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May 1 20

5 Essential Estate Planning Documents

by Phil Levin, Esq.
Free to use

Estate planning isn’t just for older people, couples with children, or individuals with a lot of financial wealth. Single people, young adults, and those with a modest income can also benefit from estate planning. Really, there are five essential items that should be considered by every adult, regardless of their age, marital status, or financial means.

A will or trust

Wills and trusts are the foundation of an estate plan. A will ensures that your assets are distributed according to your wishes after death, and a trust adds an extra layer of protection when it comes to safeguarding and controlling those assets. A trust can also provide tax or asset protection benefits, depending on the type of trust that is used. It’s important to remember that wills and trusts should be tailored to meet your specific needs, and that’s the reason why many “generic” or DIY documents found online do not work for families in the long run. Working with an estate planning attorney is the best way to make sure that your documents are in compliance with state and federal laws, thus avoiding certain liabilities and limiting the potential for legal challenges.

Durable power of attorney

While most estate planning documents go into effect upon your death, a durable power of attorney works while you’re alive, albeit incapacitated. If you are unable to manage your financial and legal matters for any reason, your appointed agent will have the ability to do so. For example, if you are unconscious due to an accident or sudden illness, your agent would be able to manage your bank accounts to make sure your bills continue to be paid. Once your condition improves and you are able to take matters back into your own hands, the power of attorney can be revoked. If your condition isn’t likely to improve, the power of attorney can remain in effect for as long as it is needed. This is particularly important for families caring for a loved one with dementia or Alzheimer’s.

Healthcare power of attorney

A healthcare power of attorney is similar to a durable power of attorney except for one key difference. As the name suggests, a healthcare power of attorney gives an individual of your choosing the power to make healthcare decisions on your behalf. For some people, this may be the same person who has been given durable power of attorney. However, you’re not required to name the same person in both documents. For example, you may want your spouse or someone close to you to make your healthcare decisions because you’ve had discussions with him or her about your wishes. On the other hand, the person you choose as your financial power of attorney may be a different relative who is financially savvy and wouldn’t mind the responsibilities required of him or her.

Beneficiary designations

Ideally, your estate plan will include some type of insurance that will provide benefits during a crisis. For example, long-term care insurance can cover healthcare and living expenses related to disability or old age, and life insurance will leave money behind for your loved ones after you pass away. Every insurance plan includes a beneficiary designation wherein you will name the person who will receive the funds that are paid out from that insurance. You will also have the option to name a contingent beneficiary, or someone who is second in line if your initial beneficiary is unable to receive the funds for any reason. Aside from insurance plans, 401k plans and other retirement savings typically include a beneficiary designation as well.

Guardianship designation

Typically, a guardianship designation is included in your will. A guardianship designation allows you to name someone who can take on the responsibility of raising your minor children upon your death. This should be a person or couple who is both capable and willing to serve in this role. Without a guardianship designation, the decision of who your child(ren) will live with will be made by a judge.

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Mar 1 20

Strategies to Avoid 5 Common Estate Planning Mistakes

by Phil Levin, Esq.

Every estate planning attorney has, at some point in their career, heard a sad story about complications in handling a loved one’s estate. Legal language can be tricky, and sometimes a minor mistake can cause major problems. One way to prevent potential conflict among family members or a lengthy and expensive probate process is to avoid some of the most common estate planning mistakes.

Not Having an Updated Will or Trust –

The number one mistake in estate planning is not updating your documents included in your estate plan. Any time you have a major life event change, you should review your Will or Trust to check for any needed changes such as adding or removing a beneficiary or a major asset. If you do need to make changes to the beneficiaries, remember that life insurance policies, 401(k) plans, IRAs, and other financial accounts often have their own beneficiary designation documents that will need to be updated as well.

Some examples of major life events that call for a review of your estate plan include the death of a spouse or other beneficiary, marriage or divorce or remarriage, and birth or adoption of a child. If any of your beneficiaries have passed away and you don’t have a contingent or backup beneficiary named, those assets could be held up in probate. If a child has joined your family, you’ll need to amend your estate plan to include naming a guardian for the child as well as someone to manage any inheritance left for them.

No Health-Care Directives –

Accidents or illness can strike anyone at any time, regardless of age or health status. Not having the appropriate documents in place could leave your loved ones in a difficult position. By having a living will prepared, you can make sure that your wishes with regards to your medical care are known. A Power of Attorney for Healthcare allows you to actually name the person(s) whom you want to make such healthcare decisions on your behalf if you are incapacitated and can’t speak for yourself. It’s also helpful to have HIPAA authorizations on file so that your medical providers will be able to share your healthcare records with whoever you’ve named in the document.

Not Taking Advantage of Favorable Tax Laws –

Tax laws, at both the state and federal levels, can affect how much of your assets actually end up in the hands of your loved ones. Tax laws change often, so it’s important to have a relationship with an attorney who is frequently reviewing your plan to ensure that you are taking advantage of all favorable options. You can also help reduce the amount of taxes that may be owed by your estate when you die by taking advantage of laws regarding gifts. These laws are also subject to change and could impact other aspects of your planning, so be sure to embark on any planned giving strategies with the help of an attorney.

Not Having an Estate Plan –

Obviously, not having an estate plan of any kind is a major mistake. Every adult, even if they’re young, unmarried, and childless with few assets, should consider starting their estate planning. It’s never too early to have some basic documents such as a will and healthcare directives in place. Of course, it’s even more important for those who are married, have children, or a considerable amount of assets to have a complete estate plan.

Not Consulting with an Estate Planning Professional –

It’s easy to find fill-in-the-blank estate planning documents online for a small fee or maybe even for free. However, do-it-yourself estate plans aren’t typically effective and may not be in accordance with laws that are specific to your state of residence. Using an online template can also cause you to overlook some of your specific needs. For many reasons, planning your estate isn’t an area where you should be taking the cheapest route possible. Hiring a lawyer to help you with your estate plan is worth the cost, and that cost may be less than you expect.

Feb 4 20

SECURE Act Changes Retirement Plans and IRA Rules

by Phil Levin, Esq.

Retirement benefits (such as pension, profit-sharing, 401(k) or IRA benefits) make up a substantial portion of many people’s assets.

Congress recently passed, and the President signed into law on December 20, 2019, the Setting Every Community Up for Retirement Act (the SECURE Act) as part of the Further Consolidated Appropriations Act, 2020.

The SECURE Act made various changes to the rules governing retirement benefits.

The key changes are as follows:

Distributions After Death

The most significant changes in the law are that the rules governing required distributions after the death of an employee or IRA owner generally now require that any remaining assets be distributed to the designated beneficiary by the end of the tenth calendar year following the employee or IRA owner’s death. This substantially reduces the benefit of the stretch.

Until now, designated beneficiaries could take distributions over their life expectancy (or faster if they wanted). The ability to stretch the distributions over a long period of time provided a substantial income tax benefit.

There are exceptions for spouses, minor children, disabled or chronically ill persons, or persons not more than 10 years younger than the employee or IRA owner.

These changes are generally effective for persons dying after December 31, 2019.

Traditional IRA Contributions After Age 70 ½

Until now, an individual could not contribute to a traditional IRA if he or she reached age 70 ½ or would reach age 70 ½ by the end of the year for which the contribution is made. Beginning in 2020, this limitation is repealed.

Unlike a traditional IRA, an individual over age 70 ½ is already permitted to contribute to a Roth IRA. However, there are income limits for eligibility to contribute to a Roth IRA. These limits remain in effect.

When Distributions Must Begin

Until now, employees and IRA owners generally had to begin taking distributions at age 70 ½, though they could defer the distribution for the year in which they reach age 70 ½ until April 1 of the following year. However, an employee who is not a 5% owner (with attribution) may defer benefits until retirement; and no distributions are required from a Roth IRA.

The new law increases the age threshold from 70 ½ to 72. This change is effective beginning in 2020 for individuals attaining age 70 ½ after December 31, 2019.

This change benefits some IRA owners who want to do Roth conversions to the extent it will not put them into too high a tax bracket. They will have an additional year or two before they have to take distributions that would be added to their income.

This change also benefits IRA owners who do not need to take distributions from their retirement plans and IRAs. They will be able to accumulate money in their retirement plans and IRAs for a longer period of time.

Planning Considerations

Roth contributions and conversions

It generally makes sense to contribute to a Roth IRA or convert to a Roth IRA to the extent the tax rate on the conversion is less than, equal to, or not too much higher than the tax rate that would otherwise apply to the distributions.

The limitation on the stretch will bunch the distributions after death into a shorter period of time. This generally will result in the distributions being taxable at higher rates.

As a result, Roth contributions and conversions will be advantageous more often.

Spouses of IRA owners who died within the last nine months

Most married people name their spouse as the primary beneficiary of their retirement benefits. However, under the new law, the surviving spouse’s beneficiaries generally will not be able to stretch the distributions for more than 10 years.

As a result, if an employee or IRA owner died in 2019 within the last nine months, the surviving spouse should consider disclaiming the benefits. In this way, the benefits will pass to the contingent beneficiaries, who may be able to stretch them over their life expectancy under the old law.

Reviewing existing trusts

Many people left their retirement benefits in trust rather than outright for the same reasons they left their other assets in trust rather than outright. By leaving assets in trust, their beneficiaries’ inheritances will not be included in their estates for estate tax purposes, and will be better protected against their creditors and spouses, and Medicaid.

Some people designed their IRA trusts so that any distributions from the IRA to the trust would be paid out to the beneficiary on a current basis. They may have been willing to have the beneficiary receive modest distributions in the early years, but may not want the beneficiary to receive the entire amount at the end of 10 years. These trusts should be reviewed, and if appropriate, changed to discretionary trusts.

Charitable remainder trusts

A charitable remainder trust is a possible workaround to replicate the stretch.

A charitable remainder trust distributes a percentage of the trust assets to one or more individuals for life or for a term of up to 20 years, whereupon the trust ends and the balance of the trust assets goes to charity. The distribution percentage must be at least 5%. The client may select the charities.

The payments can be fixed based on the initial value of the trust, or may vary based on the value of the trust each year. The actuarial value of the charity’s remainder interest must be at least 10% of the value of the trust as of inception.

Since a charitable remainder trust is tax-exempt (except for New Jersey income tax purposes), it can take the benefits in a lump sum without any adverse tax consequences.

Since the individual beneficiaries receive distributions for life (or for a fixed term of up to 20 years), the result is similar to that of a stretch.

There are some tradeoffs to a charitable remainder trust. It is less flexible than a traditional trust since the payments may not vary from year to year except based on changes in the value of the trust assets.

The payments to the individual beneficiaries have to be outright. There is an economic cost since the actuarial value of the charity’s interest has to be at least 10% of the value of the trust as of inception. However, for some people, this may be a small price to pay to be able to replicate the stretch.

Jan 1 20

Revocable Living Trusts – Still One of the Best Estate Planning Strategies

by Phil Levin, Esq.

Your clients trust you with their financial future and the legacy they want to leave behind. They rely on you to anticipate challenges, foresee trouble, and take preventative measures. It is up to the trusted advisor to know what problems are likely to arise and have solutions ready to help avoid conflict in the family, waste of resources, and other common pitfalls.

One useful tool to keep assets safe and to ensure they are distributed in the way your client wants is through the use of a revocable living trust.

What is a Revocable Living Trust?

A revocable living Trust (RLT), sometimes called a revocable trust or living trust, is an alternative to a will. It’s a document that instructs a trustee on how to manage the client’s assets during the client’s lifetime and how to manage or distribute the assets upon the client’s incapacity and death. Diverse assets such as life insurance policies, real estate holdings (including the client’s personal residence), bank accounts, and investments can be managed with an RLT.

An RLT allows a client to name him or herself as the initial trustee and to name a successor trustee in the event that the client becomes incapacitated or dies. By being named trustee, the client retains full control and also retains the benefit of his or her assets.

In addition to serving as the trustee, the client has the ability to alter the trust as he or she sees fit, to add or remove beneficiaries, and use the assets as he or she wishes. Because the assets in an RLT are still under the control of the client, he or she will pay taxes on any income within the trust accordingly.

RLTs Avoid Probate

One major benefit of using an RLT as an estate planning strategy is that it avoids probate. This is accomplished by ensuring that all assets that otherwise would have been in your client’s name at death are funded into the trust. Then, when the client dies, there are no assets in the name of the client and no need for a probate. The terms of the trust will dictate what happens to the assets, not a court or state law.

Probate can be a long and expensive process and can restrict beneficiaries’ access to assets from a few months up to several years. Estates whose assets span more than one state could ened up going through probate in each state. Why put beneficiaries through this process when it can be avoided simply by creating an RLT?

Protecting Inheritances

boatPassing financial security on to the next generation is a popular goal for many clients. However, inheritances can be vulnerable to many life events and changes a beneficiary might experience. Assets can be spent too quickly, devalued, lost in a divorce, seized by creditors, or become vulnerable in a lawsuit.

A properly drafted RLT allows clients to put restrictions in place to ensure their hard-earned money continues to benefit the next generation. Whether it is the use of a spendthrift provision or no-contest clause, or merely establishing an age that a beneficiary has to attain before receiving any distribution, the client is in control.

Providing Privacy

If a client has a traditional will, the terms in the will become public record as soon as the probate is opened. With an RLT, by contrast, assets are distributed privately. Without court supervision, there is no need for the RLT to be filed with the probate court. In turn, the transactions involved in administering the trust are not entered into the public record and cannot be searched, thous providing providing privacy to both the client and the beneficiaries.

What Could Go Wrong?

Most clients have a clear idea as to how they want their estate to be divided, but without proper estate planning, a lot can go wrong. Lack of foresight in estate planning will always come to bear sooner or later. Below are some common shortcuts and their consequences- and how an RLT can help avoid these headaches.

A client’s child is added directly to their bank account. This may seem like a straightforward way of designating a recipient for an asset, but what happens if the child incurs significant debt? The bank account will be seized by creditors, and the child will not see a penny. There is also the added risk that the creditor may decide to take the money as soon as the child is added to the account, despite the fact that the child never made any contributions to the account, and the client is still alive. The creditor will deem the child to be the owner of the account and can use those funds to satisfy the outstanding debt. By contrast, if the bank account is funding into an RLT, it can be protected from the beneficiary’s creditors during the client’s life and after their death.

A client leaves their home to their child through the use of a transfer-on-death (TOD) deed. The client intends for the child to receive a certain share of the estate by deeding them the home upon the client’s death. What happens if the home is sold before the client passes away? Instead of an equal share in the estate, the child will receive nothing. By funding all assets into an RLT and designating shares for each beneficiary to receive, you will not have to worry about individual assets. In this instance, if the home is an asset of the trust and is sold, the proceeds will be deposited into a bank account owned by the trust, so even if the child does not get the house, they can still get the value of the house as part of their share.
· A client names a beneficiary directly in their life insurance policy. Again, in this case, there is no protection against the beneficiary’s creditors. And what happens if the policy premiums are not paid? If the policy lapses, there will be no asset for the beneficiary to inherit. This too can be avoided with the care and specificity of an RLT. As mentioned before, having the proceeds payable to the RLT means that the client can stipulate how the funds will be distributed to beneficiary instead of an outright distribution. Also, if the policy lapses, as a beneficiary of the trust, he or she will still receive a share of the overall trust assets.

Honoring the Client’s Wishes

As we have seen, any of these events could disrupt the client’s original intent of dividing assets as desired. An RLT is a much safer and simpler option. Instead of having to worry about how separate assets are titled and making sure beneficiary designations and account owners are updated every time the client changes his or her mind about who is to receive them, an RLT allows for one set of instructions that control everything.

With assets being held in a trust and distributed over a period of time, an RLT encourages the continued management of the estate by qualified financial advisors. If the assets are allowed to be distributed outright, it is highly likely that the beneficiaries will cash out.

Your clients depend on you to help them plan and make sound decisions about their financial health. Working together, we can help develop a comprehensive financial and estate plan that will help build financial stability for today and tomorrow. Do not hesitate to reach out for more information about how we can collaborate to best serve our clients.

When creating an estate plan, you want to make sure that your own needs are met in the form of a healthcare directive and power of attorney. These documents ensure that your financial and medical needs will be taken care of according to your specifications should something happen to you to prevent you from making those decisions yourself.

Your Kids

If you have minor children, even teenagers, you will want to have some type of plan laid out for guardianship in case something happens to you. Make sure that you select guardians who not only have your overall values, but who will also keep your kids’ day to day life stable and secure. This a big decision, so don’t be afraid to take a lot of time to think about who you would want to raise your kids.

This quick list of things to think about when estate planning will help you get some idea of what, out of your giant pile of stuff, is important and should stand out. Talk to your estate planner if you’re feeling overwhelmed and need help, as they can assist you in picking out what you absolutely shouldn’t forget to cover, whether you’re writing a living trust, gifting property, or writing a will.

Dec 3 19

What Assets Should You Protect?

by Phil Levin, Esq.
What to Start With When Planning Your Estate

When planning your estate, you’re probably going to feel a little overwhelmed at some point (and that’s why your estate planner is there to help you!) Sure, in general terms, you might have considered what is and isn’t in your estate, but when you get down to it, you might realize you have way more stuff than you thought you did. This in turn leads to the question of what you should protect first. What assets are so important that they should be the first things you start with in your estate plan?

Ideally, you want to protect everything, because everything is important in its own way. But you have to start somewhere. Here is a suggested list of what you should start with, in no particular order. Note that some of these aren’t necessarily assets in the traditional sense (i.e. tangible items), but they do deserve a mention.

Your Home

First and most obvious, you need to think about your home, if you own one. Think about what you want to have done with your house after you pass on. Do you want it sold? Do you want it to be granted to your relatives? Owning a house is a big responsibility, and it can be expensive. If you want to have your home liquidated, that could be the best option if you’re unsure whether your relatives could financially support home ownership.

Your Business

This can apply to a business you own or just your assets that you have from work (equipment, stocks, etc.). If you have equipment or a business that you want to keep in the family, you should protect that in your estate plan. You can also include other plans for what you might want done with it, such as sale, transfer of ownership, or something else.

Family Items

boatEveryone has family heirlooms and items that they don’t want to see leave the family. These items are important to your heritage and help future generations understand your origins. Include these valuables in your estate plan and make sure you grant them to someone you know will keep them safe and pass them along, ensuring that the heirlooms are kept in the family.

Intangible Assets

You may have stocks and investments that you count among your assets. When you pass away, think about what you want done with them and whether you think it will be more profitable to sell or transfer them. Make sure you grant these intangibles to someone that you know will be able to manage them, particularly if you’re giving away cryptocurrency, which is volatile and, although very popular, hard to handle.


When creating an estate plan, you want to make sure that your own needs are met in the form of a healthcare directive and power of attorney. These documents ensure that your financial and medical needs will be taken care of according to your specifications should something happen to you to prevent you from making those decisions yourself.

Your Kids

If you have minor children, even teenagers, you will want to have some type of plan laid out for guardianship in case something happens to you. Make sure that you select guardians who not only have your overall values, but who will also keep your kids’ day to day life stable and secure. This a big decision, so don’t be afraid to take a lot of time to think about who you would want to raise your kids.

This quick list of things to think about when estate planning will help you get some idea of what, out of your giant pile of stuff, is important and should stand out. Talk to your estate planner if you’re feeling overwhelmed and need help, as they can assist you in picking out what you absolutely shouldn’t forget to cover, whether you’re writing a living trust, gifting property, or writing a will.