estate planning

7 Mistakes to Avoid When Naming Beneficiaries

7 Mistakes to Avoid When Naming Beneficiaries

“Probate” is a dirty word to most people.

Sure, sometimes it can be helpful. But you generally want to avoid it.

Think of it like the raw broccoli that for some reason is included on every party platter everywhere, but without the dip. No dip, just raw broccoli. Avoid. It.

One of the ways to avoid probate is by naming beneficiaries on your financial accounts and contractual policies.

In estate planning, a beneficiary is a person or entity who receives part of your estate after your death. You can name a beneficiary through your estate planning documents OR through a contract such as a life insurance policy, IRA, or agreement with your bank.

If you designate a beneficiary on an account or policy, then the assets or proceeds of that account or policy will pass directly to the named beneficiary, probate-free, after your death.

Sounds cool, right?

Right. It is very cool.

However, sometimes beneficiary designations can have unintended (and undesirable) consequences. Here are some mistakes to avoid when naming beneficiaries:

1. Not naming a beneficiary

This one seems obvious, but it’s worth mentioning because it is so easy to avoid.

If you do not name a beneficiary (or take other steps to avoid probate), you are virtually ensuring that your estate will be probated. And although probate is not the worst thing in the world, it is costly and time consuming. It is also usually avoidable.

Even if you believe all your accounts and policies have named beneficiaries, double check. Triple check. Check once a year. Do everything you can to make sure you don’t make the silly mistake of forgetting to name a beneficiary.

However, designating beneficiaries is not always as easy as it sounds…

Our Most Popular Estate Planning Blog Posts of 2018

Our Most Popular Estate Planning Blog Posts of 2018

The end of the year is always a great time to reflect on life and to commit yourself to improvement in the year to come. (And to create some awesome estate planning New Year’s resolutions!)

We recently wrote about the importance of using this time to review your estate plan. But estate planning is a big and often complicated topic. To help you think about estate planning and the issues you may face in the future, here are our posts from 2018 that readers found the most useful:

1. What is the Difference Between a Will and a Trust?

Wills and Trusts are two of the most common (and most well-known) estate planning documents. But what are the differences between them? What are their relative advantages and disadvantages? In our most popular post of the year, we explain the differences (and similarities) between a last will and testament and a living trust.

2. 4 Tips to Identify Undue Influence

In Oklahoma, undue influence consists of taking an unfair advantage of another's weakness of mind or body or the use of authority to procure an unfair advantage over someone. This post explains how undue influence can occur in estate planning and how you can identify and avoid it.

11 Estate Planning New Year's Resolutions

11 Estate Planning New Year's Resolutions

There’s nothing quite like the new year to make you think of fresh possibilities and new beginnings.

There’s also nothing quite like way too much turkey, wine, and football over the holidays to make you realize that you should maybe consider some lifestyle changes.

You have probably already started on your list of new year’s resolutions for 2019: read more, get a gym membership (and actually use it this time), spend more time with family, etc. And those are great resolutions. “New year, new me” and all that jazz.

But there is one more goal you should add to your list: organize your estate plan.

While most resolutions are about helping your self, an estate plan is about helping your loved ones. To make it easier for you to set your affairs in order, we created this handy list of 11 Estate Planning Resolutions for 2019:

1. Execute a Trust and/or a Will

You, like a majority of Americans, may not have a living trust or a last will and testament. You may not even know what those documents are. Which one is better? Which one is right for you? What are the differences between a will and a trust?

Both a trust and a will control what happens to your estate — your property, your “stuff” — after your death. However, there is one huge difference between the two: a trust avoids probate, while a will does not.

Yes, even if you have a will, your estate must still go through probate after your death.

Remember that there are two main sides to estate planning: (1) What happens to your “stuff” when you die and (2) who takes care of your self when you become incapacitated. You can solve the first part of that equation in 2019 by creating a trust or a will.

Get Our FREE 2018 Estate Planning Checklist

Get Our FREE 2018 Estate Planning Checklist

Prepare yourself to be shocked: 2018 is almost over.

If you’re like me, you’re looking forward to a few weeks of Christmas carols, football, family, bowl games, presents, and (best of all) football.

This is also a great time to look back on the year that was:

Perhaps you started a new job or got a raise; maybe you made an addition (by birth or marriage) or subtraction (by death or divorce) to the family; or maybe you purchased a house, received a windfall inheritance, or started a new business.

Life can change a lot in a year.

But do those life changes mean you need to make changes to your estate plan?

To help you answer that question, we have put together a 10-question checklist to review your estate plan.

This is How Much You Will Pay in Taxes in 2019

This is How Much You Will Pay in Taxes in 2019

Interesting fact: many tax provisions are indexed for inflation.

Okay, I may have a loose definition of “interesting.” But the fact is still true. And inflation indexing is actually a really important thing when it comes to taxes.

The Internal Revenue Service (IRS) recently made several announcements regarding the 2019 tax year, including the updated estate and gift tax exemption.

Also included in the announcements were annual inflation adjustments for over 60 tax code provisions for 2019: tax rate schedules, standard deductions, cost-of-living adjustments, and more.

In the spirit of Christmas, I thought I would explain what these inflation announcements are and what they mean to you. After all, nothing says “Merry Christmas” like taxes.

Important note: Keep in mind that the numbers discussed in this post are for the tax year beginning January 1, 2019. These are not the numbers you will use to prepare your 2018 tax returns which will be filed in April 2019 (you can find that information here). This is the information you will need for your 2019 tax returns in 2020.**

IRS Raises Estate and Gift Tax Limits for 2019

IRS Raises Estate and Gift Tax Limits for 2019

The Internal Revenue Service (IRS) recently announced that the estate and gift tax exemption is increasing next year: up from $11.18 million per individual in 2018 to $11.4 million in 2019.

This means that if an individual dies in 2019, she can leave $11.4 million to heirs and pay no federal estate tax. Using a concept called estate tax portability, a married couple can shield double that amount, $22.8 million, from estate taxes.

The IRS also confirmed that the annual gift exclusion amount for 2019 remains at $15,000 per individual per year, unchanged from 2018. This means you can give $15,000 to as many people you want (me, for instance) each year without filing a gift tax return.

Now that we have these big announcements out of the way, let’s unpack what all this fun information actually means.

How You Can Talk About Estate Planning Over Thanksgiving

How You Can Talk About Estate Planning Over Thanksgiving

There’s nothing quite like family gatherings to remind us that life is very, very, VERY short.

Sometimes, these gatherings can help you remember how much you love your family or convince you to leave them a little something in your estate plan.

Other times, they remind you that there are some family members that annoy you to your core, like, for instance, little Kevin who made a huge mess at the dinner table last Christmas and had to sleep on the hide-a-bed in the attic. You decide to write Kevin out of your will ASAP.

Like I said, there’s nothing quite like family gatherings…

Love ‘em or hate ‘em, holidays might be the only time each year that you and your family all come together. And I suggest you use that time to talk about what happens when you die. Talk about your estate plan.

But how does that talk come up organically? How can you casually segue from Uncle Bob’s bad joke to the contents of your living trust or your advance directive? It’s not an easy task.

Here are a few simple ways you can work estate planning into your Thanksgiving festivities.

What is a Last Will and Testament?

What is a Last Will and Testament?

Remember that scene in The Matrix where Morpheus offers Neo a red pill or a blue pill?

Morpheus (a Yoda-like figure) tells Neo (the Luke Skywalker of the movie, as it were) that the reality he had been living in was a lie. (I like Star Wars a lot.)

He then offers Neo two pills — one red, one blue — and tells him that if he takes the blue pill, he will wake up tomorrow and go on with life as usual. But if he takes the red pill, he will “wake up” (both literally and figuratively) and learn just how deep the rabbit hole goes.

The catch? If Neo takes the red pill, he can never go back to the way things were. You can’t close Pandora’s Box once it has been opened.

Needless to say, Neo takes the red pill and proceeds to become the Chosen One and kill robots for three movies. It’s great.

I often think of that scene when someone asks me a question about estate planning. Because that rabbit hole is pretty deep, folks. And I’m an attorney, so there’s always a chance you won’t be able to shut that Pandora’s Box.

But for you, I’ll do my best to keep things short and sweet.

In my last blog post, I talked about trusts: what they are, what they do, why you should have one. I also spent some time discussing how trusts are different than wills. So now, given that comparison, it only seems fair that I talk about wills.

15 Best Personal Finance Blogs

15 Best Personal Finance Blogs

I once had a client who asked me to create a comprehensive estate plan, the whole package: trust, will, power of attorney, etc. It was exactly what she needed.

So I drafted the documents, she signed them. She died about a year later.

At this point, you may be thinking, “But good thing she had estate planning documents, though, right?” There was just one problem:

There was no money left in the estate for the heirs.

My client spent all this time and thought and money for a great estate plan that was ultimately (essentially) useless because she spent all her money.

Most people want an estate plan primarily to make it easier for their loved ones to get the property you leave them. But if you don’t have any property to leave, then the plan doesn’t do much.

The point is this: Estate planning is much broader than simply creating legal documents that pass on your “stuff.” It also involves creating a financial plan to make sure you have “stuff” to pass on.

What is a Trust?

What is a Trust?

Life is super confusing.

We literally get dumped into this big world full of complicated things like taxes and etiquette and lawn care, and we’re just supposed to know exactly what to do?

My adulthood has been a constant stream of realizing that I misunderstood basic concepts about life that everyone else apparently already knew. Actually that was my childhood, too. So it’s been my whole life. For example:

When I was younger, there was a good stretch of time when I thought “Watergate” was just another word for a dam. Like, a literal gate for water. A water gate.

But whenever I heard people use “Watergate” in conversation, I got this impression that it was not a good thing. As a result, for a few while I assumed that dams were somehow really bad things but had no idea why.

I eventually figured out what Watergate really was; however, that was by no means the last time I misunderstood something. Learning is great and also sometimes embarrassing.

Many people have similar misunderstandings about estate planning. For instance, clients often think their modest assets do not warrant a living trust. After all, aren’t “trust fund babies” supposed to be wealthy? Isn’t a will good enough for me?

Approximately 1 of every 2 clients I talk to doesn’t know exactly what a trust does or how it is different than a will. That is a mostly made up statistic based on the last few client meetings I could remember off the top of my head. I’m not saying it’s not true. I just don’t have the hard data…

But here is a very real statistic: only 42% of U.S. adults currently have a will or a trust. That’s crazy! Part of that is due to the fact that wills and trusts are complex, hard-to-understand documents. And attorneys usually don’t make it much easier.

That’s why I thought I would take the time to explain just what the heck a trust really is.