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Kennett Square Probate & Estate Administration Law Blog

Dear beneficiary: It seemed like such a good idea at the time ...

While we tell ourselves and our kids not to wait until the last minute to do something, the U.S. Supreme Court seems to hand out its big decisions right at the end of the session. It is impossible to know if the docket is the cause, if the court spends extra time deliberating and crossing t's on some cases or if, perhaps, the court enjoys building anticipation before the justices leave for the summer.

One of the decisions handed down near the close of the 2013 session involved retirement accounts -- specifically, inherited retirement accounts. The decision got us to thinking about how important it is to consider a variety of possible scenarios when planning retirement or devising an estate plan

Women outlive men, but are they as careful with estate planning? p2

We just saw an article about the gender wage gap. According to the White House, women in the U.S. -- and in Pennsylvania, for that matter -- make just 77 percent of what men make. That leaves roughly half the workforce 23 cents short for every hour they work. That wage gap, if nothing else, should be an incentive for women to be especially careful in their retirement and estate plans.

The goal, then, is to be careful with your savings and your retirement income. For the most part, we would rather not use up our retirement money on medical bills. But some of us face a real risk of a long final illness. Or we know that living alone could mean recuperating from an accident in a nursing home.

Women outlive men, but are they as careful with estate planning?

It is a mixed blessing, really, that women tend to live longer than men. On one hand, the extra years -- about six, according to researchers -- give women more time to spend with family and friends, a couple more elections to vote in and a few more Chester County's Fourth of July celebrations to enjoy.

On the other hand, though, women may have six more years of medical expense to bear, or they may have six years of living without their husbands and their husbands' retirement benefits. There are as many risks as there are opportunities, it seems.

Rich families disinherit children; give to charity, new business

A new study surveyed over 4,500 individuals and interviewed 16 "very wealthy families" from North America, Asia and Europe. Researchers with the study were attempting to determine what the most powerful people in the world plan to do with their fortunes. Surprisingly, a large number claim they will not be leaving their fortunes to their children. The article noted that this was particularly true of second generations of wealth considering the future of their children, the third generation. The mindset was that the first generation built the wealth; the second generation preserved it while the third generation was likely to lose it.

Instead of allowing their heirs to become part of this trend, these wealthy families are building estate plans that are designed to help their children succeed. Some noted that they are moving away from the traditional trust notion for fears that children who rely on funds from a trust lack self sufficiency. Some are leaving their fortunes to charities, while others are using the funds to establish a business that their heirs could have a "renewed sense of direction."

Among the wealthy are a few notable famous figures. Nigella Lawson, food critic and judge on ABC's hit show The Taste, was quoted as saying she would not leave her fortune to her children because doing so "ruins people". Former Police front man and musician extraordinaire Sting has taken a similar pledge, stating his children will not inherit his millions.

Protecting children's inheritance from divorce

With roughly one in two marriages ending in divorce in the United States, it may be wise to account for this contingency in an estate plan. The following tips can help if you have children that you want to ensure receive an inheritance and do not end up giving the inheritance to an ex spouse.

Generally, an inheritance given in one individual's name remains the asset of that individual during a divorce. This is true in most cases as long as the asset is not comingled with other property. This means the inheritance should not be put into a joint checking or savings account, but should be kept separate from all marital funds to help better protect it from getting split if the couple were to divorce in the future.

Tough times call for creative estate planning

In tough economic times, an individual may have to shelve inheritance planning for more immediate concerns, including having enough liquidity on hand to retire in comfort.

In that regard, a recent article profiled a number of companies that are marketing to this very concern for old-fashioned security in retirement. The product they are pitching is a deferred-income annuity.

Without an inventory of online accounts, heirs may be confused

When it comes to monthly bill paying, chances are that many Americans utilize online bill payment services. Many banks offer an online banking option, allowing customers to pay bills and transfer funds between accounts -- without every leaving a paper trail. In addition, many brokerage and life insurance companies also offer online statements. Even the federal government and many state governments allow tax returns to be e-filed.

What all of this means is that an outsider -- or an heir -- might be hard pressed to get an inventory of a decedent’s financial affairs without help. More than ever before, the process of locating assets and valuing an estate can be burdensome due to digital asset holdings.

Wills and trusts should also plan for the unexpected

Does your estate plan include a contingency for a medical emergency? If not, there may still be time to maximize your retirement finances while preserving assets for your heirs.

An attorney that focuses on estate planning may advise individuals to plan on needing 10 to 15 percent of their current income after retiring. To help meet that goal, retirement account plans like 401(k)s and IRAs may offer a catch-up contribution option to individuals after they turn 50. Deferring Social Security benefits may be another good strategy to consider, as the benefit can increase by 8% until a retiree turns 70.

Estate planning can even extend to memorial service details

It’s been said that a funeral or memorial service is for a loved one’s survivors. Such services can help family members and friends celebrate an individual’s life and provide some degree of closure.

From that viewpoint, it makes sense that an individual thinking about inheritances to heirs and loved ones might also want to provide direction on how he or she would like to be remembered. Although there is a separation of church and state, a lawyer can nevertheless help individuals accomplish this aim through legal documents that describe an individual's wishes regarding a religious or memorial service.  

Trusts offer great flexibility in estate planning

There is a great deal of flexibility available in planning for loved ones’ inheritances. A grantor may wish to leave certain assets to assist in grandchildren’s college expenses. Perhaps an adult child is going through a divorce and an individual doesn’t want to commingle an inheritance with marital property, possibly creating a property division dispute.

From asset protection to providing funding for specific needs, a trust can help provide different benefits. With the help of an attorney, an individual may be able to find the right trust that balances flexibility with any restrictions or other estate planning intentions. An attorney may also offer assistance by serving as the trustee of a trust, if needed.

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Larmore Scarlett LLP

Larmore Scarlett, LLP
123 E. Linden Street,
P.O. Box 384

Kennett Square, PA 19348

Phone: 610-444-3737
Fax: 610-444-9532
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