Many people mistakenly believe that naming their spouse, child, or loved one as the beneficiary of their life insurance policy is enough to secure the benefits for them in the event of their death.

While life insurance is indeed a crucial tool for financial and estate planning, it’s important to understand that simply designating a beneficiary may not provide the desired level of protection. Without certain safeguards, there is no assurance that the intended beneficiary will ultimately receive and retain the insurance benefits.

When it comes to life insurance, there are factors to consider beyond just choosing a beneficiary. Without proper precautions in place, the benefits could be at risk of being lost or mismanaged. That’s why it’s crucial to explore additional protective measures to ensure your beneficiary receives the full benefit from your insurance policy and that it is used according to your wishes.

To fully safeguard your life insurance benefits, it’s essential to understand the potential pitfalls and take steps to protect your policy’s proceeds. By implementing appropriate strategies and seeking professional guidance, you can secure the intended outcome, providing your loved ones with the financial support you intend even after you’re gone.

Name a Trust as the Beneficiary of Your Life Insurance

A popular way to ensure your loved ones receive money and property as part of your estate plan is by structuring the ownership of assets through a trust. By titling assets in the name of a trust or making the trust the beneficiary of accounts or properties, you can designate your spouse or child as the ultimate recipients. This approach can also be applied to life insurance policy proceeds, providing an additional layer of protection for your beneficiaries.

There are two common methods to achieve this: naming a revocable living trust as the beneficiary or establishing an irrevocable life insurance trust. These options allow you to have control over how your assets are distributed and provide valuable benefits for your loved ones.

Revocable Living Trust

If you have accounts and property that fall below the estate tax exemption or if you’ve already established a trust, considering a revocable living trust as the beneficiary of your life insurance policy can be a smart choice. By doing this, the death benefit from your policy will be added to the assets already held in the trust, and it will be distributed according to the instructions outlined in the trust agreement. The great thing about this option is that it seamlessly aligns your life insurance proceeds with the rest of your estate plan, ensuring everything works together smoothly.

Irrevocable Life Insurance Trust

By establishing an irrevocable life insurance trust, you add an extra layer of protection for your life insurance policy. This trust has the ability to both own the policy and be named as the beneficiary. You have two options to create this trust: either transfer an existing policy into it or have the trust purchase a new policy. To cover the insurance premiums, you can utilize your annual gift tax exclusion by making cash gifts to the trust.

When you pass away, the trust becomes the recipient of the death benefit from the policy. Then, the trustee carries out the instructions specified in the trust document and distributes the funds accordingly. This approach offers an additional advantage of reducing the value of the life insurance policy and the death benefit from your taxable estate. It’s a smart strategy to safeguard your life insurance proceeds and potentially minimize estate taxes.

What’s next?

While the estate tax exemption is currently set at a high level, it’s important to remember that it could change in the future. Given this uncertainty, it’s wise to take proactive measures to safeguard the financial well-being of your loved ones.

If you have already purchased life insurance, it’s worth considering the additional step of structuring your life insurance estate plan. This can provide added security and peace of mind for the future of your family.

To explore the best options available and create a plan tailored to your needs, reach out to us today. Our team is ready to assist you and ensure that your loved ones’ financial futures are protected.

As you near retirement, your approach to estate planning is different from other stages of your life. When you no longer earn a salary and benefits from a job, how will you sustain your new lifestyle? You must be able to afford your needs while securing your family’s future during retirement. This is where smart estate planning can help. Here are 5 Estate Planning Tips to make your retirement years productive and meaningful.

Tip #1 Maximize Insurance and Retirement Accounts

If you’re looking to pass money to heirs tax free, start converting traditional IRA (Individual Retirement Account) into Roth IRA. The converted amount is subject to regular income taxes, but withdrawals – either by you or your heirs – are tax free. With tax rates at an all-time low, it may be better to pay taxes on the money now rather than later.

Many people with young children decide to purchase life insurance to replace their income if they have an untimely death. However, life insurance can also be an effective estate planning strategy for a financially secure retirement. Life insurance can provide beneficiaries with tax-free funds and provide replacement income for your spouse, your children, your elderly parents, or other individuals who depend on you for financial support.

Tip #2 Plan for Disability

A comprehensive estate plan should include provisions in case you become disabled. Several documents you should create include:

Power of Attorney

A power of attorney gives someone the right to act on your behalf regarding your financial affairs. If you get sick or hurt, your agent can step in and take care of your finances. This lets you name someone you trust to manage your day-to-day finances.

Living Will

A living will puts your wishes regarding end-of-life care in writing. Without it, you may have to undergo extreme medical measures that you would not have asked for if you were able. Also, your loved ones could wind up depleting your estate by insisting on such extreme medical measures.

Advance Health Care Directive

An advance health care directive allows someone you chose to make medical decisions for you if you can’t make them for yourself.

Tip #3 Set up a Trust

If you want to keep your money in the family for as long as possible, a trust can be used to ensure that money is passed from one generation to the next and is protected from divorces, lawsuits and creditor claims.

A trust allows you to designate a trustee to manage your finances according to your instructions. For example, you can direct your trustee to invest in your children’s college education rather than letting minors spend all of their inheritance.

You can instruct your trustee to pay for your family’s medical needs first, or to provide distributions to your children when they are older, like 30 or 40. You can also instruct your trustee to pay for your medical expenses and insurance payments out of trust funds if you become disabled.

Trusts can be set up in several ways. Most people choose to have a revocable living trust, which allows them the most control to change or update their trust when necessary.

irrevocable, or permanent, trusts offer many tax benefits. When money is put into an irrevocable trust, the assets no longer belong to you. They belong to the trust itself. As a result, the money cannot be subject to estate taxes. While a trustee ultimately controls the money, you can create stipulations on its use, and money can be distributed from a trust even while you are alive.

Setting up a trust can allow you to avoid expensive court cases, such as probate and conservatorship proceedings. Additionally, a trust can restrict disbursements so that your property is used only in the way you intended.

Tip #4 Create a Will

Writing a will is the most basic of estate planning strategies. This document stipulates how your assets will be divided after your death.

Without a will, your estate will be divided in probate court, meaning someone else decides who gets your money. Having a will doesn’t mean your heirs avoid probate though. A will still has to go through probate.

It’s also a good idea to review beneficiary information after any major life change, such as the birth of children, the death of a family member, marriage, or divorce.

Tip #5 Donate or Give Away Your Assets

As of 2022, the IRS allows individuals to give up to $16,000 per person per year in gifts. If your goal is to avoid estate taxes, these gifts can decrease the value of your estate. The money is also tax-free for recipients of the gifts.

Another way to reduce your estate value is through charitable donations. Rather than giving a one-time gift, consider setting up a donor-advised fund. This option would give you an immediate tax deduction for money deposited in the fund, and then lets you make charitable grants over time. A child or grandchild could be named as a successor in managing the fund as well.

However, be careful about giving away assets that appreciate in value, such as stocks or a house, which receive a step-up in basis when part of an estate. That means the taxable amount of an asset is adjusted upon the owner’s death and, as a result, it may be beneficial to transfer certain assets after death rather than before.

To kick-start your Retirement Estate Planning process, DOWNLOAD Your Free Estate Planning Guide

What’s next?

Complex rules and changing tax laws can make estate planning difficult. However, ignoring it can leave you and your family bereft during your retirement. Even if you don’t have a lot of money in the bank, the right attorney can make the most out of estate planning tools and strategies so that you can live your best years in retirement.

Start taking action now with your estate planning by booking your free consultation with our team at Crider Law Group.

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What do Activities of Daily Living mean?

When the business is dependent on you as the owner, having an estate plan before you need one is a critical investment. If you suddenly pass away without an estate plan in place, your business may not be able to survive. After your death, your entire business and its assets may have to  go through a lengthy and expensive probate process, which could cause your family to suffer.

Estate planning involves creating a comprehensive legal plan for the management and distribution of your assets after your death. Your assets include all possessions of value, including property, bank accounts, insurance, etc. that are tied to your business. Your estate plan should also include financial instructions and medical directives in case you suddenly fall ill and become incapacitated.

To protect your business and your family, consider these tips to start your estate planning on the right path.

#1 Decide the future of your business

Before you start preparing your  estate planning documents, first imagine if there is a future for your business without you running it. Here are some questions  to help you in your decisions:

What is your Succession Plan?

How will the business continue without you? Do you have a Succession Plan? Many business owners will gesture towards their business and say “THIS is my succession plan.” However, this view may leave out important considerations for transfer of the business, your or your surviving spouse’s income needs, and other important topics.

A Succession Plan is a strategy for the successful transfer of business operations, management and ownership to partners, future generations, or successors. It is important to create a succession plan as part of your estate plan to ensure that whoever replaces you as a business owner is someone you fully trust. The succession plan should include details about not only how the property and financial assets of the business will be transferred to a new owner, but how your income needs will be met after the transfer. 

Would you rather sell the business instead?

Can you and your family live comfortably from the sale proceeds when you retire? If so, selling the business might be the better option. If you’re a sole proprietor, the process is relatively straight forward. But if you have a corporation, an LLC, or multiple business partners, you may need a Buy-Sell Agreement to facilitate the sale of your ownership. Generally, any current co-owners of the business will have a right of first refusal on purchasing any interest that has become available.

#2 Organize your business records

Make the hand-over process easy for your successors by having a secure and organized filing system for your business records. Here are just some of the more important records that you need to update and prepare for your estate plan:

1. Your business plan
2. State-filed documents, such as Articles of Organization or Incorporation
3. Your Operating Agreement, if any
4. Your Succession Plan, if any
5. Financial records and statements
6. Tax returns
7. Insurance policies
8. Business licenses

A note on Insurance Policies:

Apart from having a general life and disability insurance and naming your family as beneficiaries, you might consider purchasing a separate life and disability insurance policy for your business called a “key person” policy.

With a key person policy, you can name your business as the beneficiary. These policies provide payouts when a “key person” in the company passes away or experiences a disability. This money could be a lifeline for your small business. This money can also be used to fund the buy-out provision of a Buy-Sell Agreement, providing ready cash to the new owners to pay your surviving spouse or other heirs for the value of your business.

#3 Appoint an Agent in a Power of Attorney

It is in your best interest  as a business owner to appoint someone that you trust to be your agent under a power of attorney who can oversee your business and finances on your behalf.

A durable power of attorney is a legal tool that involves appointing a trusted individual to handle your finances if you can no longer make decisions due to health reasons such as being in a coma, developing dementia or becoming too ill to make decisions.

While an ordinary Power of Attorney expires if you become mentally incapacitated, a Durable Power of Attorney remains intact even if you become incapacitated.

In California, a Durable Power of Attorney can become active whenever you choose. You can make it take effect immediately or choose a specific date in the future.

What can an authorized agent do with a Durable Power of Attorney?

• Buy and sell property
• Manage bank accounts, bills, and investments
• File tax returns
• Apply for government benefits
• Manage your business

#4 Create a Living Trust

As a business owner, you own many assets that are tied specifically to your business. Shouldn’t you be concerned about how your beneficiaries will manage your assets when you pass away?

Creating a Living Trust ensures that no matter what happens to you, the assets that keep your business running will be protected and will be managed by your Trustee – the person or entity you trust to manage your financial affairs.

Most people name themselves as the trustee during their lifetime. If you decide to do this, you can remain in control, even though your assets have been put into the trust. You can also name a successor trustee (a person, business, or institution) who will manage the trust’s assets if you ever become unable to manage your property, or when you die.

#5 Audit and review

To help you make smart decisions for your estate plan, you need to take a hard look at your business and personal situation by answering these questions:

• If you die today, what is the current net worth of your personal and business assets? This can be done by totalling your current assets and liabilities and adding the value of any life insurance.
• Is estate privacy important to you? Do you want your estate to be public record upon your death? If your estate goes through probate, anything filed with the Court will be a public record.
• Do you have a list of reliable trustees? It is advisable to have two or more alternates in case your first choice is unwilling or unable to serve.
• If your heirs or successors predecease you, who are your alternate beneficiaries?
• How will your assets be distributed after your death, and when will these distributions take place?

What’s next?

Estate planning is complex, especially for entrepreneurs and owners of small and medium businesses. The right attorney can help you protect your business and your family after you’re gone, advise you on such issues as taxes, organize titles and trust documents, and facilitate the smooth transfer of assets and business operations to your beneficiaries.

Start taking action with your estate planning by booking your free consultation with our team at Crider Law Group.

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What do Activities of Daily Living mean?

According to the USDA National Agricultural Statistics Service (NASS) – family-owned farms make up 97% of 2.1 million farms in the US. Among the family farms surveyed, 67% expected ownership to naturally pass on the next generation while only 23% actually had a succession plan.

The report suggests that losing a multi-generation farm business happens more often than you think. In fact, only 30% of the farms surveyed continue into the second generation and even fewer (12%) survive into the third generation.

Don’t let years of hard work come to a devastating end. Here is a list of essential estate planning tips for farmers, farm families, and anyone in the agriculture business. Whether you’re a legacy family enterprise or a start-up farm or ranch owner, you need to map out the long-term success of your farming business with smart estate planning.

Tip #1 Know Your Estate Planning Needs

As a farm business owner, there are many issues to consider to protect the business and ensure its success in case you retire, become incapacitated, or die. Ask yourself these questions to begin the process of creating your farm estate plan and succession plan.

• What are the farm’s assets and their approximate value?
• Who should I transfer those assets to—and when?
• Who should manage those assets if I cannot—either during my lifetime or after my death?
• Who should make decisions on my behalf if I am unable to?
• What do I want done with the farm if I suddenly become incapacitated or die?

Download your free copy of our California Estate Planning Guide to maximize the actual value of the farm estate you’ll leave to your heirs and beneficiaries.

Tip #2 State Your Goals

Farm land and a farm business are two different things. However, they both need to be addressed simultaneously, and the specifics of what to do with each will depend on your situation. Some issues to consider:

• What will happen to the farm when I die?
• Will the farm operation continue to be run by the family?
• Will the land stay in the family and will the farm operation be run by others?
• Will the farm cease operations and assets sold?

Tip #3 Decide on a Transfer Strategy

You’ll need to make a decision about whether to sell to a third party or leave the farm business to your family when you pass away or retire.

If you’re planning on selling the farm business, you’ll want to maximize the value of the farm operation and get top dollar when you sell. 

If you’re transitioning the farm to a family member, the reverse applies. You’ll want to minimize the value of the farm business so you can transfer the most assets for the least amount of tax.

Consider these actions when developing a farm transfer strategy:

Planning to sell:

Establish legal partnerships, LLCs, or corporations to allow separation of management and ownership

• Prepare Buy-Sell Agreements to ensure an orderly transition of the farm business
• Consider a Lease Agreement with option to purchase
• Retain the option to fund your retirement or trust for your beneficiaries from the sale proceeds

 Planning to transfer to beneficiaries:

• Reduce estate taxes, if you are subject to estate taxes
• Create the option to hand-over the farm property as a “gift,” subject to donors’ income tax
• Retain the option to hold the farm assets in a Trust

Tip #4 Create a Farm Succession Plan

If you want a legacy farm, you need to get the family organized so that the business will survive multiple generations. 

Here’s a list of considerations to help you create a family succession plan:

• Do you have a management team in place?
• Are family members involved in management of the farm, and, if so, how?
• Who are your tax and legal advisors?
• What is the equitable distribution of farm income and assets among family members?
• Are there family issues to consider? Might there be a conflict between your surviving spouse and your heirs?
• How will your plan change if there are new family members? If there are disowned family members?
• How will you adjust your plan if there are changes in your finances or tax laws?
• What will be your source of income when you retire from the farm business?

For a complete guide to creating an ideal family farm succession plan, check out these resources from California Farmlink.

Tip #5 Place The Farm in a Trust

A farm trust is a legal tool for holding, managing and distributing property. It’s an essential strategy in your farm estate plan that lays out how you want your assets managed during your life and distributed after death.

There are 4 components to a Farm Trust that you need to identify to get started (1) your Trust Property, specifically your farmland, farm business, or cash; (2) your Successor Trustee or Representative; (3) your Trust Beneficiaries, specifically your children, business partners or others; and, (4) your Instructions for how the Trust Property should be used or distributed.

Choose from these 3 Types of Trusts:

1. Revocable Living Trust

This type of trust can be amended or “revoked” before your death. It can be adjusted to accommodate changes in your life circumstances, if you want to add and remove beneficiaries, for example. It’s a flexible strategy that lays out how the farm should be managed in case of disability or incapacity.

Placing the farm in a Revocable Living Trust means the trust owns the farm, and not you as an individual. However, you retain the ability to manage, sell or transfer the farm assets in the trust as the owner or trustee. You keep all the control over the revocable living trust.

2. Irrevocable Living Trust

Like the name suggests, this trust cannot be changed and assets cannot be reclaimed after you create the trust, unless the trust document says so. An irrevocable trust can also be used during your lifetime and in case of disability or incapacity.

3. Testamentary Trust

Often created with a will, a testamentary trust takes effect after your death. It is used to protect your assets and minimize estate taxes for your beneficiaries.

What’s next?

Once you have considered these tips, the next step is to seek the advice and services of a qualified estate planning lawyer who can help you create a farm estate plan, and advise you on such issues as taxes, organizing titles and trust documents, and facilitating the smooth transfer of farm assets and farm operations to your beneficiaries.

Start taking action now with your estate planning by scheduling your free consultation with our team at Crider Law Group.

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It’s never too early to start preparing for the inevitable – that one day your parents will become too old and dependent on your support. And one of the toughest realities that you will need to face is financing your parents’ care in their old age.

Here’s a short list of strategies to help your family shore up the financial resources to cover the cost of elder care. And even if your parents are financially settled and don’t need your help, it’s still useful to talk about these subjects and be better prepared.

1. Start a Regular Family Dialogue

It’s important to ease into the difficult subject of finances with your parents by starting a regular family dialogue and slowly build trust. A parent may feel guilty about poor money decisions in the past, or feel too proud to let their own child take care of them, or may have other plans on how to spend their money.

Talking about the future and asking the hard questions will bring issues to light and may even help improve your relationship. Once you have established a level of trust through honest and caring dialogue, your parents will soon feel comfortable to accept your help.

2. Set a Clear and Specific Agenda

Prepare for the family dialogue by letting your parents know about the agenda in advance so that you’ll have a productive family meeting. The purpose of these meetings is for you to better understand their financial situation so that you know how you can be most helpful. Below are some questions that can direct your discussion and help formulate a plan of action.

• Are they financially prepared for retirement?
• Is there a retirement plan or will they just keep working?
• Will they need your financial help?
• Who will oversee activity on bank accounts or help them decide when to file for Social Security?
• How to create a budget to help prevent them from taking on more debt?
• Who will accompany them to meet with a lawyer to set up an estate plan?
• Who will provide them with financial support to continue living independently?
• Will your parents agree to move in with you for health and financial reasons?
• Who is the designated family member to discuss a parent’s personal affairs with key professionals, such as doctors, financial representatives and Medicare officials?

3. Set a Plan of Action

Once you’ve reached the point where you can talk freely about finances, help your parents take action. Identify the sources of funds and draft a spending plan now and years into the future. For reference, the average cost of assisted living in California is $4,500 / month according to Genworth’s Cost of Care Survey 2019. Below are some questions to help you get a clear view of your parents’ finances.

• Have you done an inventory of Assets vs Liabilities? What does that look like?

• Have you done an assessment of Income vs Expense? What does their monthly expenditure look like?

• What are their financial gaps? And how do you plan to source the funds to close these gaps?
  When will your insurance policies mature? And how do you plan to spend the returns?

4. Review Healthcare Options

Ask your parents if they’ve thought about needing a greater level of healthcare in the future. It may be weighing on their minds. The sooner you can help them start planning for what may lie ahead, the better you’ll all sleep at night.

Health Insurance

Does their employee benefits package include access to a flexible spending account for health care or other financial or tax incentives they aren’t taking advantage of? There may be ways to help your parents save money on their current insurance plan. During the next open enrollment period, review all of the insurance options available with your parents.

Medicaid

In California, we have a more comprehensive “Medi-Cal” program that pays for long-term care and many non-medical support services for seniors who live in their homes. Check if your parents are eligible for Medi-Cal and prepare for a strict qualification process. To learn more about Medi-Cal eligibility and enrollment visit coverdca.com for the most up-to-date information.

Veterans Benefits

If your parent was in the military, learn about their benefits under the VA pension program. More than a third of Americans over the age of 65 are wartime veterans or are spouses of wartime vets. The Aid and Attendance pension under the VA program pays for long term care for senior veterans and their spouses – a significant financial lifeline in case of a health crisis.

5. Prepare to Offer Direct Financial Support

If your parent has exhausted all the available savings, insurance, employment, government benefits and other resources that could provide a financial cushion for the high cost of elder care, you should also consider giving direct financial support. Do everything you can to assist your parents financially while securing yours and your children’s future.

Consider a no-interest loan to your parents even if they don’t have the ability to pay it back. Just keep in mind you may never see the money again. Reach out to siblings and relatives about setting up a fund to support their financial needs.

SOURCE: Women Who Money

What’s next? Consider a Durable Power of Attorney

A Power of Attorney is a legal document that authorizes you to act on your parent’s behalf on a broad range of business and personal matters, for example, handling personal finances.

An ordinary Power of Attorney expires if your parent becomes mentally incapacitated, while a Durable Power of Attorney ensures that you continue to have legal authority to make important decisions when your parent is unable to.

Our elder law experts at Crider Law will help you draft a Durable Power of Attorney and an Estate Plan that fits your parent’s needs. Schedule your free consultation today.

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Planning for the future helps patients and their families cope with the disease to some degree. For example, having a financial plan will enable the person with dementia to live with dignity and comfort in their final years.

Putting a plan together should cover – (1) Medi-Cal Planning for Long-term Care and Well-being; (2) Estate Planning or making arrangements for finances and property and;

(3) Naming a Trustee or appointing another person to make decisions on behalf of the person with dementia.

The sooner that a plan is set into motion, the more likely it is for the person with dementia to be involved in the process. 

Here are some suggested steps to get you started:

1. Assess Legal Capacity

Does the patient with dementia have the mental ability to execute a will? This is called “testamentary capacity” and could be challenged in court when it is suspected that the “testator” — the person who signed the will — lacked the mental capacity at the time to execute it.

Consult a medical professional to ascertain the level of mental capacity required for understanding and executing the documents. It also helps to have a lawyer present to help explain to the testator what is being asked of them before signing it or present alternative legal tools such as a Durable Power of Attorney – the process of appointing an agent to make healthcare decisions on their behalf.

2. Prepare the Documents

If your loved one does not have a will, and there are no signs of dementia, you can simply draft one using an online form in anticipation of the future onset of dementia. But if you have a complicated situation, you may need to prepare the following documents and seek legal advice:

• Itemized list of assets (e.g., bank accounts, contents of safe-deposit boxes, vehicles, real estate), including current value and the individuals listed as owners, account holders and beneficiaries.
• Copies of all estate planning documents, including wills, trusts and powers of attorney.
• Copies of all real estate deeds.
• Copies of recent income tax returns.
• Life insurance policies, including their cash values.
• Long-term care insurance policies or benefits booklets.
• Health insurance policies or benefits booklets.
• List of names, addresses and telephone numbers of those involved in decision- making, including family members, domestic partners and caregivers, as well as financial planners and/or accountants.

3. Prepare a Cost Evaluation for Daily Assistance

Assess the potential cost of caring for a loved one who suffers from dementia, including the benefits from insurance and/or Medi-Cal programs. By the time your parent is in need of daily assistance, you should have the resources available to support their care.

4. Discuss End-of-Life Wishes

It may be a good idea to start the difficult but important conversation with the dementia patient about their end-of-life wishes in anticipation of their future mental decline. Here are suggested points of discussion and decisions to be made to help the patient and their family prepare for the inevitable –

• Decide on the doctors and other healthcare providers.
• Decide on the types of treatments to be administered.
• Decide on the healthcare facilities.
• Appoint the Executor: or the person who will manage the estate.
• Name the Beneficiaries: or the people who will receive the assets in the estate.
• Appoint the Health Care Agent, and a back-up in the event that the original agent is unable to fulfill their responsibilities.
• Decide if the Health Care Agent with power of attorney has authority to consent to an autopsy.
• Decide if the Health Care Agent with power of attorney has authority to refuse or sign a DNR
• Decide on funeral arrangements

What’s Next?

This resource should not be taken as legal advice. Consult our experts at Crider Law to help with guardianship, disability planning and other legal issues that typically affect the elderly. Schedule your free consultation today.

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