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Don’t Risk it: Protect Your Finances From Coronavirus Complications

July 7, 2020

Dear Clients, Colleagues, and Friends: Many Americans spend a lot of time and effort in managing their finances. While most are worried about how the coronavirus (COVID-19) will impact their income—whether that’s because they are temporarily furloughed, find themselves suddenly without a job, or watching their investment and retirement accounts dwindle—there is another way COVID-19 can wreak havoc on American’s finances: lack of incapacity planning. As the coronavirus continues to expand across the country, thousands of Americans are unable to carry out normal financial responsibilities because they are too ill, or they are stuck abroad and unable to travel home, or from a lack of resources due to being isolated at home. While feeling healthy, individuals should plan ahead now and ensure that someone will take care of their financial duties by setting up a Financial Power of Attorney. This important legal document will not only protect your finances should you fall ill from COVID-19 but also from any events that might leave you incapacitated, like an injury or accident. Financial Power of Attorney: what is it? A Financial Power of Attorney (FPA) allows you to select a trusted family member or friend who will be responsible for managing your money and other property if you become mentally incapacitated (unable to make your own decisions) due to illness or injury. Without this document, bills won’t get paid, tax returns won’t be filed, bank and investment accounts held in your name will become inaccessible, retirement distributions can’t be requested, and property can’t be bought, sold, or managed. What happens if I don’t have one and get sick? Why would a court do that?—You may ask. As an adult, no one is automatically able to act for you, you must legally appoint them through the use of an FPA. Without it, you and your loved ones could lose valuable time, money, and control. WORD OF CAUTION: Don’t think you’re protected just because your assets are held jointly with your spouse, child, or family member. Here are three reasons why you shouldn’t rely on joint ownership: 1. Limited power. While a joint account holder may be able to access your bank account to pay bills or access your brokerage account to manage investments, a joint owner of real estate will not be able to mortgage or sell the property without the consent of all other owners. 2. Tax liability. By adding a family member’s name to your accounts or real estate titles you might be saddling them with gift tax liability. 3. Property seizure. You read that correctly. If your joint owner is sued than your property could be seized in order to pay their debt. 4. Medicaid disqualification. Putting a loved one’s name on a joint bank account or property title can disqualify them from receiving government benefits, such as Medicaid. Only a comprehensive incapacity plan will protect you and your assets from a court-supervised guardianship or conservatorship and the misdeeds of your joint owners. Do not rely on joint ownership as your plan—it’s simply too risky and unreliable. Already got one? Chances are it’s outdated. An FPA can become “obsolete” in […]

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Protecting your Separate Property

February 25, 2020

Often, we have clients who desire to protect their separate property before a marriage, or their gifts from parents later in life. One way to do this is with a prenuptial or postnuptial agreement. These agreements are difficult to do, for all of the obvious reasons. Another way to maintain separate property is to create Separate Property trusts to hold assets that are separate property. Separate property assets are those assets that you owned before marriage and have not been commingled, and also any inheritance that is received as separate property. This can be accomplished as a part of overall estate planning using a three-trust setup, two Separate Property Trusts and a Community Property Trust to hold jointly owned assets. The benefit is that the Separate Property trust assets are not subject to division in the event of a dissolution of the marriage. The income and value from the assets may be used to determine the ability to pay spousal and child support, but the assets continue to be separate property. In this trust, you can still fulfill your bequests upon passing. Usually, the desire is to give the assets to your surviving spouse and/or your children, but it could also be to share certain Separate Property Assets with others. An added benefit is that separate property of one spouse is not liable for the obligations of the other spouse. It can be quite effective for asset protection. Also, Community Property may be converted to Separate Property with a fair and equitable Transmutation Agreement between the parties. If you are married, at some point before passing away, it is advisable to place all of your accumulated assets into the Community Trust in order to obtain a full step-up in basis on the entire value of the property upon the passing of the first spouse. Similarly, if property is held in Joint Tenancy, it is advisable to change title to the Community Trust to obtain the full step-up in basis upon the passing of the first spouse. With a full step-up in basis, the surviving spouse can sell the property, after the first passing, for its value at the date of death without paying income taxes on the sale.

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The Durable Power of Attorney and Living Will Protecting your health, dignity and assets

April 5, 2019

At some point in your life, you may be confronted with various situations, such as deteriorating health, an accident or other  unforeseen circumstances, which may cause you to be unable to make decisions about your own medical care and personal finances. However, by executing a Durable Power of Attorney and Living Will, you can ensure that any medical wishes you have will be respected and your personal and business affairs will be kept in order. Advance preparation and comprehensive estate planning is the key.

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TRANSFERRING ASSETS TO YOUR TRUST

April 5, 2019

Most people are aware that one of the major benefits of establishing a trust is that a trust avoids the expense and delay of probate. Unfortunately, too many people establish a trust, and then defeat one of the major reasons for having the trust by failing to transfer all of their assets into the trust. Probate proceedings can only be avoided if all of the assets of the deceased have been placed in the trust.

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THERE MIGHT BE A WILL, BUT IS IT THE WAY?

April 5, 2019

If you are like most people, you believe a simple Will is all that is needed to transfer your property to your loved ones in the event of your death. While it is in fact one way to accomplish this goal, it often times is not the best way or most cost efficient approach.

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