Excuses, excuses….

People procrastinate on finishing their estate plans for some reason.  Apparently they know when they are going to die so they can decide when to sign the documents and finish the plan. I have a yearly cycle that I see. We are currently in a non-excuse time and thus people are working to finish their estate plans. Like you doing research on the internet… you should be applauded. However, let’s get you done before the summer vacation excuse kicks in!

Ok, so people start the year strong with estate planning in my experience. They have new year’s resolutions and want to clean up their worlds so estate planning often moves up the priority list. Other than some ski trips, a trip to Hawaii, and of course (for my elderly clients) the “I have a doctor’s appointment that day” excuse, many clients finish their estate plan during the first quarter of the year.

Oh that is until the taxes excuse kicks in. That’s mid-March for most clients I have found. Estate planning slows down until April 16th when the tax excuse is over. Again, it’s a window of opportunity for me, the estate planning attorney, to help clients finish their work before summer.

Actually the summer excuse starts in May with the graduation excuse. “I can’t sign that day as I will be back east for my son’s college graduation….”  Then the summer starts and people travel, there are lots of weddings, and then they have to get ready to send the kids back to school.

Ok, then my final large window to help clients… the fall.  From the Tuesday after Labor Day until mid-November people are taking care of business! They are doing stuff like getting their estate plan done. They are organized. They call me. We get their trusts signed, we get their trusts funded, and people are protected by their new estate plans.

Then the whole country comes to a shut down about the Friday before Thanksgiving. From that day until about January 2nd I might as well close my office! I don’t though so if you are reading this blog in December I am still working so call me up!

That is the cycle as I see it. I have been doing estate planning since 1994 and feel I have a pretty good handle on it. Of course a lot of people finish their estate plans throughout the year but the above is a broad generalization of what I see in my practice.

Whatever time of year it is, whatever excuses may exist, and whatever reasons you have for wanting to talk about your estate plan give me a call!


Learning what you don’t know

Like most things in life preparing wills and trusts is something you can not learn in one day. In fact, you can’t learn it in one year.  I was reminded of this last week at a continuing education seminar I attended. I have been doing this type of work since 1994 and, in fact, been practicing exclusively in this area of law for the majority of the time. However, I still learn new things! I go to continuing education to learn about the latest laws, the latest ideas, but also to go a level deeper in my knowledge. I want to dissect detailed areas of the law and understand them!

Each time I go to a new deeper level I realize how unfair it is, to you the general public, for attorneys to dabble in an area of law. Wills and trusts looks so easy on the surface level but it is so deep and involved and so easy to mess up! The problem is the attorneys that dabble just don’t know what they don’t know. They, in fact, have no clue what they don’t know!

Sure there are in-depth classes they can take, books they can read, and some of them do all that.  A few new estate planning attorneys, like I did in about 1995 or 1996, will go to Wisconsin for a week of intense estate planning training through ALI-ABA which presents an incredible estate planning boot camp at the University of Wisconsin. It rotates each year; one year beginning, the next intermediate and the last advanced.  I went to a beginning year as that was the level of my knowledge back then. Hopefully one of these years I can go back for the advanced course of study because though I could teach most of the classes being offered I also know I will learn something if I do!

Unfortunately, most attorneys that dabble in wills and trusts do not go to many, if any, estate planning classes. They think they have some good forms and they “have the practice guides” if a tough problem presents itself. The problem is they do not know what a tough problem is since they don’t know what they don’t know!

Let me be clear this is NOT about how much money a client has. Certainly larger estates offer complexities but a lot of modest, and even small, estates create much more difficulty. Some small cases really require the knowledge of an advanced estate planning attorney.  Unfortunately many clients don’t know what they don’t know and they assume their case is easy.

The bottom line is hire an attorney with vast experience in estate planning. Do not hire an attorney who dabbles in estate planning just because you know him or he is giving you a good deal. Hire a trained professional!


Protect your ASSets

Ok, I apologize but I couldn’t resist the title for this post.  Our society is crazy with litigation. Yes, you can blame the lawyers but individuals have to hire the lawyers and sign the lawsuits that are filed! However, it’s no doubt litigation is out of control, people sue for everything big and small, and juries sometimes give crazy judgments (i.e. McDonald’s hot coffee at the drive-thru case).

If you are like me you live an honest life. You work hard, you stay out of trouble and you are not a huge risk taker. However, life has risk no matter what you do! Let’s talk about protecting against that risk….

Start with insurance. Of course you should purchase insurance for large risks from a top rated insurance company.  House, car, liability, health, business, and of course an umbrella policy. In my opinion if you don’t have a million or two, at least, of umbrella insurance, you are missing a major piece of asset protection. Finish reading my blog post and then call your insurance company!

Ok, so you have insurance, you have an umbrella policy and you live a relatively careful life. That’s a good start. Let’s talk about what else you can do.  Your standard revocable “living trust” does NOT provide asset protection for you. Yes, really! A revocable trust is a dynamic device but it provides you no protection.

What about you setting up a trust for a third party (your kids) or your parents setting up a trust with you as a beneficiary?  The current gift tax laws allow for five million to be transferred tax free NOW. This is a huge change in the gift tax laws. The exemption had been stuck at one million for almost 10 years. In theory the gift tax exemption goes back to one million on January 1, 2013 so this is planning to do NOW.  You can put five million into a trust to benefit “your spouse” and “your children.”  You don’t need names; it can even be future people. Your best friend can be trustee.

By doing the above trust you have given away your assets so protected from your creditors. It’s in a third party trust so your kids are protected.  Your best friend is trustee and, in theory, he can only give assets to your spouse and kids. Presumably your spouse and kids will share with you right!?

Yes there is some “risk” involved but I would rather bank on my kids and best friend rather than some stranger who might sue me!

That type of trust arrangement is tough for a lot of people to swallow but there are a lot of other things we can implement to give you protection without giving up much control: a qualified personal residence trust, an irrevocable life insurance trust, and a family limited partnership to name a few.  Let’s chat about these options and others!


Powers of Attorney for Financial – Not so Simple

YES you can find free power of attorney forms on the internet.

YES you can go to stationary stores and find similar forms for very cheap.

YES you can find some attorney who knows nothing about estate planning who can print a form and charge you fifty bucks.

However, will that really solve the dilemmas you will be facing when the document is needed?

A lot of people when planning for their, or other’s, future think a power of attorney for financial affairs will solve all problems.  They think it will enable them to stand in someone else’s shoes (or appoint someone to stand in their shoes) and make all decisions.

It’s not that easy.

First, and foremost, there is a huge difference between medical and financial. There are two completely distinct documents and sometimes more. Today we are focusing on financial matters which actually includes some quasi financial matters as well.

Second, is the reality that a power of attorney for financial affairs has limited duty in our world. Why is this? Well, a proper estate plan usually has a trust. If your assets are in a trust a power of attorney is completely inapplicable to trust assets. You need to make sure your successor trustee documents are in place for that!

Also, most banks and financial institutions do not honor generic powers of attorney. Instead they require a “bank power of attorney.”  This is usually specific to their bank and will include the exact account numbers to be included in the power of attorney authority.

Also, for real estate transactions you need a “specific power of attorney” which mentions the real estate by address and, even better, legal description and APN (assessors parcel number). That way you can record it with the county recorder.

The third major issue is making sure your power of attorney is written to cover the topics you want, is “durable,” goes into effect when you want and appoints a trustworthy person.

Though most people do similar forms there are some differences. In some cases we will limit powers. However, in my experience if a client feels like they want to limit the powers of the person they are appointing I suggest they think about appointing someone else as their power of attorney!

Powers of attorney are not costly documents to have properly prepared but it is important that they are properly prepared, well thought out, and properly executed.

Call or email me to discuss what would work best for YOU!


ILIT’s Do not Have to be About Estate Taxes

An ILIT is the standard acronym in the industry for Irrevocable Life Insurance Trust.  An ILIT is one of the most dynamic estate planning tools available and that’s why I mention them from time to time. The key on this blog post is the idea that an ILIT need not have anything to do with estate taxes.

Historically ILITs were used to create a tax free fund of money. With the current five million dollar ($5,000,000) exemption from federal estate taxes a lot less people are worried about estate taxes.  Of course the law is set to sunset December 31, 2012 and go back to ONE million dollars ($1,000,000) on January 1, 2013 but let’s put that concern aside for the moment. Let’s assume you do not have any estate tax concerns. Read on because this article will have a great idea to provide tremendous value to your family!

Let’s say you are a professional making a nice salary. Let’s say you have a husband and two young kids.  Like most people you want to provide for your husband and also your kids.  What if you could give them money tax free and with CREDITOR PROTECTION built in!?  Well, that’s what an ILIT can do for you and your family. The way it works is this….

Let’s say you want to provide a two million dollar death benefit to your family should you die prematurely.  Term life insurance, especially at young ages, can be purchased for pennies on the dollar.  I am not a life insurance salesperson but let’s assume you get two million dollars of term death benefit for $200/month. That’s a wild guess but let’s go with it.  Obviously the odds are in your favor that you will not die during the term of the term life insurance. Maybe it’s 10 or 20 years.  However, IF you die during that time your family will thank you forever for having the thoughtfulness of having two million dollars of death benefit. Even in today’s days of .002 percent interest most people can live decently with two mil in the bank!

Life insurance is often can distribute tax free after death but not always. There are many situations where it can create a taxable event. Thus proper planning is important. However, it can be made to be tax free with an ILIT if set up properly.

Ok, but why an ILIT?  An ILIT creates creditor protection for your spouse and kids. The two million would sit in an investment account, in the name of the trust, and in most cases the spouse can even be the trustee in charge of distributing assets! However, a properly drafted ILIT has built in asset protection so that their creditors can not get that money! It’s an incredible tool.  TAX FREE MONEY WITH CREDITOR PROTECTION BUILT IN!

The simple mechanics are you hire an attorney, like me, to set up an ILIT for you. The ILIT then purchases a life insurance policy (term or whole life) on your life. Each year you gift money to the ILIT trustee (usually a trusted friend) who pays the premiums of the life insurance. When you die the trustee claims the death benefit, invests it in the name of the ILIT, and then distributes the funds to the beneficiaries you have selected in the trust. It’s really simple!

The costs are not great to set up an ILIT and the combination of tax savings and creditor protection are truly PRICELESS!

Contact me to discuss your situation to see if an ILIT will help you!  -John

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10.0John Bernard Palley
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