It’s Going to Cost Me What?? (The Automobile Analogy to Updating Your Trust)
March 24, 2010
It happened again. After telling the audience at a recent seminar that trusts really are living documents that need to be updated periodically, I was approached by several attendees afterward asking if I really meant their trust needed to be updated. After all, they only want to make minor changes; they don’t need anything big; their trust was created by a very good attorney.
That’s when I told them that any trust needs to be reviewed regularly, no matter how good the attorney or the trust. People change, lives change, and laws change—and any of these changes could affect your trust. In fact, I recommend that my own clients review their trusts annually and update their trusts every 2 to 3 years, if for no other reason than because I am a better attorney today than I was yesterday and can do more to protect them and their families.
People are often surprised when I tell them that the cost of updating their trust can be as much as they paid for their entire trust several years ago. They don’t understand why an “update” is so involved and expensive. This reaction led me to an epiphany.
These folks understand “update” differently. When a client hears “update,” they think minor modifications: changes to the people named, the trustees, or distributions. These “modifications” are like getting the oil changed and the tires rotated on your car. They are items that need regular maintenance.
An “update”, however, is much more comprehensive; it includes changes that take into consideration:
- Tax law changes,
- State law and asset protection changes,
- Changes affecting how the trustees manage and distribute your money,
- Incorporation of new ideas,
- Plugging holes in old legal thinking that plagued older documents, and
- The most current thinking of over 1,000 lawyers
An “update” is trading in your worn out used car for a newer model that performs better. The standard provisions have been re-engineered to perform better. “Updating” your trust in my office means you are getting the best protection for your family, and your hopes, dreams, and aspirations.
As a trust based estate planner I aspire to show you the benefits of making modifications when necessary, and updating when the benefits of using modern language insure the result you desire and deserve.
If you are happy with your old car and just need an oil change or new tires, don’t buy a new car; but if a new car appeals to you, it will be a good value. Is the cost too much? Absolutely not, but sticker shock is a powerful emotion.
Can I “sell” a Chevrolet for the same price as a Cadillac? No, and I don’t want to; a Chevrolet might be right for your family and your budget – it will provide a reliable result if you have no special circumstances, hopes, or aspirations. However, I don’t often advocate in favor of a Chevrolet because experience teaches me that in an alarming number of cases the Chevy will fail when you need it most—after you die. No one wants an out of warranty repair bill.
My personal satisfaction and passion comes from making sure you understand the choice you are making. As long as you see both the Chevrolet and the Cadillac for what they are and choose the one that provides you the best value, we will both be happy.
In my next post I’ll give some concrete examples describing why my constantly improving Cadillac trust is a better value than your current vintage Chevrolet trust.
Online Accounts: Until Death Do Us Part
March 17, 2010
Does your estate plan include a digital Will?
Last night while I was having dinner with a friend who also works in the legal world, talk turned to the digital age, and one of our dinner partners remarked about how interesting it was that our friend had recently moved and had acquired modern technology like digital cable TV. The punch line was that when asked if he was online, he replied he had something better, a secretary who was online.
Not many people I meet in my practice have personal secretaries any more. Almost all of them are “online.” Whether you use the internet for email, online banking, bill paying, photo or data storage, medical information, or social networking, it is likely that you have a myriad of usernames and passwords that ought to be regularly changed.
What happens to those online accounts when you die?
Andrea Coombes recently wrote an interesting article Don’t Take Your Passwords to the Grave that describes some of the common risks associated with estate plans that do not adequately address internet accounts.
A somewhat more well known problem was documented in 2005 in A Corporal’s Death on Law.com which described the problems the parents of a deceased soldier had accessing their son’s email account to retrieve his son’s contacts and preserve a record of his correspondence.
To add to the mix, social networking sites such as Twitter, Facebook, MySpace, LinkedIn, etc, sometimes have their own policies regarding what happens to a user account when the owner passes away.
You can protect against the loss of the electronic paper trail as a result of your death by leaving behind a list of accounts, usernames and passwords. You can download my suggested form for this purpose at www.bregmanandburt.com. But because of the confusing privacy rules, this may not be enough. Your trust, Will, and powers of attorney should all include provisions addressing who owns or can access your online accounts after your death. You also have the option of creating an “online will” to deal with your online assets such as accounts and passwords.
If you use the internet and your estate plan does not contain these important provisions, seek the help of a competent estate planner who understands the digital world. I welcome your call to review your estate plan or discuss these issues with you.
Leaving A Legacy: Improving the World With Social Capital
March 10, 2010
Social capital is the money or time you contribute to worthy causes that improve society. A favorite saying around charitable causes is the phrase “give or get” which means members can either contribute an amount of money toward the goal or they can go out and raise that sum of money from people they know. The saying recognizes that the time expended raising money is often as important as contributing the money itself.
But the social capital I want to talk about in the context of estate planning emanates from my friend’s philosophy that “money is only a tool.”
Although it is often unexpected, when I initiate conversations with estate planning clients my goal is to begin each relationship by learning what each new client values.
Commonly, they are proud of the manner in which they have provided for their family and their intention to provide financial support after they die. However, they often worry that their descendants won’t use their inheritance wisely; and sometimes clients feel that their descendants don’t really need an inheritance anyway.
The concept of social capital solves many issues. It allows you to contribute money to causes you believe in and set up your descendants to be caretakers of the capital for the future. It benefits the descendant that doesn’t need your money by speaking from your heart to their own. It benefits the spendthrift by substituting personal responsibility for temptation.
There are 2 schools of thought about the use of social capital. Some clients are just not interested in the concept, believing they have supported their causes during their lifetime and it is their descendants’ turn to decide how to act. Others see the use of social capital as a key tool to building a legacy through strength of character. Depending on the client’s perspective there are different ways to use this tool.
One way is to purchase life insurance and name a favorite cause as the beneficiary. This allows small amounts of premium dollars to blossom into a large gift that can provide major support for a favorite cause. This works well in many situations, but it does not build responsibility in your descendants.
There are tax motivated strategies such as naming a charity as the beneficiary of a retirement account that has not yet been taxed. Leaving the descendants post-tax assets and gifting the as of yet untaxed retirement plan can yield a good income tax and estate tax result. Creating charitable remainder trusts as a technique to avoid capital gains on appreciated property is a good strategy when contemplating the sale of highly appreciated real estate or a business. These strategies share the defect of providing social capital, but not involving your descendants.
A good way to speak to your descendants is to set aside a portion of your wealth in a donor advised fund and name your descendants as the advisors to the fund. Your voice comes through because you leave your descendants the responsibility of making decisions about how, when, and to whom to give money. It encourages them to honor your legacy by becoming involved in the causes they support.
However you choose to create a philanthropic legacy, you will be speaking in a clear voice to your descendants about your values and making a difference the way you decide best suits your own perspective.
Leaving a Legacy: Your Own Voice in Your Estate Plan
March 4, 2010
(image courtesy of www.treasurechestproducts.com)
Back in December I blogged about estate planning not being about money and described the beginning of a journey to find the legacy you want to leave to your children, today I’m going to write about another part of that journey… finding your own voice.
Part of finding your legacy means looking for and putting your own voice into your documents. Recently I blogged about George Washington’s Will and the way he breathed life into his estate plan by describing the importance of his swords bequeathed to his nephews and the even more important freedoms for which they stood. Not all of us can be the father of our country, but all of us can bequeath the lessons of a lifetime and speak to our descendants through our estate plan.
Estate planning interviews that begin with how much money you have and to whom do you want to leave it are likely to end there as well. Interviews that beginning by listening to your own life’s story give you an opportunity to explore who you are, what you have done, and what is important to you.
When I was first starting out as an inexperienced estate planning attorney, I was often so in awe of my clients who were worth a lot of money that I couldn’t wait to try to impress them in return with the amount of knowledge I had and to use that knowledge to save them even more money. I was so awe struck, that I neglected to appreciate the value of who they were. If it was often a less than satisfying personal relationship for me, I slowly realized, it must have been mutually unsatisfactory for my clients as well.
I began to understand if I first learned who my clients were, I would soon appreciate what they valued, and it would become apparent how they had managed to accumulate the wealth and why they were now asking me to preserve it for their descendants.
Certainly passing along hard earned money is a priority for some clients, but poll after poll and personal experience say that what clients really want to deliver to the next generation is their own legacy. Passing on the money is easy; passing on your legacy is harder.
I have experimented with various tools for getting my clients in touch with their values for estate planning purposes. The best strategy is active listening. The hard part is that it is so easy, it doesn’t seem like I am working, I am learning. But as I learn from my clients, their voices ring in my head. As I draft their documents, who they are becomes embedded within the corners of the document creating a monument that will live at least as long as the money.
What do you value? Let me help you deliver those values to the next generation and maybe the generation after that.