Klitzman Law Group, PLLC

How Will Today's Young People Retire?

 Many young Americans are expecting that their retirements will be funded by receiving inheritances from other people.

It is one of the biggest fears wealthy people have: if they leave a large inheritance to younger family members, they will not be motivated to make their own money and will instead live off their inheritances. In light of that fear, a recent survey of affluent 18-22-year-olds seems troubling at first glance.

A large percentage of them are expecting that their retirements will be funded by the inheritances they receive. This could mean they are spending all their own money and not saving any of it as Bloomberg discusses in "Rich Kids Are Counting On Inheritance to Pay for Retirement."

While the common fear actually happens in real life, which is why the fear developed in the first place, it is not likely that is what is happening here. When one looks deeper into the situation, the young people in the survey are not wasting all their money.

They have a lot more expenses at their age than older generations did. This is in part due to student loan debt. House prices are also continuing to rise in urban areas and incomes for those just starting out have remained mostly stagnant for many years. For now, the kids cannot afford to save. That might change in a few years, as they grow into their careers.

If you do want to know how to best leave an inheritance for a younger family member, then visit with an estate planning attorney who can help structure it in a way that is unlikely to lead to wasteful spending.

Reference: Bloomberg (June 7, 2018) "Rich Kids Are Counting On Inheritance to Pay for Retirement."

Suggested Key Words: Estate Planning, Inheritance

Funding a Trust

After creating a trust, you need to fund it. That does not have to be a difficult process.

One of the many problems of “discount” trusts, either from a trust service or an online document service, is that they never get around to funding the trust. When the settlor passes away, the trust does not work as intended, because there are no assets in it to be distributed according to the terms of the trust. The time and money spent creating the trust were all wasted.

Trusts must be funded. That does not mean just putting money in them. It means transferring the title of property to the trust, as the Times Herald-Record discusses in "How to transfer assets to a trust."

Transferring title of property differs for different types of assets. However, it does not need to be difficult for any asset type. It is mostly a matter of filling out the right paperwork and getting that paperwork to the proper authority. For example, when you purchased your home, the title was transferred to you and registered with your local Register of Deeds. You just need to do the same thing for the trust this time.

There is someone who can help you make sure that your trust is properly funded. That is an estate planning attorney who knows how to transfer title in different asset types. This is one reason why it is better to hire an attorney to create a trust, instead of using a cheaper service. It helps make sure that your trust gets funded and will be effective when it is needed.

Reference: Times Herald-Record (May 31, 2018) "How to transfer assets to a trust."

Suggested Key Words: Trusts

Dealing with Foreign Property

Americans who have foreign property or who inherit it need to plan carefully.

Foreign real estate can cause issues in two separate ways, when it comes to estates. It can be difficult for people who own it, when they are planning their estates. It can also be difficult for Americans who inherit it. For the first problem, people need to understand that any real estate owned in a foreign country, is subject to the laws of that foreign country.

Many countries have strict rules about who may inherit property. These rules are unlike anything in the U.S. Attorneys who practice in the foreign country need to be consulted, so any estate plan can take the foreign laws into account when dealing with that property. Inheritors face other issues, as the Washington Post discusses in "Inheriting property overseas can be a dream come true, but it comes with challenges."

The first thing to understand is that individuals who inherit property worth more than $100,000 or corporations that inherit property worth more than $16,000, must report that information to the IRS. There is usually no tax associated with the inheritance.  However, failure to report it can be penalized.

Income generated from the property in the foreign country must be reported to the IRS. Whether any tax is due, depends on whether taxes on that income are paid to the foreign country and how much those taxes are. Finally, the use and sale of the land might be restricted by the foreign country, so local attorneys should be consulted on those issues.

Reference: Washington Post (May 29, 2018) "Inheriting property overseas can be a dream come true, but it comes with challenges."

Suggested Key Words: Estate Planning, Inheritance

Life Insurance Mistakes

Life Insurance can be an important part of estate plans.  However, many mistakes can be made concerning it.

One of the problems many people have in their estate planning, is providing a way to get needed cash to family members. This can be the result of creating wills that will take a long time to get through probate. It can also be the result of not having that many assets in the first place, which can be a problem for parents with young children to support.

Life insurance is a possible solution that can solve both these problems. However, mistakes are often made, as Wealth Management discusses in "Eight Life Insurance Mistakes Clients Make."

Common mistakes include:

• Not buying life insurance at all, when people have good reason to do so.
• Buying too little coverage to meet the expected needs of minor children.
• Many people purchase the wrong type of coverage for what they need.
• Just getting life insurance from their current employer's benefit plan, instead of shopping around and then leaving jobs and losing coverage.
• Not purchasing any coverage for stay at home parents, since the breadwinner will need to take more time off work, should anything happen to the other spouse.
• Purchasing a policy that only offers coverage until children reach the age of 21, instead of funds for college and when getting started in their careers.
• Not creating a trust to handle any payouts, after a child reaches the age of 18, especially when the child is still too young to manage it.
• Canceling a policy as soon as possible, before making sure the child will not need it, if something happens to the parent.

Reference: Wealth Management (May 25, 2018) "Eight Life Insurance Mistakes Clients Make."

Suggested Key Words: Estate Planning, Life Insurance

Financial Illiteracy and Retirement

To be adequately prepared for retirement, it is important to save money wisely. A new survey suggests that many people do not have the knowledge necessary to do that.

Retiring is very expensive. There are a few lucky people who do not have to worry about that too much. They have sufficient money that they can choose to stop working anytime and never worry about money. However, for others, it is important to carefully save for retirement.

It takes a long time to save for retirement. If investments are not chosen wisely, people might never save as much as they need. Researchers recently decided to see how much people in the U.S. and 15 other countries knew about investing properly for their retirements. The results were not encouraging, as Bloomberg reports in "The World Isn't Prepared for Retirement."

Over half of the Americans surveyed, did not know that it is better to invest in a mutual fund than in a single company's stock. This is basic investing knowledge that is apparently not widely known. The other results were also disappointing. However, some of the survey results were intriguing.

People were asked whether they expected to have a robot companion during retirement. The Chinese seem especially bullish on the idea, with 20% of people answering yes. Only 6% of Americans did so.

If you do not know about investing properly for your retirement, it is important to learn. This is especially true, if you are nearing retirement age and do not have much time left to save for retirement.

Reference: Bloomberg (May 29, 2018) "The World Isn't Prepared for Retirement."

Suggested Key Words: Elder Issues, Retirement

Michael Jackson Estate Sues Disney

The Michael Jackson estate has seen so much litigation that it should probably get bulk discounts for court and lawyer's fees. The latest litigation has the estate suing the Walt Disney Company.

There might never have been a more contentious estate than that of Michael Jackson. Every few months, just when it seems things have died down, the estate is back in the news because it has been sued or is suing someone itself.

The latest case is over a documentary produced by the Walt Disney Company. In the documentary, footage of Jackson's children was used and short clips of two of his songs were also included. The estate claims this is copyright infringement and that Disney did not even ask permission to use the material.

Disney claims it did not need permission, because it was making a documentary. TMZ reported on this case in "Michael Jackson Estate Sues The Walt Disney Co. You've Got Balls For Exploiting MJ's Kids!!"

The estate does have a duty to protect any copyrights entrusted to it. If someone were to make a movie and use an entire Michael Jackson song in it, then the estate would need to file a lawsuit, if the song had been used without permission. However, in this case the estate might be a little overzealous.

Copyright does allow for the use of material without permission, if that use falls under the fair use doctrine. Doctrine normally does allow for short clips of material to be used and more material can be used, if it is done for educational purposes.

Reference: TMZ (May 30, 2018) "Michael Jackson Estate Sues The Walt Disney Co. You've Got Balls For Exploiting MJ's Kids!!"

Suggested Key Words: Estate Administration

Long-Term Care Planning

It is important to plan for how you will be able to afford long-term nursing home care, long before you ever need it.

No one wants to end up in a nursing home in the final years of their life.  However, the people who need nursing home care do not have much of a choice in the matter. Some people are just going to need it.

The problem is that staying in a nursing home for any length of time is incredibly expensive. As the country ages, it is likely to get more expensive, since there will be competition for rooms. The government will actually pay for people's nursing home stays, but it is not exactly easy to qualify. Before the government will provide assistance, a person needs to have no assets or only have protected assets, such as a home that someone else is still living in, as the Brentwood Home Page discusses in "Long-term planning for long-term care."

There are ways around this problem.  However, planning needs to be done well in advance. For some people, purchasing an insurance policy will be an option but long-term care insurance is expensive and not always available. Other people will need to get creative, so their assets can still be passed on to their heirs and the government will still pay for nursing home care.

Figuring out how this can be done requires the assistance of an elder law or estate planning attorney. The challenge is that it needs to be done at least five years before a person enters a nursing home. If you are nearing retirement, it would be a good idea to visit an attorney.

Reference: Brentwood Home Page (May 28, 2018) "Long-term planning for long-term care."

Suggested Key Words: Elder Law, Estate Planning

Coordinate Your Estate Plan

One way that people often make mistakes in their estate plans, is not making sure that all the various ways that assets can transfer to other people after death have been properly coordinated.

After someone passes away, there are several different ways their assets can be passed on to another person. Some assets might have to go through probate, but other assets will be passed on automatically as a matter of law. Depending on the planning the deceased has done, assets could be passed on through the instructions in a trust.

It is important that all the different ways assets can pass down, do not contradict one another for an estate plan to be effective. A will can be created that says the contents of a bank account should be divided between three children, but that provision could be overridden, if that bank account says it should be transferred on death to only one of the children. This scenario was the subject of a recent reader question to the NWI Times in "Estate Planning: Catching up on reader's questions."

This is actually a common problem. When people open bank accounts, they make them transferable on death at the bank's urging. Then they do something different with the account, when they create their will. This leads to problems. The person who gets the bank account through the transfer on death, is under no legal obligation to heed the wishes stated in the will.

For this reason, it is important to periodically review your estate plan and all your beneficiary designations on financial accounts, to make sure that everything still matches up and works according to your wishes.

Reference: NWI Times (May 27, 2018) "Estate Planning: Catching up on reader's questions."

Suggested Key Words: Estate Planning, Wills

Preventing Wasted Inheritances

Wealthy people often worry that younger generations of their family will waste any inheritance that they receive.  However, there are ways to help prevent that from happening.

 Many wealthy people have a legitimate fear that if they leave their children or grandchildren large inheritances, most of the wealth will be wasted. Having not earned the money on their own, the heirs might not value it as much.

They might spend it on wasteful things. They might use the wealth as an excuse not to work hard for themselves. They might make bad investments.

There are many possible scenarios that could lead to a wasted inheritance. Fears that this will happen appear to be on the rise, since in the next few decades, the largest transfer of wealth from one generation to another will occur, as Baby Boomers pass away. However, there are a few simple things that can be done to prevent any waste, as the Wills, Trusts & Estates Prof Blog discusses in "Will the Next Generation Squander the Largest Wealth Transfer in History?"

These things include:

• Talk to your potential heirs about the inheritances they will receive. Let them know how you would like them to manage it and spend it. Tell them why it is important to you that they handle their inheritances in a certain way.
• Do not focus on how much you will be leaving to your heirs. Focus on values and how handling the money properly can create a benefit for society. Leave a legacy in this way that is more than just a bank account.
• Use estate planning to prevent waste, by limiting how an inheritance can be spent and when.

Reference: Wills, Trusts & Estates Prof Blog (May 29, 2018) "Will the Next Generation Squander the Largest Wealth Transfer in History?"

Suggested Key Words: Estate Planning

What Your Kids Need to Know about Your Death

It is important that you talk to your children about what you want to happen, if you ever become terminally ill and what you want to happen, after you pass away.

Most parents dread the thought their children might become ill and pass away before the parents. No matter how old the child is when it happens, it is painful for parents to lose their children. However, the reverse seems normal.

That parents will pass away before their children, seems like the natural order of things. Because it seems so normal, it is not often discussed how painful this can be for the children, even adult children. Parents do not talk to their children about what they want to happen when they are ill or deceased. However, things would go a lot better if they did, as Forbes discusses in "Talking To Your Kids About Your Dying Wishes."

You can make things a lot easier for your children, by letting them know a few things. Talk to your kids about what you want to happen, if you are ever terminally ill and on life support. Children need to know whether you would like to stay on life support or not. Tell your children about what your funeral wishes are and if you have made any arrangements. It is also a good idea to talk to your children about what is supposed to happen to your property, after you pass away.

The more your children know what to expect, the less likely they are to fight between themselves. The conversation with your children does not need to be long or contentious. It is not a difficult conversation to have at all. They just need to have an idea about what you want to happen, so they are not surprised at the same time they are grieving over losing you.

Reference: Forbes (May 15, 2018) "Talking To Your Kids About Your Dying Wishes."

Suggested Key Words: Estate Planning, Elder Issues