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February 2010 |
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SUPER
INVESTING newsletter series |
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7 New Year's Resolutions for 2010-Part 6 of 7 Hello Rogue Investors, Welcome to issue number 6 of 7 New Year’s Resolutions for 2010. Reminder: In only one week, I will be teaching a one-on-one tax lien workshop in Sedona, Arizona. Please get in on the special pricing before the end of January. As a special bonus, anyone who attends will receive information on estate planning concepts. Call now to reserve your spot – 1-913-381-4520. You have probably heard the joke many times. “There is nothing certain, but death and taxes.” Well, we seem to spend a lot of time trying to avoid taxes and little time contemplating death. I understand it is not a pleasant topic of conversation and no one wants to think about his own mortality. The problem is the mess you leave behind, especially if your death is unexpected. Have you considered what would happen right now if you died? Do you have a will or trust set up? Do you have a living will prepared in case you are incapacitated and not able to make decisions? Have you specified where you want personal items distributed? Do you have a burial plot or do you plan on being cremated? Ray: Ray lived a comfortable retirement life in Ft. Meyers, Florida. He was never married, but somehow the life of a bachelor just appealed to him. Both his father and his mother died without a Will and this was a hassle that he complained about. However, friends and family commented to him that he should consider setting up a Will so that his family would not encounter the same problems. Ironically, Ray did not want to think about his own death; in fact, with no kids what did he care? Ray passed away peacefully two years ago and his relatives faced the following: distribution of his house, a court appointed executor, a family member who had to be bonded, payment of bills, utilities, lawn maintenance and upkeep before the house could be sold over a two-year period, and ongoing legal problems and expenses. Ray’s story is not isolated. I knew Ray. Every year millions of Rays die without a Will or Trust specifying their desires for distribution of their estate. In some ways Ray’s story is not even that complicated. Throw in a second marriage and kids from different spouses and you start to see how complicated it can be. Are you comfortable subjecting your spouse, parents, kids and others to decisions made by the court and published openly? Do you care whether it takes years for this process to play out, while seemingly polite and civil family member fight for the bones you’ve left behind? I know what you are thinking. What a depressing topic. I agree, so we should get these things done and then move on to other fun and exciting concepts. Let’s review my resolutions:
Resolution Number 6: I will finish my estate planning. First, let me dispel something. Estate planning is not just designed for wealthy individuals who are concerned about inheritance taxes and where all their millions will go upon their deaths. Your estate is really you and your things (real estate, cars, personal property, jewelry, furniture, tools, etc.). Add it up some time. We all have an estate. In bankruptcy proceedings, for example, you are required to disclose all of your things and, depending upon your state of residence, you will be able to keep some of your estate and you may have to dispose of some of it to pay creditors. Your estate is not necessarily the mansion on the hill, but it is your three-bedroom home, car, bank accounts and personal property. The point of estate planning is two-fold: (1) to protect these items now and (2) to plan for their distribution upon your death. First, let’s talk about protecting yourself now. I have talked about protecting your business by setting up a structure, such as a Limited Liability Company. With your estate you should consider doing the same. That is where a Trust document could come in to play. A Trust is a legal arrangement where you place items, such as real estate, in the care of a Trustee and you then become the beneficiary. The idea here is a layer of protection. You no longer own your things directly, but you are the beneficiary. If you wish, you can set up multiple beneficiaries or even have a charitable organization as the beneficiary, allowing you payments or distributions as long as you are alive. This concept was developed by Crusaders who left their property to be attended to by someone while they were gone and then when they returned, they requested it back. Obviously, a lot has changed since then, but the concept remains the same. Second, a Trust document replaces a Will and lays out where your property and personal things will be distributed upon your death. A Trust is a private document that is not shared with the public. Contrast that with a Will, which also allows you to legally decide where your items will be distributed, but is a public document open to view by anyone. In my opinion, a Trust is much better than a Will, but it will also cost you more to prepare. If you do not have a Will right now, then my recommendation would be to first have a Will prepared. You can even do this by downloading a form, filling it out and using your local bank to notarize it. Be sure it is legal for your State and that you have witnesses to sign the document. If you can afford it, have an attorney prepare the document so that she can maintain an original copy. One of the problems with Wills can be who has the latest and greatest version, and the appearance of mysterious versions after a death. If an attorney and another close loved one (usually the executor) holds a copy, then you can avoid those problems. With a Trust, the trustee holds a copy and helps you transfer certain things like real estate to the Trust. You have probably seen or heard of property titled as the Mary Lou Downing Trust. This means that Mary Lou’s Trust owns the property and she is the beneficiary. If you are familiar with IRAs, the concept is similar. The IRA owns the property and you are the beneficiary. An example would be Equity Trust Company IRA FBO Michael Williams. This literally means my IRA owns the property for the benefit of me. The point to all of this is plan ahead. One of the worst things that can happen for your loved ones is you dying intestate, which means without a Will or Trust. In this case, the State steps in and decides how your estate will be distributed. This can be complicated and time consuming, resulting in delays and extra hassles for your loved ones. Please stay tuned for my final New Year’s resolution.
All the best,
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SUPER
INVESTING newsletter series |