John Lane Law

What are the Biggest Estate Planning Mistakes?

“Taking a few simple steps now can potentially help save your beneficiaries thousands in legal fees and taxes.”

One of the largest wealth transfers our nation has ever seen is about to occur, since in the next 25 years, roughly $68 trillion of wealth will be passed to succeeding generations. This event has unique planning opportunities for those who are prepared, and also big challenges due to the ever-changing legal and tax world of estate planning.

Fox Business’ article “5 estate planning disasters you'll want to avoid,” discusses the biggest estate planning errors to avoid.

Failing to properly name beneficiaries. This common estate planning mistake is easily overlooked, when setting up a retirement plan for the first time or when switching investment companies. A big advantage of adding a beneficiary to your account, is that the account will avoid probate and pass directly to your beneficiaries.

Any account with a properly listed beneficiary designation will override what is written in your will or revocable living trust. Therefore, you should review your investment and bank accounts to make certain that your beneficiaries are accurate and match your intentions.

Naming a minor as a beneficiary. This can be a problem, if they are still minors when you die. A minor won’t have the legal authority to take control of inheritance or investment accounts until they reach the age of 18 or 21 (depending on state law). When a minor receives an asset as a beneficiary, a court-appointed guardianship will be created to supervise and manage the assets on behalf of the minor. To avoid this mistake, you can name a guardian for the minor child in your will.

Forgetting to fund a trust. Creating a trust is the first step, but many people don’t properly fund their trust after it’s established.

Making a tax mess for your heirs. A significant advantages of passing on real estate or other highly appreciated investments or property, is that your beneficiaries receive what is known as a “step-up” in basis, so that they aren’t responsible for any income taxes on the appreciated assets when they are received. The exception is when inheriting retirement accounts, such as 401k’s and traditional IRAs. Except for a surviving spouse, inheriting a traditional IRA or 401k means that you are now responsible for the taxes owed. With the recent passage of the SECURE Act, most non-spouse beneficiaries must totally withdraw a 401k or IRA within 10 years. It is deemed to be ordinary income for beneficiaries, which could result in a huge tax bill for your heirs. To avoid this, you can convert some or all of your retirement account assets to a Roth IRA during your lifetime, which lets you to pay the conversion taxes at your current income tax rate—a rate that may be much lower than your children or grandchildren’s tax rate. When you pass away, any money that is passed inside a Roth IRA goes tax-free to your heirs.

Failing to create a comprehensive estate plan. Properly establishing your estate plan now, will care for your loved ones financially, and can also save them a lot of emotional stress after you’re gone.

Talk to an experienced estate planning attorney about planning now. It can really affect your family for generations. It is one of the best gifts that you can leave your family.

Reference: Fox Business (Nov. 12, 2020) “5 estate planning disasters you'll want to avoid”

Coronavirus News Should Make You Think about Estate Planning - John M. Lane Law, PLLC

“Nobody likes to think about their own mortality, and that's why so many people go without basic estate planning documents. Often, an event like the coronavirus can be the kick in the pants you need to get your affairs in order.”

The global Coronavirus (COVID-19) outbreak has many of us thinking about what could happen, if the disease spreads more fully across the general population. We all need to plan for what could possibly happen. To protect yourself and your family, it’s smart to be certain that you have the following these documents prepared and updated, says Motley Fool’s recent article entitled “The Coronavirus Should Have You Thinking About These 4 Things.”

1. A will or revocable trust. Be sure that your assets will pass to those who you want to receive them after your death. This is critical during crisis times. You don't want to make things any harder than they need to be. Create an estate plan to avoid potentially expensive and time-consuming processes like probate, which will have greater importance, if your family is confined to their homes in a quarantine situation. A simple will can cover what happens to your assets at death. This typically works well, especially for modest estates. State laws differ on how complicated a probate process would be with a basic will. Some people opt to use a fully funded revocable trust that doesn't require probate. For either a will or a revocable trust, make sure that it’s up to date and reflects your current preferences and family circumstances.

2. Updated beneficiary designations. If you have an IRA, 401(k) account, or life insurance policy, those you name as beneficiaries of that account will receive the proceeds, despite a totally different arrangement in your will or trust. Many of us also don’t designate any beneficiary for these accounts, which means added complications in the event of death.
3. Healthcare power of attorney. When we’re in the midst of this Coronavirus, it’s even more urgent that you'll be able to get the healthcare you need, if you're hit with this illness. A durable power of attorney for healthcare will give the individuals you choose the ability to make whatever medical decisions you specify on your behalf. An estate planning attorney can help you draft documents that match your specific wishes.
4. Financial power of attorney. You can designate an agent to help take care of your finances, if you become incapacitated or otherwise unable to handle your financial affairs. A general durable power of attorney for financial matters is another document that lets you delegate responsibility and authority to make financial transactions to the person you name.

Estate planning may not be the highlight of your week, but the Coronavirus outbreak has more people thinking about what they need to do. Make sure your family will have what they need even if something happens to you.

Reference: Motley Fool (March 8, 2020) “The Coronavirus Should Have You Thinking About These 4 Things”

Simple Estate Planning Tools - John M. Lane Law, PLLC

“The longevity of successful retirement cannot be overstated, thus the importance of building, preserving and protecting one’s assets during retirement.”

When we look at the steps taken in our investing lives, the basics are simple. As working investors in the initial stages, the priority is accumulation and growth. Therefore, we participate in retirement plans such as IRA’s, 401-k plans, etc.

As Marco Eagle’s article, “Money Talks: Estate planning tools” explains, the next phase is the retirement stage, when the focus shifts from accumulation to preservation and maintenance of the nest egg.

Growth is a component of any retirement plan, but protecting your purchasing power during retirement is critical. You also want to generate a predictable stream of income during retirement, in order to avoid compromising your lifestyle.

The final stage of successful retirement planning is often overlooked: that’s the estate planning phase or the strategy of a succession plan to pass assets to your family. There are many estate planning tools that can be used to execute an estate plan. You can create a personal trust. Under this arrangement, your assets are transferred into a trust during your lifetime and then transferred by the trust at death. It’s important from both a tax standpoint and an allocation standpoint, regarding who receives what and how much. This is what your estate plan does for you and your family.

Work with an experienced estate and trusts attorney to establish your estate plan, so you can achieve your final objectives when passing assets to the next generation. Some individuals like the ability to exercise control with an effective plan to pass assets to their beneficiaries, without the need of trusts or probate.

There are many types of insured annuity strategies that will pass assets immediately to the beneficiaries, without the need of probate. Avoiding probate is frequently part of a strategy to make the assets available, immediately after the death certificate is issued.

Some see the foundation of their estate planning as the incorporation of life insurance. This lets the beneficiaries inherit assets, generally tax free. Avoiding a taxable event upon death is also appealing, based on both taxes as well as overall portfolio values. Talk to a professional about your situation.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Marco Eagle (June 11, 2017) “Money Talks: Estate planning tools”

How to Build, Protect and Enhance Your Wealth throughout Your Life - John M. Lane Law, PLLC

“Save early and often. The sooner you start to save, the easier it will be to amass a comfortable nest egg -- thanks to the power of time and the magic of compounding”

For the 70th-anniversary issue of Kiplinger’s Personal Finance, Kiplinger outlined its best advice to show you how to build, protect and enhance your wealth throughout your life in an article entitled “5 Time-Tested Tactics to Save for Retirement.”

Start Now. A 25-year-old who saves $450 a month in a tax-deferred retirement account and earns an average yearly return of 7% will have about $1.1 million at age 65. If he or she waits until age 35 to start saving, they’d have to save $950 a month to reach the same balance by age 65. You should aim to save 15% of your income, including any employer match for your retirement plan.

Take advantage of employer incentives. For your company’s 401(k), you can contribute up to $18,000 ($24,000 for people 50 and older) in 2017 to this pretax account. Your employer may also add another 4% to 6% of your pay, maybe more. Try to save 15% of your income, including the company match, from the beginning of your career until the end. Even if you have to cut back for a few years, contribute at least enough to get the full company match, and boost your contributions later to get back on track.

Take stock. Calculate the future value of your current savings and see how much more you’ll need to save to attain your retirement goal.

Plan a plan. Create your retirement budget, with a column for essential costs (housing and food) and another column for discretionary expenses. Factor inflation at 2.4% over the next 20 years, and consider a separate calculation for health care costs which likely will increase at a much higher rate, perhaps as  much as 5%. Match your expenses to guaranteed income, like pensions and Social Security, plus the annual amount you plan to withdraw from savings. If you see a gap, you’ll need to spend less or work a bit longer. That may not be a bad thing, since staying in the workforce for a few extra years gives you more time to contribute to your retirement accounts—and you have fewer years to finance when you do retire.

Up your contributions. If you’re 50 or older, you can make catch-up contributions to your IRA and 401(k). This year, you can add $6,000 to your 401(k) above the $18,000 annual contribution limit. That’s a total of $24,000 for the year. You can also save an extra $1,000 in a traditional or Roth IRA beyond the $5,500 annual contribution limit (a total of $6,500 for the year). If you invest $24,000 in a 401(k) every year starting at age 50, you’ll boost your retirement savings by more than $580,000 by the time you’re 65, assuming a return of 6% per year. If you invest $6,500 in your IRA during those years, you could accumulate over $157,000 in your IRA in 15 years.

Self-employed savings. If you’re self-employed, you can contribute up to 20% of your net self-employment income (business income minus half of your self-employment tax) to a SEP-IRA in 2017 with a cap of $54,000. In a solo 401(k) plan, you can save more, because you can contribute as both an employer and an employee. The maximum contribution this year is $54,000, or $60,000 if you’re 50 or older.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Kiplinger (March 2017) “5 Time-Tested Tactics to Save for Retirement”

Time to Review your Financial Planning - John M. Lane Law, PLLC

“There's no time like the present to take stock of your financial life.”

Business Insider’s recent article, “A financial adviser shares a 5-step checklist to complete before the end of 2016,” notes that many folks spend more time planning vacations than they do their finances or retirement. The beginning of the new year is an excellent time to take a comprehensive review of what you have—both assets and liabilities—to prepare for the year ahead and any financial milestones or challenges you may face. These can include things like marriage, a home purchase, adopting a child or retirement.

Here are some important financial steps to at the start of 2017.

Take financial inventory. Consider aggregating your accounts and identifying what you have, such as IRAs, bank accounts, and life insurance. You should take an inventory of your debt and determine how you will pay it off in 2017.

Review your estate plan. OK, it’s not that exciting, but it’s important. Don’t wait until this time next year, because tragedy can strike at any time. If you fail to plan properly, and something unfortunate happens, your family may be left unprepared. It's critical to have control over what will happen to everything that you leave behind.

Update your beneficiary forms. This is a task that should be reviewed periodically—especially if you've been married or divorced, had children or retired in recent years. A designated beneficiary on an insurance policy or an IRA has precedence over a will or a trust. As a result, it's important to make adjustments after major life changes.

Make some smart tax moves. You should know how the taxes work on your 401(k)s and IRAs, so take a look to be certain you're saving effectively. The maximum annual contribution to a 401(k) is $18,000 or $24,000 if you're over 50. Therefore, if you've got a holiday bonus, that’s the perfect reason to add to your retirement accounts.

You should also remember that you can gift as much as $14,000 per person annually to as many people as you'd like without a gift tax liability. In addition, with any tax planning for retirement, you might think about converting your retirement money through a Roth IRA conversion ladder. Money transferred from a traditional IRA to a Roth is tax- and penalty-free after paying taxes on the conversion.

Evaluate your path to retirement. Retirement planning is important at every stage of life, so be pro-active. If you create a plan, it can hold you accountable. It is important to speak with a qualified estate planning attorney. Don’t just “set it and forget it.” Stay on top of issues and continually monitor the situation.

If retirement is in the near future, or if you're planning to retire early, start to have discussions about identifying guaranteed income, social security, your pension options, and how to utilize any or all of them into your overall income plan, along with the tax consequences.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Business Insider (December 9, 2016) “A financial adviser shares a 5-step checklist to complete before the end of 2016”

No One is Exempt from Planning for Incapacity - John M. Lane Law, PLLC

“Most people can’t or don’t want to think about the day they might be incapable of making even basic decisions.”

Incapacity planning is about designating how you want to be cared for in the event that you lose your cognitive ability. It’s hard to face, but it’s absolutely necessary, says Barron’s in “Three End-of-Life Estate Plan Lessons.” Most people don’t give much thought to the issue until it is too late to do it correctly. That means added expense and leaving money on the table for Uncle Sam to collect in unnecessary taxes.

Let’s look at some important lessons about incapacity planning:

1. Inform your surrogates and agents about your wishes immediately. You should also explain your thought process to them so they have complete information to carry out your wishes if necessary. What often happens is that Dad has a fall or an illness that puts him in rehab. The family reacts by shifting into crisis mode, and they make important decisions relying on the information readily available instead of the complete picture.
2. Select some strong surrogates. These are agents or advocates to whom you grant durable power of attorney. They will have control of your welfare. This includes handling your finances and paying your bills. Therefore, in addition to having great trust in your surrogates, you have to be sure that they’re able to manage your finances. Discuss the day-to-day administrative and financial tasks that they may need to monitor for you. Some people will divide the responsibilities into two jobs: a healthcare surrogate who will decide your medical decisions and a financial power of attorney to maintain focus on your financial affairs.
3. Don’t give a child who’s emotional and fragile the responsibility of cutting off your life. Many people select a child as their medical surrogate, but he or she may not be the one best-suited emotionally to make tough medical decisions. That involves decisions about withdrawing life-prolonging procedures or the intake of food, if the situation arises. That can be a huge emotional challenge.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Barron’s (November 8, 2016) “Three End-of-Life Estate Plan Lessons”

Olympic Event Can Show “Rio” Important Retirement Planning Tips - John M. Lane Law, PLLC

“Thinking about these events in terms of retirement planning provides a good overview of the things to think about when constructing your financial plan.”

Did you ever consider that retirement planning in the 21st century is very similar to the modern Olympics pentathlon?

The Des Moines Register’s article, “How the pentathlon reflects retirement planning,” first reminds us that the pentathlon consists of five events: fencing, swimming, show jumping and combined running and shooting.

Fencing. When fencers spar, it’s like investors balancing risk and return in their portfolios. With riskier assets, you get a better return potential. Safer investments help limit your vulnerability in a down market. A sound asset allocation strategy is like the parrying of the contestants…whether to go for broke (literally and figuratively) or balance the attack.

Swimming. The water and the waves in pool lanes create resistance and drag for swimmers. It’s never just smooth as glass when there’s a race on. A person can also experience times of resistance and slowing in his or her portfolio—like during an economic recession or an interest rate hike. The way to get around this is with a diversified portfolio to withstand the waves and to be ready to seize an opportunity when market conditions improve.

Show Jumping. This component of the pentathlon involves jumping over barriers while on horseback, which is no easy task. Obstacles can appear in life beyond market and economic risks that can ruin a well-planned retirement. There are taxes that will be part of your life, and inflation will increase your cost of living over time. Don’t trip over a barrier but rather plan ahead for what might occur.

Foot race. The pentathlon concludes with foot racing and shooting at targets—much like the final stretch that many folks face in the years leading up to retirement. These individuals are trying to save as much as possible. Part of this training requires preparing for potential health care costs in retirement, teaming with an experienced estate planning attorney to create a proper estate plan and including risk management elements in their financial plan.

Even pentathletes take time out to focus on life itself. Don’t get caught up and focus all of your energies entirely on your finances. Remember to think about the reasons why you’re saving and what matters most to you. This can help you stay committed to your long-term goals and make your retirement more enjoyable.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: The Des Moines Register (August 1, 2016) “How the pentathlon reflects retirement planning”

It’s Time for a Midyear Checkup—Financially Speaking - John M. Lane Law, PLLC

“Fantasizing about reaching your financial goals is easy. Actually accomplishing them is more difficult.”

Over a third of Americans thought about a financial resolution this year, according to a Fidelity Investments survey. Their top goals were to save more, spend less and pay down debt.

If you were one of these go-getters and goal-setters, this summer is a perfect time to look at your progress, says US News in “Keep Your Money Goals on Track with a Midyear Financial Checkup.”

While summer is a natural halfway point between New Year's financial resolutions and year-end tax planning, it's also a convenient time to contact financial experts, tax planners, human resources representatives and other advisors—who are less busy during their “off-season.” For your midyear financial checkup, look at each of these financial areas.

Taxes. By summer, you should have a decent idea of what's going on with your tax situation and can start planning. Are there any major life changes since last year to include in your tax strategy? This will mean a transition in your tax situation. Also, if you earned a nice tax refund in April or paid a large tax bill, you should ask for a W-4 from your employer and adjust your withholding. Also, look and see if you're maxing out workplace tax benefits—like your flexible spending accounts and retirement contributions.

Insurance. Use the summer to determine if your insurance plans are meeting your needs. Many employers have an open enrollment for health insurance and other benefits in late fall, so now’s the time to think about this.

Estate Planning. If you don't yet have an estate plan in place, speak with an experienced estate planning attorney. Don’t be one of the 64% of Americans that don't have a will. Get the basics prepared, such as an up-to-date will, power of attorney and health care directive.

Emergency Fund. Check on your emergency fund and see if it was depleted by a summer vacation or another event like a change of jobs. Time to beef it up! You should keep three to six months' worth of living expenses readily available. Build your rainy day fund by putting a percentage of your paycheck into savings every month. If you don't see that money available in your checking account, you won't miss it.

The Long Term. Summer vacation is also a great time to look ahead and consider where you'd like to see yourself in the future. Get started with financial strategies that will help you reach those goals.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: US News (July 28, 2016) “Keep Your Money Goals on Track with a Midyear Financial Checkup”

Be a Smart Shopper When Looking for a Final Resting Place - John M. Lane Law, PLLC

“One never expects their loved one’s last resting place to look like this.”

A Sarasota, Florida cemetery was warned by county officials to bring the grounds up to code or be fined. Recent reports had described overgrown grass and weeds at Sarasota Memorial Park; however, after a news article appeared, workers were seen mowing the lawn, weeding, and edging around tombstones.

WTSP 10 News recently published a story, “Protecting your loved ones last resting place,” which reported on the problems discovered during Memorial Day weekend. Residents walking their dog nearby noticed the overgrown cemetery. They complained to the property manager and filed a complaint with the county’s code enforcement department about the tall grass and trees on the graves.

The dog walkers even called on volunteers to mow Sarasota Memorial Park. They mowed a section one morning until they were told to leave. However, their complaint to the County Code Enforcement Department resulted in a warning to the cemetery property owners. They were ordered to clean up the cemetery or face a notice of violation and fines.

Cemetery maintenance is contractual, and it’s expected when you pay for a plot. But a contract is only as good as the company behind it. Like anything else you purchase, you need to look carefully when making a decision about a burial plot.

Research the reputation of the cemetery you’re considering. Remember: just because the cemetery looks good now—like Sarasota Memorial Park—doesn’t mean it will stay beautiful forever. Prior to making a plot purchase, ask how much is in the endowment trust fund.

In Florida, state law dictates that 10% of the purchase price be placed in a trust fund for maintenance of the property, which is monitored by the state. Also, Florida State Statue §497.262 says that cemeteries are required to be “well cared for and maintained in a proper and dignified condition.”

Be selective, and keep a digital record of the cemetery's conditions—take a photo of it the day you buy a plot and any time you visit in the event you need to file a complaint.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: WTSP 10 News (June 27, 2016) “Protecting your loved ones last resting place”