Redkey Gordon P.C.

Supreme Court Ruling Says IRAs Not Protected from Bankruptcy

As a result, financial advisers and families are taking steps to shield IRA assets for children and other beneficiaries in case those heirs ever find themselves in bankruptcy proceedings.

Is your IRA protected from creditors in the event of bankruptcy? Not anymore. Because of the recent unanimous high court decision, experts and families are taking steps to protect IRA assets for beneficiaries in the event those heirs declare bankruptcy.

A recent Wall Street Journalarticle, "Court Ruling Sparks Rush to Shield IRAs," finds that many advisers are urging clients to create a trust as the IRA’s beneficiary, or to set up an IRA as a trust account while the owner is still alive. Either way, the original owner has access to the money before he or she dies. Depending on the type and terms, trusts can shield assets (including an IRA) against creditors.

According to the original article, the challenge is identifying and employing the right kind of trust—this can be really tough as these issues are complex. The type of trust you should use will depend on a bunch of factors, such as the number of beneficiaries, the tax goals, and asset-protection goals.

But what if I already own an inherited IRA?

Based on where you live and how long you have been living there, the assets might yet fall under bankruptcy protection. Alaska, Arizona, Florida, Missouri, North Carolina, Ohio, South Carolina, and Texas all have laws that give this protection in some circumstances, even after the Supreme Court's decision.

One more thing: the Supreme Court did not directly address surviving spouses who inherit an IRA. Their status is far from certain, but some experts suggest that they roll over an inherited IRA into one under their own name.

Talk with your Bay Area estate planning attorney at Redkey Gordon and see what the new Supreme Court decision on IRAs means for your assets and your plans.

Reference: Wall Street Journal (Oct. 12, 2014) "Court Ruling Sparks Rush to Shield IRAs"

Pass the Pie: Use Holiday Time to Discuss Estate Planning

Thanksgiving weekend is a time to reflect, visit family, and of course, eat your fair share of pie. And while we may be thankful for the people and the wealth in our lives, not enough of us have planned to protect all that we have.

Pass the pie please! And not just the pumpkin pie. How about my slice of the estate? Probably not something you'd really say at your Thanksgiving dinner, but maybe you should.

CBC News in Toronto recently cited a survey that 40% of Canadians aged 65 and older felt unprepared about their estate plan. It seems that our good friends to the north are unfortunately much like those of us here in the States.

The article, titled "Estate planning: Talking with family about dividing the pie," states that families are not perfect and that many of us have relatives more akin to Bart and the Simpsons than the Brady Bunch.

What about your family? Is it always fun and laughter or are there a few of Homer's Doh!'s mixed in?

It is easy for emotions to run high during estate planning. Siblings can feel slighted, or the trust-level between siblings or even the executor can erode. That is why it is so very important to entertain these types of conversations early and often. After all, as the original article asks, who do you want deciding what is best for your family: you, or a stranger?

Unexpected events happen, and it is smart to start your early planning now to alleviate headaches and heartaches in the future. Discussions about your estate may be a bit uncomfortable, but it is important and necessary. If you are having a hard time with this, the original article suggests that you use a celebrity death or a messy estate story in the headlines to spring into this personal topic.

Also here are some more pointers:

• Have a family meeting, which can be a great way to get everyone together, ask questions, and make your wishes known.
• Update your estate plan, as your life and assets can change in just a few years—as can your wishes.
• Do not forget about personal items, which are often very important to loved ones.

Wherever you are in North America … north of the border or south, do not put this off. Speak to an experienced and qualified Gold Country estate planning attorney, Robert A. Gordon and start making your plans today.

Reference: CBC News (Oct 12, 2014) "Estate planning: Talking with family about dividing the pie"

Are Online Estate Planning Forms Worth the Risk?

The online forms you come across may or may not work. These forms tend to not be state specific which means your will may or may not be valid. If you are going to take the time to draft a will or any other estate planning document (which you should), you definitely want to ensure that it is valid. Visiting an attorney in your state will ensure that it is valid and properly executed so that your interests are protected.

Just like fixing up your house, there are jobs you can handle yourself and those that require the assistance of an expert.

A recent article in ABA Law Technology Today, titled "3 Reasons to Avoid Online Forms for Wills and Estate Planning,"points out some glaring problems with trying to DIY your estate plan.

Are they state specific? Online forms may or may not work. These forms typically are not state-specific, which means your will may or may not be valid. Just like your house being "up to code," the code may differ from one location to the next. And just like doing the job right with a home improvement project, if you are investing the time to draft a will or any other estate planning document (which you should!), you want to make sure it is valid. An experienced estate planning attorney in your state can help make certain your will is valid and properly executed and your interests are protected.

You are missing out on valuable legal advice. Do you ever start an unfamiliar project on your home without doing any homework? Just run to the hardware store, grab some supplies and get going? That probably has a low chance of success. Websites may say that wills and other estate planning documents are quick and easy to create. However, you are missing out on valuable legal advice and experience. When you talk to an experienced estate planning attorney, you will become informed and educated on the details of your plan. You and your attorney will discuss if a will or a trust is better for you (or perhaps both), and how to apply these to your specific circumstances (e.g., step-children, special needs, college savings, or aging parents). The original article reminds us that an attorney does much more than draft the documents—he or she gives you legal advice on why you should have your document drafted in a certain way.

Websites don’t inform you of changes in the law in the future. What? There's a new tool that saves me time or a product that makes my house safer? A website will not call you when an important law changes that impacts the provisions of your will, but an experienced relationship-oriented attorney will. You can be sure that the laws are always being amended, updated, and repealed. A competent estate planning attorney keeps up-to-date on those changes and communicates them to his or her clients. Many individuals ask their attorneys to contact them annually to see if there are changes to the laws and to be certain their wills are valid and still reflect their wishes and their circumstances.

The original closes with the reminder that you get what you pay for—whether that is a weekend warrior fixing the plumbing or an experienced Sacramento professional at Redkey Gordon P.C. who is educated in estate planning. Using a form you discover on the Internet will most undoubtedly be less expensive and perhaps less time consuming than partnering with an attorney to draft your will or other estate planning documents—but is it worth it? Remember, these are important issues concerning you and your loved ones. You want to make sure that everything is legal and you have the best strategies in place.

Think about it? Do you really want to take on this important project alone?

Reference: ABA Law Technology Today (October 7, 2014) "3 Reasons to Avoid Online Forms for Wills and Estate Planning"

Trustee, Co-Trustee ... What Is the Best Scenario?

Whichever you select, consider ways you can structure the trustee’s duties and relationships to increase the probability of achieving your estate planning goals.

Selecting an executor or trustee of  your estate plan is a very important decision that requires much thought. A recent Investing Daily article, titled "Making Your Most Important Decision," has some strategies to consider when selecting the financial fiduciaries for your estate.

The first is co-trustees. Both professional trustees and individual trustees each have advantages and disadvantages. You can try to get the best of both by naming co-trustees. There are different ways to structure a co-trusteeship, so ask your estate planning attorney about which way to go. Typically, the trust company could be the primary trustee. It would take care of the record-keeping, administration, and investments. Your trusted friend or family member serving as a co-trustee would have access to all the records, and he or she would be able to reviews them and spot any issues. The original article suggests giving the non-professional co-trustee the power to veto fees, investment decisions, and other key actions.

If the trustee has the power to decide the timing and amount of distributions, it can be a source of problems, disagreement, and headaches. One idea the original article suggests is to give the non-professional trustee sole authority over distributions. Another option is to have several co-trustees who determine the schedule and amount of distributions. They can also be required to make unanimous decisions. With a trust, you have the ability to set things up the way you think will be best. However, you might have a tough time getting a professional trustee to go along with a position that is full of limitations.

Another option in trying to get the best of both worlds without some of the issues involved with co-trustees is to split trustee duties. You could have several trustees, each given the responsibility for a specific function, or you can have just one trustee who employs several professionals to conduct some of the duties. There are many ways to split the trustee duties. In general, there are three main areas of trustee duties: (i) Administration; (ii) Asset management; and (iii) Distributions.  For example, you could choose a team that looks like this:

• A corporate trustee to keep the records, prepare taxes, and keep custody of the assets.
• An investment manager to serve as co-trustee handling only the investment decisions.
• A friend, family member, or professional advisor to be a third co-trustee who decides how much to distribute and makes any other decisions.

The original article suggests that what may be the simplest approach to splitting trustee duties is to name one or more individuals as co-trustees and then specifically empower them, and perhaps encourage them, to hire professionals under them for administration, tax reporting, and investing. In this scenario, the professionals technically would not be trustees. They would be employed by the trustee. The person appointed trustee would be responsible for distributions and other matters.

These are only a few ideas. Check out this article and then speak with your Northern California estate planning attorney at Redkey Gordon P.C.  about trustees.

Reference: Investing Daily (October 10, 2014) "Making Your Most Important Decision"

Early Planning before Alzheimer's Strikes

Medical research confirms one of the first things people have trouble with in the very early stages of dementia is managing personal finances. This means people can make very expensive financial mistakes, often before anyone notices there is a problem. I have seen this happen, and it is heartbreaking.

You never know what the future holds, so early planning for late-in-life health issues is essential.

For instance, you may notice that a loved one seems more disorganized than usual. Bills may pile up. The loved one may have difficulty remembering names and fumble for the right words. See a doctor if there are concerns. Alzheimer's and most forms of dementia are progressive. This means it will get worse over a few years.

Even before a diagnosis, it is important for people to discuss with their families how they would like to be helped. This includes who will be the primary caregiver and who will help with finances. According to a recent USA TODAY article, titled "Financial planning for dementia," a person with dementia often feels insecure that he or she will lose control and everyone else will tell him what to do, but conversations can help a person feel more independent and help families avoid misunderstandings.

Everyone should have a will, power of attorney and medical directive, and some find it helpful to have revocable living trust. Without these documents, a court may be required to appoint someone. This can be expensive, frustrating, and time-consuming.

In the course of the disease, a person may need help with a few acts of daily living and may have trouble communicating. At this point, someone else should take care of all financial matters, and it might be time to look at assisted living as the next step.

Healthcare costs for dementia patients can be substantial. It is very important to provide for the financial security of a healthy spouse. That is why it is a good idea to speak to an elder law attorney—he or she may be able to help a family protect some assets and income for the healthy spouse.

You should also consider the financial challenges associated with Alzheimer's disease and dementia, which can be substantial. Also, the choices for care can be overwhelming. An Sacramento elder law attorney is a helpful resource to help you and your families manage costs and find the right care for your parent or relative.

Reference: USA TODAY (October 11, 2014) "Financial planning for dementia"