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Newport Beach Estate Law Blog

The reality of how many people do estate planning

When you think about how many people do their estate planning, it's easy to assume that every adult must have some sort of plan. After all, everyone has assets, even if some people have more than others. Many people have children. And, above all else, all people are going to pass away at some point. That's the human condition. It's the world we all live in. Certainly, we're all prepared, right?

Not really. Reports show that about 42% of people in the United States actually have written a will. This means that the other 58% have nothing in place. They have no plan for their heirs, no plan for their assets and no real idea what will happen to their estate when they pass away.

Why divorced women with children may want to make a trust

As a newly divorced mother, you probably have a lot on your mind. For example, you have to figure out how to provide everything your children need on just the income you currently have and the child support you receive. Many divorced parents only realize after the end of their marriage that child support typically does not cover even half of the monthly costs caring for a child incurs for your household.

One of the financial considerations you could overlook to the detriment of your children and your own peace of mind is the need to rearrange how you structure your estate plan. You may have shared the last will with your ex during your marriage, or you may not have even bothered to create an estate plan yet.

Add balance to your incentive trust

Are you thinking of using an incentive trust to give your heirs motivation as you pass your assets on to them? One of the most common ways that parents use an incentive trust is by specifying yearly payouts that are tied to employment. For instance, the child could get $10,000 per year from the trust for every year that they hold a job for all 12 months. In some cases, parents just stipulate that the trust pays out the same amount that the child earns, giving them extra incentive to work harder.

The idea behind this is simple: The trust motivates the child to work, rather than giving them money that allows them to neglect their career. However, what you'll find is that things are rarely as simple as they appear.

A family business is not an easy career

You own a family business. It's been successful, but you worry that your children simply see it as an easy career. By virtue of the sheer luck of being born into your family, they will always have a job waiting for them.

You're not wrong to be worried. Experts warn that this point of view can be detrimental to children. It does not give them the mindset that they need to run the company effectively.

Estate planning before Alzheimer's

Estate planning after you have been diagnosed with Alzheimer's can be problematic for your family. They may not think that your estate plan is accurate because of your condition.

For instance, say you want to leave someone out of your will. You have your own reasons to do it, and you even talked with the person in advance. You don't leave them anything.

Don't let beneficiary designations become outdated

Don't assume that your heirs will get an asset just because you leave it to them in your will. In some cases, other types of paperwork actually take precedence over your will.

A good example is a beneficiary designation. You may find yourself using this with life insurance policies, annuities and retirement accounts. The beneficiary designation is something you set up at the beginning to determine where the controlling company should send the money.

4 main classifications for children with special needs

If you have a child with special needs, a big part of your estate planning is likely setting up a special needs trust and other systems to support the child when you can no longer do so. You understand that your role as a parent is different than most, and your child may need life-long care. The trust can help to provide that for as long as possible.

Of course, exactly what type of assistance your child needs, and how much that assistance will cost, depends to some degree on what type of special needs the child has. There are four main classifications:

  1. Physical: This includes issues like muscular dystrophy, chronic asthma, epilepsy and multiple sclerosis.
  2. Developmental: This includes things like autism, processing disorders, dyslexia and down syndrome.
  3. Sensory impaired: This includes issues such as limited hearing, being fully deaf, being blind or being visually impaired.
  4. Emotional/Behavioral: This includes things like ADHD (attention deficit hyperactivity disorder), bipolar disorder and oppositional defiance disorder.

Can your child actually run your company?

Ever since you started your business, it has been your dream to pass it on to your children. You want them to love it as much as you do. You want them to have a source of income. You know how hard it was for you to find a career path, so you hope to give that to them and make their lives easier.

There's a big question that you have avoided, though: Can they actually do it?

Consider these 10 areas when setting up an estate plan

Estate planning involves far more than just 10 steps. In fact, one of the reasons that people often put it off is that they feel intimidated by the sheer amount of work that they know it's going to be.

You shouldn't feel this way. Estate planning is very important and you can accomplish it; it's probably easier than you think. But, to make it more manageable, let's start by looking at 10 different areas you want to consider. You can use them as a jumping-off point to get started with your entire plan. These areas are:

  1. Preserving wealth for future generations
  2. Making sure health care decisions are properly taken care of if you are still alive but cannot make them yourself
  3. Distributing business assets
  4. Minimizing the taxes that will be leveled on the estate
  5. Handling assets in different states
  6. Trying to reduce the odds of confusion or conflict among your heirs
  7. Picking a guardian for your children if they are minors
  8. Making sure that your heirs actually get the right assets at the right time
  9. Setting up a flexible plan to handle your estate if you cannot do so alone
  10. Dealing with any property that is owned jointly; this could be as simple as assets you bought with your spouse or assets you bought with a business partner

The odds are stacked against your family business

You have a vision for your family business that goes beyond your immediate interaction with it. You want to leave it to your children. You hope that they can in turn leave it to your grandchildren. You want to create a legacy that spans the generations and provides income and opportunities for decades to come.

It may happen, but you need to know that the odds are against you. About two out of every three family businesses do not make it down to the next generation. The odds worsen with each successive generation, as only a third of those surviving companies successfully pass to the grandchildren. In the end, it means that just 10% of family businesses make it through three generations. Nine out of 10 fail.

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The Soto Law Group
1101 Dove Street,
Suite 200
Newport Beach, CA 92660

Phone: 949-945-0415
Fax: 949-945-0197
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