shelters. While this is a great time of year to do so, we know that these facilities are overwhelmed with volunteers during the holiday season and then in great need of volunteer and monetary support the rest of the year when families have gone back to their day-to-day lives. Volunteer work such as this is such a great way to teach your children gratitude, financial responsibility, and to recognize there are many in need this week and all year round.
Volunteering and giving are great opportunities to build family unity. Bob Graham, Founder of the Namaste Foundation has discussed that in his career as a CPA he worked with clients who had inherited wealth. “I noticed the tremendous insecurities many had,” says Bob. “They lacked confidence in their ability to earn money on their own and were fearful of losing money – almost to the point of being incapable of managing it or even of responding to professional advice.” When he founded Namaste, he involved his children in the operations and later management so that they would learn financial and social responsibility. One of the gifts he gives his children at the holidays is a sum of money that they are then required to give to a charity of their choosing. I am starting this tradition with my children this year! Here are some guidelines to keep in mind when gifting to charity this season: Household items. These must be in good condition or better in order to qualify for a deduction, unless you are donating an item with a value of over $500 and have a qualified appraisal. If the value of your donated household items exceeds $250, you must have a written receipt from the charity that describes the items. If the total of your non-cash contributions exceeds $500, you will need to complete a Form 8283 and attach it to your tax return. Money. You must have a written receipt or bank statement for any donation of money to a charity, regardless of the amount. You can gift via cash, check, credit or debit card. If you donate via credit card in December but don’t actually pay that off until January, you can still take the deduction on your 2019 tax return. If you donate via payroll deduction, you’ll need a W-2 wage statement or other documentation from your employer that shows the total amount donated in 2019. Qualified charity status. Only eligible charities qualify for a deduction. You can check the eligibility on the IRS website by going to https://apps.irs.gov/app/eos/ Here are guidelines when gifting to your own family members this season: Annual exclusion. You are allowed to gift up to $15,000 in cash, property or other assets to any one person without having that count toward your lifetime gift tax exemption. If you are married, you can donate up to $30,000 as a couple to as many people as you want, as long as the total given to each does not exceed $30,000. You do not even have to be related to the recipient. Plus, limits on gifts to spouses don’t apply. Funding for college plans. Contributing to a child or grandchild’s college education is a gift that keeps giving forever. Contributions to a Section 529 education savings plan can be made up to the annual exclusion amount as well. Money in these plans grows tax-free and is allowed to be withdrawn tax-free as long as the funds are used for educational purposes. Other gifts. If you pay someone’s tuition or medical expenses (including health insurance premiums) directly to the service provider, this will not count against your annual exclusion or lifetime gift tax exemption. As long as it is paid direct to the provider, you won’t have to file a gift tax return. These are all great options, especially for grandparents looking for a productive way to gift to their children or grandchildren. There are also constructive ways to use gifting to reduce a taxable estate!  If you are spending the upcoming holiday with older family members, this is actually a great opportunity to talk about planning with them. While there are few “perfect” times to talk with parents about their estate plan, the relaxed times you spend together on vacation or downtime during the holidays can be one of them. You have the benefit of having everyone together sitting down in one place. So take advantage of that!
Here are some tips on how to bring up this critical conversation: Find a good place to start. One of the best ways to ease your parents into a financial discussion is to bring up your own. Tell your parents that you were looking into your own estate plan and wondering if they had already executed their own. You can let them know that you have learned that the different types of plans require very different levels of effort from the executor and cost from the estate and that you want to be prepared to know what to expect. If nothing else ask for the to tell you who they have put in charge. Take it easy. If you feel that your parents may need extra help and support with organizing their financial lives, be reassuring rather than applying pressure. Let them know that you want to make sure their fi nancial independence is kept intact for as long as possible. Take things one step at a time, such as extending an offer to help them use online bill pay or assist them with organizing their information at tax time if they are not tech savvy. Share with them your asset tracking and bill pay spreadsheet that was prepared as part of your planning. If you haven’t done your planning yet, reach out to me and I will be happy to share the sheet with you! Respect boundaries. Many parents feel uncomfortable discussing their finances with their children. If you face this obstacle, let your parents know that you don’t need to know the amount or particular details of their accounts if they aren’t comfortable, but you at least need to know where to find their important documents when it becomes necessary, but that you aren’t attempting to control them in anyway. You simply want to help and make things as easy as possible for you and your siblings when something does happen. What is a Personal Family Lawyer®? A lawyer who develops trusting relationships with families for life.  Estate planning is often considered something you only need to worry about once you get married. But the reality is every adult, regardless of age, income level, or marital status, needs to have some fundamental planning strategies in place if you want to keep the people you love out of court and out of conflict. In fact, estate planning can be even more critical for unmarried couples. Regardless if you’ve been together for decades and act just like a married couple, you likely aren’t viewed as one in the eyes of the law. And in the event one of you becomes incapacitated or when one of you dies, not having any planning in place can have disastrous consequences. If you’re in a committed relationship and have yet to get—or even have no plans to get—married, the following estate planning documents are an absolute must: 1. Wills and Trusts If you’re unmarried and die without planning, the assets you leave behind will be distributed according to your state’s intestate laws to your family members: parents, siblings, and possibly even other, more distant relatives if you have no living parents or siblings. The state’s laws would provide NO protection for your unmarried partner. Given this, if you want your partner to receive any of your assets upon your death, you need to—at the very least—create a will. A will details how you want your assets distributed after you die, and you can name your unmarried partner, or even a friend, to inherit some or all of your assets. However, certain assets like life insurance, pensions, and 401(k)s, are not transferred through a will. Instead, those assets will go to the person named in the beneficiary designation, so be sure to name your partner as beneficiary if you’d like him, her, or them to inherit those assets. However, there could be an even better way. Although wills and beneficiary designations offer one way for your unmarried partner to inherit your assets, they’re not always the best option. First and foremost, they do not operate in the event of your incapacity, which could occur before your death. In that case, your partner may not have access to needed assets to pay bills, or they could potentially even be kicked out of your home by a family member appointed as your guardian during your incapacity. Moreover, a will requires probate, a court process that can take quite some time to navigate. And finally, assets passed by beneficiary designation go outright to your partner, with no protection from creditors or lawsuits. To protect those assets for your partner, you’ll need a different planning strategy. A far better option would be to place the assets you want your partner to inherit in a living trust. First off, trusts can be used to transfer assets in the event of your incapacity, not just upon your death. Trusts also do not have to go through probate, saving your partner precious time and money not to mention the public record aspect of probate.What’s more, leaving your assets in a continued trust that your partner could control would ensure the assets are protected from creditors, future relationships, and/or unexpected lawsuits. Consult with me for help deciding which option—a will or trust—is best suited for passing on your assets. 2. Durable Power of Attorney When it comes to estate planning, most people focus only on what happens when they die. However, it’s just as important—if not even more so—to plan for your potential incapacity due to an accident or illness. If you become incapacitated and haven’t legally named someone to handle your finances while you’re unable to do so, the court will pick someone for you. And this person could be a family member, who doesn’t care for or want to support your partner (the worst possibility if you are estranged from family), or it could be a professional guardian who will charge hefty fees, possibly draining your estate. Since it’s unlikely that your unmarried partner will be the court’s first choice, if you want your partner (or even a friend) to manage your finances in the event you become incapacitated, you would grant your partner (or friend) a durable power of attorney. Durable power of attorney is an estate planning tool that will give your partner immediate authority to manage your financial matters in the event of your incapacity. They will have a broad range of powers to handle things like paying your bills and taxes, running your business, collecting government benefits, selling your home, as well as managing your banking and investment accounts. Granting a durable power of attorney to your partner is especially important if you live together, because without it, the person who is named by the court could legally force your partner out with little to no notice, leaving your partner homeless. Next week, we’ll continue with part two in this series on must-have estate planning strategies for unmarried couples. What is a Personal Family Lawyer®? A lawyer who develops trusting relationships with families for life. That’s why Breiner Law Firm offers a Family Wealth Planning Session where I can review your family wealth needs and help identify the best strategies for you and your family. I don’t just draft documents; I ensure you make informed and empowered decisions about life and death, for yourself and the people you love. While preparing for your Session, you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can mention this article to find out how to get this $750 session at no charge. You can begin by scheduling a time for us to sit down and talk because this planning is so important. Don’t Forget to Include Your Digital Assets In Your Estate Plan Part 1If you’ve created an estate plan, it likely includes traditional wealth and assets like finances, real estate, personal property, and family heirlooms. But unless your plan also includes your digital assets, there’s a good chance this online property will be lost forever following your death or incapacity.
What’s more, even if these assets are included in your plan, unless your executor and/or trustee knows the accounts exist and how to access them, you risk burdening your family and friends with the often lengthy and expensive process of locating and accessing them. And depending on the terms of service governing your online accounts, your heirs may not be able to inherit some types of digital assets at all. With our lives increasingly being lived online, our digital assets can be quite extensive and extremely valuable. Given this, it’s more important than ever that your estate plan includes detailed provisions to protect and pass on such property in the event of your incapacity or death. Types of digital assets Digital assets generally fall into two categories: those with financial value and those with sentimental value. Those with financial value typically include cryptocurrency like Bitcoin, online payment accounts like PayPal, domain names, websites and blogs generating revenue, as well as other works like photos, videos, music, and writing that generate royalties. Such assets have real financial worth for your heirs, not only in the immediate aftermath of your death or incapacity, but potentially for years to come. Digital assets with sentimental value include email accounts, photos, video, music, publications, social media accounts, apps, and websites or blogs with no revenue potential. While this type of property typically won’t be of any monetary value, it can offer incredible sentimental value and comfort for your family when you’re no longer around. Owned vs. licensed Though you might not know it, you don’t actually own many of your digital assets at all. For example, you do own certain assets like cryptocurrency and PayPal accounts, so you can transfer ownership of these in a will or trust. But when you purchase some digital property, such as Kindle e-books and iTunes music files, all you really own is a license to use it. And in many cases, that license is for your personal use only and is non-transferable. Whether or not you can transfer such licensed property depends almost entirely on the account’s Terms of Service Agreements (TOSA) to which you agreed (or more likely, simply clicked a box without reading) upon opening the account. While many TOSA restrict access to accounts only to the original user, some allow access by heirs or executors in certain situations, while others say nothing about transferability. Carefully review the TOSA of your online accounts to see whether you own the asset itself or just a license to use it. If the TOSA states the asset is licensed, not owned, and offers no method for transferring your license, you’ll likely have no way to pass the asset to anyone else, even if it’s included in your estate plan. To make matters more complicated, though your heirs may be able to access your digital assets if you’ve provided them with your account login and passwords, doing so may actually violate the TOSA and/or privacy laws. In order to legally access such accounts, your heirs will have to prove they have the right to access it, a process which up until recently was a major legal grey area. Fortunately, a growing number of states are adopting a law that helps clarify how your digital assets can be accessed in the event if your death or incapacity. The Revised Uniform Fiduciary Access to Digital Assets Act The Revised Uniform Fiduciary Access to Digital Assets Act, which has been adopted in 37 states so far, lays out guidelines under which fiduciaries, such as executors and trustees, can access these digital accounts. The Act allows you to grant a fiduciary access to your digital accounts upon your death or incapacity, either by opting them in with an online tool furnished by the service provider or through your estate plan. The Act offers three-tiers for prioritizing access. The first tier gives priority to the online provider’s access-authorization tool for handling accounts of a decedent. For example, Google’s “inactive account manager” tool lets you choose who can access and manage your account after you pass away. Facebook has a similar tool that allows you to designate someone as a “legacy contact” to manage your personal profile. If an online tool is not available or if the decedent did not use it, the law’s second tier gives priority to directions given by the decedent in a will, trust, power of attorney, or other means. If no such instructions are provided, then the third tier stipulates the provider’s TOSA will govern access. As long as you use the provider’s online tool—if one is available—and/or include instructions in your estate plan, your digital assets should be accessible per your wishes in states that have adopted the law. However, all 50 states are expected to adopt the Act soon, so even if the law isn’t on the books in your state, you should take it into serious consideration when planning. Look to me for guidance In the second part of this series, I’ll offer practical steps for preserving and passing on your digital assets in your estate plan. Meanwhile, contact me as your Personal Family Lawyer® if you have any questions about your online property or how to include it in your estate plan. Next week, we’ll continue with part two in this series, discussing the best ways to protect and preserve your digital assets through estate planning. I don’t just draft documents; I ensure you make informed and empowered decisions about life and death for yourself and the people you love. That's why I offer a Family Wealth Planning Session™. One of the benefits of a Family Wealth Planning Session is that you will get more financially organized than you ever have been before and understand all of the options for ensuring everything you are working so hard to leave behind to the people you love is handled with the ease, grace and care you desire. Mention this article and I will waive the $750 fee on your session. What is a Personal Family Lawyer®? A lawyer who develops trusting relationships with families for life. That’s why Breiner Law Firm offers a Family Wealth Planning Session, where I can review your family wealth needs and help identify the best strategies for you and your family. You can begin by emailing me today to schedule a time for us to sit down and talk because this planning is so important. sarah@breinerlawllc.com  Choosing the Right Life Insurance PolicyWhile purchasing life insurance may seem pretty straightforward, it’s actually quite complex, especially with so many different types available.
In order to offer some clarity on the different types of policies out there, I’ve broken down the most popular kinds of life insurance here and discussed the pros and cons that come with each one. Term life insurance Term life insurance is the simplest—and typically least expensive—type of coverage. Term policies are purchased for a set period of time (the term), and if you die during that time, your beneficiary is paid the death benefit. Terms can vary widely—10, 15, 25, 30 years or longer—and if it’s a Level Term policy, the premium and death benefit remain the same throughout the duration. If you survive the term and want to retain coverage, you must re-qualify for a policy at your new age and health status. In addition to Level Term, other variations include “Annual Renewable Term,” in which the death benefit is unchanged throughout the term, but the insurance is renewed annually, often with an increase in premiums. With a “Decreasing Term” policy, the death benefits decrease each year until they reach zero, but the premium remains the same. Decreasing Term life insurance is often used to cover a mortgage, student loan, or other long-term debt, so the policy expires at the time the mortgage/debt is paid off. Whole life insurance Whole life, or permanent, insurance pays a death benefit whenever you die, no matter how long you live. With a whole life policy, both the death benefit and premium stay the same for your entire life span. However, depending on when you purchase coverage, the premium can vary widely depending on how much the policy’s death benefit is worth. So, for example, purchasing whole life in your senior years can be extremely expensive and possibly not even available at all. What’s more, your whole life policy premiums will be much higher than your term life insurance premiums because the insurance company knows the policy will pay out when you die, no matter how long you live. Indeed, the premium for whole life policies can be among the most costly of all types of life insurance coverage, including similar types of “permanent” policies discussed below. This is simply the price paid for the guaranteed death benefit and a level premium. Universal life insurance Universal life is a variation on whole life—it covers you for your entire lifespan, but also contains a “cash-value” component. Rather than putting 100% of your premium toward your death benefit, part of your premium is put into a separate cash-value account that earns interest and is tax-deferred. The insurance company invests the cash-value funds in various investment vehicles of its choice, and provided the market performs well, you can access those extra funds for things like paying the policy’s premiums, paying off debt, or supplementing your later-in-life fixed income. Some insurance companies will even let you take tax-free loans against the policy’s cash value. That said, the cash-value account is set at an interest rate that can adjust to reflect the market’s current rates, so if the interest rate of the cash value account decreases to the minimum rate, your premium would need to increase to offset the account’s reduced value. While universal life premiums are typically more costly than term policies, universal life also allows you to adjust the death benefit within certain guidelines. This added flexibility allows you to choose how much of one’s premium funds will go toward the death benefit and how much goes into the cash value, offering you the ability to adjust the death benefit as your financial circumstances change. Variable universal life insurance Variable universal life insurance is quite similar to normal universal life except that variable policies allow you to choose how your cash-value funds are invested, rather than the insurance company. This offers you more control over the cash-value investment and potentially higher returns. However, if the invested cash-value funds perform poorly or the market tanks, your policy could be at risk. Given a major drop in the cash-value account investments, you may have to pay increased premiums just to keep the policy in force. Moreover, the fees and expenses associated with the cash value investments for variable policies may be much higher than you would pay if you simply invested the funds on your own. Because understanding life insurance can be confusing, it’s best to get the advice of a trusted advisor before you meet with an insurance agent, who might try to talk you into more coverage than you need in order to earn a larger commission. By sitting down with me as your Personal Family Lawyer®, I can work with you and your insurance advisors to offer truly unbiased advice about which policy type is best for your family and life circumstances. One of the benefits of a Family Wealth Planning Session is that you will get more financially organized than you ever have been before and understand all of the options for ensuring everything you are working so hard to leave behind to the people you love is handled with the ease, grace and care you desire. What is a Personal Family Lawyer®? A lawyer who develops trusting relationships with families for life. That’s why Breiner Law Firm offers a Family Wealth Planning Session, where I can review your family wealth needs and help identify the best strategies for you and your family. You can begin by emailing me today to schedule a time for us to sit down and talk because this planning is so important. sarah@breinerlawllc.com Five reasons to never give an outright inheritance to your children - and what to do instead4/16/2019 If you’re like me, you want to leave an inheritance for your children. It’s likely part of what you are working so hard to do. But, far too often, the way we leave those inheritances actually does more harm than good. Something no parent wants. Giving outright ownership of our assets to the kids could put everything you’ve worked so hard to leave behind at risk. Why, how, and what can you do about it? Let me share with you the five reasons leaving an outright inheritance to your kids is a mistake and then show you the way to protect your kids’ inheritance for many, many generations.
Your Child’s Future Divorce According to current statistics, forty-two percent (42%) of our children will divorce during their lifetime. In most divorces property is divided evenly. So if you have a married child, or a child who will get married in the future, and you leave them an inheritance, and they later divorce, as much as half of their inheritance could go to their ex-spouse. You aren’t working as hard as you are to support your child’s future ex-spouse, right? Good news, there is an alternative! Extreme Debt/Bankruptcy Your child may incur such extreme debt that the only possible relief will come through bankruptcy. Possible causes of such debt are a business venture gone bad, a health event such as cancer or disease, injury, addiction, mental illness, accident that results in either a temporary or permanent inability to work in combination with potentially staggering medical bills. There could also be an accident, resulting in judgment, as discussed below. Bankruptcy does happen to good people and you can ensure that the inheritance you leave behind will never be at risk due to a mistake or health issue. Lawsuit Unintended neglect that injures someone’s person or property could wipe out an inheritance that you leave your children. For example, ACE Financial Services, Inc. in 2012 found these lawsuit judgments:
Mismanagement I have many clients who tell me they do not trust their children to manage money. This could mean that their children are spendthrifts, unwise investors, or easily manipulated out of the money. And, the statistics support this for nearly 20% of inheritors. According to Prof. Jay L. Zagorsky of Ohio State University, 40% of individuals inheriting less than $100,000 will spend or lose the entire inheritance and 18.7 % of individuals who inherit more than $100,000 will spend or lose the entire inheritance. It’s quite likely that if that inheritance was left in a different way those numbers would greatly improve. I’ll share more with you about that below. Lost Work Ethic My father once said, “Some people can’t handle prosperity.” He was right. In fact, most people cannot. For example, Thomas Stanley and William Danko in their book, The Millionaire Next Door, uncovered research showing that children who received an inheritance were worth four-fifths less than others in their same profession who didn’t. Vic Preisser, of the Institute for Preparing Heirs, says that unprepared children who inherit money are susceptible to excessive spending, identity loss, and guilt over receiving money they didn't earn. Preisser says, "In a year to 18 months, everything falls apart -- marriage, finances -- and if there is a drug problem it becomes worse." Thus leaving an outright inheritance to our kids, may do harm instead of good. There is an alternative! As we can see, an outright inheritance is NOT the best answer for your kids. Most lawyers would tell you that the answer is to leave your kids’ their inheritance in a Trust and they’d be right, but they would likely still distribute that Trust outright to your kids at specific ages or stages. There’s another plan for your family that is far, far better. The Alternative An alternative to an outright inheritance to your children (“outright” meaning they both personally own and can personally lose the inheritance) is to gift your assets to your children at the time of your death via a Lifetime Asset Protection Trust. A Lifetime Asset Protection Trust can be drafted to give your children full control of their inheritance (if you choose), but ensure they never own the inheritance. And because the rule of law is you can’t lose what you never owned, you are gifting your children with airtight asset protection, of the kind they couldn’t give themselves at any price. When you gift an inheritance to your children via a Lifetime Asset Protection Trust, the trustees of the trust own the property, not your children. Thus, if your children ever get divorced, file bankruptcy, or are ordered to pay damages in a lawsuit, they can’t lose the inheritance, simply because they never owned it. You can use the Lifetime Asset Protection Trust as a vehicle for educating your children about investing, giving, and even business by allowing them to become a Co-Trustee of the Trust, with someone you’ve chosen and trust to support their education. And you can even build in provisions to allow your child to become the Sole Trustee of the Trust or the right to become Sole Trustee at specific intervals, as well, giving them effective full control without the risk of ownership. There are quite a few nifty additional ways we can structure this trust to meet the needs of your unique family and children. When you come in for a Family Wealth Planning Session, if you desire to provide the most airtight form of asset protection for your child, and set up a structure that incentivizes them to invest and grow their inheritance rather than squander and waste it, I will discuss all the options with you then. One of the benefits of a Family Wealth Planning Session is that you will get more financially organized than you ever have been before and understand all of the options for ensuring everything you are working so hard to leave behind to the people you love is handled with the ease, grace and care you desire. What is a Personal Family Lawyer®? A lawyer who develops trusting relationships with families for life. That’s why Breiner Law Firm offers a Family Wealth Planning Session, where I can review your family wealth needs and help identify the best strategies for you and your family. You can begin by emailing me today to schedule a time for us to sit down and talk because this planning is so important. sarah@breinerlawllc.com |
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