You’ve probably heard you need to have a financial power of attorney in place, but the whole thing seems a little ambiguous…what does this important document (which is an important part of a complete estate plan) actually mean? Let’s cover the basics.

What is a financial power of attorney?

A financial power of attorney (“POA”) is a legal document that designates someone to handle your financial decisions on your behalf, if you are unable to do so while living, due to incapacitation. (Note that upon death, your financial power of attorney terminates and your will and/or trust kick in to guide decision making in your absence.)

There are two main types of financial power of attorney I offer my clients.

  • Immediate power—effective from the moment you sign it, without any medical certification; while immediate, you do not lose control of your affairs. (This is typically what I recommend.)
  • Springing power—becomes effective only upon medical certification that you are unable to carry on your legal and financial affairs.

What happens if I don’t have a financial POA?

If you don’t have a financial POA, and you were to become incapacitated, any financial decisions would need to be made by a court-appointed conservator. Under a court’s direction, the conservator would handle your financial matters. It’s a quite expensive and time consuming process, especially compared with the relative simplicity of executing a financial POA. Also, needless to say, most people would elect to trust their important financial decisions to a person they love and trust, over someone the court appoints.

After I die, can my agent continue to operate under my financial POA?

A common misperception is that your agent will be able to use this power after your death. Instead, at your death, any of the agent’s powers will be automatically revoked. The representative appointed through the probate process will carry out your estate plan.

Who should I choose to serve as my “attorney-in-fact?”

two people talking on the beach

The agent (or attorney-in-fact) you choose will be managing your finances, so it is critically important to choose someone trustworthy; someone who will not abuse or exploit this power; someone who will listen to your wishes, goals, and objectives, as included in the document or otherwise communicated; and someone who will look out for your best interests.

You also have the option of designating a successor agent who can take over if the original agent is unable or unwilling to serve. This is highly recommended.

Who should receive a copy of my financial POA?

The person named as agent and any person named as a successor agent should receive a copy. It may also be wise to share a copy with your financial institution(s), such as your bank/credit union, as well as with your financial advisor and/or accountant.

Can I revoke my financial POA?

Yes, you may revoke the financial POA at any time. You can also amend the financial POA (change it, revise it, etc.) at any time.

Are there other estate planning documents I need?

Yes, definitely! There are six “must have” estate planning documents. The financial power of attorney is one of these documents that create a comprehensive estate plan.

Who needs a financial power of attorney?

I’m a staunch believer that every adult Iowan needs an estate plan—including young professionalsnewlyweds, the non-wealthy, and especially people with minor children—and, therefore a financial power of attorney. A financial power of attorney can even be incredibly important (but often overlooked) for college students.


Do you have a financial POA? How about a full estate plan in place? Why or why not? I’d love to hear from you. Email me at gordon@gordonfischerlawfirm.com or call (515-371-6077).

hand holding flowers

It’s the end of January and that means Tax Day is creeping closer. You tend to hear a lot about what sort activities are tax deductible. You may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions. And, you’ll certainly want to be aware for substantiation purposes what contributions are indeed deductible.

But, in conquering your charitable giving goals, it’s just as important to know which nonprofit organizations are NOT qualified beneficiaries for tax-reducing gifts. Additionally, not all gifts to qualified charities are eligible. Contributions to certain entities may appear to be tax-deductible, but in actuality are not. This is not to say that these contributions are not valuable and helpful to the respective donees, it’s just that the U.S. government isn’t going to give you a tax break.

Knowing what you can and can’t claim helps you maximize the potential tax savings that the charitable tax deduction offers.

Contributions made to the following are NOT considered viable for the charitable deduction:

Promises and Pledges

man on computer in blue room

Let’s say you made a charitable pledge to a local 501(c)(3) for $150, but only paid $50 in donation during the tax year of the respective tax return. You can only deduct the the $50 actually donated. Once you make the transfer of the rest of the pledge ($100) then you could deduct that from the appropriate tax year.

Political parties, campaigns, and action committees

It’s important to get involved in the process fo democracy, but joining politic through monetary support does not translate into a charitable donation. Funds given to political candidates, parties, and PACs cannot be claimed. This also includes money spent to host or attend fundraising events or advertising.

boy skateboarding with American flag cape

Fundraising tickets

I’m sure you cannot count all the times you’ve been asked to purchase raffle tickets, bingo cards, lottery-based drawings and the like. It’s a common fundraising tactic, but such costs are not deductible.

Personal benefit gifts

The IRS considers a charitable contribution to be one-sided. This means if you receive something in reciprocity for a donation—anything from a tote bag, to a plant, to a three-course dinner—only the amount in excess of the fair market value of the item/service received is deductible. Let’s say your little neighbor is selling popcorn to raise money for their scouting troop. You buy some popcorn from the kid for $10 and the retail value of such a popcorn tin is $6. This donation would translate into a $6 charitable deduction. Likewise, you purchase a $75 ticket to an annual event hosted by a qualified charity. The event includes a meal that would have cost you $30 at a restaurant; overall your charitable deduction would be $45. (Read more about quid pro quo donations here.)

Receipt-less donations

You’ve probably given more than you can write off from small cash donations to your church’s collection plate, the Salvation Army holiday bell ringer, and charity bake sales. Why cannot you just guesstimate, add this all up, and deduct the amount off of your taxes? Receipts. The IRS requires proof of all cash donations big and small; a canceled check, statement or receipt from the recipient organization can suffice for cash donations up to a $250 (in total), and then more substantiation is demanded.

Person-to-Person

I’ve seen many successful crowdfunding campaigns for individuals raising money for a multitude of things. Let’s say your cousin is raising money for an expensive medical procedure through an online site and you donate to help them reach their goal. Or, maybe your nephew is raising money to take a mission trip this summer. Unfortunately and contributions earmarked for a certain individual (despite the economic/medical/educational need) are not deductible, according to IRS Publication 526. However, if you were to make a contribution to a qualified organization that in turn helped your cousin or nephew out with a grant or scholarship, for example, the contribution would be deductible. Make note though, even if you were to give a contribution to a charity in order to help a specific individual, you cannot designate the money to one specific individual for the gift to. Basically the contribution cannot be given directly or indirectly to a specific individual and still be tax deductible.

two people talking

The list could go on for contributions that are not deductible, but some other notable inclusions to be aware of include:

  • For-profit schools (nonprofit schools are good to go so long as donations are not made to benefit a specific individual)
  • For-profit hospitals (nonprofit hospitals are A-OK)
  • Foreign governments
  • Foreign-based nonprofits (with some exclusions for specific nation-states)
  • Fines or penalties paid to local or state governments
  • Value of your time for services volunteered to a charity
  • Value of blood donations (you just need to do that one out of the goodness of your heart…literally)
  • Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups
  • College tuition (Even if the school is a nonprofit, tuition to attend the school is NOT tax deductible as a charitable contribution)
  • Professional groups/associations (such as civil leagues)

This may make it seem like there are many exceptions to the charitable deduction rule, however there are still an innumerable number of qualified nonprofit organizations that are a good way of reducing taxes (remember, you have to itemize) while also helping others. If you have questions about the charitable contribution tax deduction it’s a good idea to consult with your professional advisors. It’s also a good idea to heed these tips prior to making a charitable donation and double-check the organization’s status on the IRS’ Exempt Organizations Select Check tool, which allows users to search a list of organizations eligible to receive tax-deductible charitable contributions.

I would be happy to have a conversation regarding the tax code, the best time and way to maximize a charitable donation, and help ensure you’re in compliance in compliance with all state and federal laws. Contact me at via email or by cell phone (515-371-6077). 

GoFisch January Newsletter

The January edition of GoFisch is live! This month’s edition features:

Estate Planning Spotify GoFisch

  • A curated Spotify playlist to get you inspired to finally fill out my estate plan questionnaire.
  • The rundown on resolutions you can (and will) actually keep this year!
  • Nonprofit & philanthropy news.
  • Must-read blog post highlights.
  • A short video explaining how helping causes and organizations important to you can also help with your tax bill.

Like what you read? Don’t forget to subscribe to GoFisch and tell your friends!

discussion over table with laptop

Imagine I’m working with a great new client named Daphne. She wants to found a nonprofit organization to assist at-risk youth in her local community and across Iowa. This is a hypothetical memo I would send to Daphne outlining the steps of what it takes to form a nonprofit in the state of Iowa. (Note, if you’re looking to form a 501(c)(3) it’s best work with a qualified attorney for advice and counsel specific to your situation and goals.)

To:                  Daphne Downright – SENT VIA EMAIL
From:             Gordon Fischer (gordon@gordonfischerlawfirm.com)
Subject:         How to Form a 501(c)(3) Nonprofit
Date:              January 24, 2018

Dear Daphne:

Good afternoon! I very much enjoyed our phone conversation of this morning, where we discussed your intent to begin a nonprofit to assist at-risk youth. Certainly this is an noble mission and I have no doubt that you could make a big impact. I also acknowledge you are very busy and don’t have the time to allocate to dealing with all of the documentation. So, I’m here to take this stress off of your plate!

Let’s recap some details regarding the process for founding a nonprofit organization. These steps will set your public charity up for the best possible success.

Main Steps to a 501(c)(3)

To recap what we talked over, forming a 501(c)(3) involves four steps:

  1. drafting, editing, and filing articles of incorporation;
  2. drafting and editing bylaws, with new board members then voting in favor of the bylaws in a duly authorized meeting;
  3. applying for an Employer Identification Number (EIN); and
  4. drafting, reviewing, and editing the IRS non-exempt status application, known as IRS Form 1023, as well as all the supporting materials IRS Form 1023 requires.

By far, the most difficult and time-consuming of the four steps is the IRS Form 1023. You should definitely review the form immediately, so you can gain a sense of the level of detail and involvement it requires.

How much does it cost?

While my regular hourly rate can go up to $300 per hour, I often have agreed with clients to perform all the legal work required to successfully begin a nonprofit for a flat fee of $4,800. I typically bill this over the span of five months, i.e., five easy payments of $980, due on, say, the first of each of the months.

Additionally, as you would expect, this matter will necessitate payment of filing fees to governmental agencies, such as the Iowa Secretary of State’s Office and the IRS. (The Iowa Secretary of State has a $20 filing fee, and the IRS 1023 Form has a $850 or $400 filing fee depending on the amount of gross revenue expectations). Of course, clients are solely responsible for payment of all such governmental fees.

How long does this take?

It usually takes a few months to pull all the paperwork together, including and especially Form 1023. I’ve had, however, ambitious clients who wanted to do it much faster, and I was able to accommodate. The flat fee includes as many conferences with me as you reasonably need for us to complete steps 1-4, above.

Benefits of Nonprofit Formation

Daphne, the benefits of a 501(c)(3) are many and include:

Tax exemption/deduction

Organizations that qualify as public charities under Internal Revenue Code 501(c)(3) are eligible to be completely exempt from payment of corporate income tax. Once exempt from this tax, the nonprofit will usually be exempt from similar state and local taxes.

Even better: if an organization has obtained 501(c)(3) tax exempt status, an individual’s or company’s charitable contributions to this entity are tax-deductible.

Eligibility for public and private grants

Nonprofit organizations can solicit charitable donations from the public. Many foundations and government agencies limit their grants to public charities.

Being able to offer donors income tax charitable deductions for donations, as well as eligibility for public and private grants, are probably the two major reasons folks want to obtain 501(c)(3) status.

Formal structure

A nonprofit organization exists as a legal entity and separate from its founder(s). Incorporation puts the nonprofit’s mission and structure above the personal interests of individuals associated with it.

Limited liability

Under the law, creditors and courts are limited to the assets of the nonprofit organization. The founders, directors, members, and employees are not personally liable for the nonprofit’s debts. There are exceptions. A person cannot use the corporation to shield illegal or irresponsible acts on his/her part. Also, directors have a fiduciary responsibility; if they do not perform their jobs in the nonprofit’s best interests, and the nonprofit is harmed, they can be held liable.

Focus your giving

With charitable giving flowing through a central nonprofit organization, and not through, say, a for-profit business, it’s easier to focus the giving on a singular mission. A for-profit business may be easily pulled away from a charitable mission by the pet causes of lots of different customers, clients, vendors, and employees. A nonprofit should be much less susceptible to such pressure.

Responsibilities of Forming & Managing a  Nonprofit

Of course, there are serious responsibilities that come along with creating and running a nonprofit. These can’t be overstated, and include:

Cost

Creating a nonprofit organization takes time, effort, and money. Plus, keeping a nonprofit on track, compliant, and successful also requires great care.

Paperwork

A nonprofit is required to keep detailed records and submit annual filings to the state and IRS by stated deadlines to keep its active and exempt status. 

Shared control

Although one who creates a nonprofit may want to shape his/her creation, personal control is limited. A nonprofit organization is subject to laws and regulations, including its own articles of incorporation and bylaws. A nonprofit is required to have a Board of Directors, who in turn determine policies. 

Scrutiny by the public

A nonprofit is dedicated to the public interest, therefore its finances are open to public inspection. The public may obtain copies of a nonprofit organization’s state and federal filings to learn about salaries and other expenditures. Nonprofits must be transparent in nearly all their actions and dealings.

Continue the discussion

I hope this information is helpful to you as you begin this journey. It won’t always be easy (although I will attempt to make it as simple as possible for you!), but it will be worthwhile.

I would enjoy the opportunity to be of service to you. Thank you for your time and attention. If you have any questions or concerns, please contact me. As I told you this morning, I offer anyone/everyone a free one-hour consultation. Simply reach out to me anytime via my cell, 515-371-6077, or my email, gordon@gordonfischerlawfirm.com.

Warmest regards,

Gordon Fischer

Gordon Fischer Law Firm, P.C.

red for hire sign

It may sound basic, obvious even, but if your nonprofit organization is hiring any employee or independent contractor, you NEED to have job descriptions for each role. And, not just basic job descriptions, but comprehensive overviews of the open position. Be it a position for chief executive officer, marketing manager, or programs director, the advice remains the same.

Job descriptions are in part a legal protection, and in part a primary means for announcing the open position to both internal and external stakeholders which is going to help you find or recruit the best candidates for the organization. If that’s not enough to convince you, consider these four major reasons:

  1. Job descriptions can be used as a basis for objective performance management. It provides both management and employees a shared understanding of the duties of the position.
  2. Job descriptions assist in making sure staff duties align with your organization’s overall mission and vision.
  3. When conducting interviews, job descriptions can, and should, inform the development of interview questions.
  4. Job descriptions can be the foundation of a compensation system that accurately reflects employees’ qualifications and responsibilities in the organization.

woman working on computer

I’m here to assist you and your organization on the legal aspects of nonprofit employment ranging from new hires, to employee handbook, to employment contracts. Don’t hesitate to contact me via email or phone (515-371-6077). We’ll schedule your free one-hour consultation and make a plan to set your organization up for success!

woman doing photo at sky

You’ve almost certainly had to designate your beneficiaries on savings and checking accounts, life insurance plan, annuity, 401(k), pension, or IRA. All of these accounts are passed along at the time of death via beneficiary designation (sometimes referred to as payable on death (PODs) or transfer on death (TODs) accounts). It’s easy to forget, but beneficiary designations take precedence over whatever is written in your will. So, even if you have the six basic “must have” estate planning documents in place, you still need to address who is named as your beneficiaries.

I have a few simple tips for reviewing and protecting your important accounts:

  1. Be sure to name a primary beneficiary (or beneficiaries), using the appropriate beneficiary designation forms.
  2. Be sure to also name an alternate beneficiary in case the first beneficiary dies before you.
  3. Don’t name your estate as the beneficiary (not without lots of expert advice).
  4. Review the beneficiary forms once a year to make sure they still reflect your wishes.
  5. Update the beneficiary forms more often if there has been a change in your life circumstances, such as a birth, adoption, marriage, divorce, or death. For example, if you’ve gotten a divorce you may not want your ex-spouse to be the beneficiary of your life insurance.
  6. Each time you change the beneficiary designation form, send it to the organization that holds the account, and request they acknowledge receipt.

 

couple holding hands in green space

Checking your beneficiary designations is a smart estate planning step you can take today. But, of course, you’re going to need a solid estate plan to account for all of your assets that are not transferred via beneficiary designation. A great way to get your key estate plan documents started is by downloading my free, no-obligation Estate Plan Questionnaire. You can also contact me by phone (515-371-6077) or email with any questions or concerns.

wall street sign

A less-than-obvious, but ideal asset for charitable giving is appreciated, long-term, publicly traded stock. The merits of this giving tool are numerous, but there are some questions I hear from donors considering this options. For instance, when do you assess the value of a stock donation—before the donation, during, or after? And, how do you determine a specific dollar value on an asset that’s perpetually fluctuating?

Simple Stock Equation

math equation on chalk board

Forget stock charts or complicated formulas, there’s a simple solution. The value of a gift of publicly traded stock is the mean average of the high and low prices on the date of the gift.

For example, Jill Donor gifted 100 shares of Twitter stock to her favorite charity. On the date of Donor’s gift, the high was $25 per share and the low was $23 per share. In this case, the value of a share for charitable deduction purposes would be $23.50 ($25 + $22 divided by 2). The charitable deduction value of Donor’s gift would be $2,350 ($23.50 per share x 100 shares).

Any subsequent sales price, or current valuation (if the charity retains the stock), is irrelevant for valuing publicly traded stock and determining a donor’s charitable deduction. Again, only one factor matters: the average of the high and low selling price of the stock on the date of the gift! Of course, this equation doesn’t account for changes in the stock market in terms of what day would be better to donate over another. For that you’ll need to talk to your financial professional advisor or watch the trends to donate on a date with preferred value.


If you’re interested in gifting stock to a qualified charity, ensure you’re doing so in a way that maximizes all of your financial benefits and contact me for a free consult. Or, if you’re a nonprofit leader wanting to accept gifts of stocks but are unsure of how to facilitate, don’t hesitate to reach out via email or phone (515-371-6077).

man stretching at desk

For decades, employers enjoyed very wide latitude in disciplining and firing employees for attendance problems, even if the absenteeism was the result of illness or injury. That latitude has been significantly altered since the passage of the Americans with Disabilities Act (ADA) in 1990. Let’s explore how some of the policy implications of the civil rights law play out in the workplace. Don’t forget the ADA applies to nonprofit employers too, and non-compliance is not an option!

ADA Coverage

The ADA protects only “qualified individuals with a disability.” Disabilities as defined under the ADA can mean either physical or mental impairment that substantially limit one or more major life activities. It can also mean an individual who has a record of such an impairment or is regarded as having such an impairment.

 

group of people in line

A qualified individual must be able to perform essential functions of the job, with or without reasonable accommodation. What’s a reasonable accommodation? It may include the following (but is certainly not limited to):

  • Making existing employee facilities readily accessible for use by persons with disabilities
  • Modifications to work schedule
  • Job restructuring
  • Appropriate reassignment to a vacant position
  • Acquiring/modifying equipment or devices
  • Adjusting/modifying examinations, training materials, or policies
  • Providing qualified readers or interpreters

Tension Between ADA and Absenteeism

It can be difficult when an employee is absent for a health reason, and co-workers must pick up the slack, or the work simply goes unfinished. But, the employer risks violating the ADA if the company terminates or disciplines such an employee without first considering whether the employee is a “qualified individual with a disability.” If the answer is yes, the employee does fall under the ADA umbrella, then the employer must consider whether they can reasonably accommodate the employee. An employer is required to make a reasonable accommodation to the known disability of a qualified employee, if it would not impose an “undue hardship” on the employer’s operation. Yet another term that sounds ambiguous at its face, undue hardship is defined as an action requiring significant expense or difficulty with regard to things like the structure of its operation, employer’s size, financial resources, and nature of the industry.

Employers are NOT required to make an accommodation if it would mean lowering quality or production standards. (They’re also not required to provide personal items for use, like hearing aids.)

Of course, not all persons with a disability will need the same kinds of accommodation. Some examples relating to absenteeism include:

  • Abe was diagnosed with cancer and will be absent as he undergoes chemotherapy.
  • Betty has a chronic medical impairment in the form of diabetes and will need to attend related medical appointments in regular intervals.
  • Charlie deals with major depressive disorder, and a recent exacerbation of symptoms means he’ll need time to recuperate.
  • Diana will also need time to recover from surgery for her chronic back condition.

Practice Pointers

To control attendance problems without violating the ADA, you should:

  • Evaluate each situation (that is, whether the employee is qualified, disabled, or whether you can provide a reasonable accommodation) on a case-by-case basis while acting as consistently as possible with past practice and in accordance with your attendance policy;
  • Have a written attendance policy that emphasizes the necessity of good attendance, but also provides you with flexibility that you might need to accommodate a qualified individual with a disability;
  • Maintain accurate records of all absences, including a separate and confidential file for any medical certifications or medical information relating to an employee’s absences;
  • Be aware of the interplay between business/nonprofit policies and state and federal laws; and
  • Call your attorney when you have questions about your duties under the ADA. The saying, “An ounce of prevention is worth a pound of cure,” is smart to keep in mind!

Smart Employers Seek Advice

Again, nonprofit employers, remember the ADA applies to you too! The ADA can be a complex law, and it can get even trickier when trying to accommodate appropriately for absenteeism, while balancing business/nonprofit operations. Know you don’t have to navigate it alone. Questions? In need of counsel? Don’t hesitate to contact me.

wealthy dollar bills

There is a rumor that has been floating around that only the rich need estate planning. That is extremely false. Everyone needs an estate plan, but the wealthy don’t need estate planning as much as the middle-class and working-class folks. If this contradicts everything you’ve ever thought about estate planning allow me to explain.

The Case of Kingston Lear

Suppose Kingston Lear (get it?!), a wealthy Iowan, decides he doesn’t need a qualified and experienced estate planner, he can do it himself, or use an online, one-size-fits-all service. Hey, Lear figures, this way he’s saving both time and money. Also, nothing is going to happen to him for a while, he can get around to doing a proper estate plan with a proper estate planning professional “someday.”

Of course, “someday” never comes, but Lear’s death does. His three daughters are aghast that Lear has no real estate plan. The template resembling an estate plan is completely inadequate for the size and complexity of Lear’s assets.

A Matter of Trusts

Lear could have easily, with the help of a professional advisor, set up a trust (even a plain, “vanilla” revocable living trust would have worked) to avoid probate. But, the online service he used didn’t even explain the difference between wills and trusts. So, Lear’s assets all must go through probate. This means that the time and money Lear though he was saving is gone in a flash.

Probate Costs and Fees, If You Please

Probate fees are going to equate to at least 2% cut of Lear’s estate. Remember, Lear’s estate is large and complex and valued at $10 million, so the actual figure is probably going to be more like four percent.

Using 4% as the figure for probate fees means a loss of $40,000 ($10 million X .04 = $400,000). This is $400,000 that could have been passed down to his daughters through a trust, or split generously between his heirs and charitable organizations near and dear to Lear’s heart.

Also, court costs may amount to another 1%, or loss of $10,000 more ($10 million X .01 = $100,000).

Loss of Privacy

Another major benefit of a trust—again, not explained to Lear because didn’t seek any individualized advice—is privacy. A will (or most any document that goes through probate, absent very special circumstances) is simply a public document. Anyone can read, copy, share, and write about it.

Consider one of Lear’s major assets was an ongoing business—a Shakespearean-themed jousting complex, where families could have fun practicing jousting.

horses at fence

Unfortunately, in some of the probate papers, it was disclosed that there had been numerous complaints by the Iowa Horse Association about the treatment of horses. It isn’t long until this hits the blogs, and some of the more sensational aspects of the report (though hotly disputed) goes viral. The jousting park which had been quite profitable, is now eschewed by all the good people of the area. The daughters are forced to sell the business asset to preserve the family’s good name (or what’s left of it) and sell at a loss. While the jousting park had been worth as much as $1 million, the daughters have to sell, so there’s a “paper loss,” but nonetheless less a loss, of another $900,000.

Loss of Future Profits

The $900,000 is a conservative figure; it doesn’t include lost future profits. If not for the scandal becoming public, who knows how long the jousting park could have remained really popular and this profitable. Years? Decades? It’s quite difficult to quantify, but it’s certainly probable that there are some lost profits. The question is: how much?

Costs of Cases

Because Lear’s will wasn’t drafted by professional, there are many ambiguities and loopholes. It’s not long before the three daughters begin fighting and, with unclear direction from their father, they wind up suing each other.

Taking a court case all the way to trial can easily mean $50,000 in attorney’s fees, plus each daughter will want and need her own attorney. So, another $150,000 is lost to attorney’s fees!

Total Losses Equal?

Lear could have had his estate plan done by an Iowa professional for a few thousand dollars. Instead, he lost a total far greater than that:

  • Probate Fees: $400,000
  • Probate Court Costs: $100,000
  • Loss on Sale of Jousting Park: $900,000
  • Loss of Future Profits of Jousting Park: Incalculable?
  • Attorney’s Fees for Daughters’ Litigation $150,000

This is a hit for the inheritance of $1.55 million, leaving $8.5 million (rounded up), or a little less than $3 million per daughter. But you know what? That still leaves an inheritance of $8.5 million to be split amongst three sisters.

The Rich Can Afford Bad Estate Planning

crown - silver

Lear acted unwisely, arguably recklessly! A great deal of his money was wasted that could have been used for great charitable work in Iowa through local nonprofit organizations. But, for all his foolishness, Lear’s daughters still end up with $3 million each. Will the daughters incur much suffering with “only” $3 million? No.

That the rub; the rich can afford to make big (and small) estate planning mistakes.

You Can’t Afford Bad Estate Planning

Let’s look at this from a normal Iowan perspective. At least 2% in probate costs and fees, a huge drop in value in a key asset, attorney’s fees for litigation…can a middle-class estate merely shrug these kinds of losses off? Not a chance.

The rich aren’t like you and me. They can badly botch estate planning. You and I can’t afford to make mistakes with our estates; there’s not room (and not enough money!) for error.

Need an estate plan but aren’t sure where to start? It’s easy from start to finish. Fill out my obligation-free Estate Plan Questionnaire or contact me.

I KEEP six honest serving-men
(They taught me all I knew);
Their names are What and Why and When
And How and Where and Who.– Rudyard Kipling

I’ll use all six “serving men”—what, why, when, how, where, and who, albeit sometimes in slightly different order—to explain three broad topics: (1) estate planning; (2) trusts; and (3) business succession planning. If you’re unsure of any of the three topics listed, this is the blog post for you.

man taking notes in notebook

WHAT is an Estate Plan, Anyway?

What do we talk about when we talk about estate planning? There are six documents that should be part of everyone’s estate plan. Additionally, you should also keep these six documents updated and current. It’s also important you take note of assets with beneficiary designations (such as those on IRAs and bank accounts).

WHO Needs an Estate Plan? Everyone!

Everyone needs an estate plan. If you’re young, healthy, unmarried, have no children, and have no significant or unusual assets, perhaps you could talk me into the idea that you don’t entirely need an estate plan. Even in such exceedingly rare cases, I strongly recommend making sure your beneficiary designations are completed and up-to-date.

For example, beneficiary designations can be found on your checking and savings accounts and on your retirement benefit plan. But, if you’re married, and/or have kids, and/or have significant or unusual assets, and/or own part or all of a business, you most definitely need an estate plan.

WHY Do You Need an Estate Plan?

Estate planning is not exactly material for scintillating conversation. In fact, I’d bet most of us like to avoid this topic because it can be confusing, and requires lots of decision-making. And, yes, it forces one to think about the mortality of loved ones and the self. Estate planning, after all, is a roadmap about what you want to happen after you move on from this life. While it may not be a fun topic, it is indeed a necessary one. If you die without an estate plan, there are several negative consequences.

Without an estate plan, you cannot choose who receives your estate assets.

If you die without a will, you leave the decision of who will receive your property, in what amount, and when up to the Iowa legislature and/or Iowa courts. With this situation there is always the very real possibility that the distribution of your estate will be greatly different than if you had chosen it through an estate plan.

Without an estate plan, you cannot choose a guardian for your minor children.

If you die without an estate plan, Iowa courts will choose guardians for your children. One of the most important aspects of a will is that it allows you to designate who will be the guardian for your children. This can ensure that your children are cared for by the person that you want, not who the court chooses for you.

Without an estate plan, Iowa courts will choose your estate’s executor.

If you die without an estate plan, the probate court is forced to name an executor. The executor of your estate handles tasks like paying your creditors and distributing the rest of your assets to your heirs. If the probate court has to pick who will be your estate’s executor, there is always a chance that you would not have approved of that person if you had been alive. If you have an estate plan, your will names a trusted executor who will carry out all of your final wishes, pay your bills, and distribute your assets as you intended.

Without an estate plan, you can’t help your favorite nonprofits.

If you die without an estate plan, all your assets— house, savings, retirement plans, and so on—will pass to your heirs at law as specified under Iowa’s statutes. If you have an estate plan, you can include gifts to your favorite nonprofits and see that they are helped for many years to come.

HOW Do You Structure Your Estate Plan?

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Again, there are six basic documents that should be part of everyone’s estate plan:

  1. Estate Planning Questionnaire
  2. Last will and testament
  3. Power of attorney for health care
  4. Power of attorney for finance
  5. Disposition of personal property
  6. Disposition of final remains

We’ll go through each document briefly, so you have a sense of what each entails.

Estate Planning Questionnaire

Estate planning involves facing heavy questions, and depending on the amount of assets and beneficiaries you have, may take quite a bit of time and thought. I recommend clients (and even those who aren’t my clients) complete an Estate Plan Questionnaire. An Estate Plan Questionnaire is a simple way to get all of your information in one place, and makes it easier for your attorney to build your estate plan.

As with any project, it helps “to begin with the end in mind.” A questionnaire can help get you there.

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Last Will and Testament

Now let’s discuss your last will and testament. In sum, you’ll be answering three major questions:

Q1. Who do you want to have your stuff?

This includes both tangible and intangible things. An example of a tangible item would be your coin collection. An example of an intangible asset would be stocks.

Q2. Who do you want to be in charge of carrying out your wishes as expressed in the will?

The “executor” is the person who will be responsible for making sure the will is carried out as written.

Q.3. If you have kids under age 18: who do you want to take care of your minor children?

You’ll want to designate a legal guardian(s) who will take care of your minor children until they are adults.

Power of Attorney for Health Care

A power of attorney (POA) for health care designates someone to handle your healthcare decisions for you if you become unable to make those decisions for yourself. A healthcare POA can govern any kind of decision that is related to your health that you want to address. A healthcare POA may include decisions related to organ donation, hospitalization, treatment in a nursing home, home health care, psychiatric treatment, and more.

For example, if you don’t want to be kept alive with machines, you can make this clear in your POA for healthcare. But, keep in mind your POA for health care isn’t just about end-of-life decisions, again, it can cover any medical situation.

Power of Attorney for Finance

The power of attorney for financial matters is similar to the health care document just discussed, only your designated agent has the power to make decisions and act on your behalf when it comes to your finances. This gives them the authority to pay bills, settle debts, sell property, or anything else that needs to be done if you become incapacitated and unable to do this yourself.

It might be obvious by now, but I’ll state it just in case: choosing an agent for a power of attorney requires that you think long and hard about who would be best suited for the job and who can be trusted.

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Disposition of Personal Property

Now, let’s get to the disposition of the personal property. This is where you get specific about items you want particular people to have. If you’re leaving everything to one or two people, then you may not need to fill this out. But, if you know you want your niece Beth to have a specific piece of jewelry, and your cousin Karl to have that bookshelf he loved, then you’d say so in this document.

Disposition of Final Remains

The disposition of final remains document is where you get to tell your loved ones exactly how you want your body to be treated after you pass away. It can be as general as simply saying “I want to be cremated and scattered in my garden,” or it can be specific and include details of plots you’ve already purchased or arrangements you’ve already made.

Beneficiary Designations

Along with the six basic estate planning documents, don’t forget about your assets with beneficiary designations.

Common accounts with beneficiary designations include savings and checking accounts, life insurance, annuities, 401(k)s, pensions, and IRAs are all transferred via beneficiary designations. These beneficiary designations actually trump your will!

Regarding assets with beneficiary designations, you must make sure that designations are correctly filled out and supplied to appropriate institution. Remember to keep these beneficiary designations updated and current.

WHEN Do You Update Your Estate Plan?

Let’s say you’ve gone to an estate planning lawyer, and these six basic estate planning documents have been drafted and signed. What else? You need to keep these documents updated and current. If you undergo a major life event, you may well want to revisit with your estate planning lawyer, to see if this life event requires changing your estate planning documents.

What do I mean by a major life event? Some common events would include:

  • Selling or buying land
  • Birth or adoption of a child or grandchild
  • Marriage or divorce
  • Illness or disability of your spouse
  • Purchasing a home or other large asset
  • Moving to another state
  • Large increases or decreases in the value of assets, such as investments
  • If you or your spouse receives a large inheritance or gift
  • If any family member, or other heir, dies, becomes ill, or is incapacitated

This is just a short list of life events that should cause you to reconsider your estate plan. There are many others; if you think you might have undergone a major life event, check with your estate planning lawyer.

WHERE Do You Keep Your Estate Plan?

You should store your estate planning documents in a safe place, such as a fireproof safe at home, or a safety-deposit box. Another option in our digital era is storage on the “cloud.” Just make sure the important agents under your estate plan—say, for example, the executor of your will, or power of attorney representative—can access the documents if and when the need arises. For most folks, that’s enough: the six documents, keeping the documents current, and remembering about those assets with beneficiary designations.

Wait a second…what do you mean by “for most folks, that’s enough?” Indeed, for most Iowans what I’ve outlined here is enough. There may be folks who have more that $5 million in assets, or who have complex assets (for example, more than one piece of real estate), or own part or all of a robust business, or otherwise have unusual situations. In such cases, a trust may be helpful. That’s considered more “advanced” estate planning and will mean additional conversations and collaboration on what estate planning tools work best for the situation.

See? That wasn’t so bad!

Whether it’s complicated or simple, it does require some thought and time. But, it’s worth the investment. A proper estate plan can save you and your estate costs and fees, help your family and friends, and provide you peace of mind.

Perhaps most importantly, through proper estate planning you can help your favorite charities in ways large and small.

Do you have an estate plan? Why or why not? I’d love to hear from you in the comments below. You can reach me at any time at 515-371-6077 or gordon@gordonfischerlawfirm.com.

Everyone has unique needs and thus every estate plan needs to be personalized. Online templates for estate plans won’t cover the nuances of your life, wishes, and assets. The best place to start on your personalized estate plan is with my Estate Planning Questionnaire.