The holiday season is a time to enjoy friends, family, and loved ones. Often we consider our life circumstances and may get in the spirit of giving. This is particularly true if you are at a point in your life where you have enough from a financial standpoint. If you are planning on giving money as a gift this holiday season, below are five things to consider.

What to Consider When Giving

Sharing your resources – whether money, vehicles, property, or other assets – in a manner that is both simple and smart as well as financially prudent can prove complicated. Accordingly, there are several things to consider such as what the gift is for, the type of gift, and if the gift is for charity. Below are five common scenarios:

1. You Want to Create a Foundation or Give to Charity: You do not have to be Bill Gates or Warren Buffet to be charitable. Through a donor-advised fund (DAF), which are like charitable savings account, you can benefit from an immediate tax deduction for any cash or investments placed in the fund. Of note, any money sitting in a DAF must be donated to charity but any money sitting in the fund can be invested tax free. Notably, changes in tax law make charitable giving different from a tax perspective than prior years. If you want to get a deduction or want to use your IRA to make the gift and you are over 70 ½, you should seek guidance,
2. Grandchildren Need Tuition for College: Consider a 529 College Savings Plan – where the money grows tax free and can also be withdrawn tax free when applied to qualified educational expenses – as a way to save for a child’s future education. There are also tax-free withdrawal benefits for pre-college education, depending on applicable state law. While a grandparent can create an account for a grandchild, contributing to a plan created by the parent can help reduce offsets on any potential financial aid award granted to the child. If your child or grandchild is already in college, consider making payments directly to the institution to avoid gift tax issues.
3. Your Car or Boat is Not Being Used: One option is to gift the property, making sure title is officially transfer and filing a gift tax return if the fair market value is above a certain amount.  If you instead are passing along the old car or boat worth more than $15,000 to a family member, make sure to let your tax preparer know so they can file any necessary gift tax returns. (You probably won’t owe any gift tax, but filing the return is a way to protect yourself from the IRS.) Alternatively, the property may be donated to a charity to receive a possible tax benefit. What the charity does with the property – in other words, uses it for the organization or sells it at a low price – can affect your tax benefit and how much the charity ultimately gets.
4. The Next Generation & the Vacation Home: First, make sure to ask whether or not your loved one wants the home. You may be surprised that they do not and, in that case, sell the property. If they do, however, make sure to work out issues in advance that may arise from the transfer of property. One way to minimize issues is to transfer title to an LLC and give LLC ownership to the children, spelling out each member’s rights and responsibilities regarding the property. You should also address what happens if someone wants to sell his or her portion and exclude spouses from the universe of eligible owners in the even of a divorce. These can be complex transactions, even for seemingly simple circumstances, so always speak with an attorney before transferring property into or out of an LLC.
5. Your Kids Have Different Needs: Sometimes fair does not mean equal. This is particularly true if your children have different levels of need due to a disability, younger age, or better financial stability. For some children, it may be necessary or advantageous to gift a portion of his or her inheritance prior to your death because of immediate need. Whatever your reasons, the division of your estate is up to you. While you cannot prevent dissatisfaction among your children once you are gone, you can try to minimize these issues. One way is to leave a letter behind explaining your motivations and adding a no-contest clause in the will.

Estate Planning Help

While gifting may be the right thing to do, it needs to be done so that everyone, including you, gets the maximum benefit. The tax implications to you depends upon the purpose of your gift, the type of gift, and whether the gift is to charity. We can advise you on your options under applicable law and what tools you can use so that everyone benefits the most from your generosity.

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2020 is fast approaching.  As we all prepare for the holidays and a new year, it is important that we wrap up any loose strings.  Before entering into the new year, here are some things that need to be on your end of year checklist:

1. Make Sure Your Estate Planning is Up To Date

Will or Trusts

Now that the federal estate tax exemption is fixed at $11.18 million per person adjusted for inflation ($11.4 million in 2019), it is important that you review your estate planning to ensure that it still makes sense. For example, when reviewing your estate planning documents, look for such terms as “Marital Trust,” “QTIP Trust,” “Spousal Trust,” “A Trust,” “Family Trust,” “Credit Shelter Trust,” or “B Trust.” With the exemption amount so high, it may not be necessary to utilize these planning strategies anymore.

In addition, you will want to make sure those individuals you have appointed to serve as your fiduciaries (successor trustee, agent under a financial power of attorney, patient advocate, trust protector, etc.) are still able to act on your behalf if the need arises.

Lastly, if your family has gone through any changes such as a birth, death, marriage, divorce, etc., you will want to double check the distribution scheme in your will or trust to make sure that the beneficiaries are still those you would like to leave assets to.

Financial Power of Attorney

How old is your Power of Attorney? Because of liability risks, banks and other financial institutions are often wary of accepting Powers of Attorney that are more than a couple of years old.  This means that if you become incapacitated, your agent may have to jump through hoops to get your stale Power of Attorney honored, if it can be done at all. This could cost your family valuable time and money. 

It is suggested that your Power of Attorney is reviewed and updated as necessary every few years so that it doesn’t become a stale and useless piece of paper.

2.   Check Your Beneficiary Designations

Another area of estate planning that needs revisiting at the end of the year are your beneficiary designations on any life insurance, retirement accounts, bank accounts, vehicles, or real estate.  If you have previously completed the forms for any of these assets, you should review them to ensure the beneficiary named is still the person(s) you want receiving the assets.

If you have not done so already, you also should make sure that your estate planning attorney has this information as well.  Because a beneficiary designation may overrule any provisions you have in your will or trust, it is important that your designations and other estate planning documents all match and carry out your objective instead of having contrary intents.

3.   Gather Tax Documents for 2019 Income Tax Return

It is prudent to spend a little extra time collecting the necessary paperwork to show your income and any deductions you may be claiming instead of waiting until the last minute.

4.   Review Car and Homeowners Insurance Policies

Everyone likes to save money and an easy way to do so is to call you insurance agent.  Analyze the coverage you currently have for your home and car to see if you are properly covered and to see if there are any additional savings available to you.  Sometimes, you can save money by having more than one policy through an insurer.  You may also be able to get a reduction on your rates if you have not filed any claims within a specific period of time.  You never know unless you ask.

5.   Review Your Paycheck Withholdings

When it comes to your 401(k), IRA, and Health Savings Account, the federal government allows you to contribute a maximum amount per year pre-tax.  As we approach the end of the year, it is a good idea to review how much you have contributed and see if you are able to give more.  Because this is done pre-tax, it is a good way to put more money away for your retirement or future medical needs while saving some money on your tax bill now.

Call Us Today! (614) 429-1053

The end of the year can be a stressful time for many, but by completing this to-do list, you will be setting up for a financially secure new year.  If you have any questions or need to schedule an appointment to review your estate planning, please give us a call.

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We are excited to announce that we have two new additions to our team at Charles H. McClenaghan, LLC!

Mara is our new Legal Assistant. Originally from Oshkosh, Wisconsin, she recently moved to Columbus with her fiancé. While trying to convince said fiancé it’s time for a dog, she practices pet ownership with her cat, Fish. Her hobbies include hiking, camping, traveling, and spending quality time with her family and friends.

Morgan is our new Law Clerk. Originally from Massillon, Ohio, she now resides in Hilliard with her fiancé. Morgan is a third-year student at Capital University Law School and will be taking the Bar Exam in the summer of 2020. She has two cats named Jane Doe and Hazel, and her hobbies include reading, attending sporting events, and traveling.

Please join us in extending a warm welcome to Mara and Morgan. We are excited to have them on board!

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Estate planning is not just about what happens to your stuff when you die. It is about coordinating all aspects of your life so that you can be taken care of during times when you are unable to care for yourself, and your money and property are distributed in the way you want.

Who Needs This Type of Planning?

Employing a large number of advisors to assist you can seem like an overwhelming task and only necessary for the very wealthy, but everyone can benefit from this comprehensive approach. When everyone is on the same page, your team can work together seamlessly behind the scenes to make sure everything is taken care of.

Introducing the Starting Lineup

An estate planning attorney helps by arranging your legal affairs so that trusted people are authorized to make decisions for you when you are unable and so that your money and property are handled and distributed as you desire after your death. As your legal counsel, we are well-versed in the strategies to accomplish this.

A financial advisor plays an important role by being able to understand your specific financial goals and investment objectives. He or she is able to craft a financial plan to ensure you have sufficient cash to meet your needs and live the lifestyle you want. Financial planning often moves beyond retirement planning to laying the foundation for multigenerational wealth transfer.

An insurance professional provides an analysis of your current and future insurance needs. For many estate planning strategies, life insurance is critical to ensuring that there are funds available to take care of all your beneficiaries.

An accountant or CPA brings valuable tax planning strategies to the planning process. Although much of the focus in estate planning has historically been on estate taxes, a comprehensive plan must consider the impact of all taxes you and your beneficiaries may owe.

We Are Here to Help You Get Started

Call us today at (614) 429-1053 to schedule an appointment to review your existing plan or draft a comprehensive new estate plan using a team approach.

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If you or your grown children are part of a blended family, your estate planning should reflect the special considerations and complexities involved.

Identify Your Goals Each family has its own dynamics and priorities—and blended families add another dimension that must be considered as you create or update your estate plan. The decision about whether to provide for your stepchildren or step-grandchildren in your will or trust is an important and often emotionally difficult decision. The following factors are among those in play:

Age. The ages of both you and your spouse and the ages of your stepchildren often have an impact on estate planning decisions. If you and your spouse are older and both financially independent, and all of your children are adults, it may make sense for each of you to leave your assets to your own natural heirs. However, if you and your spouse are young adults, and your spouse’s children are quite young, it is more likely your assets will be intertwined. In this case, you may decide to provide for your stepchildren in your estate plan. Grandparents are likely to weigh similar considerations in determining whether to include their step-grandchildren in their estate plan.

Relationship. Some people simply do not get along with their stepchildren or their step-grandchildren or do not have a close relationship for a host of other reasons. If this is the case, they may feel less inclined to provide for the stepchildren in their estate plan. In contrast, other individuals come to view their stepchildren with as much love and affection as they do their own children and may want to reflect this relationship in their estate plan.

Importance of bloodline. For some people, it is very important that only those children or grandchildren related to them by blood receive the bulk of their money and property. This may be the case even in situations where younger stepchildren are involved and their relationship with those children is strong.

Heirlooms or other personal property. If one of your ancestors brought a special piece of furniture or jewelry that has been passed down through the generations, you may want to ensure that it goes to your blood children or grandchildren or to another relative when you pass away. This may also be the case if you have items that belonged to a deceased spouse that are of sentimental value to your children or other family members.

We Can Help Design a Successful Estate Plan for Your Blended Family. If your family is one of millions of blended families in our country today, we can help you create or amend your estate plan to ensure that your wishes for your stepchildren or step-grandchildren, as well as other family members, are carried out after you pass away. Please call us today at (614) 429- 1053 to set up an appointment so we can discuss your unique circumstances and goals and the best tools for accomplishing your wishes for your blended family.

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A common misconception is that only wealthy families and people in high risk professions need to have an asset protection plan. But in reality, anyone can be sued. A car accident, foreclosure, unpaid medical bills, or an injured tenant can result in a monetary judgment that will decimate your finances.

What Exactly Is Asset Protection Planning? Asset protection planning is the use of legal structures and strategies to safeguard property that creditors might snatch away, by completely, or, at the very least, partially, protecting it from the creditor’s reach. Below are three tips that you can use right now to protect your assets from creditors, predators, and lawsuits.

Asset Protection Tip #1 –Load Up on Liability Insurance. The first line of defense is insurance, including homeowner’s, automobile, business, professional, malpractice, long-term care, and umbrella policies. Liability insurance not only provides a means to pay money damages, it often includes payment of all or part of the legal fees associated with a lawsuit.

Asset Protection Tip #2 –Maximize Contributions to Your 401(k) or IRA. Under federal law, tax-favored retirement accounts, including 401(k)s and IRAs (but excluding inherited IRAs), are protected from creditors in bankruptcy (with certain limitations). Therefore, maximizing contributions to your company’s 401(k) plan is not only a smart way to increase your retirement savings, but it will also safeguard the investments from creditors, predators, and lawsuits. On the other hand, if your company does not offer a 401(k) plan, then start investing in an IRA for the same reasons.

Asset Protection Tip #3 –Move Rental or Investment Real Estate into an LLC. Aside from having good liability insurance, moving your real estate into a limited liability company (LLC) can be a great way to help protect your assets from creditors, predators, and lawsuits. There are two types of liability that you should be concerned about with rental or investment property: (1) inside liability (where the rental or investment property is the source of the liability, like a slip and fall on the property, and the creditor wants to seize an LLC member’s personal assets) and (2) outside liability (where the creditor of an LLC owner wants to seize LLC assets to satisfy the member’s debt).

One of the experienced lawyers at Charles H. McClenaghan, LLC can help you create an a personalized asset protection plan that best serves you and your family. To schedule a consultation, call (614) 429-1053.

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What Is Asset Protection Planning?

Asset protection planning is the positioning or repositioning of assets to preserve and protect your property in advance of a claim or the threat of a claim. In other words, this type of planning will not be effective to shield your property from an existing claim. Instead, it must be done long before there is even the hint of a claim. In fact, if you transfer assets to shield them from existing creditors, it could be considered a fraudulent transfer, resulting in legal penalties.

The goals of asset protection planning are to provide an incentive for settling a claim, improve your bargaining position, offer options when a claim is asserted, and, ultimately, deter litigation.

What Is Traditional Asset Protection Planning, and Why Does It Often Fail?

There are several types of traditional asset protection planning that have been around for years.  The most common is liability insurance – automobile, homeowner’s, umbrella, officers’ and directors’, malpractice, and the like. You probably have at least one liability policy in place right now. Unfortunately, liability insurance may actually encourage a lawsuit since it is perceived as “easy money.” Aside from this, liability insurance often fails because the coverage is inadequate, the policies have extensive exclusions, or the carrier becomes insolvent.

Another common type of traditional asset protection planning is the use of a business entity, such as a corporation, to segregate business assets and liabilities from personal assets and liabilities.  But while a corporation may shelter your personal assets from a lawsuit filed against the corporation, the opposite is not true – if you, as the shareholder of a corporation, are personally sued, your shares of stock in the corporation are not protected from a judgment entered against you. Of course, it is possible that if your corporation fails to observe certain formalities, then the “corporate veil” may be pierced, and your personal assets will become vulnerable to a judgment entered against the corporation.

The final common type of traditional asset protection planning is established under state law and allows residents to exempt specific assets from the claims of creditors. This may include protection for property owned jointly by spouses (“tenancy by the entirety” ownership), a primary residence (“protected homestead”), the cash value of life insurance, investments held in a retirement account, and annuities. Nonetheless, these state exemptions are often subject to limitations, such as placing a cap on the value or land area of the protected homestead.  

What Should You Do?

You may think that only wealthy people need to do advanced estate planning. The truth is that anyone who has accumulated any amount of wealth can be sued for just about any reason. The only way to fully protect you and your family is to adopt more advanced forms of asset protection planning such as irrevocable trusts and sophisticated business structures.

We can help you go beyond traditional asset protection planning by creating a comprehensive plan that will be tailored to your unique family situation and financial status. Please call us today at (614) 429-1053 to set up your asset protection consultation. 

The post Are Your Assets Safe? What is Asset Protection Planning? appeared first on Charles H. McClenaghan, LLC.

What is a Will or Trust Contest?

A will or trust contest is a type of lawsuit that is filed to object to the validity of a will or trust.

If a will or trust is successfully contested (i.e., declared invalid), then the court “throws out” the will or trust. If there is a previous will or trust, then those terms will control. If there are no other estate planning documents, the state’s laws of intestacy will control. This can be a disastrous outcome for your intended beneficiaries.

Who Can Contest a Will or Trust?

Only a person who has legal “standing” can file a lawsuit. Standing means that a party involved in a lawsuit will be personally affected by the outcome of the case.

The following people have standing to question the validity of a will or trust:

• Disinherited or disadvantaged heirs at law–Family members who would inherit or would inherit more under applicable state law if the deceased person failed to make a valid will or trust.
• Disinherited or disadvantaged beneficiaries–Beneficiaries (such as family, friends, and charities) named or given a larger bequest in a prior will or trust.

Note: Not everyone involved in your life will have standing to challenge the validity of your estate plan. For example, even if a friend or business associate suspects that your will or trust is invalid, they may not have standing to contest it (unless they are your heir at law or named in your prior will or trust). 

When Can a Will or Trust Contest Be Filed?

A handful of states’ laws allow residents (and in some states nonresidents) to establish the validity of their estate plan before they die. This pre-death validation process allows an individual to confirm their estate planning decisions while they are capable of defending them, which, in turn, will bar challenges to the plan after he or she dies.

The time limit and procedures for contesting a will is determined by the laws and rules of the state in which the probate case is filed.

With regard to trusts, the time frame to contest them varies greatly from state to state. In some states, your heirs can be limited to as little as a few months to contest your trust, while in other states the time frame can be as long as a few years.

What Are the Legal Grounds for Contesting a Will or Trust?

In general, there are four grounds to challenge the validity of a will or trust:

1. The will or trust was not signed as required by state law. Each state has specific laws that dictate how a will or trust must be signed in order for it to be legally valid (usually wills not entirely in your handwriting must be signed in the presence of two witnesses who meet certain requirements).
2. The person making the will or trust lacked the necessary capacity. The capacity to make a will means that the person understands (a) their assets, (b) their family relationships, and (c) the legal effect of signing a will. Each state has laws that set the threshold that must be overcome to prove that a person lacked sufficient mental capacity to sign a will. Some states apply the same standard to establishing a trust and others apply the standards for capacity to make a contract (understand the purpose and effect of the contract).
3. The person making the will or trust was unduly influenced into signing it. As people age and become weaker both physically and mentally, others may exert influence over decisions, including how to plan their estate. Undue influence can also be exerted on the young and the not so young. In the context of a will or trust contest, undue influence means more than just nagging or verbal threats. It must be so extreme that it causes you to give in and change your estate plan to favor the undue

Note: While it is easy to assume that a will or trust signed in an attorney’s office is valid, this is not always the case. Attorneys who do not specialize in estate planning may be unfamiliar with the formalities required to make a will or trust legally valid in their state. Therefore, it is important for you to work with an attorney who is familiar with the estate planning laws of your state. Ensuring that an estate plan is protected against these legal grounds is particularly important if you wish to disinherit or favor one part of your family.

How Can Clients Avoid a Will or Trust Contest?

When you create or update your estate plan, one of your goals should be to insure that your final wishes are fulfilled. If you are concerned about challenges to your estate plan, consider the following:

1. Do not “do it yourself”! If you are concerned about an heir contesting your estate plan, only an experienced estate planning attorney will be able to help you create and maintain a plan that will discourage lawsuits. Also, note that unintended consequences can result from a “do it yourself” plan because a box or DVD cannot give you legal advice and it’s impossible to work around laws you know nothing about.
2. Let family members know about the estate plan. It is not necessary to let your family members know about all of the intimate details of your estate plan; at the very least they need to know that you have taken the time to create one and where it can be found.
3. Use discretionary trusts for problem beneficiaries. Instead of completely disinheriting a beneficiary who may squander their inheritance or use it against your wishes, you can require the beneficiary’s share be held in a lifetime discretionary trust and name a third party, such as a bank or trust company, as trustee.  This will allow you to control when the beneficiary will receive distributions and who will inherit anything that is left when the beneficiary dies.
4. Keep the estate plan up to date. Estate planning is not a single transaction, it is an ongoing process. Therefore, as the law and your family, assets and circumstances change, so should your estate plan. An up to date plan shows that you took the time to review and revise the plan as your family and financial situations have changed. This, in turn, will discourage challenges since the plan will encompass your current estate planning goals.

The Bottom Line on Will and Trust Contests

Will and trust contests are on the rise. Putting together an estate plan that is designed to head off challenges will go a long way to giving you and your loved ones peace of mind.

If you are interested in learning more about how to create and maintain an estate plan in Ohio that will be difficult to overturn, please give our office a call at (614) 429-1053.

The post How to Avoid a Disastrous Will or Trust Contest appeared first on Charles H. McClenaghan, LLC.

Some people might feel tempted to leave less fortunate family members or friends more of their assets and estate, but this decision can leave more financially stable loved ones feeling resentful or hurt. One common method to avoid hurt feelings and fighting over their assets is to instead divide an estate equally among beneficiaries. However, not every family’s situation is best served with this strategy. For those who require a different strategy to ensure all beneficiaries are treated fairly, it is important to meet with us so we can help you design a plan that benefits everyone.

Another good way to limit fighting is to avoid naming multiple family members as trustees or personal representatives, and instead name a qualified, third-party as a personal representative and/or trustee. Consider selecting someone you trust, or someone who has a legal or financial background. If you select a child, try to ensure the reasons for choosing one child over another are obvious and logical. Selecting a child because he or she is the oldest–even though they lack proper judgment–can cause years of resentment to be unleashed, while naming your child who is a CPA and lives down the street (regardless of that child’s birth order) makes a lot more sense.

An additional way to curb the possibility of fighting among your family members is to clearly communicate your wishes to them during your lifetime. This can take many forms. At a minimum, you can briefly tell your family that you have had your estate planning documents prepared and where they are located. Alternatively, you can bring out the documents and go over them page by page. By letting your family members know about your estate plan, you mitigate much of the contempt that is so often brought on by secrecy.

For those concerned about problematic beneficiaries who may squander generational wealth, disinheritance is not the only solution, and may backfire if it fuels a legal challenge. One alternative to disinheritance is use of a discretionary trust. This type of trust requires that the beneficiary’s share be held by a neutral, third-party trustee, like a bank or trust company, and distributed to the beneficiary in the time and manner you have described. A discretionary trust enables you to provide for your beneficiary without the worry that the money will be wasted.

It is incredibly important for people of all ages to prepare estate plans and update them routinely. While it can be difficult to talk about money with your loved ones, looping them into your plans now is a good way to prevent fights over assets once you are gone.

By keeping your estate plan up to date and working with an experienced estate planning attorney, you can reduce the likelihood that your will or trust will being contested or that your family will be torn apart by a bitter legal battle. If you’re eager to create and maintain an estate plan that maintain family peace and harmony–and also will be difficult to overturn–call our office today at (614) 429-1053. We work hard to ensure the wishes of our clients are carried out with fidelity. No matter your goals, we aim to protect the assets you’ve acquired and secure financial stability for the next generation (and, if desired, beyond).

The information presented here has been prepared by Charles H. McClenaghan, LLC, for promotional and informational purposes only and should not be considered legal advice.  This information is not intended to provide, and receipt of it does not constitute, legal advice.  Nor does the receipt of this material create an attorney/client relationship.  An attorney client relationship is not established until such time as Charles H. McClenaghan, LLC, enters in to a written engagement agreement with a specific client for a specific legal matter.

LEGAL NOTICE:  THIS MESSAGE IS AN ADVERTISEMENT AND SOLICITATION.

The post The Harmonious Family that Won’t Fight? The Outcome May Surprise You appeared first on Charles H. McClenaghan, LLC.

On April 15, our associate attorney, Phillip Haer, became a dad. Phil and his wife, Libby, welcomed their healthy baby boy, Charles “Charlie” Robert Haer.  Charlie was born at 8 lbs 15 oz and 21 inches.

We are so happy and excited for Phillip and Libby and their newest adorable family member!

Congratulations Phillip and Libby!

The information presented here has been prepared by Charles H. McClenaghan, LLC, for promotional and informational purposes only and should not be considered legal advice.  This information is not intended to provide, and receipt of it does not constitute, legal advice.  Nor does the receipt of this material create an attorney/client relationship.  An attorney client relationship is not established until such time as Charles H. McClenaghan, LLC, enters in to a written engagement agreement with a specific client for a specific legal matter.

LEGAL NOTICE:  THIS MESSAGE IS AN ADVERTISEMENT AND SOLICITATION.

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