Tempe Arizona Estate Planning

Wealthy Kids Unappreciative? You’re Not Alone

Wealthy Kids Unappreciative? You’re Not Alone

While this isn’t true in all wealthy families, the hard work that it took to achieve financial success is not always appreciated or valued by children or grandchildren. Can that be changed?

In 2007, the Boston College Center on Wealth and Philanthropy embarked on a four-year study to take a look at the lives of wealthy people and how being affluent has impacted their lives, and those of their children, as reported in the MarketWatch article, “How to leave an inheritance that doesn’t tear your family apart.”

Participants were asked about how their money helps or hinders their deepest aspirations for themselves and their children. The study found that participants with children worried less about making more money and impacting the world through philanthropy than “to be a good parent.”

Most parents don’t want to discuss money with their kids, and rightly so. It’s a daunting conversation, and can invite the question: “How much inheritance can I expect?”

However, when parents don’t communicate their hopes and dreams, the chances of a successful outcome aren’t great. A 20-year study at The Williams Group revealed the reasons why there is a 70% failure rate among affluent families, where family assets dissipate, and family relationships disintegrate. The research found that it’s connected to a family’s ability to have meaningful, productive and honest discussions about the effect of money and the purpose of the wealth.

Some well-intentioned parents will respond to their children’s question of “how much and when?” by creating a structure that does the protecting for them. They establish trusts that distribute assets to their children at age-appropriate milestones. Or they add a term in their will that says, “if there is any fighting, it all goes to charity.”

In some families, the parents don’t tell the children what their inheritance will be, thinking that not knowing will ensure that the kids don’t lose their motivation to achieve in their own right. However, children who are left in the dark may have other questions, like could they count on their parents if they wanted to start a business of their own, or would they be cut off if they ran into trouble.

Family conversations about wealth, work ethics, and social responsibility that begin when children are young and continue over time, changing as their children mature, is far more likely to lead to a family that understands and respects the origins of the family’s wealth and the responsibility that comes with it.

Your estate plan can communicate your values by the way in which it is structures.  Some clients choose to set up a foundation where their children will be involved in deciding how the yearly charitable donations are distributed.  Others want there children to choose meaningful charities and put them in charge of making the specific distribution.  The structure of your children's trust can also allow them to determine where their share would go at their passing and under what circumstances named individuals would inherit.  The key is to discuss these issues with an experienced estate planning attorney who knows the right questions to ask that will put a customized plan in place for your family's needs.  Contact the Soto Law Firm today to sit down with an attorney who can assist you in creating the right estate plan that will give your children the best chance for success in the future.

Reference: MarketWatch (February 21, 2018) “How to leave an inheritance that doesn’t tear your family apart”

Planning for Life Insurance to Help Your Beneficiaries

What if you have $4 million in life insurance coverage, but no one in the family knows where the policies are or how to go about finding them?

Organizing your records and telling your family members about where important documents are, is a gift to your family. After you have passed, they’ll appreciate not having to go on a scavenger hunt to find out where your assets, including your life insurance policies, are located. This recent article from The New-Enterprise, “Relieve your loved ones of a huge burden by being proactive, and organized,” offers a great checklist that you can use to start getting organized.

Keep your insurance policies (and a record of them) in at least two places where they’re safe and easily accessible. That will reduce any delays in processing the life insurance. However you shouldn’t keep life insurance policies in a safe deposit box because it’s required to be sealed temporarily upon the death of the owner. Storing your life insurance policies in safe deposit box will create a delay in the settlement of the life insurance proceeds. Here’s a list of the information to keep. For every policy, list:

• The name of the issuing insurance company;
• The address of the issuing company;
• The name and U.S. headquarters of the group, if the issuing company is part of a group of companies;
• The policy number;
• The date the policy was issued;
• The amount of the death benefit;
• The contact info of the agent/broker who sold you the policy;
• The type of life insurance policy issued; and
• Where the original life insurance policy is located.

In addition, set out these directions on how to file a claim, when the time comes:

• Obtain multiple copies of the death certificate;
• Contact the insurance agent or the company to complete the necessary forms; and
• Submit the policy claim along with a certified copy of the death certificate.

It doesn’t usually take very long for the settlement to be issued once you’ve submitted the claim. You’ll normally be able to receive the distribution of life insurance proceeds in one of the following options:

• A lump sum;
• A specific income provision, which is payments of both principal and interest made on a predetermined schedule;
• A life income option, which is a guaranteed income for life (the amount depends on the death benefit, beneficiary’s gender and age at the time of the insured’s death); and
• An interest income option, where the insurance company holds the proceeds and only pays interest on them, with the death benefit going to a secondary beneficiary at your death.

It may not be the most fun way to spend a few hours, but by getting your insurance policies and other documents organized, you’ll spare your family stress and potential problems after you have passed. Don’t forget to do the same with your estate planning documents, and if you don’t have one in place, speak with an estate planning attorney to also take care of that detail.

One issue that many parents with minor children don’t realize is that life insurance proceeds will be given to their children at age 18.  If a parent passes away with minor children named as the beneficiaries, a conservator for that minor child will have to be appointed by the court.  To avoid the long drawn out process of a conservatorship, a much better option would be to name your revocable trust as the beneficiary of your life insurance policy, so that a successor trustee will invest and be in charge of those funds until your children reach a predetermined age.  This process not only avoids the time, hassle, and expenses of a conservatorship, but also protects your children from spending those funds unwisely.   Contact the Soto Law Firm today to discuss how you can protect the life insurance proceeds for your children’s long term benefit.

Reference: The (Elizabethtown, KY) New-Enterprise (September 22, 2018) “Relieve your loved ones of a huge burden by being proactive, and organized”

Timing Inheritance for Their Own Good

Having an estate plan forces you to ask many important questions, and one of them is when the right time is for your children to have access to their inheritance. The answer is different for every family.

You know your kids best—the one who turns a dollar into ten bucks with seemingly no effort and one who burns through cash like an ATM machine. Some children never learn to manage money well, and others seem to be born with good financial skills. There are ways to control when your children inherit wealth, and how much they inherit.

Wealth Advisor’s article asks, “When Should Children Have Access To Their Inheritances?” The article looks primarily at distributions from trusts created by a will (testamentary trusts). However, these considerations also apply to trusts created during your lifetime, which are called inter-vivos trusts or revocable trusts.

Distributions can be discretionary, mandatory or event-driven. A common distribution structure includes mandatory distributions at specified ages, such as 25, 30, and 35. A third of the principle is distributed at age 25, with half of the balance doled out at age 30, and the remaining balance distributed at age 35.

In addition to mandatory distributions, a trust can provide that the trustee has the authority to make either fully discretionary distributions or distributions under some “ascertainable standard,” such as for the beneficiary’s health, education, maintenance and support.  However, detailing only mandatory distributions or event-based distributions significantly reduces the fiduciary’s flexibility.

A trust should be created with the help of an experienced estate planning attorney. He or she will help guide your decisions about trust distributions, that include both the principal and the income generated by that principal.

In many situations, when an estate plan is designed, you may not be sure of the ultimate size of your children’s inheritance. In that case, your attorney can help you plan for an income stream in today’s dollars, as well as a cost of living adjustment to account for inflation. This will eliminate any mandatory income distributions that may mean large distributions to children at relatively young ages.

Alternatively, you could give the trustee the power to make these decisions, and let your children have access to whatever amounts the trustee thinks is appropriate. There’s also a hybrid approach, giving the trustee certain mandatory distributions combined with discretionary distributions. Some estate planning attorneys believe that this provides the most asset protection and flexibility.

For those children who have the right financial acumen and who are deemed sufficiently responsible, the responsibilities of trustee can be passed to them at specific ages, which allows for the continuation of asset protection and divorce protection for the assets left to such beneficiaries.  This strategy allows beneficiaries to achieve the control they are looking for without losing the asset protection and divorce protection for those assets when they are distributed out of the trust.

Contact the Soto Law Firm today to determine what your best option should be based on your goals and family dynamics.

Reference: Wealth Advisor (July 30, 2018) “When Should Children Have Access To Their Inheritances?”

Why Estate Planning is So Important

You don’t need to be wealthy to create a financial disaster for your family. Not having a will or other estate planning documents, could wreak havoc on their budgets and make their lives stressful.

It’s true—planning a summer vacation is far more fun that facing your own mortality and deciding who gets Aunt Susan’s soup tureen.  However, families who are left to clean up the mess, when a loved one doesn’t put an estate plan into place, including a will, power of attorney and healthcare directive documents, are the first to tell you, they’d rather you go on vacation after you prepare your estate plan.

Investopedia’s recent article, “4 Reasons Estate Planning Is So Important,” reminds us that estate planning isn't only for the rich. To show you that estate planning is necessary, look at these four reasons why you should have an estate plan to avoid potentially devastating consequences for your loved ones.

Keeps Your Wealth From Going To Unintended Beneficiaries. Estate planning helps middle-class families plan, in the event something happens to a family's breadwinner(s). If you don’t decide who receives your assets when you pass away, you won’t have any control as to who gets what. Without an estate plan, a probate court will decide who gets your assets, based on state intestacy law. This may not be what you would have wanted. A will or a trust can avoid this result.

Families with Young Children are Protected. If you're the parent of minor children, you need to name a guardian to be certain your children are taken care of the way you’d want. Without this fundamental provision in your will, the probate courts will make this decision.

No Huge Taxes for Your Heirs. Estate planning serves to protect your family from unnecessary estate and income taxes. You want to minimize or eliminate all of their federal and state estate taxes or state inheritance taxes, as well as the income that tax beneficiaries might have to pay. Without a plan, these taxes can be significant.

Avoids Headaches and Messes for Your Loved Ones After You're Gone. Family fighting after a loved one dies is not uncommon, and it's another reason why an estate plan is needed. An estate plan will let you say who controls your finances and assets, if you become mentally incapacitated or after you die. It will also go a long way towards settling or preventing any family conflict and ensuring that your assets are handled in the way you wanted them to be.

Think of an estate plan as a gift you leave, your final message, to those you love from the grave. It’s your way of telling them you cared enough to address the really tough stuff. Contact the Soto Law Firm today to schedule your appointment an estate planning attorney to get the process started.

Reference: Investopedia (May 25, 2018) “4 Reasons Estate Planning Is So Important”

King of Pop Sends His Father a Clear Message Through His Will

We know now that the brilliant songs, dances and smiles from the Jackson Five took place under a harsh atmosphere created by their father, who relied on corporal punishment to drive his kids to success.

Before Michael Jackson was the King of Pop, he and his brothers were trained and terrified by their father Joe Jackson. The senior Jackson, who died in late June at age 89, had no room for softness in his plan to create what became a show business dynasty.

People’s article, “Joe Jackson Was Left Out of Son Michael's Will: 'This Is a Decision His Son Made' Says Lawyer,” reports that his son Michael, the King of Pop, had a troubled childhood with Joe, marred by trauma. In numerous interviews before his death in 2009, Michael said that beatings were common—punishments for minor infractions or poor performances—and his mother was powerless to intervene.

Joe remained unapologetic and even defiant about getting physical with his kids. He told Oprah Winfrey in 2010, that he didn’t regret using a strap as a method for hitting.

Their complicated relationship continued to play out even after Michael’s death. When Michael’s will, signed in July 2002, became public seven years later, it was discovered that Joe was effectively written out of Michael’s fortune.

His father was not among the names in the “Petition for Probate” list, which outlined all of the beneficiaries and fiduciaries named in the will and in the Michael Jackson Family Trust. These included trusts for his children and his mother, Katherine, who was named as guardian of his kids. In fact, rather than his father as a backup guardian for his children, Michael instead listed fellow Motown legend Diana Ross.

Apparently, there was a bit of discord among members of the family, who did not all believe that Michael Jackson’s 2002 will was legitimate. However, even if that had been proven, the three previous drafts of the will would have been considered and none of them included Joe Jackson. His attempt to challenge the will after Michael died failed, and the judge was very clear that Michael Jackson’s wishes were to give nothing to his father.

Whether you are leaving someone out or including someone that no one thought should be provided for, proper drafting of your will or family trust should be done by an expert to ensure that challenges to these documents will not succeed.  At the Soto Law Firm, we have extensive experience putting together the right plan for you and your family that will survive future challenges.  Call us today to set up a free consultation to discuss your estate planning options.

Reference: People (June 27, 2018) “Joe Jackson Was Left Out of Son Michael's Will: 'This Is a Decision His Son Made' Says Lawyer”

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Elvis’s Daughter Sues Money Manager, Says She’s Left with $14,000 From Father’s Fortune

The only daughter of the king of rock says that her former money manager was “reckless and negligent” with investments, while paying himself a hefty $700,000 salary. He’s counter-suing.

Lisa Marie Presley says she’s lost the $100 million-dollar trust fund set up for her by her dad, Elvis Presley, as a result of reckless investments and excessive fees by her former money manager, Barry Siegel. The Daily Mail’s recent article, “Lisa Marie Presley claims her ex-money manager lost $100 million trust fund left to her by Elvis with 'reckless and negligent' investments while paying himself a salary of $700,000.”

Instead of telling Lisa Marie the truth about the investments, Siegel covered up the dire straits of her finances, Presley's lawyers say in court pleadings. Siegel is counter-suing, contending that Presley “squandered” away her fortune, because of her “uncontrollable spending habits.” Siegel wants $800,000 in damages.

Presley’s complaint against Siegel and his company, Provident Financial Management, says that Siegel “enriched himself with exorbitant fees.” She claims that he and his firm ran the $100 million trust fund her father set up for her “into the ground.” What’s now left is just $14,000.

Siegel’s largest investment of the trust funds was in American Idol's holding company, which ended up going bankrupt.

Presley says that despite allowing the trust's assets to be run to ruin, Siegel profited richly from his "service" as trustee. She claims that from 2005 and the time of the American Idol bankruptcy, he billed $4.9 million to "manage" the trust, an average annual salary of $701,000 per year. However, had he disclosed the trust's true financial condition to Presley and restricted spending to the trust's "income" rather than its principal assets, she would have lived comfortably on an annual budget of between $1.5 and $2 million per year, after taxes.

On this budget, Lisa Marie says Siegel's lucrative compensation package would have amounted to between 40% to 50% of Presley's post-tax annual budget—"an amount she undoubtedly would not have agreed to, had she been aware of her true financial condition.”

Instead of telling Presley the truth, Siegel covered up the dire straits of her finances, say her lawyers. Siegel repeatedly told Lisa that she was in "good shape" with her finances, the documents state. Her attorneys cited several emails from Siegel responding to inquiries from Presley about how her trust fund was doing:

“We're in good shape on your finances.”

“We're ok.”

“Be assured that we are doing everything on our end to maintain both your current lifestyle and the future of you family.”

These were what Siegel allegedly told Presley. She fired him and Provident in 2015, after discovering that he had kept her in the dark about the trust's true financial condition.

Papers filed in court by Presley’s attorney claims that Siegel’s 2005 decision to sell 85% of her trust’s stock in Elvis Presley Enterprises (EPE) was blamed for a big part of the loss. Presley lost big when an investment in American Idol’s holding company went bankrupt after the show’s last season.

She also claimed that Siegel ran her trust’s real estate portfolio into the ground. The trust owned two houses in Hawaii and California and both had mortgages worth more than the properties were worth. Siegel agreed that she could afford to purchase an estate in England, with a transaction structured so poorly that the trust could not make a balloon payment and the mortgage on the estate defaulted.

This story illustrates why you should employ only the most trusted individuals to manage the assets that you intend to leave your posterity.  Furthermore, naming the right professional trustee to be in charge of trust assets can ensure that such individuals have a fiduciary responsibility to manage trust assets in the beneficiary’s best interests.  If you have questions about naming trustees or other fiduciaries for your family’s trust, contact the Soto Law Firm today to discuss your planning options.

Reference: Daily Mail (June 19, 2018) “Lisa Marie Presley claims her ex-money manager lost $100 million trust fund left to her by Elvis with 'reckless and negligent' investments while paying himself a salary of $700,000”

Taking Control of a Trust: What You Need to Know

Taking Control of a Trust: What You Need to Know

For those who are inexperienced with handling large amounts of money, taking control of a trust can be daunting. Start by learning the basics about trusts, so you can feel more comfortable in this new role.

Fear of the unknown is one reason why people, who have never been responsible for a trust, might feel uneasy. As reported in WTOP’s article, “7 questions to ask when taking control of a trust,” having access and control of more wealth seems like it should be an easy change to get used to.  However, the increased wealth comes with increased risk and responsibility. To get more accustomed to this new position, start with the fundamental questions:

What are the trust’s rules? There are different types of trusts, each with its own set of legal rules. Many are extremely complex.  Therefore, you should work with a trust attorney to be certain you’re doing things right.  You should also look at the trust agreement or the will provisions that established the trust. This will give you the instructions for managing, investing, and distributing trust assets. It will also detail your powers and how you can use the funds.

What’s the history of this trust? If more information is needed on the history or intentions behind the trust, talk to the advisers who are involved with the trust. This can give you a sound history on how the trust has operated in the past.

How are the trust funds invested? Investors should know what assets they own and why. This also applies to trust assets. Once you establish an appropriate asset allocation for the trust, you may want to have an investment policy statement to ensure that the ongoing management of your assets coincides with your intended allocation, risk tolerance, and objectives.

What about taxes? If a trust earns income, it will likely be subject to income taxes. Taxation of trusts can become extremely complicated, so work with a tax attorney or accountant in order to plan appropriately for your situation.

What protection is there from creditors or a divorce? There are some trust structures that increase your odds of shielding assets from a potential lawsuit.  Asset protection strategies implemented in an estate plan can afford beneficiaries with the ability protect their assets from predators and other litigious individuals and entities.

Who would be the beneficiary of this trust if I die? When a trust is first established, the original grantor may designate the next beneficiary if you pass away.  However, if a successor beneficiary isn’t stated in the trust, you need to consider how this asset affects your existing estate plan and change your documents to direct the asset at your death.

Inheriting a trust can be a life-changing event for you and your family. Don’t feel you have to go it alone—your estate planning attorney will be able to help. You and your family should enjoy the new opportunities and the security that the trust provides.  Contact the Soto Law Firm today to schedule a free consultation to discuss the proper administration of your trust.

Reference: WTOP (April 18, 2018) “7 questions to ask when taking control of a trust”

New Law Would Require Background Check for Pennsylvania Guardians

New Law Would Require Background Check for Pennsylvania Guardians

A bill has been introduced by a Berks County lawmaker with the intent to require background checks on individuals who want to be court appointed guardians to the incapacitated.

Preventing convicted felons from serving as guardians to vulnerable people, including seniors and the disabled, who have been declared incapacitated by the court sounds like common sense. It is hard to believe that rule is not already in place, isn’t it?

The Reading Eagle reports in a recent article, “Bill would require background checks for guardianship,” that Pennsylvania State Representative Mark Gillen is seeking co-sponsors for the bill, after he read about a Reading Eagle investigation that found courts in Philadelphia and Montgomery counties appointed Gloria Byars, a convicted felon, to manage the estates of more than 75 incapacitated adults.

Advocates praised the bill, saying it goes a long way to creating state standards. After more than ten years of state working groups, advisory committees and task force reports recommending standards for guardians that include licensing and background checks that have yet to be put in place, these advocates praised the lawmaker for responding to the issue that the newspaper article raised. However, they also had concerns that the bill's language didn’t specifically address whether agencies that delegate court-appointed responsibilities to staff, must conduct background checks on those employees. The proposed law might not prevent a case like Byars', who worked for a guardianship agency, from happening again.

Critics say the felony ban would bar relatives with a criminal conviction from being appointed, even if the offense is long in the past. There’s nothing in state statute that currently prohibits a court-appointed guardian from having a criminal record. The new legislation would change that and would disqualify convicted felons from being appointed guardians. It would also require federal and state criminal history checks.  In addition, it bans undocumented immigrants from serving.

Lawrence A. Frolik, a University of Pittsburgh School of Law professor and national expert on elder legal issues, called the bill heavy handed.

"The use of felony disqualification disproportionately impacts minority communities," Frolik said.

Advocates said that doing a criminal background check would be limited, and someone like Byars, who was convicted for financial theft and fraud, could still slip through the cracks, because she worked as an employee for a guardianship agency.

Gillen said he hopes that the amendment process will iron out this loophole. He noted that his strategy is to start out with a lean piece of legislation, and then seek input from stakeholders.

Here at the Soto Law Firm, we help clients avoid these types of incapacity issues.  In a General Durable Power of Attorney, commonly known as a Financial Power of Attorney, clients name those individuals they wish to perform financial transactions on their behalf, which would avoid the need to have a guardian or conservator appointed if they became incapacitated.  Through Trust planning, a client can choose successor trustees who would step in an control assets titled in the name of the trust, which process also avoids the need for a the appointment of a guardian or conservator.  Contact the Soto Law Firm today to set up a free initial consultation to discuss your options for avoiding these types of incapacity issues in Arizona.

Reference: Reading Eagle (April 14, 2018) “Bill would require background checks for guardianship”

Gray Divorce Reveals Traditional Roles Still Rule in Family Finances

Gray Divorce Reveals Traditional Roles Still Rule in Family Finances

The divorce rate for 50-plus couples has doubled since the 1990s. That has left many, who relied on their spouses to handle all of the family finances, with some unpleasant surprises.

With all of today’s changes in traditional gender-based roles, it is surprising to learn that a majority of married women—more than 50%—still leave the big decisions regarding investments and financial planning to their male spouses, as reported in Bloomberg’s article, “Rise of ‘Gray’ Divorce Forces Financial Reckoning After 50.”

The study shows that it’s not just older women taking the more traditional gender roles of their parents: about 61% of millennial women said they leave investment decisions to their husbands. This contrasts with 54% for baby boomer women. UBS surveyed more than 600 women who have either been divorced or widowed within the last five years, along with 1,500 couples. Respondents needed to have at least $250,000 in investable assets to take part in the study.

The difference between attitudes toward making major financial decisions between married women and women who were divorced or widowed is remarkable. Almost 60% of widows and divorcees regret not taking part in long-term financial planning, when they were part of a couple.

About 85% of married women who weren’t active in making long-term financial decisions said that their spouse knows more about financial issues than they do.  A total of 80% of women said they were okay with how financial responsibilities were split in their relationship.

Almost all of them would counsel other women to get more involved early on and stop the cycle of financial abdication. Of those women who were divorced or widowed women in the survey who remarried, 80% were more active in the financial decision-making in their current relationship.

More than half of divorcees and widows only learned about financial issues, after the marriage ended. Sometimes, the surprises were good, like learning about a 401(k) account that was previously undisclosed. But most of the surprises are not: credit card debt, outdated wills and secret spending issues.

Widows and divorcees were surprised about how little they knew about the family finances. Almost all of those surveyed said that in any new marriage or relationship, they would demand full financial transparency.

At the Soto Law Firm we help clients, whether single, married, or divorced, get more involved in planning with their assets and finances, through irrevocable asset protection trusts, business planning consulting, and probate avoidance.  We work closely with a client's financial advisor and accountant to determine how we can most efficiently and effectively resolve the issues facing each client.  Please contact our office for a free consultation to get the process started.

Reference: Bloomberg (April 15, 2018) “Rise of ‘Gray’ Divorce Forces Financial Reckoning After 50”