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Wednesday, August 30, 2017

Removal of a Trustee



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Monday, August 14, 2017

Testamentary v. Inter Vivos Trust

The world of estate planning can be complex. If you have just started your research or are in the process of setting up your estate plan, you’ve likely encountered discussions of wills and trusts. While most people have a very basic understanding of a last will and testament, trusts are often foreign concepts. Two of the most common types of trusts used in estate planning are testamentary trusts and inter vivos trusts.

A testamentary trust refers to a trust that is established after your death from instructions set forth in your will. Because a will only has legal effect upon your death, such a trust has no existence until that time. In other words, at your death your will provides that the trusts be created for your loved ones whether that be a spouse, a child, a grandchild or someone else.

An inter vivos trust, also known as a revocable living trust, is created by you while you are living. It also may provide for ongoing trusts for your loved ones upon your death. One benefit of a revocable trust, versus simply using a will, is that the revocable trust plan may allow your estate to avoid a court-administered probate process upon your death. However, to take advantage this benefit you must "fund" your revocable trust with your assets while you are still living. To do so you would need to retitle most assets such as real estate, bank accounts, brokerage accounts, CDs, and other assets into the name of the trust.

Since one size doesn’t fit all in estate planning, you should contact a qualified estate planning attorney who can assess your goals and family situation, and work with you to devise a personalized strategy that helps to protect your loved ones, wealth and legacy.


Monday, July 24, 2017

A Primer on Advance Medical Directives

While the main objective of estate planning is to help individuals protect their assets and provide for  loved ones, there are other important considerations, such as planning for incapacity. In short, it is crucial  to plan for the type of medical care people wish to receive if a serious accident or illness makes them unable to make or communicate these decisions. By putting in place advance medical directives, such as a durable power of attorney for healthcare and a living will, it is possible to plan for these unexpected events.

Durable Power of Attorney for Healthcare

A durable power of attorney for healthcare is commonly referred to as a healthcare proxy. This estate planning tool enables individuals to designate a trusted family member or friend to make medical care decisions in the event of incapacity. This person essentially acts as an agent, and is responsible for working with doctors and other medical professionals to ensure they provide the type of medical care the incapacitated individual prefers. If a healthcare proxy is not in place, it will be necessary for loved ones to ask the court to appoint someone make these decisions. In the end, this advance medical directive protects individuals in the event of an emergency and relieves others of the burden of going to court.

Living Will

A living will is another important advance medical directive that clarifies the type of medical care an individual prefers to receive if he or she becomes terminally ill and cannot communicate decisions about end of life treatment. In particular, a living will establishes whether certain measures, such as a ventilator or a feeding tube, should be used to prolong the individual's life

Other Essential Healthcare Directives

In situations when an individual becomes critically ill and does not wish to receive extraordinary life prolonging measures, it is necessary to complete a do not resuscitate order (DNR). In the event of a medical emergency, a DNR notifies doctors, nurses and emergency personnel not to use cardiopulmonary resuscitation to keep an individual alive.

Lastly, it is also important to ensure that other healthcare providers and organizations can access an individual's medical records and history. For this reason, it is necessary to complete a HIPAA authorization - a document required by the Health Insurance Portability and Accountability Act.

In the end, the possibility of becoming ill and not being able to communicate is not something most of us want to think about. However, putting in place these important advance medical directives can give you and your loved ones peace of mind knowing that your wishes will be carried out.


Monday, July 17, 2017

The Difference Between Equal and Equitable Inheritances

When it comes to estate planning, many individuals believe that dividing assets equally among adult children is the best choice. However, there are situations in which leaving each child the same amount might not be practical. For this reason, it is important to know the difference between an equal inheritance and an equitable inheritance, in which each child receives a fair share based on his or her circumstances.

What is an equal inheritance?

In this situation, each child gets the same amount of the remaining estate after both parents have died.

This option works well when the needs of each child are the same, or the parents provided similar support to each child in the past. Moreover, each child must be mentally or emotionally capable and financially responsible.

It is important to note that cases in which an estate includes real property and other tangible assets, it may be necessary to determine the differences in value of these assets in order to leave each child an appropriate amount. Lastly, leaving an equal inheritance may be the best way to avoid the emotional and financial costs of disputes.

What is an equitable inheritance?

In some cases, leaving each child and equal inheritance may not be the right thing to do. For example, it may be wise to reward a child who has taken on the role of caregiver for an aging parent or to compensate him or her for lost time and wages. There are also circumstances in which children may have been given different amounts of money while the parents were alive either for a wedding, educational expenses or a down payment on a home.

Lastly, for those who have a disabled child who receives public benefits, it may be necessary to provide for living expenses and medical needs in a special needs trust. In all of these situations, an equitable distribution of the estate assets is the best option.

The Bottom Line

In the end, determinations about the distribution of an estate to surviving children should be made in a way that will preserve family harmony. For this reason, it is important to discuss your decisions with your children and engage the services of an experienced estate planning attorney.




Monday, July 10, 2017

How to Leave Gifts to Step-Children

Today, blended families have become increasingly common, and many individuals have step-children, that is, children of a spouse or partner. In situations where step-children have not been legally adopted, however, they do not have a legal right to an inheritance from a step-parent. For those who wish to leave step-children part of their estate , it is necessary to include them in an estate plan.

The easiest way to leave gifts to step-children is to name them in a will. As with any other gift, they can be given a percentage of the estate, or specific gifts. If there are other children involved, it is important to avoid confusion by naming each child and step-child by using their individual names, rather than terms such as "descendants," "heirs," or "children."

There are also a number of estate planning tools that can be utilized to include step-children in an inheritance. If the objective is to avoid probate, for example, a revocable living trust can be established in which a step-child is named as a beneficiary. Moreover, it may be necessary to provide for a disabled step-child who is eligible for public benefits by establishing a special needs trust. Lastly, a step-child can also be named as a beneficiary in a life insurance policy or a pay-on-death financial account.

While there is no legal obligation to leave step-children an inheritance, it may be the best choice for those who have a close relationship, or played a significant role, in raising them. However, this will reduce the amount of assets available to other children and beneficiaries. Because blended family relationships are complex and subject to emotional challenges, it is important to explain these decisions with all family members.

By engaging in an open and honest dialogue, you can minimize the potential for strife and the possibility of a will contest. In particular, it is important to clarify why you gave each recipient a gift, the selection of your executor, and your thoughts about the family.  Lastly, you are well advised to engage the services of an estate planning attorney who can help ensure your wishes regarding step-children are carried out.


Monday, June 26, 2017

How a Prenuptial Agreement Can Protect Your Estate

There are many circumstances that can impact an estate plan, not the least of which is divorce. While ending a marriage is complicated, it is not only crucial to arrive at a fair and equitable distribution of the marital assets, but to preserve your estate as well.

While the laws vary from state to state, it is important to understand the difference between separate and marital property. Generally, separate property includes any property owned by either spouse before the marriage, as well as gifts or inheritances received by either party prior to or after the marriage.

Marital property, on the other hand, is any property that is acquired during the marriage such as houses, cars, retirement plans, 401(k)s, IRAs, life insurance, investments and closely held business, regardless of who owns or holds title to the property.

One way to protect an estate in the event of a divorce is to put in place a prenuptial agreement. This legal document specifies each party's property ownership and clarifies their respective property rights should they end the marriage. A prenuptial agreement can reduce the conflict that is normally associated with divorce, avoid court intervention regarding questions of property division and also serve as an effective estate planning tool.

In short, a well designed agreement will distinguish separate property from marital property so that those assets are not misclassified if one of the spouses dies. Moreover, a prenuptial agreement is beneficial to those who are entering into second marriages because it will help to preserve the rights of children from prior relationships. In addition, for those who marry later in life and acquire significant assets, a prenuptial agreement can protect the estate from claims by former spouses.

In the end, a prenuptial agreement can enable each spouse to protect their assets and provide for their loved ones in the event of divorce or death. If you are considering marriage, it is essential to put a comprehensive estate place that includes a prenuptial agreement.

 


Monday, June 19, 2017

How Title Insurance Protects Homebuyers

Buying a home is the single largest investment that many individuals will make which makes it essential for potential homeowners to protect their interests. In particular, it is crucial to ensure that the seller can transfer free and clear ownership of the property by obtaining title insurance.

In short, title insurance protects both lenders and owners against claims for unknown defects in title to the property such as another individual claiming ownership of the property, unpaid taxes, judgments and liens, improperly recorded documents, encroachments and easements, as well as fraud and forgery.

In a residential real estate transaction, there are two types of policies, a lender's policy and a buyer's policy, and the homebuyer is required to pay for both. The lender's policy, or mortgagee's policy, specifically protects the lender's interest, including the loan amount and legal costs. The buyer's policy protects the owner up to the original sales price of the property, or its full market value, depending on the type of policy the buyer purchases.

In order to obtain title insurance, it is necessary to engage the services of an escrow agent, or an attorney, who will order a title search. This is a comprehensive examination of public records associated with the property such as deeds, taxes, court records - judgments, bankruptcies, wills, trusts, divorce decrees and other documents.

The title company will rely on the results of this search to issue a preliminary report, or a title commitment, which details the potential defects and outlines the conditions that must be met before a policy can be issued. This report gives the seller the opportunity to remedy any liens or other encumbrances before the loan closing, or in the alternative, from the proceeds of the sale.

In sum, title insurance protects lenders and buyers from a wide range of problems such as a fraudulent sale, unpaid taxes or other liens and defects. While the cost of a title insurance premium is typically based on the purchase price of the home, it also depends on the services the title company is offering. Lastly, the rules governing title insurance vary from state to state, so it is important to consult with an experienced real estate attorney.


Monday, June 12, 2017

Investment Strategies for Minority Investors

As a minority business investor, it is essential to have an investment strategy that will maximize your returns. Once an investment decision is made, it is critical that a target business will enhance value of a broader investment portfolio.  At the same time, many minority investors are also business owners who know what makes for a successful enterprise. This post is a discussion of what minority investors should look for in a privately held business.

What makes for a great minority investment?

Since a minority investor has a significant but non-controlling ownership interest in a business, the first rule of thumb is to invest in business enterprises that you understand and with which you are comfortable. At the same time, great investments can also be found outside your business comfort zone provided that you have good management skills and the acuity to understand your target's business model.

Investing in a small business starts at the top,  that is with the owners. Accordingly, getting to know the owner and understanding how they do business is critical in your decision-making process. One key attribute you should look for in an entrepreneur is passion. Without it, he or she will lack the vision to steer the company toward success. It is also wise that you exercise caution by conducting background checks particularly with an eye toward ascertaining any legal actions in which the owner and other key people have been involved.

Of course, it's not only a matter of the people, it's about the numbers. The onus is on you to do your own due diligence, perform your own research and undertake an analysis of the proposed business plan. An investment proposal can be filled with numbers that amount to nothing more than smoke and mirrors. It's your job to ensure the numbers add up.

Level of Investment

Once you've done your homework on the target business, you need to decide how much to invest and how closely you will be aligned with the entity. Determining how much to invest is really a matter of risk management. In order to safeguard your investment, it is critical to negotiate a deal that is mutually beneficial. In particular, you should consider having an exit strategy with an understanding that your investment will be repaid by a certain date at an agreed upon rate of return.

You must also decide whether you will have no active participation in the decision-making and operations of the business or if you will be involved in the management of the entity. Even as a minority investor, your stake in the business may be significant enough to warrant having a seat at the table in order to advise on policy and evaluate management's performance.

Business Categories

As a minority investor, there are many business categories to consider that depend on your investment strategy. For example, investing in a start-up tends to be high-risk since management may not have a track record of success or a proven business model. Nonetheless, start-ups can also offer great rewards if they are breaking ground in a new business method or technology. The caveat is that the majority of start-ups are short-lived and destined for failure within the first 5 years.

If you are looking for a growth opportunity, there are business enterprises that have successfully launched but need another infusion of capital to grow. These businesses have an initial track record that will allow you to determine if your investment will be rewarded, even if it is subordinated to original investors. On the other hand, opportunities can also be found in companies that have stopped growing because of insufficient capital but still have a solid business plan.

For investors with a greater appetite for risk, companies that are failing can be ripe for a turn- around, provided that your stake comes with a hand in the decision-making and that the business fundamentals remain sound. Even bankrupt entities with cash flow potential offer investment opportunities for investors who are willing to have a high level of involvement.

The Bottom Line

For the minority investor, the nature of investing is high-risk, and every opportunity is unique - some offer greater rewards as well as higher risks. Your ability to make a decision on the merits of a business plan depends on your capacity to be a good business manager as well as a shrewd dealmaker. Investing in a privately held business requires a lot of up-front sweat equity in researching your target company, analyzing financial reports, evaluating the businesses track record, and ascertaining management's skills.

In particular, investing in a closely held business is an investment in the owners as well as the business. These entrepreneurs need to be innovative and have the ingenuity and passion to grow the business. In the final analysis, investors and owners need to be honest partners and strike a deal that is a win-win. The goal for both parties is to ensure the enterprise is successful and offers a worthwhile return on investment.

If you do your homework, your investment in privately-held businesses can be quite lucrative. That being said, it's always in your best interest as a minority investor to have a lawyer on your side of the table to craft an investment agreement, advise you of your responsibilities and shield you from potential litigation.


Monday, May 29, 2017

Why New Parents Need an Estate Plan

Becoming a new parent is a life changing experience, and caring for a child is an awesome responsibility as well as a joy. This is also the time to think about your child's future by asking an important question: who will care for your child if you become disabled or die? The best way to put your mind at ease is by having an estate plan.

The most basic estate planning tool is a will, which enables a person to determine how his or her assets will be distributed after death. Without this important estate planning tool, the state's intestacy laws will govern how these assets will be distributed. In addition, decisions about who will care for any minor children will be made by the court. For this reason, it is crucial for new parents to have a will as this is the only way to name guardians for minor children.

In this regard, selecting guardians involves a number of important considerations. Obviously, it is important to name individuals who are emotionally and financially capable of raising a child. At the same time, a will can also establish a trust that provides funds to be used to provide for the child's needs. Ultimately, guardians should share the same moral and spiritual values, and childrearing philosophy of the parents.

In addition to naming guardians in a will, it is also critical to plan for the possibility of incapacity by creating powers of attorney and advance medical directives. A durable power of attorney allows a new parent to name a spouse, or other trusted relative or friend, to handle personal and financial affairs. Further, a power of attorney for healthcare, or healthcare proxy, designates a trusted person to make medical decisions in accordance with the parent's preferences.

Finally, new parents should also obtain adequate life insurance to protect the family. The proceeds from an insurance policy can replace lost income, pay household and living expenses, as well as any debts that may have been owed by the deceased parent. It is also important to ensure that beneficiary designations on any retirement accounts are up to date so that these assets can be transferred expediently.

In the end, having a child is a time of joy, but also one that requires careful planning. The best way to protect your family is by consulting with an experienced estate planning attorney who can help you navigate the process.

 


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