Atlanta trust lawyers are abuzz following a recent US Supreme Court decision that will have big implications for clients. The fact that these professionals keep up-to-date on legislation and court decisions that affect their clients is one of the most important reasons not only to hire an estate planning lawyer in the first place, but also to check in with the attorney at least annually to see if any changes need to be made to a previous plan in light of new information.
While a person’s own IRA can be protected in the case of bankruptcy, the court has determined that an inherited IRA cannot. While that is big news for those who have already inherited an IRA, it is a call to action for those planning to leave one behind. Being aware of the consequences of the Court’s decision can drastically change the approach to planning in order to protect heirs from this new development.
It is common for estate planning lawyers in Atlanta to see clients who have much of their wealth in the form of an IRA or 401(k). During the planning process, they determine how that money should be used after their death. It often makes up a large part of the estate they intend to leave behind. As of recently, this was commonly done by placing it into a Revocable Living Trust. Now, however, if the heir declares bankruptcy, that money can be taken away.
A Real-Life Example of Savings and Loss
The possibility of losing an inherited retirement account in this manner is more common than you might expect. Take for example the case of Joan and Robert. Robert worked hard to save for retirement, accumulating $450,000 in his 401(k). Unfortunately he was also diagnosed with a serious medical condition and accumulated over $300,000 in medical debt before he passed away.
After his death, his wife transferred the funds of the retirement account into an “inherited” IRA so that she could access the money without having to pay a 10% penalty before age 59 ½ . That money was her lifeline.
However, the medical bills spiraled out of control and were eventually turned over to a collection agency. Unable to pay back the balance, Joan was forced into bankruptcy. Little did she know that the money in her “inherited” IRA could now be seized by creditors during the bankruptcy proceedings. Had Robert planned for this possibility, the funds would have stayed protected.
Protecting Wealth In An IRA For Beneficiaries
In order to protect money in an inherited retirement account, many estate planning lawyers in Atlanta are now recommending that their clients consider setting up a Standalone Retirement Trust. This type of trust can protect against other threats, too. Basically, it makes the money inaccessible to any future creditors of the trust’s beneficiary because the trust was not established or funded by the beneficiary. By naming an independent trustee rather than having the beneficiary play this role, there are even more protections in place. An Atlanta trust lawyer can offer a variety of suggestions on how to choose the appropriate trustee.
There are some fairly stringent guidelines that need to be followed to make sure the trust works as intended. A trust lawyer in Atlanta will need to make sure these regulations are adhered to so that the trust can qualify. When done properly, the trust’s distributions can be made similarly to how they would have from the IRA without the risk from the beneficiary’s creditors.
Whether you are just beginning the planning process or you have already created an estate plan, this big decision by the US Supreme Court can affect you and those you leave behind. Make sure to contact your trust lawyer in Atlanta to ensure that your IRA is protected for the next generation.
Estate planning lawyers in Atlanta work with clients at all different stages of life. For example, many couples realize the importance of meeting with an estate planning lawyer before getting married. While things are rarely straight forward (every situation is unique, after all), they can get pretty complicated in cases where one or both of the parties involved has been married before.
Who Owns What
When you enter a second or subsequent marriage, you’re likely bringing quite a bit of “stuff” with you. You probably have various accounts that are all in different names: his, hers, and theirs. The same is true of assets. And then there are kids to consider. Some accounts and assets might have the children’s names on them, too.
Creating an estate plan is an excellent idea in these situations. For one thing, it helps untangle some of the confusion over who has access to what. Not only that, but just because you intend for certain assets to go to your children, without an estate plan directing what will happen, the courts will have to make decisions based on the law, not on your intentions.
In reviewing your assets with the Atlanta estate planning lawyer, you’ll want to take a look at all of your (and your spouse’s) various accounts to make sure they have the correct beneficiary designations. Keep in mind that you very likely might have your ex-spouse named as a beneficiary on any variety of accounts. Chances are, you’ll want to make some changes.
Develop a Strategy and Avoid the Pitfalls of Not Planning
The estate planning lawyer will be able to go through, item by item, to help you determine the best approach to distributing your estate according to your wishes. This might involve creating a simple will that names your spouse as the primary recipient of your assets, with a certain percentage going to your children. On the other hand, you and your spouse may prefer to actually set up completely separate trusts that reserve your pre-marriage property for only your own biological children.
An important thing to note is that if you pass away without a legally binding estate plan, your assets could be given directly to your new spouse. Upon his or her death without a will, those assets—the ones that were originally yours—would be inherited by the spouse’s children, not yours. This is a pretty big deal and is something that is better addressed between you and a Georgia estate planning lawyer than between bickering, resentful step-siblings later.
This is the first in a series of articles on what to expect when you work with your Atlanta estate planning lawyer. Each article will cover several of the topics that you will need to consider to make a plan that works for your needs.
Estate planning lawyers in Atlanta, as well as around the country, have slightly different approaches when working with clients. These approaches need to be tailored to your personal needs, as well as to the estate planning laws of the state. That said, there are some typical things that you will likely want to cover in your plan, and your lawyer will help you determine which are important for you. Today’s article focuses on items that will be helpful should you pass away, but are also important should you become temporarily incapacitated.
- Biographical Information: Estate planning lawyers in Atlanta Your estate plan should include biographical information that will make it easier for your executor and others to follow through on your wishes following your death or incapacity. In addition to information about your family members, you will want to include where to find important documents like your birth certificate, marriage certificate, divorce decree, and death certificates of those who have preceded you in death but will still weigh in to the decisions that need to be made. (For example, if you have an inheritance from a parent that needs to be considered.)
- Dependents: Your estate planning in Atlanta obviously needs to take your children and other dependents into consideration. As well as including basic information such as names and locations, you will also want to be sure that you have legal guardians named for minor children or adult children with special needs. It’s also a good idea to include information about others who rely on you, such as children you watch or adults for whom you provide care, as other arrangements will have to be made immediately so as not to disrupt their care.
- Animals: Whether you have pets or livestock, their care needs to be considered when you undertake your estate planning. Should you become incapacitated or pass away, how will these animals be cared for immediately? This can be a simple agreement with someone to feed and care take your pets while you are unable, or it may be a more formal arrangement for how to deal with livestock that are a part of your estate.
- Employment: Your estate plan should include information about your current employment situation. You want your family to be able to contact your employer about what is going on. Additionally, your employer may have benefits that go into effect based on your death or incapacitation, so it is important for those making decisions to have access to these benefits to care for you or your estate.
- Financial Power of Attorney: When you are incapacitated, it is unlikely that you will be able to manage your finances. Having a durable power of attorney means that you are giving someone else permission to take care of expenses for you. They might use this power of attorney to pay your bills, manage investments, and even to take care of medical expenses.
There are many, many topics that you will want and need to cover with your estate planning attorney in Atlanta and knowing what they are in advance can help you to use your time efficiently, as well as have an idea ahead of time of the kinds of choices you’ll want to make.
To get started creating a solid estate plan that protects your assets, wishes and the people you love, we encourage you to contact our Atlanta estate planning law firm at 770-425-6060 and ask to schedule a free Georgia Family Treasures Planning Session with the mention of this article.
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Will and trust lawyers in the Atlanta, Georgia, area recognize that there is no one-size-fits-all approach to estate plans. Every situation is different, and each person needs individualized attention. While there are services that offer cookie-cutter forms that will supposedly allow you to set up a decent plan, there is no comparison to working with an actual estate planning attorney who can work with human understanding to meet your real needs.
For example, the needs of women have been changing dramatically over the past several years. Gone are the days when a woman was expected to stay home and live on an “allowance” if her husband chose to give her one. Instead, so many women today have their own jobs, their own finances, and their own desire to protect their assets.
Older Women and Widows
In addition, women typically live longer than men. So, even if the husband was originally in charge of working with the will and trust lawyer, once he has passed away, the widow has an entirely new set of needs. She needs to make sure that her estate is able to support her as costs continue to rise, as well as to determine what she would like to have happen to her assets after her own death.
Not all estate planning lawyers in the Atlanta GA area are current with the times, either. There is still a tendency to create trusts that will “take care of them” without them actually having any say over the contents of the trust. Today’s women are often quite capable of managing their own finances and are better served by having flexibility to grow their funds rather than being restricted by the trust.
There are plenty of reasons that a younger woman should to meet with an Atlanta will and trust lawyer, too. In the case of a single mother, assigning a guardian is critical in case of the mother’s death or incapacitation. If a guardian is not legally named, the courts will step in and choose a guardian for the child without taking the mother’s wishes into consideration. An estate planning attorney may also advise younger mothers to consider setting up a trust for their child(ren) and maybe even to look into life insurance policies that could be used to fund the child(ren)’s future.
Whether married or not, many younger women have careers and would benefit from retirement planning in this earlier stage of life. By being proactive early on, a woman can set up her 401k and other accounts to make sure she realizes her long-term financial goals. Looking to retire young, to pay for your kids’ college, or to travel the world? A will and trust lawyer in metro Atlanta can help put things in motion now to make that a reality later.
If you have a significant other in your life, it makes sense for the two of you to work together with your Atlanta estate planning attorney to make sure that your goals align and that your plans are compatible. Your attorney can help you properly deal with “his, hers and ours” to ensure that your assets are titled properly and that your financial house together is built on a solid foundation.
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There are a lot of reasons to consider setting up trusts for your children, but trust and estates lawyers in Atlanta see far too many cases where this just isn’t done. One of the biggest reasons for not setting up a trust could be that you just don’t think you have enough assets to warrant one. We hear about “trust fund babies” and automatically think of the super wealthy, not regular folks like ourselves.
Really, though, even those in the middle class should be thinking about setting up trusts for their children. Even if you don’t have a lot of extra money lying around, you have other assets that can quickly add up in value. Add to that the payout from a life insurance policy, and you suddenly realize that you have quite a bit of financial worth that might be left behind to children who are not ready to handle it. Anything more than about $100,000 is reasonable to consider putting into a trust for children here in Atlanta
What Does the Trust Do?
When you set up a trust with your trust and estates lawyer in Atlanta, you will discover that there are many different ways to use this tool. One of the most important benefits of a trust is that it allows you to stipulate how your children will use the money you leave behind. If your intention is for your kids to use the money for college, but they want to use it to buy a sports car instead, what’s to stop them?
In your case, the trust is what can stop them. You can implement restrictions on how the money is spent. You can, for example, determine that the funds in the trust are designated for specific functions, such as paying for education or day-to-day expenses. In some cases, there is a designated adult to help keep things on track, although this person must be chosen wisely. In other cases, the parent sets age limits on the trust, assuring that the children don’t have access to the money until they have more time to mature.
Protecting the Trust
Another reason to consider a trust is to protect your children’s money from misuse by the adult in charge of the funds. In the case of a “custodial” account, the person in charge can have a lot more say in how the money is spent. This could translate into frivolous expenses, including paying himself or herself an unrealistic amount to “manage” the funds. With a trust, however, the person in charge (the “trustee”) is held more accountable and is required to follow your wishes.
If the trustee does manage the funds poorly, it is also possible that your child would have some legal recourse, as the trust is a legal contract.
Talk to an Atlanta Trust and Estates Lawyer
The best way to determine if a trust is right for you and family is to talk to an Atlanta trust and estates lawyer. Our attorneys are available to sit down with you at no-charge to review your estate plan and consider how a trust or other estate planning tools can best meet your needs. To schedule a complimentary Georgia Family Treasures Planning Session, simply call 770.425.6060 and mention this article.