man writing on trust paper

If you’re unsure of what a trust is and how it works, you probably don’t have one. And, if you don’t have a trust, you’re not alone. About 57 percent of U.S. adults don’t have an estate planning document like a will or a trust even though they believe having one is important.

What Is a Trust? How Does It Work?

If you haven’t stopped to consider how a trust might help ensure that your wishes are followed and your assets are handled, you could be making a critical estate planning mistake.

A trust is simply a legal agreement among three parties—settlortrustee, and beneficiary—that provides instructions on how and when to pass assets to the trust’s beneficiaries. Let’s look at the role of each of these three parties, and then delve into how trusts work.

Settlor

A settlor—sometimes called the “donor, “grantor,” or “trustor”—is the person who creates the trust and has the legal authority to transfer assets into it.  

Trustee

The trustee is the person who agrees to accept, manage, and protect the assets delivered by the settlor. The trustee has a fiduciary duty to administer the assets according to the trust’s instructions and distribute the trust income and principal according to the rules outlined in the trust document and in the best interests of the beneficiary.

A trustee can be one, two, or more people. A trustee can also be what is known as a “corporate trustee,” such as a financial institution (like a bank) or a law firm that performs trustee duties and charge fees for their services. There are no formal requirements for being a trustee and nonprofessionals frequently serve as a trustee for family members and friends.

Beneficiary

The beneficiary is the person or entity benefiting from the trust. The beneficiary can be one person or entity or multiple parties. Also, trust beneficiaries don’t even have to exist at the time the trust is created (such as in the case of a future grandchild or charitable foundation that has not yet been established).

Trust Property

A trust can be either funded or unfunded. “Funded” mean that the settlor’s assets—sometimes called the “principal” or the “corpus”—have been placed into the trust. A trust is unfunded until the assets are in it (failing to fund a trust is a common estate planning mistake). 

Trust Assets

Trusts can hold just about any kind of asset: real estate, intangible property (like patents), business interests, and personal property. Common trust properties include farms, buildings, vacation homes, stocks, bonds, savings and checking accounts, collections, personal possessions, and vehicles.

“Imaginary Container”

Think of a trust as an “imaginary container” that holds and protects your assets. After the trust is funded, the trust property will still be in the same place before the trust was created—your land where it always was, your artwork on the wall, your money in the bank, your comic book collection in the den. The only difference is the asset will have a different owner: “The Jane Jones Trust,” rather than Jane Jones.

Transfer of Ownership

Putting property in a trust transfers it from personal ownership to the trustee, who holds the property for the beneficiary. The trustee has what is called “legal title” to the trust property and, in most instances, the law treats trust property as if it were now owned by the trustee. Each trust has its own taxpayer identification number, just like an individual.

But trustees are not the full owners of trust property. Trustees have a legal duty to use trust property as directed in the trust agreement and as allowed by law. The beneficiaries retain what is known as “equitable title”—the right to benefit from trust property as specified in the trust.

Assets to Beneficiary

The settlor provides terms in a trust agreement directing how the fund’s assets are to be distributed to a beneficiary. The settlor can provide for the distribution of funds in any way that is not against the law or against public policy. The near-limitless flexibility of trusts is a primary advantage for setting one up.

Types of trusts

A joke among estate planners says that the only limit to trusts is the imagination of the lawyers involved.  It’s true, though, that the number and kind of trusts are virtually unlimited.

Let’s start by taking a look at the four primary categories of trusts:

Inter vivos and Testamentary Trusts

Trusts that are set up during the settlor’s lifetime are called “inter vivos” trusts. Those that arise upon the death of the settlor, generally by operation of a will, are called “testamentary” trusts. There are advantages and disadvantages to both types of trusts, and how one decides depends upon the goals and purposes of the settlor.

Revocable and Irrevocable Trusts

Inter vivos and testamentary trusts can be broken down into two more categories: revocable trusts and irrevocable trusts. A revocable trust can be changed at any time during the settlor’s lifetime. Second thoughts about a provision in the trust or about who should be a beneficiary might prompt modification of the trust’s terms. The settlor can alter parts of the trust or revoke the entire thing.

Irrevocable Trust

An irrevocable trust is a type of trust that can’t be changed by the settlor after the agreement has been signed and the trust has been formed and funded. The terms of an irrevocable trust can’t be modified, amended, or terminated without the permission of the settlor’s beneficiary or beneficiaries.

A revocable living trust becomes irrevocable when the settlor dies because he or she is no longer available to make changes to it. But a revocable trust can be designed to break into separate irrevocable trusts at the time of the grantor’s death for the benefit of children or other beneficiaries.

You might wonder, “Why make a trust irrevocable? Wouldn’t you want to maintain the ability to change your mind about the trust or its terms?”

Not necessarily.

Irrevocable trusts, such as irrevocable life insurance trusts, are commonly used to remove assets from a person’s estate and thus avoid them being taxed. Transferring assets into an irrevocable trust gives those assets to the trustee and the trust beneficiaries forever. If a person no longer owns the assets, they don’t comprise or contribute to the value of his or her estate and so they aren’t subject to estate taxes upon death.

Revocable living trusts

There is no “one size fits all” trust—different kinds of trusts offer different benefits (and drawbacks) depending on a person’s circumstances. Age, number of children, health, and relative wealth are just a few of the factors to be considered. The most common trust my clients use is a revocable living trust, sometimes referred to by its abbreviation, “RLT.”

A revocable living trust—created while you’re alive and that can be revoked or amended by you—has three advantages over other kinds of trusts:

 1. Money-Saving

Establishing a revocable living trust helps avoid costly probate—the legal process required to determine that a will is valid. Probate generally eats up about two percent (2%) of an estate, which can add up to a chunk of change you’d probably rather see go to your beneficiaries.

Avoiding probate also means avoiding other fees, such as court costs, that go along with it.

2. Time-Saving

A revocable living trust not only eliminates the costs of probate, but the time-consuming process of probate as well. Here in Iowa, probate can take several months to a year, or sometimes even longer, leaving beneficiaries without their inheritances until the very end of the probate process. The transfer of assets in a trust is much faster.

3. Flexibility

Don’t want your 16-year-old niece to inherit a half-million dollars in one big lump sum? I agree it’s probably not a good idea.

A revocable living trust offers flexibility for the payout of an inheritance because you set the ground rules for when and how distributions are made. For example, you might decide your beneficiaries can receive certain distributions at specific ages (21, 25, 30, etc.), or for reaching certain milestones, such as marriage, the birth of a child, or graduation from college.

last will and testament

Drawbacks

Despite the significant advantages of establishing a revocable living trust, there are drawbacks people should be aware of

For starters, trusts are more expensive to prepare than basic estate plan documents such as wills. However, the costs associated with sitting down with a lawyer and carefully putting in place a trust is, in my opinion, greatly outweighed by the money your estate will save in the end.

Creating a trust can also be an administrative bother at the start of the process because assets (farm, business, stock funds, etc.) must be retitled in the name of the trust. But, all things considered, this is a small inconvenience that is greatly outweighed by the smooth operation of a trust when you pass away.

You Can Trust me to Talk About the Best Trust(s) for You

Interested in learning more about trusts or questioning if you need one? Feel free to reach out at any time by email, gordon@gordonfischerlawfirm.com, or on my cell, 515-371-6077. If you want to simply get started on an estate plan (everyone needs at least the basic documents in place!) check out my estate plan questionnaire, provided to you free, without any obligation.

letter of instruction

When I prepare estate plans for my clients, they typically include six key documents. For more complex estates, the plan may also involve trust and/or business succession documents. However, to make estate planning as simple and the least chaotic for your loved ones tasked with fulfilling your wishes, I also recommend drafting another document: a letter of instruction.

What Exactly is a Letter of Instruction?

Think of a letter of instruction like an easy-to-read-and-understand summary shortcut for your estate plan’s executors and representatives. Its main purpose is to help guide the person(s) settling an estate through the process, step-by-step, in plain, clear language.  The letter can serve as a cheat sheet of sorts. It’s not legally required and certainly doesn’t take the place of a valid will, but it’s a meaningful nod to those you have tasked with handling your affairs.

Your letter of intent doesn’t have to go by any specific form or outline, so some people tend to use it as a way of giving personal instructions and giving details beyond what is articulated in your estate planning documents. A useful letter of intent can include the following information:

  • Location(s) of:
    • Important papers such as birth certificates, any divorce/marriage certificates, citizenship papers, etc.
    • Estate plan.
    • Titles and/or deeds to real estate and rental property.
    • Recent copies of all financial statements like tax returns and other potentially important legal documents.
    • Safety deposit boxes and the respective keys.
    • Tangible property that may not be readily accessible
  • Names, passwords, account numbers, and PIN numbers for financial accounts.
  • Social security number.
  • Contact information for:
  • Instructions for the care of any pets. (You may also want to establish an animal care trust.)

Regular Updates & Safe Storage

Like your other estate planning documents, the letter of instruction should be reviewed annually and updated as needed. Because the letter of intent includes confidential personal information it should be stored in a secure place that can also be accessible by your estate plan’s executor.

But First, an Estate Plan!

Before you go about drafting a letter of intent, it’s important to place a priority on executing an estate plan that helps you meet your goals and define your legacy. My free, no-obligation Estate Plan Questionnaire (the first of the six key estate planning documents) is a great place to get started. Otherwise, contact me by phone or email with any questions and to discuss which estate planning strategies may be best for you and your family.

cash and checkbook

When estate planning you’re answering many of the unknowns for the future by deciding to whom you want your stuff—your cash assets, real estate, personal property, physical body, to name just a few—to pass to and when. You also have to consider some tough topics about your own mortality and imagine a future for your loved ones that doesn’t involve you in it. Estate planning also has a little bit of a learning curve—figuring out what strategies and documents you may need to help you meet your tax, financial, charitable giving, and estate goals and why. (Just one of the many reasons a qualified estate planner is a must.)

The one thing that shouldn’t be a mystery or an unknown cost is the cost of an estate plan. If you’re going to invest in a quality set of legal documents that never expire, tailored to your personal situation and intentions, you should know what you’re getting yourself into. Click the image below to see a cost breakdown by packageRate Sheet Checklist

That’s why Gordon Fischer Law Firm is always transparent with estate planning package rates. You can find them at the end of my Estate Plan Questionnaire (the first of many important documents a part of your plan) and you can also find them on this (super shareable!) estate plan package rate sheet.

Don’t have an estate plan? Don’t let any questions about costs hold you back. Get in touch with Gordon at gordon@gordonfischerlawfirm.com or by phone at (515) 371-6077.

father's day

Happy Father’s Day to all the dads, grandpas, uncles, and father figures out there! There are many kinds of fathers, from the beer-drinking to the book-reading, from the golf-loving to the car-fixing, to all of the above. And, just like there’s not one kind of way to be a dad, there’s no single type of father that needs an estate plan; everyone needs an estate plan regardless of the size of your tool shed. That’s why today is a great day to talk to your dad about estate planning.

Of course, estate planning can be a difficult subject to broach over grilling or yard work, but it’s an important conversation to have to see where your father is at. And, you can’t go buy an estate plan at the store or have one made for him, but in terms of long-term value, an estate plan is one of the best moves your dad could make.

Your father has likely taught you so much over the years. This could be your opportunity to give back to him and help him out with something for once by sharing information or just offering encouragement to complete the estate planning process.  Let’s consider a couple of different scenarios.

If Your Dad Doesn’t Know Much About Estate Planning

That’s okay! This is your chance to share some important basics about what estate planning entails. There are three main points you can pass along and then feel free to direct him to an experienced estate planning attorney who can explain the rest.

  1. Without an estate plan, there are major detriments. You cannot choose who receives your assets, how much and when. If a father has minor children they cannot choose who is the main guardian for the children if something were to happen to both parents/guardians. Without an estate plan, you also cannot choose your executor (the person to carry out the closing of your estate). Furthermore, 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. Also, without an estate plan, the probate process can be even more cumbersome, time-consuming, and difficult on what is likely to already be a stressful time for loved ones.
  2. A basic estate plan includes six key documents. An estate plan questionnaire helps to organize important information in a single document. (Your estate planner will use this to ensure the documents are individualized to your estate’s unique needs.) A “last will and testament” is just one of those documents. The other documents in a basic estate planning package include: health care power of attorney; financial power of attorney (including an advanced directive, if desired); disposition of personal property; and disposition of final remains.
  3.  Your dad may be in need of a trust depending on his estate planning goals, size of the estate, and other considerations like ownership business.

Getting started with the process is easy. I recommend starting with my free, no-obligation estate plan questionnaire or giving me a call.

If Your Dad Already Has an Estate Plan

Give your dad a high-five because he’s ahead of the curve! Seriously, more than half of Americans do not have essential estate planning documents. However, there may be some points that you dad forgot about or needs to revisit.

Beneficiary Designations

Beneficiary designations are notoriously forgotten because they can be set once and then, even if things change, people forget to switch the name. Imagine the scenario of Beneficiary designations (sometimes called PODs and TODs) on accounts like savings and checking accounts, life insurance, annuities, 401(k)s, pensions, and IRAs. Make sure that designations are correctly filled out and supplied to the appropriate institution. Of course, remember to keep these beneficiary designations current as well.

Revisit Regularly

If things change in your personal life you may well need to update your estate plan. Some examples are if marital status changes; a new child or grandchild is born; a named beneficiary passes away; you move to a new state or buy property in a different state; or there’s a significant change in financial situation.

Additionally, sometimes changes to laws (like the federal tax code) can impact the structure and most advantageous tools for estate planning. Any estate planner worth their weight should be able to tell you if your current estate plan aligns with any changes to laws.

I recommend to my clients that they review their estate plans once a year to make sure everything still fits with your estate planning goals.

Give the Best Gift this Father’s Day

I understand you can’t really “give” your dad an estate plan, but you can help him check this major legal “must” off the life checklist by helping point him the right direction. You can also offer your assistance when it comes to gathering important documents or information for the Estate Plan Questionnaire. Let your dad know that when he’s ready to discuss his planning decisions that you’ll be there to listen, and if necessary, bring your siblings (if any) and other family members to the table so that everyone is on the same page. (Note that all the aforementioned information totally applies to mothers too!)

father with family

Questions, concerns, or otherwise from you or your father? Contact me at any time via email or phone (515-371-6077). I also offer a free consultation and make house calls!

 

hands typing on computer

A cutting edge issue in traditional estate planning is cryptocurrency. “Cryptocurrency” (as defined by Investopedia) is “a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.”

The most common, and for now the unofficial standard for cryptocurrency (AKA altcoin) is Bitcoin. But the market is getting increasingly more crowded with others including Ripple, Dash, Litecoin, and Zcash to name just a few. (For the purposes of this article, we’ll focus on Bitcoin, but these points could be applied to cryptocurrencies in general.)

Many posts could be written about cryptocurrency, its benefits, and its challenges, but this post is focused on how to account for Bitcoin in your estate plan, as opposed to a standard currency, like the U.S. Dollar.

Acknowledge the IRS’ Perspective

The IRS has determined, at least for the time being, virtual currency is treated as personal property for federal tax purposes. So, virtual currency transactions are most definitely not the same as, say, online banking through your local community credit union. Instead, for general tax purposes, Bitcoin is treated like tangible property you own, like a painting or a car.

Establish the Existence of Bitcoin

Unlike a checking or saving account. there are no beneficiary designations on Bitcoin accounts. In fact, quite the opposite — Bitcoin is anonymous. Therefore, if you were to die without communicating that you have Bitcoin, it will die with you.

For security reasons, of course, you won’t want everyone to know about your ownership of Bitcoin. But you do need to develop a method for passing along the important details to a trusted representative such as your named trustee or executor. This is somewhat similar to accounting for digital assets in your estate plan and many of the same steps/tips apply.

Bitcoin falls into somewhat of a “grey” area outside the realm of a pure digital asset, but it also isn’t a pure financial asset. It might make sense to entrust the existence of Bitcoin to the person you assign to take care of your digital assets, especially if they have a better knowledge base of the what/why/how of cryptocurrency.

Make sure the Bitcoin is Accessible

Unlike a traditional bank account, your executor/trustee can’t just simply contact Bitcoin (as they would your community credit union or bank)  after your death. Your agent must have your private key (or username/password depending on the wallet host) in order to access and then distribute the coin as you’ve determined in your estate plan. Again, if you’re the only person who has access to your “wallet,” the Bitcoin will be forever lost in the network. If you’re comfortable with it, you could include your Bitcoin private key on a secure digital archive site like Everplans or, more traditionally, you could keep the key in a safety deposit box.

Plan for the Prudent Investor Act

Many states, including Iowa, have a version of the Prudent Investor Act. (The text of Iowa’s law can be found under the Iowa Uniform Prudent Investor Act.) Under the Act, if you die with a large reserve of Bitcoin, it could be considered an “investment” which the trusted agent could be required to sell and/or diversify. In the face of uncertainty, it’s always better to account for contingencies in your estate plan before your loved ones are faced with a bad scenario. If one of the goals of your estate plan is to grant your executor/trustee the ability to hold your Bitcoin long-term, then it’s wise to include specific language in your will or trust absolving the executor/trustee from liability if they “fail” to diversity your Bitcoin.

Think About Taxes

If your executor/trustee retains your Bitcoin it would not be considered income (at least at the time of this post’s writing). However, if Bitcoin is converted to cash following your passing, it must be declared as income on an estate tax return. Additionally, if your executor were to retain Bitcoin, see it appreciate in value, and then sell it, there is the issue of the capital gains tax. (“The IRS requires American resident taxpayers to report Bitcoin trading income and losses worldwide on U.S. resident tax returns.”) Consider this in your directive of how you would like your Bitcoin to be managed in event of your death.

Fair Market Value: Step Up or Down

The fact that Bitcoin is currently considered personal property means evaluating for either a step-up or step-down in basis given the fair market value on the date of death. (I write more on this in regards to four different types of assets here.)

Let’s consider the hypothetical where Betty inherits 100 Bitcoins (BTC) from Amy. At the time of Amy’s death 1 BTC is worth $50 and when Betty goes to spend 1 BTC, it’s worth $60. That means Betty’s taxable gain on the use of the Bitcoin is $10. How much Amy initially paid for the 100 BTC is irrelevant. Again, the only relevant factor is the fair market value on the date of Amy’s death. It’s wise, as part of your estate planning, to consider your Bitcoin’s depreciation or appreciation to determine how this may affect your heirs. It’s even wiser to discuss your individual situation with professional tax and financial advisors, as well as your estate planning attorney.

Estate Planning is a Must, not an Option

It’s likely we’re going to only see more unique situations, such as that which cryptocurrency presents, in the future. While the future value of Bitcoin may be uncertain, for certain you need an estate plan, and you shouldn’t let your investment die with you. If you already have an estate plan, it’s probably a good time to revisit it to ensure it accounts for assets like Bitcoin. Email me or give me a call (515-371-6077) with questions or to discuss your digital estate planning needs.

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?

light bulb on post-it note

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 number 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.

hand holding orb

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.

woman on laptop on patio

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 the 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 another 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.

Don’t Forget About Benefiting Charities!

Perhaps most importantly, through proper estate planning, you can help your favorite charities in ways large and small. One common way grantors elect to support the causes and organizations they care about is by naming them as a beneficiary of a certain amount or percentage of the estate’s assets.

Time for a Trust?

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 a high net worth, 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.

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.

red poppies memorial day

I want to take this moment on Memorial Day to express my deep gratitude for the fallen heroes and military veterans who have served America. Indeed, we can enjoy the land of free only because of these brave individuals.

While Memorial Day is the unofficial start to the summer season, ushering in the much awaited season with a long weekend of sunshine and BBQs. A Monday off of work is always a cause for celebration, but throughout all this we must not forget the true meaning of this important day—to praise, to thank, and to remember.

GFLF has worked with many veterans on estate planning and in nonprofit formation/compliance, and it’s always an honor. There are not enough “thank yous” in the world to express our gratitude for what the veterans (and their families) have done for our country. I would also like to extend this sentiment to first responders who have served on the front lines of protecting the public including police, firefighters, and EMS personnel. A special and sincere thanks to those who have sacrificed in the line of danger and their families.

man with army parachute

As modern-day heroes, our veterans and first responders’ stories are important. Their legacy is important. To preserve that tradition of strength and service, you need an estate plan to ensure your property and assets are distributed to your loved ones, and favorite charities in accordance with your wishes.

So, in an attempt to express my gratitude, I would like to offer 25% off the cost of an estate plan package to all Iowan active duty or retired service members and first responders. The rate also extends to spouses. The discount will be available through 6/30/2019. Contact me via email or by phone (515-371-6077) to lock in the rate and discuss your estate plan needs.

Veterans Day flags

What Does an Estate Plan Include?

There are six documents that should be part of most everyone’s estate plan.

  1. Estate planning questionnaire
  2. Will
  3. Power of attorney for health care
  4. Power of attorney for finances
  5. Disposition of personal property
  6. Disposition of final remains

You should keep these documents updated and current. (Here are a few common “big” events that may necessitate estate plan revisions.) Also, don’t forget about assets with your beneficiary designations. For most Iowans, that’s good enough—six documents, keeping them current, and also remembering about those assets with beneficiary designations.

Special Estate Planning Consideration for Veterans

It’s super important that military veterans work with an attorney that specializes in estate planning as veterans have some unique assets and situations to consider. This can make the estate plan more complex and there can be unintended serious legal consequences if your plan is not drafted properly. A few examples of inputs to consider for veterans involve:

  • Retirement benefit pay (considered guaranteed income)
  • Survivor Benefit Plan (if so elected)
  • Pension benefits
  • Life insurance
  • Dependent Indemnity Coverage (if applicable)

Cost of an Estate Plan

Because I want every Iowan to have an up-to-date estate plan I’m very transparent with the cost of an estate plan that that takes into full consideration YOUR situation. (This is why you need an experienced estate planner to draft your documents.) With the Memorial Day estate plan discount, that translates into significant savings.

Estate Planning Process

I write about my process at length, but it’s just five steps! Seriously, it’s not that painful. My clients report back to me that they have such relief and peace of mind when it’s completed.

DISCLAIMERS

The “Memorial Day discount” is only applicable for estate plans created by active or retired veterans and first responders (and their spouses). Availability of the discount ends after June 30, 2019 at which point the prospective client must have contacted Gordon Fischer Law Firm and indicated an intention to make an estate plan.
Memorial Day discount merely relates to pricing and in no way creates an attorney-client relationship, nor any other kind of professional relationship. The Memorial Day discount does not create a contract or agreement of any kind.
Gordon Fischer Law Firm, P.C. retains full and total discretion as to who it chooses to serve as clients and why. Gordon Fischer Law Firm, P.C. retains the right to refuse service to anyone it so chooses.
The Memorial Day discount may not apply to individuals or families with a net worth of more than $1 million dollars. (High net worth families definitely need an estate plan, very much so, but the applied strategies and tools will be more complicated.)
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’s the rub; the rich can afford to make big (and small) estate planning mistakes.

You Can’t Afford Poor Quality 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 no 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.

table with book and tea

Often when I’m reading fiction I’ll find estate planning-related issues that cause conflicts, both big and small, for the characters. And, while the stories may be fictitious, the lessons they give us serve as valuable reminders of the importance of quality estate planning.

One such tale I recently revisited is the 1845 gothic novel, Wuthering Heights, in which author Emily Brontë swiftly weaves in ample estate planning issues with English family drama worthy of the Kardashians.

While many estate planning laws and practices have evolved and changed since the mid-1800s, many also have not. Indeed, the outcome of failing to create a valid, quality estate plan certainly has not.

All in the Family

Wuthering Heights twists and turns with love, revenge, birth, and death spanning some thirty-something years from the late 1700s to 1803. Among many other plot devices, conflict rests on the real property (named Wuthering Heights and Thrushcross Grange) that a man named Heathcliff comes to in possession of through a number of different property rights and inheritance laws. In this way English common law has its own sort of starring role in the book, a character for which Bronte shows an impressive grasp of.

Of course, I don’t want to spoil the book because it’s a classic and you should enjoy the experience of exploring it yourself. So, without any spoilers there’s a lot of family conflict and one of the characters (Heathcliff) taking vengeful advantage of a number of unfair laws (especially those discriminating against women) of the time to gain property and power over his siblings. What were these unjust laws you ask? For one, married women couldn’t legally own property in England during this period. Additionally, inheritances generally passed to sons only. (If a father did not have sons and did not specifically name a daughter as a beneficiary, the father’s closest male relative would usually become the heir to the father’s estate.)

Yet, the irony of Heathcliff’s unyielding (and suspect) property acquisition is that in the end, he failed to make an estate plan and therefore failed to seize his opportunity to decide to whom and when he wants his things to pass. Apparently, he had thought about it, but likely did what so many of us do and made excuses and put it off until it was tragically too late. (Again, no spoilers, but Heathcliff’s ending is no fairytale.)

First Wuthering Heights Lesson: Stop the Procrastination

This brings us to our first important Wuthering Heights estate planning lesson: make an estate plan. Seriously, every adult needs an estate plan, as you never know when unexpected death or incapacitation may occur. For instance, you’ll want to have a health care power of attorney in place before a medical emergency occurs. And if/when it does, you’ll want your assets to go to the beneficiaries of your choosing. Having a valid estate plan in place also saves your loved ones ample time, energy, and money in court costs and lawyers’ fees.

What Happened to the Estate

Because Heathcliff lived in 19th century England, without a valid will in place at the time of his death and without a clear heir at law or living spouse, Heathcliff’s property was “escheat,” a common law doctrine that made sure property was not in limbo without a recognized owner. This meant the property passed to the “Crown” (basically whomever the feudal lord of the area was, or in modern day it would be as if the property was held by the state) and then eventually passed to Heathcliff’s next generation of family members. Now, Heathcliff, given his history with his family, may not have chosen for his unqualified nephew (and niece) to inherit his property. Heathcliff may have wanted to make charitable bequests of his property to a charitable organization he supported. But, the fact of the matter is he didn’t have a will, let alone an estate plan, so then inheritance laws and the judicial system made these personal decisions for him.

As an estate planning attorney, I can assure you this is not something that only happens in books. Without a valid will in place your estate will go through a process called intestate succession where the Iowa probate process and the courts will decide how your hard-earned property is to be distributed. This can take a long time, cost a great deal in fees and court costs, and your property may end up transferred to beneficiaries you never would have selected. Plus, without an estate plan, you cannot give upon your death to charity.

Second Wuthering Heights Lesson: Intestate Succession

Dying in Iowa without an estate plan is different than dying in 1800s England, but what does the intestate succession process actually look like?

It depends on the family situation. If married, the estate will pass to the surviving spouse. If there’s a surviving spouse and living children (whom are not children of the surviving spouse, but children of the deceased), then the estate will be split with half to the spouse and half divided amongst the living children (often referred to as “issue” in legal speak). If there is no spouse and no children, then the division process works its way down a list of surviving family members from parents, then to grandparents, then great-grandparents…and if no one from that list is alive than the estate would pass to the deceased spouse’s issue (such as stepchildren). Finally, if there are no family members living to inherit the estate, the intestate property will escheat (remember when we talked about that before) to the state of Iowa.

Assets that are inherited via beneficiary designations (such as 401ks, IRAs, annuities, checking accounts, and pensions) only become the property of the probate estate and pass through the intestate succession process if no beneficiary is named.

Note well that these highlighted provisions are just the basics. Other statutes come into play with the intestate process pertaining to various personal and financial situations.

Just as enlisting an attorney to help you craft a quality, individualized estate plan, it’s important that an attorney is brought on by the surviving family of the person who died intestate in working out how property will be divided.

brown books on shelf

Write Your Plan Before “The End”

The bottom line is: don’t be Heathcliff. Every adult (even young adults, and especially adults with minor children) needs to make an estate plan. Not only will this help your family avoid the worst-case scenario of litigation, it will also allow you the benefit of determining who you want inheriting your estate and when. You shouldn’t rely on the rules of intestate succession for dispersal of all the assets you acquired over the course of a life.

Lucky for you, it’s even easier to make an estate plan than it was back in the time of Wuthering Heights. Get started with my Estate Plan Questionnaire or contact me with questions about your individual situation.

hands of 2 grooms

Everyone needs an estate plan! This goes for if you’re a young professional or have minor children or are retired. And, it goes for all married couples

This year marks a decade since Iowa Supreme Court decision of Varnum v. Brien, which legalized same-sex marriage in the state. This case was a precursor and set a standard echoed subsequently in other states and eventually at the national level. The Supreme Court’s opinion in Obergefell v. Hodges, which legalized same-sex marriage was a major win for both LGBTQ and human rights. 

Love is love written on card

The 10-year marker of the Varnum decision reminded me that Obergefell had an enormous impact on estate planning. With same-sex marriage now recognized across the country, it opened a multitude of previously unattainable tools and tax-savings that come along with a legal and recognized marriage. Yet, same-sex couples still may have situations that require extra or special planning. You may be surprised to learn that It can’t be it covered by a single article, so I’ll hit the high points. Here are five considerations for same-sex spouses engaged in estate planning.

Unlimited Marital Deduction

The unlimited marital deduction is a money-saving must for all married couples. The unlimited marital deduction is an essential estate preservation tool because it means an unrestricted amount of assets can be transferred (at any time, including at death) from one spouse to the other spouse, free from taxes (including the estate tax and gift tax). Prior to Obergefell, same-sex couples had to depend on their individual applicable exclusion in order to provide for a surviving partner.

(Note that the marital deduction is available only to surviving spouses who are U.S. citizens. If your spouse is not a U.S. citizen, look at other tools, such as a qualified domestic trust (QDOT), which may act to minimize or eliminate taxes.)

marriage equality flags

Guardianship of Minor Children

A will is so critically important for several reasons, including the fact a parent can make a designation of guardianship for minor children should something happen to the parent while the child is still under age 18. Without a will, no guardianship can be established, and Iowa Courts must choose guardians. Unfortunately, with no clear evidence as to what the former caregivers would have preferred, the Court must make its “best guess” as to who the parents would have preferred and what would be in the best interest of the child. The Court may, or may not, choose who the caregivers would have named.

Child smiling on bridge

Establishing guardianship is SO important for all parents, but especially so for same-sex parents. The legal relationship between a minor child and a parent in a same-sex marriage should specifically be identified in the estate plan. Additionally, if only one spouse is currently the natural or adoptive parent of a minor child, the spouse of the said parent should consider adopting the child to legalize the relationship. Without this officially established relationship, the death of the adoptive/natural parent could open the door for a custody battle with the deceased’s family or the child’s birth parents. To avoid litigation (and avoiding litigation in estate planning is always a good idea), co-parent adoptions protect each parent’s rights regarding guardianship.

If adoption isn’t on the table, it’s smart to create a trust with specific provisions for the relationship between the non-legal parent and the minor child if someone else were to become the guardian.

(Expert advice: The adoption tax credit is not available for a spouse adopting a spouse’s child. If adoption is in the plans it may be financially advantageous for the adoption to take place prior to marriage.)

Give Your Assets to your Child(ren)

Adoption also plays an important role not just in guardianship but in the passage of assets. Typically, when parents die their assets are passed on to their child(ren). If this is indeed an estate planning goal for a same-sex couple, adoption should definitely be considered since it’s more common in same-sex marriages for only one parent to be biologically related to the child.

The term for adoption by a spouse (without the “first parent” losing any parental rights) varies from state-to-state and can be called second-parent adoption, co-parent adoption, stepparent adoption, or confirmation adoption.

mom daughter blowing kiss

Once an adoption is final, an adoptive parent has all the permanent legal rights and responsibilities of a parent-child relationship, exactly the same as that of a birth parent.

Without the legal determination and an estate plan the child(ren) may not get anything as the couple’s assets could flow instead to other family members.  

Professional Planner

For all the aforementioned considerations and more, it’s smart for all couples, but especially same-sex couples, to avoid the DIY online estate plan templates. Most of these services don’t include the specific provisions and important estate plan needs of LGBT couples. Seek out a lawyer with ample experience in estate planning who understands the potential legal challenges your estate could face so they can adequately protect your assets from potential peril. For instance, if you think the situation could arise where family members who disprove of the marriage or decisions regarding the estate could create future conflict, your lawyer should be able to advise on how a “no contest” clause to be incorporated into the estate plan.

Comprehensive Review

As stated before, given the tax-saving tools that marriage provides, it’s nothing but beneficial to review any and all existing estate plan documents of each spouse. (Married couples often seek joint representation in estate planning, but individual representation can help couples avoid conflicts of interest.)

In your estate plan review confirm that definitions accurately reflect relationships with verbiage such as “spouse,” “children,” “husband,” “wife,” and the like, so there’s no ambiguity when it comes to execution of the plan.

Following marriage, it’s also a good idea to take a look at re-titling property (such as a home) from sole ownership to joint tenancy. This means that if one spouse were to pass, the other would get the property without it passing through probate. (Depending on your situation, you could also consider “tenancy in common” as another option for holding property titles under multiple names.)

Additionally, don’t forget to check your beneficiary designations on accounts such as savings/checking, insurance, 401k, and retirement benefits, as these designations actually trump your will.

Ask your professional advisors—lawyer, financial advisor, insurance agent—to help you maximize your money-saving benefits when it comes to gift, income, and federal/state estate taxes.

two brides getting married

Get Started

You’ve worked hard for the assets you’ve built and the property you’ve acquired. Almost assuredly you want these assets to pass to the ones you love—the ones you’ve built a life with and around. Don’t let legal loopholes, family members that will never fully understand that love is love, or guardianship issues get in the way you crafting your legacy. It’s never too early to get started on your estate plan (with my free, no-obligation) estate plan questionnaire. I’m always happy to discuss the topic over the phone (515) 371-6077 or via email.