Asset Protection ~ Facts & Fiction
Recently, I read a column that suggested asset protection strategies should be used by those with modest estates. While I appreciate the premise, I respectfully disagree. Asset protection strategies used by high-net worth or ultra-high net worth individuals require a substantial investment in resources – specifically time and money. Most families with modest estates don’t have $2-5 million in liquid assets, a mortgage free million dollar primary residence, a second vacation home, watercraft, and insurance to cover the value of all of these assets. Let’s be real, if: (1) Your family residence is still subject to a mortgage, you don’t actually own the asset to protect. (2) You own 1 or 2 multifamily income producing properties that are still subject to mortgage, you don’t actually own the asset to protect. You do, however, own the income, which is what umbrella insurance and LLCs are for. (3) You don’t have the funds readily available to replace your mortgage-free family home, the only way to protect that asset is with a robust homeowners insurance policy. Economic uncertainty is frightening. And ways exist for families with modest estates to protect what they have and undergird their wealth accumulation efforts. However, if you’re thinking about asset protection consider the above and think again: AFFORDABILITY. The legal fees alone are generally $10,000 or more, and they generally do not end because asset protection or wealth preservation is not a “set it and forget it” endeavor. CURRENT JURISDICTION. All states (or jurisdictions) don’t allow you to establish an asset protection plan or recognize asset protections trusts. IT TAKES A TEAM. Lawyers, tax professionals, appraisers, insurance professionals, and, even, security professionals depending on your other family members and the size of your estate. Experienced estate planning and wealth preservation professionals will do what they can within legal parameters to set you and your family up for success. But, it’s not like the movies and if a wealth preservation professional snaps their fingers and agrees with everything you say, run…fast…and far.
High-Wire Acts & Estate Planning
“If you look down, what you see may not be legally binding.” Like most people, I listen to podcasts on a regular basis. One episode heard lately had absolutely nothing to do with the law, but mentioned the issue of “informed consent.” That led me down the legal rabbit hole considering my duties as a lawyer with potential clients. Every time I or one of our associate attorneys meets with a potential client, we must obtain their informed consent to provide them with legal services. And what exactly is informed consent? Ensuring that our potential client has the requisite mental capacity to take the steps they want to take. For example, the capacity needed to establish a Last Will and Testament requires that a potential client knows what they have and its approximate value, who their heirs would be, what they want to do with their estate assets, and understands the consequences of the distribution scheme they have in mind. Next, they must have accurate knowledge related to the services they are seeking. Using the Will as an example again, a potential client must know that an estranged spouse, can, in Illinois reject the Will and take 1/3 of the Estate. Related to the two elements above, a potential client must then understand the implications of their actions, like establishing a Will that disinherits an estranged spouse or doesn’t mention an estranged spouse. Can you say probate? Oh,..and then we have to explain what that is. After all of the above, the potential client then must have the freedom to say “no thank you” to our pitch. If Junior is sitting next to Grandma whispering in her ear and Grandma says reluctantly, “Ok. Who do I make the check out to and give everything to Junior,” Houston, we could have a problem. Finally, Grandma must provide us with the authority to prepare the Will. If Grandma says, “sounds good,” I’ll talk to my family and walk away. Grandma hasn’t given us authority to do anything. Now… I’ve a few questions: (1) When you sign up for one of the online platforms, are you providing your informed consent? (2) And if so, to whom? (3) What AI program or online platform took and survived the bar exam? I love technology, but leaving issues involving family and money to something that is artificial and has no real world experience in probate courts is a high-wire act, to say the least. Need a Review Of Your High-Wire Estate Plan
COVID-19: What We’re Doing Is What We’ve Been Doing
From its inception, The Law Offices of Max Elliott has used technology to provide safe, efficient, secure, and cost-effective services to our clients. Over the years, our systems and processes, which were new to the legal industry, have been slowly adopted by other firms. And we’ve continued to evolve and grow into providing even more convenient and secure services for our clients. We were the first solo firm in Illinois to use a secure, encrypted client portal, which is now critical in light of COVID-19. Using our portal, we collaborate with clients about their legal matters safely and securely. Clients can upload or download the instruments and information they need without leaving home. Potential clients can complete intake online or over the phone. We were one of the first small firms in Illinois to accept credit or debit card payments. From the beginning, clients could forgo using postage or coming to our office to drop off payments. Appreciating the busy lives of clients, we routinely teleconference with clients and provide “house calls” for signing conferences. Recognizing the benefits of technology and productivity, our team members are accustomed to telecommuting. Valuing our workers, even as a small firm, we already have a paid sick leave policy, among other benefits. So, our firmwide processes, which are critical to keeping clients safe during the COVID-19 public health crisis, are processes that we’ve been using for years. We’re not changing much about how we work because we were already providing safe and secure client services. And we thank our clients and vendors for helping us provide a safe and secure law practice for all the individuals and families who comprise our firm\’s universe.
Don\’t Try This at Home…Though the Law Says Differently
On September 24, 2014, the Illinois legislature enacted an amendment to the Illinois Power of Attorney Act. The Act was changed to “simplify” the healthcare power of attorney form. Estate planning attorneys in Illinois have been watching this legislation for a while, hoping that it would die. Unfortunately, it lives and the consequences we foresee are anything but simple. In fact, it looks like our legislature gave our citizens an early Halloween scare. The problem is that this can produce genuinely monstrous results: No standard form is required. So in medical emergencies, doctors must use their own judgment about legal forms. Huh? The notice page that makes the suggested format legal is FIVE PAGES long, which includes a litany of questions users are to ask themselves and presumably include answers to on their healthcare power of attorney “form.” Yeah, right. The form you use can be “included” or “combined” with the statutory property power of attorney. Doing so will allow your bankers to read all about your health concerns and your doctors can do the same with issues concerning your finances. Did our legislature forget about HIPAA? The changes removes actual provisions regarding choice of agent…OK…so that’s a tad misleading – that guidance is somewhere in that FIVE PAGE notice. What is optional in the form of your choosing is selecting quality of life over length of live, with some mention about pain. The changes remove language from the suggested format that reflects actual U.S. congressional privacy laws for medical practitioners and third parties. This language is now placed in the statute. Presumably, users will review the Illinois Power of Attorney Act, understand it, then read FIVE PAGES of notice, understand that notice, and create this legally sound, uniquely tailored form. Yeah, right. The form also provides that successor agents are “optional.” Not providing successors has always been optional, lawyers just didn\’t like saying so. We don\’t like telling folks about that particular option because not providing successor agents is tantamount to driving 70 MPH on a busy highway with no seat belt or airbags. Forget Frankenstein or Freddie Krueger, the new changes to the Illinois Power of Attorney Act are sufficiently scary and worse – they\’re REAL.
80% Get It Wrong…
In the digital age, it\’s rare that potential clients haven\’t done research before contacting our firm. So, when speaking or meeting with them, it\’s important to hear what they\’ve found. Sometimes it\’s factually correct, but not for their case; sometimes it\’s factually incorrect with respect to their case; and often the pieces just don\’t fit together at all. So then I say, \”Think about this…\” And, as colleagues continue to criticize DIY services, as online legal documents services proceed with IPOs, and as folks continue to ask me to opine, I thought these few facts may be worth sharing:
JD, CPA, CFP – What\’s with the Estate Planning Alphabet Soup
When designing an estate plan for a new client, I usually ask if the client has a financial “team.” “A team?” you may wonder or say to yourself, “I don’t need a team because I don’t even have an estate! I just need a will, if that.” On the contrary, as mentioned in a previous post, you probably do have an estate and it’s likely larger than you think. So yes, you probably need a team. Consider this analogy: To maintain overall good physical health, you need a primary doctor, a dentist, and, if you’re female, a gynecologist. Now these providers may only consult with each other once, if then, but they are certainly aware of the other\’s existence because your good health requires it. An estate planning team works in a similar way, albeit a little closer, and is essential, especially if you have loved ones you want to protect. So here\’s the line-up: Estate planning attorney: Does more than draw up a will or a trust, and while online DIY services offer estate planning, if you use one, be sure there\’s a review by an attorney who understands the probate, trust, and tax laws in your state. In addition to the many laws, an estate planning attorney must also have a good command of the various, related documents needed to protect you and your family now and in the future. He or she should also possess, at least, a basic understanding of the federal and state tax implications of the distributions and powers designated within the documents, near-term financial planning, and retirement planning. Certified Public Accountant (CPA): Must take a licensing exam, work for as an accountant for about 5 years, and take continuing education courses to retain certification. Accordingly, a CPA’s knowledge base is deeper than a non-certified accountant. A CPA whose specialty is estate and income taxation typically consults with your estate planning attorney to ensure that the tax implications for you and your beneficiaries are minimized. Certified Financial Planner (CFP): While not required for CFAs, a CFP must take extensive exams in financial planning, taxes, insurance, estate planning, and retirement. He or she must also take continual financial planning courses to maintain their certification. A CFP performs the research needed to help determine how best to allocate funds to reach your personal goals and the goals of your family and consults with the estate planning attorney to ensure beneficiary designations are accurate and that allocations and distributions are aligned with your goals and unique investment style. In a nutshell, your estate planning team is a group of capable and highly qualified individuals who, together, help to ensure that: The intentions underlying your financial and personal interests are legal and accomplished during and after your lifetime; The tax implications of those interests are minimized; and The financial interests are secured and grown if possible. *Note: Different states have different rules on fee-splitting arrangements, but typically attorneys cannot accept fees from non-attorneys, at least in Illinois, which is a healthy check-and-balance on your team.
Saving Parents\’ Precious Resources
Occasionally, I’m stunned by how little current clients\’ or customers\’ needs are considered by service providers. As an estate planning attorney for “non-traditional families,” one of my key concerns for my clients is providing them with services that are not only excellent, but also efficient. Nontraditional families include women who are heads of households with children and, as the primary wage earner, they have 3 issues to continually manage: Financial resources Time Parenting While The Law Offices of Max Elliott may not be able to assist in quality parenting, we do provide services and use tools that bring efficiency to the first 2 issues. In plain English, we help our clients by saving them money and time. Estate planning, as is said so often now, is not just for the very wealthy. So our services allow you to determine the scope of estate planning protection that fits within your financial framework. Are you a median wage earner who rents with a teenager living at home but working his or her way through college? If so, then an estate plan that encompasses education planning and a Qualified Personal Residence Trust, or “QPRT,” may be unnecessary AND we won’t turn you away. We will simply recognize that more than likely, to protect your family and yourself, you will and should want to start with simpler vehicles, which is what you can obtain for probably less than 1-2 months’ rent. BUT… “It’s not money, but time,” you say. Well let’s look at Joan: Joan is an HR executive at a Fortune 500 company and earns more than the median. Plus, she’s up by 5 AM to workout, get the kids off to school and daycare, is working her smartphone by 7:30 at the office by train by 9ish, eats lunch at her desk, is on the 5:15 and cooking or ordering in by 6:30 but answers her email until 10:00 PM. Weekends are for catching up on the latest SHRM reports she missed while taking the train during the week. Joan came up along the ranks in HR, so it would be unwise for us to waste her time talking about 401(k) planning and HSAs. She’s a tech wizard who lives in the ‘burbs and works downtown, so I’d also never think to ask her to commit to only in-person meetings when a teleconference or an exchange on our secure client directory will suffice. Speaking of that directory, if you are the mom, renting, and with the teenager or a parent with kids and no time like Joan, or someone who just wants to save time and money, our secure online portal that is available for clients makes it easy to engage in substantive, secure conversations, exchange documents, and pay fees all in one place. It’s not an open e-mail or even e-mail on our website. It’s a secure, designed specifically for lawyers and used strictly by us and our clients. So, in concluding this shameless “use our service” self-promotional piece, I’ll just say that whoever you choose as your legal services team, make sure that your precious resources are considered and used wisely.
Thanks for the Flux*
In a recent newsletter, I gave thanks to what means most to me personally – my relationships. Having given thanks on a personal level, I now turn to what I am thankful for professionally. I am ever so grateful that the legal profession is in a state of flux and, what many of us think, is a period of dramatic transition. Liking “change” may sound odd coming from one whose profession is based on the cardinal rule of “precedent.” Still, I like good ole flux, especially when it’s followed by progress. Dating back to the early 17th century, the word, “flux,” meant a sense of “continuous succession of changes.” Works for me. I have witnessed on numerous occasions non-stop, sequential, flips and flops that have brought about positive and progressive steps for humanity. Often, while in the moment, we don’t recognize turmoil as the benefit it is because the moment is painful. However, here is where hindsight is acceptable and we can nod, \”Yes, that was tumultuous and painful, but worth it.\” So I am optimistically thankful of the continuous succession of changes occurring within our profession, most of which, like other professions, have been brought on by technology. It started with computers, then e-mail, next the Internet, and now this “cloud” thing. Computers made writing and editing a faster process, whereby time saved could have been money saved by clients. Hmmm… E-mail, especially within firms, made communication between colleagues collaborating on cases easier and faster. Still, occasionally something would get lost in the translation, especially since the business world frowned upon emoticons. Plus, sometimes, instead of getting lost, something would be set free, to everyone, e.g., when a poor associate accidentally hit “reply all” and client confidentiality was no more. 😮 Moving on, we entered the age of the Internet, where “surfing” became more than something LA lawyers did when they finally took a vacation. It was also the age where an occasional law clerk wished they were in the ocean when, instead of performing online research, they were surfing without permission and blasted by a pornado. Today, a few daring legal eagles are embracing “the cloud,” online storage and project management systems that allow for not just storage but client and team collaboration. Technology dramatically streamlined many of the processes lawyers depend on, decreasing the need for all that file cabinet space – and exorbitant client fees to pay for it, allowing for the sharing of legal information online, and helping potential clients better and more completely understand what we do. Some think that technology has brought us too far. Clients are scrutinizing bills and, heaven forbid, asking us to explain to them, in plain English, the fundamentals of their cases or matters. Whereas before clients would just listen, get the bill, shrug their shoulders, pay the bill, and be thankful. Yes, Mr. Mason, those were the good ole days…Not. I like these days better. I like clients who care about their finances – being fiscally prudent is the world we live in and I like clients who live in reality. I relish clients wanting to understand their options and the legal parameters of their matters because, ultimately, while I may know what’s best for them from a legal perspective, they know what’s best for them from a human perspective. If the 2 perspectives form the frame in which I work, there is an opportunity to build a lasting bridge that benefits us both. Yes, I like these days better because today’s changes are bringing transparency, accountability, client collaboration, and more flexible fee arrangements. All of that combines in a formula providing more people access to the legal system and the protections and justice it brings. Of course, there will unfortunately still be “dream teams” but there will be more “Cinderellas,” too. Of course, there will be growing pains, more oopses, and battles between the old and new guards. However, if the changes we’re experiencing in the legal field mean more of our society will receive the legal services they need, I am very thankful for these changes, indeed. Now, let’s eat! Send me an e-mail or comment below and I\’ll tell YOU what the asterisk (*) after the \”Flux,\” means.
2 Lessons for Families on a Tight Budget
The Great Recession was enough to make most people try to pinch pennies where they can. However, the fact is that planning for the protection of your family costs money; it may not cost tens of thousands of dollars, but it still costs. Basic instruments that help protect the family are generally available for little or no charge at the courthouse – or on most state governments\’ websites. Still, to ensure that your instruments are correct, which means your family is appropriately protected, a legal consultation, even if brief, may be worth it. And for goodness sake don\’t try to prepare the instruments yourself. Document preparation services and low-cost collectives are in what is referred to as a \”race to the bottom.\” Allow me to illustrate this point: Once, I was in court for a hearing, so I decided to make it a 2-fer and get another client’s instruments filed with the court after my appearance. Waiting for the clerk, I overheard another clerk speaking with a woman who was trying to decide how to handle a guardianship matter in the least expensive, most efficient way she could. The woman told the clerk that she had the appropriate Power of Attorney (“POA”) and had possessed this document for a long time. The clerk then responded that the woman was “fine.” As a lawyer and, more importantly, as a human being, I find it necessary to step in when someone may be unwittingly jumping off a cliff. So I gently injected myself in the conversation just to inform these ladies that Illinois had changed both its powers of attorney a few months earlier. Eyes became saucers … oops. Lesson #1: Good advice isn’t typically free, BUT bad advice is typically very, very expensive. Even if an individual believes that they can’t afford a lawyer, instruments and the requisite advice for basic family protection is available for much less than the cost of really bad advice: Healthcare Power of Attorney, authorizes another individual to make decisions regarding your medical care and treatment while you are incapacitated. This POA is available in many places and is relatively self-explanatory. However, if you seek to have an attorney review your form, depending on your health, it should not take an unreasonable amount of time amounting to an unreasonable fee. Caution: If the form is driven by an online document preparation service, be sure an attorney licensed to practice in your state with a focus on estate planning performs the review. Laws change and automated document preparation services can’t modify their forms as quickly as an independent lawyer. HIPAA release forms, instruct medical institutions to release your medical records to the individual you designate on the form. The forms are universal because they’re governed by federal law and are available almost everywhere. They should supplement your Healthcare Power of Attorney. Property Power of Attorney, like a healthcare POA, authorizes an individual to step into your shoes and make decisions about your financial affairs. Also, like the healthcare POA, the document is readily available and should be reviewed by an appropriate attorney. Lesson #2: VIP documents, providing basic family protection, before death, cost a lot less than bad advice, even with proper attorney review. Today, most families are on tight budgets, but that shouldn\’t prevent you from being able to protect your family like families whose budgets are more flexible. However, to not protect properly…well…see Lesson #1.
Money-Saving Tips with Estate Planning
This may sound counterintuitive coming from a lawyer, but my practice is purposely designed around protecting families and loving interests and saving my clients money. Yes, and I am a lawyer and said, “I want to save folks money.” So for the next few months, the focal point of my blog posts will be how you can save money through estate planning. Of course, I’ll digress occasionally, but I’ll return to the course in due time. Sometimes the discussion will be about how certain estate planning processes clients experience may be costly or inexpensive depending on the approach. Other times, the discussion will address decisions that may be costly or may save you a bundle depending on various considerations and scenarios. So let’s get started and today’s piece will cover very basic ways to save with wills or, more accurately, the lack of one or keeping the cost of probate down if the estate requires one. Money Saver Tips: In Illinois, if the estate is less than or equal to $100,000.00, probate and its accompanying court costs may not be necessary. If at any time your estate grows to more than $100,000.00, a valid will that is kept current may save your heirs thousands in having to open a significant estate where there is no will or the will is invalid. A valid will has 2 witnesses and is not handwritten. Save some money and don’t get it notarized. Wills in Illinois do not require notarization. When calculating the size of your estate for probate purposes, do not include life insurance; life insurance and retirement plans are not part of the probate estate. So if all you have is a $50,000 home and no creditors, see Money Saver Tip #1. If your estate is more than $100,000.00 and you aren’t completely sure about how to distribute your assets, don’t use a DIY program or a Big Box Store will-in-a-box. Refer to Money Saver Tip #2 for the possible consequences. Tune in next week for money-saving tips with estate planning.