Solidly Single
If you are single, you are in good company. Nearly half of all adult
Americans are single. Being single can mean considerable personal and
economic freedom. Nevertheless, just like your married counterparts,
proper Life & Estate Planning is necessary to keep you in control.
Incapacity & The Law
Every adult American is responsible for
making his or her own personal, health care and financial decisions. In
fact, you may take many basic decisions for granted. For example, you
decide where to live, what medical care is appropriate and how to manage
your finances. But what if an illness or injury leaves you unable to
make even these basic decisions? Who will make such decisions for you?
Who will have your best interests at heart?
Proper Life & Estate Planning is required
in advance of your incapacity, if you want to appoint your own
decision-maker. Otherwise, by default you may find yourself in the
Probate Court in a legal process that typically employs three lawyers
and makes your private personal, health care and financial circumstances
a matter of public record.
Minor Children
Do you have minor children (i.e., under age
18 in most states)? If so, you probably invest considerable time and
money to provide them with a moral, safe, and secure home environment.
What if you died while they were still minors? Who would rear them to
adulthood? Who would provide the moral, safe, and secure home
environment? Unless you want a Probate Judge to make the selection for
you, proper Life & Estate Planning is required.
Who will manage the inheritance you leave for
your minor children until they reach adulthood? Again, that decision
will be made by a Probate Judge in the absence of proper estate planning
by you.
What if you are divorced? Absent a showing of
unfitness, the Probate Court will appoint the surviving biological
parent not only to rear the children to adulthood, but also to manage
their inheritance. Even worse, if the surviving biological parent then
survives your children, they ultimately may receive the inheritance ...
along with their new spouse and stepchildren!
Your Valuables
Is family harmony important to you? Whether
it is grandma's yellow pie pan, antique furniture or that Civil
War sword, such items should be identified in your Life & Estate
Plan along with the designated recipient of your own selection.
Otherwise, your valuables could end up in the hands of the wrong loved
one or sold to a perfect stranger in your Estate Sale. Either way,
relationships between and among your loved ones could be bruised or
battered unnecessarily.
Death, Taxes & Trusts
Benjamin Franklin noted that there are only
two certainties in life: Death & Taxes. While there is little
we can do to avoid the former, proper estate tax planning can minimize
the latter. One of the best kept secrets for reducing Federal Estate
Taxes is giving while you are living. Such giving leverages the Annual
Gift Exclusion (AGE) that is available to every taxpayer.
Under the AGE, each taxpayer may give $12,000
each year to as many people as they wish. This wealth transfer does not
trigger gift taxes to the donor or to the donee. Additionally, any
future increase in the value of the gifted asset is not included in the
donor's estate for determining Federal Estate Taxes later on. For this
reason, gifts of appreciated assets (e.g., stock that is rapidly going
up in value) are popular. [Note: Legal counsel should be sought before
making AGE gifts because of important capital gains considerations.]
Are your likely beneficiaries young,
inexperienced or irresponsible? If so, various Trusts can be created to
protect your AGE gifts from their potential divorces, lawsuits,
bankruptcies and good, old-fashioned squandering. Through carefully
drafted Trusts you can control how and when the gifted assets are made
available to your beneficiaries. As legendary jurist Oliver Wendell
Holmes put it: Put not your trust in money, but put your money in
trust.
Premarital Priorities
Are you or someone you know planning to get married? If so, you should
consider some of the important financial and legal consequences of
exchanging vows before the big day.
Premarital Agreements
Whether you are single, widowed or divorced,
you might want to consider executing a Premarital Agreement with your
intended before you say I do. Legally speaking, a Premarital
Agreement is a two-party contract made in contemplation of marriage and
is effective upon solemnization of the marriage. Practically speaking,
it allows prospective spouses to lay their financial cards on the table
and agree in advance to such things as:
- Asset ownership during the marriage;
- Asset disposition upon death;
- Asset division upon divorce; and
- Spousal support.
To help ensure that your Premarital
Agreement withstands future legal challenges to its terms, be sure to
dot the i's and cross the t's. Here are some points to
remember:
- Provide full, written disclosure of all assets by both parties;
- Provide adequate time for negotiation and reflection well in
advance of the wedding day;
- Make sure the Agreement is entered into voluntarily and the
provisions are not unconscionable or unfair;
- Make sure each party understands the provisions; and
- Make sure each party has independent legal representation.
While perhaps not very romantic, a properly
drafted Premarital Agreement can protect family wealth and the interests
of other family members in such wealth (e.g., family business
ownership). In some circumstances, it also can help determine whether
money is a primary motivating factor in the relationship before it is
too late. Love may be blind, but you should approach marriage with both
eyes wide open.
Yours, Mine & Ours
If your marriage would create a Blended
Family, then careful estate planning is required to reach
often-competing goals. For example, how will you provide for the
financial needs of your surviving spouse during their lifetime and for
your own children?
Careful coordination between your financial and
estate planning is required. One possible strategy could be called the Triple
Play. Here's how it works: First, you and your spouse-to-be execute
a Premarital Agreement identifying and separating your respective
assets. This will allow each of you to retain control over their
eventual post-mortem disposition. Second, you create a QTIP Trust
as part of your estate plan. Upon your death, this Trust will provide at
least its net income on the assets it holds for your surviving spouse.
Upon their death, the assets are held and administered for your own
children. Finally, a Life Insurance policy on your life will provide the
funds needed to fuel the QTIP Trust and/or Trusts for your own
children upon your death. Why Life Insurance? Because it provides a known
sum of cash when it is needed at an unknown time in the future.
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