Help Your Clients Choose the Right Beneficiaries

beneficiaries, willFor many clients, estate plans control the two most significant assets they own: their retirement planning assets and their primary residence. But even well-drafted estate plans can fail if a client names the wrong person the beneficiary of a retirement plan, annuity, or life insurance policy.

CPAs, as the quarterbacks of the financial or estate planning team, have an important role to play in ensuring clients choose the right beneficiaries. Here is what CPAs should keep in mind when helping their clients make this crucial decision.

Ask your clients the right questions.

To ensure that your clients designate their beneficiaries in the best possible manner, be sure to ask them the right questions when performing an annual review. Who are the current beneficiaries of their assets? Why (and when) were the beneficiaries designated the way they were? Does the entire financial/estate planning team know who the beneficiaries are? Asking these questions in an annual review may make clients aware of new options. For example, a client may remember that he designated his ex-wife as the beneficiary of his life insurance in case he died before his child support obligations were fulfilled, but realizes now that his children are grown child support is no longer a factor. Or a client whose son is struggling with debt and facing creditors may see that it’s better to establish a trust for the son rather than making him the primary beneficiary of her life insurance policy.

Make sure clients’ estate plans stay up-to-date, even when their circumstances change.

Significant life events such as marriage, divorce, and remarriage, for example, require clients to update their estate planning documents. But clients sometimes fail to complete the necessary paperwork. The legal process of a divorce, for example, can be emotionally and financially devastating, and clients may not feel like tying up all the loose ends—such as revising an estate plan—right away. Clients also may forget to update their beneficiary designations if they change advisers midway through making an estate plan.

Show clients how their choice of beneficiary affects their entire estate plan.

Many clients designate their beneficiaries in isolation, without thinking through the effect that decision will have on their entire estate plan. This decision can lead to serious federal or state estate tax consequences. Estate plans can founder if clients’ non-probate assets (those that pass by ownership or law or by contract designation beneficiary) aren’t properly coordinated with their probate assets (those that are in the decedent’s name alone and will pass through the probate estate, either by will or by the laws of intestacy if the client does not have a will). CPAs can help by showing clients how their beneficiary choices affect the whole plan, and encouraging them not to view the designation of beneficiary as a stand-alone decision.

Inform clients of the financial implications of the beneficiaries they have chosen.

Clients sometimes don’t fully understand the implications of how they designate assets to beneficiaries. For example, a client may name his minor children as beneficiaries of an IRA or retirement planning asset without realizing that the children will be able to use the funds however they wish when they turn 18 or 21 (depending on what state they live in). In the case of a significant asset, the client may be better off establishing a trust that will control the asset until the children are older than that. Or a client may name a trust she established as the primary beneficiary of a retirement planning asset, without understanding that stretching out the benefits over the lifetime of a trust is generally not permitted except in the case of a special trust known as a “see-through trust.” Advisers must consider all these implications and be sure their clients understand them.

Pay special attention to tax apportionments.

CPAs should also review the tax apportionment language in a will to determine how any federal and/or estate taxes that are assessed will be allocated among the assets. If this is not done carefully (and the plan reviewed on a continuous basis) beneficiaries under the will can be inadvertently disinherited. Specifically, if a will provides that all taxes are to be paid from the residue of the estate and not apportioned among the beneficiaries who receive the assets under the will, then beneficiaries who receive significant specific bequests could receive those assets free of any federal or state estate tax, while beneficiaries who receive their inheritance out of the residual estate will have their bequests reduced by the payment of all the federal and state estate taxes, not just the taxes attributable to their share. Likewise, should a client change the designation of a beneficiary later in a way that is inconsistent with the will—for example, by naming one child the beneficiary of the IRA and all other children the beneficiaries of his will—the consequences to the other children who take under the will can be disastrous.

As part of your review of your clients’ financial picture, you, as CPA, are in a strong position to look out for complications that arise when the right beneficiaries aren’t selected, and to advise your clients appropriately to ensure they have a current, coordinated, and integrated estate plan.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Polo club founder adopts his 42-year-old girlfriend

A rather unique attempt at protecting assets in a lawsuit. Thought you might find it interesting. What do you think of Mr. Goodman’s solution?  Leave your comments below.

By Michael Inbar

A wealthy Florida man has set off a firestorm by legally adopting his 42-year-old girlfriend as he prepares for a potentially costly wrongful death suit.

John Goodman, 49, founder of the Tony International Polo Club in Wellington, Fla., was involved in a crash on Feb. 12, 2010 that killed 23-year-old Scott Patrick Wilson. Local police say Goodman ran a stop sign while driving with a blood alcohol level twice the legal limit in Florida.

While Goodman faces criminal charges of DUI manslaughter, vehicular homicide and leaving the scene of an accident that carry a possible 30-year prison term in a trial set for March 6, he also faces a civil suit from William and Lili Wilson over the death of their son. That trial is set to begin March 27.

In recently released court documents, the Wilsons learned that Goodman had legally adopted his girlfriend Heather Hutchins in October. Attorneys for the Wilsons say it was a blatant move to protect his assets.

“It cannot go unrecognized that [Goodman] chose to adopt his 42-year-old girlfriend as opposed to a needy child,” The Palm Beach Post newspaper quoted family attorney Scott Smith as saying.

Palm Beach County Circuit Judge Glenn Kelley had previously ruled a trust fund Goodman had established for his two minor children could not be considered an asset in any court-rewarded damages to the Wilson family. Now, with Hutchins also considered Goodman’s daughter, she is entitled to one-third of the trust fund, and as an adult over 35 she can begin drawing money from the fund immediately.

Judge Kelley was critical of Goodman’s move in his order granting the Wilson family the right to information regarding the adoption. Kelley said the adoption “border(s) on the surreal,” The Palm Beach Post reported.

“The Court cannot ignore reality or the practical impact of what Mr. Goodman has now done,” Judge Kelley wrote. “The Defendant has effectively diverted a significant portion of the assets of the children’s trust to a person with whom he is intimately involved at a time when his personal assets are largely at risk in this case.”

While Goodman’s move has tongues wagging on the society scene in south Florida, a state adoption expert told WPEC-TV in West Palm Beach that Goodman adopting his girlfriend may not be strictly legal.

“Adoption means the act of creating the legal relationship between parent and child where it did not exist,” adoption attorney Charlotte Danciu told the station.

“Unless you intend to create the parent-child relationship, you are violating the letter of the law.”

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

PERSONAL FINANCE: When Valentines and prenups go together

I participated in this article and wanted to share it because it has some great information about the prenup process.  Enjoy!

By Kathleen Kingsbury (a Reuters contributor. The opinions expressed are her own.)

NEW YORK, Feb 15 (Reuters) – With a flurry of Valentine’s Day marriage proposals over, it could be time for new fiancees to take a financial reality check.

Four million Americans got engaged on Tuesday, as estimated by an American Express survey released in January. Unromantic as it may seem, everyone needs a frank conversation about finances before they walk down the aisle, including one that touches on
whether or not to sign a prenuptial agreement.

“All marriages terminate, whether it is in divorce or death,” says Patricia Annino, a Boston-based attorney and estate planner.  “Signing a prenuptial agreement is assurance your assets go where you want them to.”

Money issues are one of the most commonly cited reasons for marital strife. So, adding a candid financial assessment to one’s wedding to-do list might go a long way toward minimizing disagreements down the road.

 

WHO SHOULD SIGN A PRENUP

A common misconception about prenups is that they only apply if one partner brings in significantly more assets to a marriage, or in the case of May-December romances, where there’s a wide age gap. But they should also be considered by those marrying in
mid-career, or those remarrying.

“Statistics tell us that couples are marrying later in life, after they’ve had careers and separately built their own wealth. Or people are marrying for the second or third time,” says Steve Hartnett, associate director of education at the American Academy of Estate
Planning Attorneys. “These are the exact situations where prenups are critical.”

Equally important are situations where there are children from a previous marriage. “Parents will often want to be sure their children are provided for in case of their death, ” says Elaine Morgillo, a certified financial planner in North Andover, Massachusetts.

For younger couples, prenups are often sought when one partner stands to receive a large inheritance or holds a stake in a family business. Morgillo recalls one couple who had never been married and had similar incomes, but the bride-to-be expected an inheritance and the groom owned several rental properties.

“Inheritances aren’t always sacred, but she wanted hers protected and it helps to show intent,” Morgillo says. “She knew he felt the same way about his properties.”

 

GROWING IN POPULARITY

When her boyfriend of six years sat her down on their living room couch last Valentine’s Day, Christen Petitt Hailey thought she was about to get a vacuum cleaner. Instead, he proposed and the Tampa, Florida, couple were married last November.

“Before we were married, we came up with an arrangement where I always covered the mortgage and utilities, and she paid for groceries or entertainment,” says Shaun Hailey, 36, a mortgage underwriter. “She had slightly less income, so this division seemed to work out to be the fairest.”

Indeed, this kind of ad hoc divvying up is how most modern couples handle their finances. Many are realizing this might not be the smartest route, however.

“We like to say marriage vows today have become ‘love, honor, merge your finances,'” says Anthony Fittizzi, a wealth advisor for U.S. Trust, which recently launched a financial empowerment program to counsel clients ages 20 to 35. “Couples don’t necessarily take into account issues like the start-up costs of marriage, insurance, cash management or dividing property.”

Fittizzi’s motto: Sign on the bottom line before you say “I do.” Nearly a third of single Americans said they would ask their significant other for a prenup, according to a February 2010 poll by Harris Interactive. A second poll, by the American Academy of Matrimonial
Lawyers, found that 73 percent of divorce attorneys had seen an increase in prenups signed from 2005 to 2010, with more women initiating the process than ever before.

No doubt the high divorce rate has made prenups more acceptable, but the economy may be playing a role, too.

“With this uncertain economy, there is more insecurity about assets,” says Arlene Dubin, a New York City attorney and author of the book “Prenups for Lovers: A Romantic Guide to Prenuptial Agreements.” “Clients see prenups as vital to protecting what they’ve
built.”

 

MAKING A PRENUP STICK

Prenups generally cover real estate, estate planning, division of bank accounts, and alimony, in case the marriage should end. Child custody or support can’t be included, and protecting retirement or pension benefits may require extra steps. There are also steps that
should be taken to ensure that the prenup holds up in court. These include:

 

POPPING THE (PRENUP) QUESTION EARLY

Many lovebirds might find asking their betrothed to sign a prenup awkward, but waiting until the last minute can backfire. “You shouldn’t be bringing it up in the limo on the way to the church,” says Evan Sussman, a Beverly Hills-based divorce attorney. “From a
legal standpoint, you don’t want the other person to be able to claim duress later.” Sussman recommends the subject be broached before wedding invitations go out, or at least several weeks before the event.

 

AVOIDING FINANCIAL INFIDELITY

Prenups aren’t for every couple, but considering one often brings forth key financial questions that bring more honesty into a marriage. A 2010 poll by the non-profit CESI Debt Solutions found 80 percent of spouses spent money their partner didn’t know about.

Some attorneys recommend asking for a credit report. At the very least, Dubin says, “You need a line-by-line statement of assets and liabilities so you can deal with the ramifications.” Student loans, credit card balances, and IRS liens are some of the debts a spouse can later be held responsible for.

Still, Dubin says, “Before you start this process, prepare yourself for whatever may come. And know at what point you’d have to walk away.” The same, of course, goes for asking for a prenup and having your partner turn you down.

 

RETAINING SEPARATE LAWYERS

A second means to challenge a prenup in court is if the couple are not represented by separate attorneys. This is to guarantee that one spouse, usually the less-wealthy partner, is not taken advantage of.

“Imagine if Mark Zuckerberg wanted to marry his housekeeper who didn’t speak English and he insisted she sign a prenup,” Hartnett says. “Having a competent lawyer on both sides of the table means each party gets a fair agreement.”

That said, when choosing legal representation, be sure the attorney you choose understands this is the start of a marriage, not the end.

“When a lawyer is overly adversarial, it can lead to a lot of distrust and ‘do you love me’ questions,” says Cicily Maton, partner at the Chicago firm Aequus Wealth Management. “You should choose an advocate, but do your due diligence about their style.”

Of course, prenuptial agreements can always be renegotiated as a marriage evolves. “The first draft can always be torn up,” says Ginita Wall, a San Diego-based certified financial planner. “I had one set of clients on the sixth iteration of their prenup when they decided to divorce.”

For the Haileys, being engaged meant much financial discussion. They chose in marriage to keep all their finances separate, including their tax filings. They didn’t opt for a prenup, but “getting it all out on the table upfront means no surprises,” Shaun Hailey says.

Instead, he says, “We can concentrate on saving for the important things, like a honeymoon.” (Editing by Jilian Mincer, Bernadette Baum and Andrew Hay)

Source: © Thomson Reuters 2011. Business & Financial News, Breaking US & International News | Reuters.com http://www.reuters.com/assets/print?aid=USL2E8DFF4Y20120215

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

New Risks to Wealth Management: To Gift or Not to Gift

Traditional risks related to the family’s wealth (including financial, intellectual and social assets) include the illness or death of the key family stakeholder, economic downturn and changes in the regulatory or legal environment. New risks are triggered by the dissipation of wealth due to generational mathematics—with each ensuing generation, the wealth is splintered—and the lack of creation of new wealth; this very turbulent economic time; the increased complexity of legal and tax matters; and the increased complexity of wealth management choices. These risks can be mitigated when the family coordinates its advisors and monitors the integration of all professional services.

The risks are further mitigated when the family embraces and encourages financial education and financial literacy across the generations. Mentoring, shadowing, exposure to the concepts and resources along the generation continuums reduces the chances for unintended consequences.

New Risk: The Bracket Game:  To Gift or Not to Gift…That Is The Question…..

On December 17, 2010, President Obama signed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (the Act). The Act significantly changes the federal estate tax, which impacts estate planning for many and presents significant estate planning opportunities. The biggest surprise in the new law is the ability to give $5,000,000 of assets away now and remove those assets and any appreciation in their value from the donor’s taxable estate. In a marriage, this doubles the amount to $10,000,000. This law is in effect until December 31, 2012, and it is unclear what the state of the law will be from 2013 on.

This significant increase in the gift exemption adds to the donor’s ability to gift the annual exclusion of $13,000 each year and the donor’s ability to pay anyone’s tuition and medical expenses as long as payment is made to the provider.

The Act has prompted spirited discussions, “Well, now that I can really give that much, should I? What are the non tax risks to making those gifts?”

     Factors to consider when deciding whether to gift or not to gift:

1.     How much is enough?

This question is always worth discussing. Warren Buffet’s answer is, “Leave your children enough money so they can do anything, but not enough that they don’t have to do anything (although Buffet did not leave his children the bulk of his fortune, he did leave each of them a foundation of $1billion dollars to give to the charities of their choosing).  In my experience, the answer depends upon the individual, often changes over the lifetime of the donor and has to do with his/her children and the economic times.

2.     What strings do I want on the gift?

Whatever the amount, you must decide how much control there    is over the gift. Is it to be given outright? In trust? Who is the trustee? How long should the trust extend? What are the terms of distribution? Who are the permissible beneficiaries?

3.     Should I leverage the gift?

In addition to the strings that you want to impose on the gift, you should also address leverage. If you make a gift that is eligible for a minority or marketability discount, that increases the value of the gift by at least 20%. If you fund an irrevocable trust and anticipates that the trustee will use the funds to make annual life insurance premium payments, then significantly more may be added to the trust through leverage than if the gift were to be invested along more traditional methods.

4.     Am I willing to assume the risk that the gift, once given, is gone?

What if the donee becomes divorced or has creditor issues during the donor’s lifetime, and the gift is jeopardized? Can you live with that consequence? The cascading effects from a gift can have far reaching consequences. For example, if the donor parent gifts 20% of the stock in his closely held business to his children; and one of the children becomes divorced, it is not just that the child’s interest in the business may be vulnerable. Even if it is not vulnerable, the divorce court also has the right to order the valuation of the child’s interest in that business. To do that means valuing the business in its entirety;  and having that asset valued in a hostile environment—where the ex-in-law’s lawyer will try to value that as high as possible—will in all likelihood be in direct opposition to the donor parent’s valuation and appraisals for estate planning and transfer tax purposes. In addition, if the donee child is ordered to pay alimony or child support, then the income from the gifted asset will be taken into account when the court establishes the dollar amount. If the income is phantom income, which the child donee does not actually receive, that can present additional complications and litigation.

5.     Am I willing to give up the “fruit as well as the tree”?

In most cases, the fruit and the tree—meaning the income and the principal—go hand in hand. For example, are you ready to give away 20% of the underlying asset, knowing that the corresponding 20% of the income which is attributable to that asset will also no longer be available to you?

6.     Have I considered gift splitting?

Gift splitting—where one spouse makes the gift, and the other gives consents to that gift—is a very effective estate planning technique for the second marriage couple. Frequently, in that case, one spouse is wealthier than the other. If the less wealthy spouse does not have $5,000,000 of assets in his/her own right, then using the less wealthy spouse’s $5,000,000 exemption in full or gift splitting, with the wealthier spouse giving his/her assets to his/her own children can be a very creative technique. In effect, it doubles the amount that can be gifted. When considering this technique, especially if there is a prenuptial agreement or postnuptial agreement in place, care should be taken to protect the estate of the less wealthy spouse who consented to this gift or allowed the use of his/her $5,000,000 exemption.  The possibility that the exemption could decrease later, resulting in additional estate taxes in his/her estate to his/her beneficiaries, should be thought through and discussed.

7.     Should I gift more than the $5,000,000/$10,000,000 exemption and incur the 35% gift  tax?

For many very wealthy individuals, this is a question to consider seriously. The gift/estate tax rate has not been this low in eight decades. The difference between a tax exclusive gift and a tax inclusive bequest is significant at the higher dollar levels, and exploring this (especially if the underlying assets have significant growth potential or discount opportunities) should be an option.

 Solution: Creation of a Family Risk Management Policy Statement:

A solid family risk management policy contains the purpose, principle and procedure for implementation. The purpose of a family risk management policy may be to reduce the risk for family members, both individually and as a whole. Adherence to the policy would go far to protect the family’s human and financial assets and minimize potential liability. The principle of the policy may be to make clear that the responsibility is to identify the areas of high risk and to do whatever possible to mitigate that risk. The procedure of the policy may make it clear that each family member is expected to:

  • Achieve financial literacy with regard to his or her own wealth as well as the wealth of the family enterprise.
  • Draft and have both parties sign a pre-nuptial agreement.
  • Contact their insurance providers annually to review their insurance coverage to ensure that they are current and adequate.
  • Have in place basic estate planning documents: will, revocable trust, health care proxy, power of attorney for financial assets.
  • Participate in the development of an investment policy that is aligned with the family’s shared values.
  • Protect the family’s reputation by learning how each individual’s behavior, both positive and negative, can impact the family’s reputation.

A family risk management policy statement is dynamic. It should be reviewed and adjusted as the risks that families face evolve and change.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Your New Year’s Resolution: Is your estate planning in better shape than Stieg Larsson’s?

Now is the time of year that we all make our New Year’s resolutions. At first, we tackle our resolutions with gusto. We chug along for a month or so, and then we never look at our list again. But let’s make this year different. Make this the year that you, your family, and your clients resolve to get your affairs in order.

Unlike my previous columns, this one is also expressly directed to you –  the reader – as it is my experience that when the advisors have their affairs in order, they are more likely to ensure that their clients do too.

If you don’t, however, you certainly aren’t alone. You will be in the company of Jimi Hendrix, Bob Marley, Sonny Bono, Stieg Larsson, Pablo Picasso and Abraham Lincoln.

All of them died without a will. The court fight over Jimi Hendrix’s assets lasted 30 years. Bob Marley was diagnosed with cancer eight months before his death and still did not do a will. Sonny Bono died suddenly in a ski accident without a will in place. His ex-wife Cher filed claims, and a “love child” appeared looking for a share of his estate.

When Stieg Larsson, author of the currently popular “The Girl With The Dragon Tattoo,” died suddenly of a heart attack without having a will, his lifelong partner of 32 years received nothing; Swedish law divided his intestate estate between his father and his brother.

The moral of the story is that if you do not have a will, the law in the state in which you are domiciled has written one for you, and the default law is probably not the one that you want – especially if you are in a non-traditional relationship, have children from different marriages, have creditor claims, family conflict, charitable intentions, or a business.

January is the time of year to resolve to take the following actions:

  1. Gather all of your personal and financial information together. Look at it, sit down with your spouse/significant other and review it. Is it all in order? Are all your beneficiaries (primary and secondary) up to date? Are your assets titled properly (individual name, joint, in trust)? Do you have copies of all your important documents and passwords and do you each know how to access them? What if something happens to both of you. Who else has that knowledge?
  2. Review all your insurance coverage. Is all your insurance up to date and in the right dollar amounts? Review life insurance, disability insurance, long term care insurance, property and casualty insurance, and umbrella coverage.
  3. Make sure every member of your family – you, your partner/spouse, your children, and your parents – have up-to-date health care proxies and durable powers of attorney.
  4. If homestead protection is available in your state, make sure that you have made the proper filings to protect your family home from creditors.
  5. Review your estate planning documents in light of the recent changes in the tax law. Review the documents not just from a technical point of view but also from an operational point of view. If you died today what would flow into which trust, who would receive what, what would be the tax consequences, what is the authority to make distributions, who is in charge?
  6. Prepare an income and asset analysis. If you became disabled or died today how would your family be provided for? Is it sufficient? If your spouse/partner died or became disabled today how would you be provided for? Is it sufficient? If both of you died or became disabled today how would those you are supporting be provided for? Is it sufficient?
  7. Review your fiduciary choices. Who have you named as your health care agent, attorney in fact under a durable power of attorney and guardian of minor children? In your durable power of attorney you have the ability to nominate who should serve if you become disabled or incapacitated- have you done that? Who is named in your Will as your Executor or Personal Representative? Who is named as the Trustee of any Trust you have established? Look at your back-up choices. Are your selections still the right ones?
  8. Consider writing a side letter to those who will handle your affairs that expresses thoughts that you may not wish to express now while you are alive, but that would be important for someone to know later. These thoughts could include special mental health issues for family members, thoughts about an in-law, or confidential information about certain assets.
  9. Make an updated list of all your advisors, including their updated contact information.
  10. Review the prior nine steps and make sure that you have truly accomplished them.  Then encourage your clients to do the same.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

Women And Money: Understanding Estate Industry Terms

Alimony trust: A trust established as part of the divorce agreement, into which cash, investment assets or business assets are transferred before the alimony payments are due. The trust then pays out the required amount of money for the alimony payments.

Annuities: Contracts between a financial institution and you which allow you to invest money that grows on a tax deferred basis. You may make payments at once or over time. The company promises to make payment to you – either for a specific time period or over your lifetime. No state or federal taxes are due as the money accumulates. When the funds are distributed to you they are taxed.

Beneficiary (primary, secondary): A person, trust or organization you designate to receive property at your death. You must name a primary (first taker) beneficiary for any life insurance policy, annuity, retirement plan and bank or investment accounts you hold. The secondary beneficiary you designate is the person, trust or organization you designate to take the assets if the primary beneficiary is not then living.

Clayton Q-Tip trust: A Q-Tip trust in which after one spouse’s death an independent trustee decides how much money passes to the trust for the surviving spouse and how much passes to the children (or to a trust for their benefit).

Convertible option: An opportunity in a life insurance contract to convert term insurance to more permanent life insurance, in many cases without a medical examination.

Disclaimer will: A will in which the assets are left to the surviving spouse and the surviving spouse had nine months after death to decide how much to keep and how much to disclaim for tax reasons and pass to a trust for the children.

Durable power of attorney: A document in which you give another person the authority to handle your financial affairs. The powers remain effective through any disability or incapacity you may have.

Estate:  Your taxable estate includes the total value, usually the fair market value, of all possession property and debts you own at your death. Your probate estate includes any asset that is in your name at your death. It does not include assets you own jointly with a right of survivorship, assets that are already titled in the name of your trust, assets such as a life insurance policy, or annuity or retirement planning asset that pass to beneficiaries by contract. You can have a significant taxable estate and totally avoid probate.

Fiduciary: Anyone responsible for the management of another’s property; including executor, administrator, trustee, guardian or conservator.

Gross estate: The value of your entire taxable estate without taking into account any deductions or credits.

Heir at law: The persons who are entitled by state law to inherit your estate if you do not leave a will.

Irrevocable trust: A trust that cannot be changed, amended, or revoked.

Key man life insurance: A life insurance policy on a key employee that is owned by and payable to the business. The intent is to provide the business with operating funds to hire a replacement for the key employee if he dies while employed.

“Living together” agreement: An agreement, usually between persons who are not married but living together which sets forth their respective rights to assets and income should the relationship terminate.

I hope you found these definitions helpful.  Did I miss one?  Do you have an estate related term that you don’t quite understand?  Please leave the information in the comment section below and I’ll be happy to provide a detailed response.

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently announced the release of an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  Annino’s book is an exhortation, resource and trusted companion for women in all facets of life.  To purchase the book visit:  http://amzn.to/hOHuEV or for more about Annino, visit: www.patriciaannino.com

 

 

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