Estate and Asset Protection Plan Strategies

Writer’s Website Address: www.chipbrowder.com

Fax Number (205) 349-1552

 ESTATE and ASSET PROTECTION PLAN STRATEGIES

Question:   Would you invest half of all that you own in an investment that is guaranteed to be a total loss?    Without an adequate, tax-wise estate plan, that may be exactly what you’ve done for your family!

I.          Reasons Your Estate Plan Should Be Updated:

You don't have your own written Will (caution:  Alabama Legislature has one for you!!).

Your current power of attorney does not provide for a backup or successor agent.

Present Will executed prior to 1982, or if after '82 yet still not notarized (before enactment of Alabama's self-proving statute permitting simplified probate of Will) or has a 50% marital deduction clause.

Newly married, divorced, or one or more of your next-of-kin or other beneficiaries have predeceased you or have become incapacitated.

Named executor/personal representative or trustee has died or your relationship with any of these people has changed for the worse.

You have been blessed with more children or grandchildren; or children or grandchildren have entered or completed college; or, children or grandchildren have moved out of or back into your home; and, you wish to make provisions in your Will to account for such life events.

You recently moved to Alabama.

You have bought or sold a business; added a partner to your business; have bought, sold or mortgaged a significant piece of real estate; or, you have acquired or expect to receive major assets (inheritance, etc.).

Your business or financial circumstances have significantly changed or a beneficiary of your current Will has experienced adverse litigation (judgment or tax liens), divorce or bankruptcy.

Current Will might contain an Upjohn problem where you have made trust provisions for a minor child or grandchild without proper Trustee language to ensure that the Trustee will not have to pay personal income taxes on Trust distributions for such expenses as college education for that minor beneficiary under your estate.

Question 2:  If you own your own business, would you jeopardize all you own (“betting the farm” or “putting it all on the line”) if your odds of losing everything were 3 out of 10, or even 1 out of 10?      Without an asset protection and preservation plan, that may be exactly what you are doing for your family!

Recent Statistics:  While over half of all surveyed business owners affirmed their belief that personal retirement and business succession planning were integral to their future success and, more importantly, for the financial security of their family, two-thirds of those surveyed admitted they did not have a retirement or succession strategy in place.

II.        Reasons Your Asset Protection/Preservation Plan May Need Updating:

All your assets are in your name individually, or even jointly (JTROS) with your spouse; or, your spouse has recently passed away and the assets are now in your name only

You own all your life insurance personally, or even where your company owns a significant portion, even though you have designated your spouse or family as beneficiary; or, your retirement account has grown significantly and will pass outright to your spouse or designated family member upon your death

You have not executed a durable power of attorney and healthcare directive, or merely named you spouse as the only individual authorized to manage your business affairs in the event of a debilitating accident or illness (and you frequently travel together, even on short trips?)

You have deeded property to your children or other family members; you have added your children to all your bank accounts, CDs, brokerage accounts, and other semi-liquid investments

You do not have a company buy-sell agreement; or, you are in business with your spouse or other close family member without taking such “family dynamics” into account; or, where you have such a succession plan, you have failed to provide an adequate and lawsuit-protected “funding” mechanism to implement that plan

You conduct or hold all your business and/or investment interests in your name personally or through a single entity

Substantially all your assets, other than perhaps your home and a retirement account, are tied up in your business; and/or, all your children are not actively involved in the family business

Question 3:  If you have a “special needs” spouse or child, would you invest all that you own (or half if you are blessed with two children; a third, if three children, etc.) in an investment that is guaranteed to be a total loss?    Without an adequate, “special needs” estate plan, that may be exactly what you’ve done for that child or other incapacitated family member!

Recent Statistics:  It is estimated that more than half (50%) of the senior population will incur some type of extended healthcare expenses during their lifetime; and half again, of those requiring extended care will find it necessary, either health-wise or financially due to limited resources to relocate into a nursing home (the older one becomes, that percentage jumps to 85%).    

III.       Reasons Your Estate Plan May Need A “Special Needs” Trust and Other Asset Preservation Strategies:

Mental or physical condition of a spouse, child or other loved one has substantially changed requiring “special needs” planning considerations

All your assets are in your name individually, or even jointly (JTROS) with your spouse, and either of your health has begun to deteriorate

You have been blessed with a blended family, children of a prior marriage, and wish to ensure an inheritance for those children, while at the same time providing financial peace-of-mind for your surviving spouse; or, you simply wish to minimized the possibility of “conflict” between your surviving spouse and those children of your first marriage

You have designated your spouse or incapacitated family member as beneficiary on all your life insurance, or on your retirement account, so those assets will effectively pass upon your death outright, not to your spouse or other intended family member, but instead to that extended nursing care facility or the State Medicaid Agency!

You have not executed a durable power of attorney and healthcare directive, or merely named you spouse as the only individual authorized to manage your and your family’s financial affairs in the event of a debilitating accident or illness (and you frequently travel together, even on short trips?); or, you are a single parent and have not yet designated a POA for that incapacitated family member

IV.       Last Will and Testament (“LWT”):

Your Last Will and Testament is of course the most important document in your Estate Plan.  A Will is a revocable document that provides for the disposition of property at death.  In order to make a valid Will under Alabama law, you must be at least 18 years old and of sound mind.  Your Will is the written expression of your intentions regarding the ultimate disposition of your property following your death; and, to be a "complete" LWT, the document should dispose of all your property (generally by what is referred to as a residuary clause). 

Your LWT must be your “will” and not necessarily what your children or even spouse might wish (voluntarily signed) and your signature must be witnessed by at least two (2) people who preferably are not beneficiaries under your LWT.  The execution of your Will should also be “self-proved” by having the execution of your Will notarized at the time of execution for simplification of the probate process following your death.  Your LWT being “self-proved” avoids the expense and necessity of having one of the witnesses testify as to the proper execution of your Will.