Yesterday, a mom called in a panic, needing advice. She’d gotten the family home in her divorce last year but her mortgage is starting to drown her. She felt cheated by her divorce attorney who didn’t tell her that taking the family home in a divorce can cause financial meltdown to a woman down the line if she’s not the primary breadwinner.

As moms, we think we need to keep the home intact in a divorce for the sake of the kids. What we don’t realize is that because we earn 72 cents for every dollar a man makes, it doesn’t take long to start feeling the squeeze even with maintenance and/or child support. Statistics from 1994 stats are the most recent: http://www.pay-equity.org/.

The tone in this mom’s voice was frightened. Her husband still co-owns the home and is obligated on the note. He won’t let her sell short and she’s about to go into foreclosure. He’s being difficult, obstinate, vindictive. She’d been wounded and was on the verge of tears.

Holy moly, have I been there. My instinct was to first tell her to sell or let it go into foreclosure. Give up. Walk away. No…run. Don’t let the need to keep the family home sink you.

But that would be to tell her that she’d lost, that she was going to let her ex-spouse continue to pull the strings from afar by his unwillingness to cooperate and keep her from her own true power and mastery over her life and financial affairs.

A common theme among the single moms I speak to is a feeling they’re being whipped around by the world—the tail of the dog. But at divorce, we have the opportunity to start wagging the tail ourselves. So instead of telling her to run away, I suggested she run headlong right into it–

Her home had a $1700/month mortgage payment. 5000 square feet. Four years old.

Bingo! A superb rental property and source of passive income! Rather than being frightened into foreclosure, it’s time for her to take charge and be a land baroness.

Unsure of what to do or how that looks, we talked through the steps to get there. Concrete actions she can take right now to take control of her financial situation. Spread the word, call her friends, send a flyer out to her neighbors, get on Facebook, Craigslist, Twitter even. Pray. Pray. Pray for the right renter. Pre-qualify them with a credit check and references. Take a deposit. Sign a lease. Find and move to a smaller place. Collect check. Watch equity grow passively. Like many women, she was scared of what her ex-husband might do if she rented it out. Ahh, here’s a nugget of gold for her. I asked her what her girlfriends would say about her renting out instead of selling. “Bravo!” is what they’d say. And if her ex wanted to give her a hard time, he can file a motion and tell it to a judge.

So many of us feel victimized by our past, powerless in our present, men and women alike, often by the people we once vowed to love, honor, and cherish. But the thought that her ex-husband could control every little thing she did is an illusion to be challenged. For this mom, and all of us, there is opportunity to take control of our own destiny and see the future as full of possibility and refuse to be limited by other people’s illusions of control.

Years after my own divorce, I see the road I chose was pretty scary. I left financial security for total uncertainty and the chance to live my life on my own terms. The mom who called yesterday reminded me of the fear I had when I stepped out on my own. And how worthwhile it is to conquer it.

Because, if there’s one thing I know, “Life is not a dress rehearsal.”

If so, you’re in very good company.  More than 90% of U.S. businesses are family businesses.  Out of the Fortune 500, 150 are family businesses.

Now, would you like to hear some really startling statistics?

Only 30% of family businesses will survive into the family’s second generation, 12% to the third generation and only 4% last to the fourth generation.

Scary, right?

All the blood, sweat and tears you put into building your family business…just gone.

Wondering how this happens?

The number one reason is lack of family business succession planning.

You can probably avoid many of the problems that can take your family business under with sound estate planning that takes family business succession plans into account.

Here are a few things you need to think about:

What Happens When You Give Up Control?

Don’t plan on having income from the business to support your retirement.  That will you mentally separate your financial well-being from the business and it will be easier for you to turn over control of the company you built.  It will make the company and you much healthier financially.  Talk to your estate planning attorney and plan your retirement now so that you are no longer dependent upon the company for income when you retire.

Who Takes Over?

Does your entire family work in the business?  Have you groomed one of your children to take over? How do the other siblings feel about that?  Consider what will happen if you leave one child in charge of the business and others in charge of assets the company relies on.  This can bring old childhood resentments to the forefront if siblings feel that one has been favored over the others.  If all your assets are tied together and there is no harmony between the various controlling parties, your company and your family could be destroyed.

Have You Planned for a Management Transition?

Once you retire to play golf in Florida, who will manage the company? Will management consist wholly of family members or do you have employees in key positions who can take over? Have you discussed the possible management structure with your family?  Make planning a smooth management transition a part of your estate planning process.  The two are not totally separate processes if you own a family business.

How Will You Handle the Transfer of Assets?

This is an integral part of your estate plan and your family business succession plan.  Will the transfer of assets take place with lifetime sales/gifts/transfers or will the ownership of the company be transferred only upon your death.  You need to ensure that you have enough liquid assets left for you and your spouse to live on in retirement without putting the company into bankruptcy.

Many families just don’t want to deal with these issues.  But dealing with issues as complex as these in a moment of crisis when you die or are rendered unable to make decisions by some illness or injury can mean disaster for your company.  Taking them into account while everyone is able to focus on what is and isn’t important, and looking at the big picture for the survival of your family business, will make everyone’s life easier. A little painful introspection and thoughtful planning now will allow even your great- grandchildren to enjoy the fruits of your labor.

Call us to schedule your Family Wealth Planning Session today.  Our Family Wealth Planning Session is normally $550, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge.  Call today and mention this article.

Every January, you opt in to contribute to your 401(k) the maximum allowed that year. You’ve been told over and over that this type of retirement fund will become a nice big nest egg for your retirement on dollars you never paid tax on! Isn’t that something?! What could possibly be wrong with stiffing Uncle Sam every year for the taxes you owe on that maximum contribution?

Well, a lot, actually.

Picture this…

Your potential new employer, desperate for your rare services, woos you with its yummy benefit package–medical and dental, vacation, family time. They even have a 401(k). They might even contribute to it. Before you know it, you’ve saved up $100,000 without hardly even noticing.

Your pre-tax contributions are called “Qualified Funds” meaning the IRS puts them into a special category because the government hasn’t taken its bite out of it yet. You get to grow your funds at an accelerated rate because you have more dollars in the account from the beginning. Therefore, you’ll have more money to retire on when the time comes.

And when the time comes, the TAXMAN COMETH too. And he carryeth a biggeth sticketh. And whallops you over your tax-deferring head.

When telling you about their sexy 401(k) benefits, most companies won’t tell you the downside. That would make it distinctly less sexy. But I’ll tell you some of the dirty little 401(k) secrets. Here are six:

1. You don’t know what the tax rate is going to be when you start taking distributions. Congress is notorious for increasing taxes regularly but not well known for reducing them. Odds are very good that you’ll pay a higher rate in the future than you do now.
2. You’re ability to get to your own money is extremely limited. Because you’ll pay a 10% penalty to take it out early. Once in, those funds are tremendously difficult to get out.
3. You may be tempted to think you have more than you really do. When you look at that account statement, get in the habit of lopping of 40% of its value to get a better idea of what you really own. If you have $100,000 401(k), start thinking of it as $60,000.
4. You’re paying taxes with future, inflated dollars. Huh? Savings are always devalued by inflation. So in 20 years, our cost of living (food, shelter, clothing, healthcare) will rise at an average of 4-5% a year. Retirement accounts then must keep pace with at least that PLUS whatever tax you’ll have to pay on it when you take it out. So to keep pace with inflation, qualified accounts have to make a lot MORE than other funds to keep pace with the economy.
5. You lose control over your investments. Because investments in qualified funds are limited to a few participating funds or must be invested in employer’s stock, your ability to steer your own ship is limited. You can’t hedge risks or balance your portfolios with investments of your own choosing. In short, you’re stuck.
6. If all you have to retire on are qualified funds, you will have a dilly of a time dealing with Medicaid for long-term care needs. If you ever need long-term care, you may have to liquidate funds in order to transfer them away from you or pay for your care if you haven’t purchased a long-term care insurance policy. This is why you hear of elderly couples divorcing in order to pay for their healthcare. Having to have a fire sale of your assets or get a divorce is a bitter pill that no one should have to swallow. Plus, if you have serious health issues before you turn 65, you’ll pay the 10% penalty to use your own funds. To be fair, there is an upside. For qualified accounts in payout mode, payments not taxed at all if paid directly to a nursing home. But you have to be incapacitated enough to be in a nursing home. Woowoo. I’m underwhelmed.

Qualified Funds are Uncle Sam’s Savings!

Qualified funds sound great on paper. To some degree, they are. But, the government didn’t create these vehicles without some benefit to itself. The government is willing to wait 20, 40, 60 years for a bite of your apple. The Treasury is quite content to use YOUR pre-tax earnings as its virtual savings account. But you lose control, you carry the risks, and the IRS collects a potentially much larger return later. With qualified funds, you leave the fate of your retirement funds to chance. And if your entire savings is in qualified funds, you may face difficult choices in the future.

Then What Should I Do?

DIVERSIFY! Actually, I do think you should have some qualified funds. If you can make a contribution that reduces your current tax liability by dropping you to the next lower tax bracket right now, DO IT for heaven’s sake! You can give yourself as much as a 10% raise by doing that alone! And that’s good. Just don’t let that be your only retirement plan.

TAKE CONTROL! Find out into other types of qualified funds such as Roth IRAs and self-directed IRAs which give  you more control and fewer tax consequences later. Consider stocks, bonds, mutual funds, hedge funds, real estate, and private investment. Just make sure you can change your course if you need to.

INVEST IN YOURSELF! Go back to school for that degree if you’ve always wanted. Start that business you’ve always dreamed of owning. Learn to play the piano or speak Cantonese. Go get that dream job. Your best bet may just be on yourself! After all, you have control over YOU. You don’t have control over the markets or the economy. But you can make the most of yourself, your talents, your dreams, your passion.

HIRE A FINANCIAL PLANNER!  The BEST thing you can do right now is to get thee to a certified financial adviser or planner (CFA/CFP) who is not on commission. Pay an hourly fee to someone not invested in your retirement for neutral advice. Look up a local professional at the CFA Institute, one of the governing bodies for financial advisers. Ask friends and family for their recommendations. Just don’t go it alone. There are a lot of great advisers out there waiting to be of service to you.

COME SEE US! The next thing you can do, once you’ve begun to take a closer look at your portfolio, is to come see me about how to make sure you’re assets are protected from your creditors and predators (meaning nursing homes) and that if something were to happen to you, your family would be able to carry on without you no matter what your investments are in. Call 303-747-3909 to schedule a Family Wealth Planning Session. That meeting, a $550 value, is complimentary for folks who mention this article because you’re ready to make sure you know exactly what you can do to protect yourself and your family.

You’ve worked hard, saved and managed to accumulate some wealth.

You’re not a robber baron by any means but you’re comfortable. Your siblings haven’t fared as well and you want to make sure that their children have the benefit of a solid higher education. With no children of your own, it seems the right thing to do.

So you set up 529 college education savings plans for your nieces and nephews, make them the beneficiaries, and mention everything in your will.

And life goes on…

You don’t give it another thought beyond making regular contributions. You move to another state. You divorce.

All the things that happen in the normal course of living.

You know you need to change the beneficiary of your estate and name another executor (both are still your former spouse) but you never really get around to it.

And then the unthinkable happens. You die unexpectedly, with no time to make those changes you sincerely intended to make.

This is where things can quickly fall apart for those nieces and nephews you so wanted to take care of.

To make sure your wishes are carried out exactly as you intended, take these steps now to protect those 529 college education savings plans:

1.  Name One or Both of the Child’s Parents as Participant or Owner

If you name your niece or nephew as the “beneficiary” of the 529 plan as a gift, you must add one or both of the child’s parents as the Participant or Owner. This gives them actual control over the 529 account. They can even change the beneficiary. If the child’s parent is not listed as an owner or participant, the plan will be considered part of the estate (which would then belong to your former spouse in this instance). Your niece or nephew would need the executor (again, your former spouse) to essentially turn the plan over to them in writing. And the executor and beneficiary of your estate would be well within their legal rights to refuse. Is that a risk you really want to take?

2. Update Your Will

I know you’ve heard this at least a thousand times but I’ll say it again because it is critically important in situations like this. If you undergo any kind of lifestyle change (i.e., divorce, death of a spouse or child, become incapacitated, move to another state, etc.), take the time required to have your will updated. This kind of situation happens all the time. The former spouse, as both executor and beneficiary, controls the 529 college savings funds because of a failure to properly set up the funds. If you’re going to the trouble of setting up a 529 fund and make regular contributions to it, take the necessary steps to ensure that money is used for what you intended.

3. Don’t Leave Assets or Insurance Outright to Your Nieces or Nephews

If you leave either assets or insurance directly to your nieces or nephews and they are minors at the time of your death, their parents will have to go to court to be named as guardians to gain access to these assets. Needless to say, that just adds another layer of complexity and more expense to the process.

4. Don’t Let Your Siblings Leave Assets or Insurance to You for Your Nieces or Nephews

Sometimes parents are tempted to name their siblings as the recipient of life insurance funds to be used for their own minor children. Funds transferred that way become part of your taxable estate. To use it for your nieces and nephews, you will have to file gift tax returns and use up part of your lifetime gift exemption. Additionally, those funds cannot be protected from your creditors without significant impact on your own estate plans. If your siblings name you as a beneficiary, suggest strongly that they speak to a lawyer about setting up a trust to receive funds rather than you personally. They can always name you as their children’s trustee.

5. Have Your Estate Planning and Financial Documents Thoroughly Reviewed

When you update your will, make sure all your estate planning documents are reviewed, cross-referenced and do not contradict each other. Also, make sure that the person or persons you’ve named as beneficiaries and owners of your accounts are coordinated with your estate planning documents and that all your documentation supports your ultimate goals and objectives.

I can’t emphasize enough how important it is to have current estate planning documents. And this is especially true if you have 529 college education savings plans set aside for nieces, nephews, great-nieces or nephews, etc.

If you have started a 529 plan or would like to and would like an expert opinion on how a plan like this should be handled, call us to schedule your Family Wealth Planning Session today. We can identify what needs to be done to ensure that you have the appropriate language in the plan to make sure that the money goes exactly where you intended. Our Family Wealth Planning Session is normally $550, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article.

Now that we’re living longer than ever, we need to ask some tough questions about how to care for our elders (and ourselves) when the time comes. Making the decision to place a loved one in a nursing home can be one of the most heart-wrenching decisions you’ll ever make.

When I was a teenager, my mom was by then almost 60–I’m the youngest of 10 kids and she had me at 43. She had started thinking about her elder years and one afternoon talked to me about it. She was scared she’d end up in a nursing home, like my grandmother–a woman so determined to remain on this planet she stayed in nursing home care for many years, not departing until she’d broken both hips and lost both her legs. My mother was petrified of that end to her otherwise sparkling life. Gripped in worry right along with her, I promised her that she’d never go into a nursing home. NEVER. I even put it in writing. She kept that note, with my promise and my signature and showed me many years later. Thankfully, she never did go into a nursing home. But I could not have keep that promise. Not now anyway.

My mom passed away about five years ago–of her own accord. Dependent on oxygen for life support after years of living with pulmonary fibrosis, my mom decided to remove her oxygen with the help of her family and doctors. She died peacefully, in a hospital she loved, with almost all her loved ones nearby.

But most of us won’t have the option of checking out at will like my mom did. Her’s was a unique situation. In reality, she might well have had to go into a nursing home and there was nothing I could have done to prevent it. Facing that stark reality for her, for all of us and our parents, we need to have a game plan for dealing with it when (not if) the need arises. Here are some thoughts and questions to ask:

1. Don’t Wait Until a Crisis Arises.
   The more quickly you have to make that decision, the more room there will be for making a bad decision.The best thing you can do is plan ahead. Anticipate that, at some point, you or your loved one will need nursing home care. Start asking around early and getting familiar with the facilities and options in your area. As the elder, if you have a preference for one form or provider of care over another, make sure your loved ones know what it is.
   
2. Ask What Are The Alternatives To Nursing Home Care?
   Let’s face it, no one wants to go into a nursing home.  But often, we don’t see any other option. We’re making the decision to opt for nursing home care at the last minute and in crisis mode.  That’s why pre-planning is so important. Talk to your doctor, local social workers and other elder care professionals to see if there are assisted living or home health care options available to help your loved one.
3. How Do I Find A Good Nursing Home?
   Shop around.  Planning ahead gives you the option to go and actually visit nursing homes in your area.  Make unannounced visits to homes on your short list and see what’s going on when they’re not expecting you.  And again, talk to your doctor and other local health and social workers and ask them for recommendations.
4. How Do I Get My Loved One Into A Nursing Home?
   The admission process for nursing homes can be daunting.  Planning ahead gives you more time to go through the process with less pressure.  Talk to the admissions directors of the nursing homes you’re interested in and get information on the admissions process.  Talk about your financial situation and be willing and ready to negotiate.
5. Who Pays the Nursing Home?
   Talk to a good elder care attorney and see if you’re eligible for assistance.  You may qualify for help from Medicare or Medicaid. This is a particularly tricky area of the law and you need an experienced professional to help you through it, especially if your loved one’s spouse will not be going to a nursing home.  You need to take steps to protect them.  Have your elder care attorney look at all documents before you sign them.
6. How Do I Make Sure My Loved One Will Get Good Care?
   Again, planning is crucial.  You need to sit down with the nursing home staff and determine what kind of care your loved one will need and what is available.  Have a proper care plan in place from the very beginning and make sure that care plan is part of the contract for your loved one’s admission to the nursing home.
   
7. What Are the Nursing Home’s Duties to My Loved One?
   During your investigative process, ask each nursing home for a copy of their duties under the Nursing Home Reform Act.  You may be surprised to learn what rights you and your loved one have.  And again, talk to an attorney specializing in elder law to make sure you understand what the nursing home is, and is not, obligated to do.

Making the decision to place a loved one in a nursing home requires forethought and planning to ensure that you are making the right decision and choosing the right nursing home.  Don’t go it alone.

Talk to an experienced elder care attorney and find out what your options are with regard to financing, government assistance, your loved one’s rights as a nursing home resident and exactly what the nursing home is obligated to do.

We can help you plan and help you ensure that you’re making the right decisions.  Call us to schedule your Family Wealth Planning Session today.   Our Family Wealth Planning Session is normally $550, but each month I make space for two people to have a complete planning session with me at no charge.  Call today, mention this article, and ask for one of those two sessions.

NOTE: My sister Mary–a longtime professional in medical technology–offered this link to the Medicare.gov website nursing home comparison tool! Thank you Mary!

We all know that Americans are living far longer today than we were even a short time ago. But we’re living sicker lives. Currently, elder Americans spend 65 cents of every dollar spent on health care and that amount is expected to take a sharp upward turn in dollars and as a percentage of expenditures in the near future.

One in eight Americans are 65 or over now. By 2030, one in five Americans will be 65 or over. The Baby Boom that began in 1946 this year will enter its 65^th year—the first year government and legal entitlements are widely available. That boom continued through 1965 so, doing the math, the wave of growth in our aging population will last for 19 years and will demand more and more of our attention, focus, preparation, and wisdom. Even more important, this time of intense focus on caring for our boomer elders will continue for many years.

If we think Social Security and Medicaid are in trouble now, hang on to your hat because it’s just getting started.

Nationally, four in ten of us will need nursing home care at some point in our lives. One in ten will be in a nursing home for five years or more. And the massive spike in our aging population will likely increase the number of people in nursing homes 300% by 2030.

But 76% of Americans believe they will not need long term care in their lifetimes. Obviously, someone’s miscalculating and I doubt it’s the Census Bureau. 73% of people incorrectly believe that Medicare will pay for their long term care—a dangerous misconception that leads many people to overlook planning for long term care while they’re young and able.

Here’s a shocker—75% of nursing home residents are women! Why? Aside from the well-known longevity differential between men and women, women are capable of living under less than ideal conditions for long periods of time. Men also have a higher rate of heart disease and cardiac arrest, which often takes them more quickly than women. Men simply drop dead rather than live with suffering that has no end in sight. I’m not sure if either one is preferable but I certainly don’t want to be one of the 2/3 of Americans who have to rely on friends and family for my elder care.

Currently, only 1/3 of Colorado nursing homes are ranked above average. The average cost of care in this state is around $6,200 a month but can go much higher depending on the standard of living and care the elder wants and can afford. In some areas, the average cost of care is upwards of $10,000 a month.

Who has that kind of money lying around? Who has that kind of money invested that will throw off enough income to pay for long term care? Here’s an idea of what one would need to have invested in an income-producing portfolio to pay for nursing home care in Colorado.

• Monthly cost of care:           $6,200
• Meds                                          $500
• Therapy                                     $500
• Miscellaneous                          $100
• TOTAL Monthly Need        $7,300
• Annual Need                       $87,500
• Investable Assets Needed to Meet Annual Need
  (Divide Need by Rage of Return Estimated at 3% after tax)

$2,920,000

In order to pay for the cost of care for an average nursing home, a single person would need to have $2,920,000 in investable resources! For people with less than that amount and who need long term care, impoverishment is a nearly inevitable fact of living a long life.

Many of us hope we’ll live a long and healthy life then one day, go to bed and wake up dead. But for many of us, that won’t happen.

It’s a sad reality that as we age, we will become poorer and poorer because modern medicine helps us, with all its attendant expenses, to live longer but more chronically ill lives.

Full Disclosure

Technically, I’m not a baby boomer. I was born in 1966, the year following the end of the boom. My nine brothers and sisters, though are ALL boomers and whenever I think of planning for my elders, my siblings spring to mind, not so much myself. That’s not necessarily a good thing because even though I’m in my 40s, I should begin to plan for my care now–and helping my fiance to do the same. I’m healthy, young enough and very insurable. My strategy for planning will begin with acquiring a long term care rider for my life insurance policy and making sure my assets are in a trust so that if something happened to me even now, my trustee could step in and manage my affairs seamlessly and my family could care for me in the way I’ve instructed. As I age, we will keep a weather eye out for the proper time to think about even more advanced planning for myself and my (future) husband.

Next week, I’ll bring you an article about what questions to ask a nursing home if you or someone in your life is facing the prospect of needing long term care right now.

In the meantime, if you’d like to get a better idea of what you can do to begin planning for long-term care, please call to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $550, but each month I’ve make space for two people to have a complete planning session with me at no charge.  Call today and mention this article and ask for one of those two meetings.

Making a decision about who would raise your children if something happened to you can be puzzling and even dramatic—especially for a married couple trying to agree on potential guardians. Rest assured, you know your children better than anyone and you’re uniquely qualified to make the decision in a way no one else is—not even a judge. So before you throw your arms up with an “I have no idea who to pick!” here’s a method to come to a decision that you can live with. REMEMBER: guardian nominations can be changed and should be changed over time as your children grow and their needs change. Don’t be afraid to make a decision and then change it later. That’s the natural progression of childhood in operation.

Does this kid looks like he needs a special kind of guardian? Oh yeah.

Here’s the method I recommend. Each parent should go through this exercise individually as well as together. It’s vital to keep in mind that each of you will have different answers and none of them are wrong.

1. List five people who you would be willing to raise your kids. Go with your gut on this. Don’t think too much about it, just list the top five. You can add to it if someone springs to mind as you consider the factors we’ll list shortly. Don’t restrict yourself to immediate family members. Many times, the perfect guardian can be found among close friends and sometimes in the case of older children, families that your child knows well. Some parents have named co-workers and neighbors. The decision should not be based on relationship entirely but on who will do the best job at that point in your children’s lives.

2. Consider your values*. What do you want your children to receive growing up with their guardians? Can your potential guardians raise your children in the way you would have raised them? Reflect on your potential guardians’:

• Education and Life Experience. These tend to inform one’s own personal values and impact one’s financial security. What would the potential guardian teach your children and what types of experiences would she or he provide and/or encourage?
• Religious or Spiritual Philosophies. Does the potential guardian understand yours and your spouse or partner’s religious or spiritual philosophies? Does she or he respect differences of opinion and practices? Do the potential guardians’ friends, neighbors, and extended family share that respect? Is it important to you that your children be raised in a particular faith or exposed to particular ethnic or religious traditions?

3. Consider practical matters. Raising kids is, if nothing else, a colossal give-fest. Raising someone else’s kids realistically is asking someone to commit to one of the most difficult jobs on the planet. When choosing your guardians ask yourself, and if puzzled, ask them about:

• Parenting Philosophies. Include preferences regarding matters such as diet, sleeping, style of discipline, television viewing.
• Relationship With Your Children. Evaluate the existence, quality, and nature of the potential guardian’s relationship with your children as well as the quantity of time she or he has spent with children. How do your children feel about her or him?
• Location. Consider the impact and effects of moving on your children in the aftermath of losing both of their parents and how often your children would be able to see and visit with the friends and family with whom they have spent the most time and are most comfortable and familiar. Older children tend to be more rooted in their community. Will moving them disrupt them more than necessary? Have you considered local guardians—even if they are not related?
• Age. Look at the ages of the potential guardian and her or his own family and how it relates to your children’s current approximate ages. Older siblings who have raised their children may not welcome the opportunity to do it again. Try not to take that as a personal affront. Be realistic about what it would feel like to finish raising your own children only to have to raise another family. If you’re determined to name your own parents, try to remember exactly what you were like as a teenager and see if that’s what you really want for your parents’ golden years.
• Physical and Mental Health. Is the potential guardian and her or his present partner or spouse physically and mentally healthy? Do you have any concerns about the potential guardians abilities to care for your children? Do your children have any special needs that would require additional training, talent, resources, or inclination from your guardians?
• Lifestyle and Circumstance. Is it important to you that the potential guardians be able to be “at home” at least part time with your minor children rather than, depending on their ages at the time, in full time care? Does the potential guardian have a lifestyle that would easily support the addition of children or would that be a drastic change and if so, is it a change the guardian would really want for her or his own life?
• Your Children’s Preferences. To whom do your children exhibit a natural affinity and with whom (your family or friends) do they feel most comfortable? Depending on your children’s ages and maturity levels and without causing them undue anxiety, you may want to tactfully solicit their input. In Colorado, a court is required to obtain the consent of a child over 12 before deciding guardianship so check with your kids if they’re over 12.
• Avoid Making Financial Resources a Priority in Your Choice. Many parents choose a guardian based on their ability to support their kids financially. This is not a good criterion. Rather, providing for our children even in our absence is our responsibility so that our guardians need not worry about how they’re going to pay for the children they agree to raise. Ask me about ways to provide for your kids in your absence and remove this factor on your list.

4. Rank your values and your children’s practical needs in order of importance. Don’t worry if you and your child’s other parent do not match. That would be asking a lot of two individuals. Instead, decide to honor the differences between you that make your unique as well as those that bind you.

5. Compare Your Two Sets of Rankings. Decide if any names are “out” and if any new ones have sprung to mind.

6. Remain Calm and Make a Decision:

• Rank potential guardians according to how closely they line up with your values and the practical considerations of raising your kids in your absence.
• Compare your lists
• Place common names in the order you’ve ranked them
• Discuss names that do not appear on each other’s lists and why
• Reconsider each other’s positions and adjust your list if necessary
• Decide on three to four names, in order of preference

7. Ask Your Potential Guardians If They Will Serve. By all means, do ask in advance if you possible or shortly thereafter. You can make a change if necessary. I often counsel clients to ask if the potential guardian would be willing to be listed as a potential among several nominees. That way, should you ever change your mind, you needn’t worry too much about hurt feelings. Be aware also, that nominees are volunteers and they can decline the honor if their life situation does not allow them to accept it.

8. Document Your Ranking in the Form of a Nomination of Guardianship. Visit www.coloradokidsprotection.com and walk through the process of documenting your choice.

Before you begin, you may want to review my report “Six Common Mistakes Most Parents (and Lawyers) Make When Naming Guardians.” You can download it by filling out the form to the left of this screen.

Take some time now to go through this exercise and commit to a decision. You can—and should—change your nomination from time to time as your children change. Your kids’ guardian nomination is a foundational aspect to their well-being and there should always be one in place. The odds that the nomination will be called into service are low, but well worth the time to make sure your kids are cared for by the people YOU choose. No judge in the world can possibly make the decision with all the information you have and they can’t make the decision nearly as well as you can.

I’m available to discuss your unique family situation when you’re ready to name their guardians and to take the next step in making sure they benefit from your life’s work, your resources and your wisdom. Please call my office at 303-747-3909 and request one of the two Family Wealth Planning Sessions I give away each month. Those appointments are normally a $550 value so call and get your appointment as soon as possible!

* Factors contributed by Massachusetts attorney Danielle Van Ess. www.dgvelaw.com.

I could not believe my ears. Since then, I’ve heard several probate lawyers and financial advisors say in all seriousness that there’s no need to avoid probate in Colorado because it’s cheap and easy.

What exactly is easy about a lawsuit?

“Probate is a lawsuit you file against yourself
after you die for the benefit of your creditors.”

Folks who say probate is easy are often probate lawyers who get to charge an hourly fee to dispose of your estate. In their minds, it’s better to spend the money when you’re gone because you won’t need to know what it’s costing. But your loved ones will know. They’ll figure out how much it costs to pay hourly fees that have no end in sight. They’ll know that they have to appear in court. They’ll know that you could have done something but chose to let it ride instead.

Okay, time for some mechanics in estate planning. Here are some of the factors that affect your direction when it comes to your estate plan. In general, families who choose to plan can opt for one of two main strategies. One is a will-based plan (meaning a probated estate). The other is through a trust-based plan (meaning a private estate). Here’s a little compare and contrast on them both.

Will-Based Plans

A will-based plan is an assurance of litigation. By definition, a will comes under the jurisdiction of the courts, which means it must be probated.

Will-based plans are limited to a straightforward distribution of your assets after you die. There are no provisions for distributing your assets over time, nor is there any way to use it if you become incapacitated. A will doesn’t help your family manage your affairs if you’re incapacitated. Instead you’d be subject to “living probate,” a conservatorship if you’re unable to manage your own affairs. A court will appoint a two lawyers to oversee your estate if you’re incapacitated. Both of these folks get to charge you for their time and effort. And usually not at a friends and family rate.

If you have a will-based plan, hope to heaven that you live long and die fast. Because if you hang on for any length of time, living probate will eat up money very quickly—that is over and above medical bills.

Some people obtain some of the tax planning characteristics of trust plans by making testamentary trusts inside their wills. This means that, after they pass away, their personal representative (PR) will create ongoing trusts for their beneficiaries according to the instructions left in the will.

One of the weaknesses of testamentary trusts is that it must still be probated just like a will which translates to additional legal fees, lots more hassle, and it doesn’t provide any privacy protections. The other downside is that a testamentary trust is likely to be as expensive to organize as a living trust would have been while alive.

Another risk of will-based plans is that they’re often done online without the advice of counsel. When DIYing, people make many mistakes that can cost their families oodles of cash and a whole lot of heartache. If you’d like a peak into what can happen if you DIY online, read this eye-opening article.

The pros of will-based plans are: they’re cheap, easy to draw up, and, if you have no assets or minor children, relatively easy to probate if no one will contest it. If that sounds like you…Bingo! You’re the lucky winner.

For some people, a simple will is the perfect solution. There are some folks who don’t even need a will but really only need financial and medical powers of attorney, and a living will. For people with a lot of love to pass on but no material possessions, leaving this planet with a simple will or even intestate is fine.

Trust-Based Plans

A trust-based plan is a better choice for many families. Trust creation is not a DIY job, though. You really need an attorney who knows what they’re doing to create a living trust plan for you.

Living trusts are like treasure chests. To the rest of the world, they’re invisible. While you are alive, you take your treasures in and out of your trust as if it didn’t exist. But if something happens to you and you’re incapacitated, you can pass that treasure chest on to someone who can step into your shoes and take care of your life, your assets, your business, your family.

When you pass away, that trust becomes its own unique entity. Your social security number is retired (oh, darn, no more social security tax) and your trust gets its own employer identification number (EIN). Your successor trustee then administers your trust for the benefit of your beneficiaries—your loved ones—in the way you have instructed them in your trust.

Trust Advantages: The beauty of the trust plan is that a court is not involved. It’s totally private. There is no inventory for predators to scrounge through at the courthouse. There is no risk that your loved ones will be poached on by slick con artists who know how to separate heirs from new wealth. Everything remains private, as it should be.

In a trust, we have the opportunity to make unique arrangements for our loved ones. We can make trusts that encourage our children to be productive and creative members of society; that provide for our loved ones, that give to charity; that pay for college; that put a down payment on a first home, that provide seed money for a child’s business. And we can take advantage of all the credits the IRS offers without any slipping through the cracks. How cool is that?

Even cooler, we can protect those assets even from our loved ones’ creditors. If you knew you could keep something sacred for your child, something they could rely on even if they got divorced or are sued in the future, wouldn’t you? And what if you knew you could shut off the valve if your child was wrestling with an addiction or other illness that might dilute your gift to them? What if you could shut it off until they got better? Wouldn’t you? Well, trust-based systems are the way to do that.

Trust Disadvantages: The cons of trust-based plans are threefold.

First, they’re more expensive to set up. In general, a family with assets below the federal estate tax exemption will need a foundational revocable trust plan, which can cost between $3500 and $7000. The variance depends on the size and complexity of your estate and what you want it to do—the more complicated, the more expensive. A good attorney will help you figure out what you want your plan to do and so you can pay for just that. Pay any less than that…start thinking about the quality and effectiveness of the plan.

Second, they need maintenance. While you’re living, it’s important to make sure your assets are titled the right way so they pass through your trust. Without that, trusts are as worthless as the paper they’re printed on. So you do have to check on them from time to time. A good attorney will be available to you throughout the initial funding process and have staff to serve you as well. Beyond the initial funding process, some lawyers have membership programs that give you access to attorney time at an extreme discount each and every month. If you think you’ll need to have access to an attorney frequently, look for one of those programs. But pick an attorney who communicates regularly with his or her clients so you can stay up to date on the latest developments in estate law.

The last downside to a trust-based plan is that after you pass away, there will be some administrative costs. No one knows what those costs will be in the future but the conventional wisdom is that it’s a much smaller percentage of the estate than a formal probate would be.

Full Disclosure

Obviously, I’m biased. I know trust plans are superior in almost every way for people with kids and assets despite the initial investment cost. But here’s another reason that a trust-based plan is better, and it’s a societal reason that I believe trumps the statement “probate is easy.”

It’s not the court’s job to distribute our wealth. It’s our job. We’re grown up adults and have a duty to take care of our families to the best of our ability and that includes planning for the worst. Probate clogs up our courts and takes judges’ time away from folks who really need it. We should all be mindful of taking up precious legal resources and abdicating our responsibility to the courts. (Okay, stepping off my soapbox now).

The reality is that when you pass away, you won’t be here to care about your assets. And if you don’t care, that’s absolutely your right. None of us have to care.

But many of us do care. I do. Heavens, I’ve had three different estate plans and spent a lot of money doing them. I’m grateful now that I have the skill to do it myself. I’ve invested years and many thousands of dollars to be able to do it for others the way I wanted it done for myself…the right way.

Odds are, if you complete your estate plan, you will need to revise it over the years. And you really should! The law changes constantly, assets change, families change. The beauty of finding someone you really like and want to do business with is that you have them to turn to whenever you need to revisit and revise your plan for the changing times.

My goal is to be here for my clients as a long term, trusted advisor. I’d like to help families learn what they need to know so they can make good decisions for themselves, including getting clear on the financial and emotional costs of all these choices.

I haven’t discussed what it looks like when a family has no plan in place. That’s another ball of wax. If you would like to find out what would happen to your family if something happened to you now, please contact my office either by calling 303-747-3909 or using the contact form through the icon above. I’d be honored to be your guide.

One last thought, if someone says to you that probate is easy, send them this link.

Tax laws are confusing on a good day–what you can deduct, what you can claim–And with all the recent changes to the laws, it’s almost impossible to know if you’re doing the right thing.

Hopefully, this will help. Here’s the straight scoop on how the new tax law affects your estate plan:

A Quick and Dirty List of What Changed

On December 16, 2010, Congress passed a new tax law that changes how your estate should be planned:

• The estate tax has been restored retroactively to Jan. 1, 2010.
• You can pass $5 million through your own estate without having to worry in 2010.  That amount will be indexed for inflation after 2011.  Anything over the $5  million mark is taxed at a maximum of 35 percent.
• If you die in 2011, your surviving spouse can add any of your unused exemption to theirs – a new concept of estate tax portability. In calculating the total exemption (up to $10 million) the amount that’s portable is not indexed for inflation, but your surviving spouse’s own exemption amount is.
• The gift tax still applies but the amount you can give away in your lifetime has been raised from $1 million to $5 million starting in 2011.  This amount will be indexed for inflation as well, and you and your spouse can combine your lifetime limits for a total of $10 million.  If you plan to give away more than $5 million, the tax rate on the excess will remain at 35%.
• Generation-skipping transfer tax has been reinstated starting in 2011.  This tax is applied on top of the estate or gift tax to any assets you pass on to your grandchildren or to a trust you establish for their benefit.  The $5 million exemption applies to this tax as well.  Interesting note: There is no tax excess this year but that will change next year and the excess will be taxed at 35%.  Also note that portability does not apply to the generation-skipping transfer tax.
• When considering income tax on inherited assets, remember that the cost basis for the assets is adjusted to the fair-market value on the date the owner dies. This will help limit the capital-gains tax that your heirs have to pay if they sell the asset.
• If assets are inherited in 2010, the executor of the estate has an interesting choice to make: Choose to have the estate subject to the new tax law or follow the system in effect in 2010 (i.e., no estate tax).  If you choose the old law in effect for 2010, the estate must use the original price paid for any asset to calculate the income tax the heirs will owe.  You receive an exemption of up to $1.3 million on the gains and a $3 million exemption on assets inherited from your spouse.
• The estate tax exemption is only TEMPORARY! The $5 million exemption is will reverse at the end of 2012 and bring us right back where we started from at an exemption of $1 million. Two years from now, we’ll face the same nail-biting uncertainty we did this year.
• Don’t wait to finish your estate planning because the estate tax exemption has been increased. Planning isn’t about minimizing taxes, it’s about making sure our loved ones can carry on without us. It’s about keeping our family’s business private, closely managed, asset protected, and out of court! Minimizing taxes is one of the many benefits of planning and just because the federal government has given us a larger exemption doesn’t mean we shouldn’t plan. It does mean that we should be prepared for an ever-changing landscape of estate tax laws.

So, What Do You Do Now?

Call your estate planning attorney (or hire one if you don’t already have one) and talk to him or her about the changes.  Be sure to ask about the following issues, too:

If you’ve been waiting to see what Congress would do with the estate tax before you took action on an estate, you’re in luck.  Some of the key deadlines that are normally 9 months from the date of death have been extended for people who died in 2010:

·      Filing the return

·      Paying any estate tax due

·      Disclaiming or turning down an inheritance

·      Applying the generation-skipping transfer tax

When you start planning your estate, make sure you have your hands on records showing what your assets cost when they were purchased.  If you can’t prove what the assets originally cost, the IRS is going to assume that the cost was zero and your heirs could be stuck paying capital gains tax on the total sales amount.  For the sake of your heirs, keep all your purchase records in one place, preferably with your estate planning documents.

If you’re selling appreciated assets, talk to your estate planning attorney first.  It may be a better course of action to hold the assets over until 2011.  The carryover basis question is still not entirely clear at this point and you may bypass those rules if you hold on to the assets until next year.

Many of the changes to the estate tax laws will require a whole new set of paperwork, particularly in dealing with the carryover issue.  So far, the IRS has yet to issue new forms or instructions for dealing with carryover basis.  The deadline for reporting carryover is April 15^th of the year following the person’s death.

If you’ve been chosen to be the executor of someone else’s estate, document every conversation and always follow up verbal communication in writing.  If the family disagrees with what you recommend, you’re probably better off doing what they want to do.  Just make sure they sign documentation releasing you from liability and indemnifying you from any losses they take as a result.

If you have an estate plan or are thinking about planning your estate and would like an expert opinion on how to deal with the most recent changes to the estate tax laws, call us to schedule your Family Wealth Planning Session today.  We can identify what needs to be done to ensure that you have the right plan in place to take full advantage of all the recent changes.  Our Family Wealth Planning Session is normally $550, but in January, I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge.  Call today and mention this article.

The holidays are upon us, and unfortunately, so are the opportunities for being victims of fraud.

Most of us are savvy enough to know we should shred our credit card bills and anything else with identifying information on it.

But have you thought about protecting your child’s identity?

Child identity theft is a fairly new problem but it’s happening more and more. And according to the FTC, 5% of the victims were under the age of 18.

The holiday season seems to prompt criminal creativity.

To keep your child from becoming a victim of identity theft, keep these tips in mind:

1. Don’t disclose personal information if you don’t know how it’s going to be used.

Never give your child’s personal information out over the phone, through the mail or online, especially with regard to any kind of sales promotion.  Never carry your child’s Social Security card or number in your purse or wallet.

If your child is old enough to use the Internet (and they start really young these days), watch what they’re doing.  Social networking sites have led to an increase in the amount of personal information children are providing about themselves online.  And predators are out there watching and waiting.

Just as you warn your child about talking to strangers, warn them about posting their home address, date of birth or phone number online.

2. Request that your bank require photo identification.

This is for all transactions for your accounts or accounts in your child’s name.

3. Don’t apply for credit cards through offers received by mail.

If you have opened a credit card account with your child as a joint account holder (typically a teenager), you will more than likely begin to receive credit card offers in your child’s name.  If you do, don’t assume that it’s a mistake.

If you receive an offer in the mail for your child, check with the three credit reporting agencies periodically to make sure that fraudulent accounts haven’t been opened in your child’s name.

Contact 888-5OPT-OUT or 888-567-8688 to opt out of receiving prescreened credit offers in your name or your child’s.

4. Shred all paperwork.

Just as you would shred paperwork with your information on it, shred anything with your child’s information on it.  The same protections that you employ for yourself should be applied to your child.

5. Contact the Social Security Administration

Call the Social Security Administration and request an earnings report in your child’s Social Security number and name to make sure that someone isn’t out there working under your child’s identity.

If you take these steps and your research turns up fraudulent information, take the following steps to begin to correct the problem:

• Contact the Social Security Administration and advise them of the fraud.
• Contact the three leading credit report agencies, TransUnion, Experian and Equifax and advise them of the problem.
• File a complaint with the Federal Trade Commission.

As parents, our chief concern is and will always be protecting our children.  When your kids are 50 and you’re in your 80’s, you’ll still be worrying about their safety and well-being.

Call us to talk about additional steps you need to take to protect your children.  There are legal documents you need to have in place to make sure that your children are protected in the event you’re not there to care for them.  Schedule your Family Wealth Planning Session today and ask us about the Kids Protection Plan. Our Family Wealth Planning Session is normally $550, but each month I make space for two families to have a complete planning session with me at no charge.  Call today, mention this article, and ask for one of those sessions!