Asset Protection

Passing On Family Values As Part of Your Estate Plan

August 6, 2020Filed Under: Asset Protection, Estate Planning, Senior Health and Wellness

Multl generation family in autumn park having fun

Successfully addressing and legally formalizing inheritance of family values and assets can be challenging, especially if parents wait too long to begin instilling family values. Undoubtedly the best time to teach and empower your children as eventual inheritors of your family legacy is during childhood, then continuing throughout adulthood. Waiting until your later stages in life to discuss family values as a guide to handling inherited worth is often ill-received as grown adult children prefer not to feel parented anymore, particularly when they are raising children of their own.

There is value in the spiritual, intellectual, and human capital of rising generations, and it is incumbent upon older generations to embrace this notion and work with their heirs rather than dictating to them their ideas about how to facilitate better outcomes. While the directions taken by newer generations will likely differ and can sometimes be downright frightening than that of their elders, there can still be a deep sense of service and responsibility to family values and stewardship of inherited wealth. Allow your children to exert their influence over the family enterprise early on in life and make adjustments that create synergy, connection, and like-mindedness.

If this description of a somewhat ideal family system does not resemble yours, take heart. Most families do not conform to perfect standards of interaction. The more affluent a family is, the higher the failure rate to disperse assets without severe fallout. The Williams Group conducted a 20-year study and determined there is a 70 percent failure rate that includes rapid asset depletion and disintegration of family relationships during and after inheritance. Establishing inheritable trusts can provide real benefits. Benefits include avoiding probate, reducing time to handle estate matters, privacy protection, the elimination or reduction of the estate tax, and can be effective pre-nuptial planning. A parent who wants to control outcomes should focus on these benefits of the trust instead of trying to legislate their future adult children’s behavior.

It is imperative not to allow your values and legacy to become weaponized within the family system. A sure-fire way to inspire conflict is via “dead hand control,” meaning trying to control lives from the grave. Most often, if you put excessive trust restraints on adult children, they will act accordingly to your perception that they are not adult enough to handle wealth. Instead, consider enrolling them in a few classes about managing wealth. Spark an interest in them to learn how you have created wealth, the mechanisms you used, and what their future endeavors may look like long after you are gone. Formally educate your children about finances, the earlier the better, and instead of talking about who gets what the conversation can shift to the mechanics of managing wealth. This tactic resets the context of the issue and aligns purpose and intended long term outcomes.

Estate planners try to encourage trust choices that lead to flexibility. If a beneficiary is genuinely incapable of making the right decisions, a trustee can be appointed to make distributions in the beneficiary’s best interest. This trustee discretionary power of money management can help a well-funded trust survive for generations.

You can also write a letter of wishes or provide a statement of intent to your children. Though these are not legally binding, it gives you a platform to remind them of family values and your desire for these values to be maintained for future family generations. This type of letter is an opportunity for you to convey your vision for how your wealth can bring growth and chance for fulfillment to beneficiaries.

Prosperity should positively shape lives. Family trust beneficiaries hopefully already have a self-driven life that includes purpose, responsible behavior, and a basic understanding of personal finance. If you worry your children may squander inheritable assets, create the opportunity for them to succeed through classes that teach them about managing legacy family values and wealth. Address your concerns legally and directly through a detailed trust that can help but not overly constrain them to achieve what you envision they can become. Start an honest conversation early on, but remember it is never too late to make good choices and create positive family value influences for the coming generations. A well-known Ann Landers quote sums it up neatly, “In the final analysis it is not what you do for your children but what you have taught them to do for themselves that will make them successful human beings” – a worthy goal of any family value system.

If you are interested in establishing a trust to pass wealth on to your children, we can help. We can also guide families on how to pass on family values in a meaningful way. We look forward to the opportunity to work with you.

GETTING MARRIED? YOU MAY WANT TO CONSIDER A PRENUP!

July 26, 2020Filed Under: Asset Protection, Dissolution, Divorce, Property Division

By Chris Diedling

If you are engaged and planning a wedding, this is supposed to be one of the happiest times in your life. You are soon to be married to the love of your life and your “happily ever after” is all that matters, right? The last thing you want to think about is what happens if you and your future spouse get divorced. However, as much as a marriage is the ultimate, intimate bond between two people who love each other, marriage is also a formal, civil contract between you, your partner, and the State. This civil contract comes with certain rights and legal obligations concerning assets, debts, and finances.

To put it simply, you are signing up for a lot more than “happily ever after” Marriage is a legal commitment involving sharing of property, debt, and the duty of support. The decision to enter into a prenuptial agreement is one that ought to be discussed by every soon-to-be-married couple. This discussion is a crucial planning tool for couples to get on the same page before any issues arise. Rapper Kayne West perhaps said it best about prenups, “It’s something that you need to have because when she leaves your a**, she’s gonna leave with half”

WHAT IS A PRENUP?
A prenuptial agreement, also known as a premarital agreement, antenuptial agreement, or colloquially referred to as a “prenup,” is a written contract entered into by a couple prior to a marriage. This contract establishes the property and financial rights of each spouse in the event of a divorce or separation. A prenuptial agreement determines at least three important questions to be answered in a future marriage termination: 1) How your assets & debts will be divided; 2) How your assets & debts will be categorized; 3) Whether either party will be paying support to the other.

WHY WOULD I NEED A PRENUP?
You may be reading this article with skepticism and have thoughts such as, “if my future spouse and I really love each other, we wouldn’t need a prenup” or that “prenups are only for couples who can’t fully trust each other.” This is a perfunctory and naïve way of thinking. It is so easy to be blinded by love and the idea of “happily ever after” to the point where you never stop to consider the reality of marriage.
Some other common misconceptions and falsehoods about prenups include: “prenups are only for wealthy people,” “I have zero assets going into the marriage, I don’t need a prenup” “a prenup automatically means no future spousal support or alimony,” “prenups show a lack of commitment or faith in the marriage.”

All of these notions are completely false. Many of these myths have caused reasonable, intelligent people to entirely dismiss the whole idea of a prenup when planning their wedding. Some have been lucky enough to never know the consequences of not having one; others wish they would have had a prenup.

I am not trying to rain on your joyous wedding parade in the least. By all means, there is absolutely nothing wrong with being ecstatic about your upcoming marriage! Love and happiness are both real and attainable and you should be thrilled on reaching that point with your soul mate! But, it is equally important to acknowledge reality and plan responsibly for the future. After all, responsible adults commonly plan for life events, both positive and negative, as everyday occurrences. We utilize insurance policies to plan for disasters such as floods, fires, and car accidents, etc. We use estate plans to distribute assets to our beneficiaries after we’re gone. We set up trusts and college funds for our children. We invest and save for the future. Why should a prenuptial agreement be any different? Forget the minimal, temporary discomfort in approaching the subject with your partner. The reality is, at least 50% of marriages end in divorce and that statistic could be increasing according to recent studies.

Wouldn’t you want to be prepared for any event that has at least a 50% chance of occurring?
A prenuptial agreement is not planning for a likely marital failure. Rather, it is a vital tool for couples who genuinely trust each other enough to reach a comfortable agreement on the terms of a separation in the event the marriage does fail. Instead of looking at a prenup as a lack of trust or commitment in a marriage, look at it as an indicator of common sense!
A top-notch family law attorney once told me, “never marry someone you couldn’t stand to get divorced from.” Valuable advice indeed. If you are able to discuss the issues covered by a prenuptial agreement with your future spouse, you are planning for success. After discussing these issues, you and your partner will have a better understanding of each other’s expectations and a lot of future conflict can be avoided.

WHAT DOES A PRENUP DO FOR YOU?
A prenup will serve as a roadmap for an amicable resolution in the context of separation and through all of strife that comes with it. A prenup can save a lot of time, expense, and emotional hardship should a divorce ever occur.
Identify and allocate separate and marital property/debt: The prenup can identify each spouse’s separate property and/or debt and how these assets/liabilities shall be treated if a divorce should occur. You can also decide how marital property will be divided rather than leaving it up to the court to decide through divorce proceedings.
Spousal support considerations: The prenup can be used to guarantee either spouse a minimum amount of spousal support in the event of divorce. A couple can agree on no spousal support, a fixed or sliding amount, payments for a finite period of time or until a triggering event (such as remarriage) occurs. Keep in mind that all prenuptial agreements are subject to a court’s review and if your agreement isn’t fair, the court could invalidate the provision.
Allow children from a prior marriage to inherit separate property: The prenup can ensure that children from a prior marriage inherit their share of your estate when you die. Without a prenup, the surviving spouse may have the right to claim a large portion of the deceased spouse’s property, leaving little to nothing for the children of the prior marriage.

WHAT DOES A WELL-DRAFTED PRENUP NEED?
The most essential factor for a successful and legally valid prenup is full and complete disclosure of each spouse’s assets and debts going into the marriage. Full disclosure ensures that the prenup process is both fair and equitable in the eyes of the court.
Additionally, every valid prenup must be in writing and voluntarily signed by the parties. The prenup must be fair and reasonable and both parties must understand and clearly indicate such understanding of the agreement. Both parties must have had adequate opportunity to consult with legal consul. It is highly recommended that both parties to a prenup obtain legal representation. You will want to contact and attorney to ensure your prenup is prepared and executed in compliance with the law.

HOW CAN I GET A PRENUP?

If you would like to contact Chris to discuss a prenuptial agreement, please call 513-771-2444 to schedule a free 30-minute consultation!

Four Unintended Consequences of Adding a Child’s Name to Your Bank Account

July 17, 2020Filed Under: Asset Protection

Adding your child’s name to your bank account can have unintended consequences for both you and your child. The appeal is understandable, with the thinking that it can be useful to have another party available to keep track of bills when you’re sick or away. But in truth, adding a child to your bank account can end up being more of a hassle than it’s worth.

Four Reasons Not to Add Your Children to Your Bank Account

First of all, the money in your account could be diverted to unintended parties. As of 2015, if the account held anything over $14,000, you would have had to notify the IRS and possibly pay gift taxes. If the child divorces, is in debt or has a legal judgment against them, the account becomes available to the ex-spouse, creditors, or plaintiffs, just because the child’s name is on it.

Secondly, putting your child’s name on your bank account – and a potential beneficiary’s name, at that – may frustrate the intentions of your will. Because your child’s name is on your account, they have “rights of survivorship,” which means that the entire account goes to them. If you wanted your assets divided equally between your children, for example, then whichever has their name on the account will now get more than the other.

Third, your child could lose eligibility for public funds, and your grandchildren could lose the opportunity for scholarships and financial aid. If your child ever needs public assistance, such as Medicaid, the account will be counted as an available resource and may make them ineligible. Likewise regarding your grandchildren; they may not be able to get student aid if the account which their parent’s name is on inflates their parent’s assets.

Finally, there are a few other potential consequences. If your child dies before you, then the money in the account (if held as tenants in common) could be part of their estate and would be distributed under the terms of their will, rather than yours. Or if your child spends the money in the account without your permission, because their name is on the account they would not be required to pay you back. Either way, the money in your account would have ended up out of your control.

Even though adding a child’s name to your bank account seems harmless, it can backfire, and lead to consequences for both you and your child. We can help you find ways to protect your bank accounts during your lifetime, and pass money on to your children without the threat of creditors reaching that money.

If you have questions or need guidance in your planning or planning for a loved one, please do not hesitate to contact our office at (513) 771-2444.

Is Your 401(k) or IRA a Good Investment?

November 20, 2019Filed Under: Asset Protection, Estate Planning

Kiplinger.com is suggesting it is time to rethink your financial retirement portfolio. You may have built up a significant nest egg in a 401(k) plan, but it does come with serious baggage during your golden years. It is impossible to argue against the early stages of a 401(k) when employers match your contribution to the plan. You can take advantage of the tax breaks because contribution money comes out of your paycheck before calculating taxes and that money compounds every year. When you retire, however, the tax impact of a 401(k), 403(b), or traditional IRA can become significant.

You have probably been told at retirement time that you will be in a lower tax bracket however; it is more likely that the opposite will be true. Your tax rate is expected to increase. If you maintain the same standard of living, it will require the same amount of income, which translates to the same tax rate. Additionally, your children will be grown, the house paid off, and those substantial tax deductions are gone which may push you into a higher tax bracket. You will pay taxes on withdrawals from your contribution plan(s) annually irrespective of if the money comes from dividends, capital gains, or your contributions. That money will be taxed at your income tax rate at the time of withdrawal. Currently, the top marginal income tax rate is 37 percent, and taking into account the US deficit that tax rate could increase in time.

Double taxation can eat away at your retirement savings and is often the norm because you can pay more taxes on your Social Security benefits. Unless you have a Roth IRA, distributions from your retirement plans count against your tax situation when calculating what percentage of your Social Security is subject to tax. The result is you are paying more taxes on your retirement plan distributions and Social Security income. You are also paying more taxes from capital gains, dividends, and interest from your investments.

Required minimum distributions (RMDs) can be frustrating and expensive if you neglect to take them. You have to withdraw funds from your retirement fund accounts when the IRS deems it necessary. Even if you want to leave the money in the account, the IRS will schedule your withdrawals when you reach 70 ½ years old. There are stiff penalties for not taking out the required minimum distribution. You may pay as high as an additional 50 percent tax.

If you are married a 401(k) or IRA is the worst account to leave to your surviving spouse. No one wants to die without leaving their spouse financially secure, but these two financial vehicles are fully taxable accounts. Upon your passing, your spouse is about to change tax filing status from married filing jointly to single. That takes your spouse’s tax obligation from the lowest to the highest bracket. Probably not exactly what you had in mind.

Both your 401(k) and IRA plans are subject to tax law changes. Every time Congress convenes a session, there is the possibility that increases in taxes on your retirement plans can occur. It is highly unlikely that your taxes won’t increase. The US debt continues to grow at an alarming rate. The US government will tax its citizens more than ever to gain some level of financial control. Privatize the gains, socialize the losses is the federal government’s rule of thumb, particularly when considering how massive the US debt is.

Get together with a tax planner to identify ways to move your retirement funds into better financial retirement vehicles. Sometimes conversion can cost a bit of money upfront, but in the long run, you will be far better off with regards to your retirement tax obligations.

If you have questions or would like to discuss your personal situation or for a loved one, please don’t hesitate to reach out to our Cincinnati office by clicking here to send us a message or by calling ust at (513) 771-2444.

Passing On Family Values As Part of Your Estate Plan

GETTING MARRIED? YOU MAY WANT TO CONSIDER A PRENUP!

Four Unintended Consequences of Adding a Child’s Name to Your Bank Account

Four Reasons Not to Add Your Children to Your Bank Account

Is Your 401(k) or IRA a Good Investment?

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