by Kristen Drake on March 2, 2009
It isn’t uncommon for children to ask their parents for money here and there. Sometimes it might be a gift, other times a loan. Maybe it is just relief from a temporary set-back or some seed money to start a new business.
Today, many parents are faced with the question of whether or not they should help out a child in need. Is this help really helping, or only delaying the inevitable?
Believe it or not, there are many great opportunities in these situations. Simply writing a check each time you are asked is probably not the best way to deal with this issue. More importantly, this is something you should discuss with financial and legal professionals. We have solutions, we have ideas. We can help. Here are some things you should think about.
Before you start to help, get the full picture. Does the family member have a plan? Is this a short term cash flow issue or the start of a downward spiral? You need to decide if you are willing to give outright or if you want it to be a loan. If it is a gift, is it to be deducted from his or her inheritance? If it is a loan, is it secured? What happens if the family member files for bankruptcy? You don’t want to find out the ramifications after the fact.
There are gifting issues too. In 2009, you can gift $13,000 to anyone without a gift tax ramification. There is no reporting required and no tax to be paid. In 2008, this amount was $12,000. If your married child needs help, you and your spouse can gift up to $52,000 without reporting the transfer. You don’t have to gift cash - there may be better options. Some payments are not counted as a gift (e.g., direct payments for some medical and education expenses). There are specific rules for this, so be sure you understand them.
Money and family don’t always mix well. In these hard times, it might not be avoidable.
by Kristen Drake on February 27, 2009
Young people can change the world, even when their own lives are cut short. One area of estate planning often overlooked is organ donation. It is a subject that needs more attention. Remember the story of Nicholas Green? Here you can read the complete story.
A seven year-old boy from California, Nicholas Green, was killed by highway robbers in 1994 while vacationing in Italy with his family. His parents agreed to donate his organs and corneas, which went to seven Italians waiting for transplants. Reg and Maggie Green spoke openly to the media, with no bitterness, about their loss and decision. The world took the story–and the Greens–to its heart. Organ donations in Italy have tripled since Nicholas was killed so that thousands of people are alive who would have died.
We have our own story about organ donation here on Amelia Island. It will break your heart to read the story of Katie. But I hope it moves you to talk to others about organ donation.
The Katie Caples Foundation was started in 1998 by the family of Katie Caples, a young high school student from Jacksonville who became an organ and tissue donor after not surviving the trauma of an automobile accident. As her family dealt with the devastating loss, they remembered Katie’s wish to be an organ donor. Her father, Dave, was with Katie the day she received her drivers license and she shared with him her decision to be an organ donor. Her organs saved the lives of five people from 9-years old to 62.
On April 18th, people from around the country will come to Amelia Island for the Katie Ride for Life to raise awareness of organ donation commitment. I hope to see you there. For more information, go to www.katierideforlife.org.
by Kristen Drake on February 26, 2009
Starting is one thing, finishing is another. Loose ends can be a major problem.
You can have a perfect estate planning document, but if you (or your attorney or your financial advisor) doesn’t complete all of the tasks (such as retitling assets, completing or updating beneficiary designation forms, etc.), it is not a perfect estate plan.
There seem to be many loose ends in divorce as well. Someone I know well still has accounts that have never been divided as specified in the divorce agreement. They were divorced over ten years ago. With the state of the economy, maybe there is nothing left to be divided. There can be major financial ramifications in a divorce. Make sure your attorney or financial advisor informs you of any possible issues and the steps you can take to protect yourself.
When a loved one dies, wrapping up any loose ends isn’t fun, but it’s highly recommended. A joint account with a deceased owner becomes a hassle when the surviving tenant dies.
by Kristen Drake on February 24, 2009
You can find all sorts of vacations. Right now one of the hottest types of vacation is a volunteer vacation. Here the Sierra Club offers outings:
“Service trips range from helping with research projects at whale calving grounds in Maui to assisting with archaeological site restoration in New Mexico. Usually, service trip participants team up with forest service rangers or park service personnel to restore wilderness areas, maintain trails, clean up trash and campsites, and remove non-native plants.”
I like to imagine an educational vacation. Play golf in the morning and then sit in on a lunch-and-learn workshop on Medicare. After a nice walk on the beach, or some time by the pool, attend a primer on how to find the right assisted living facility for you or your loved ones. Later, have a romantic dinner alone with your spouse or significant other, or perhaps enjoy a fun evening out with some new friends you met.
The next day, have breakfast in bed, do yoga on the beach, then take a mid-morning session on health care issues for people over fifty.
Learn a little, play a lot. Professionals would be there to answer your questions, with nothing to sell. Mix in a little golf, beach-combing and tennis. It sounds like a nice weekend.
by Kristen Drake on February 23, 2009
It is a strange story any way you look at it. I wonder about her estate plan, or if she even has one. She is single with 14 minor children. Has she named a guardian, or perhaps multiple guardians for her children? How much life insurance would you recommend she have? What if you were named as her health care surrogate? Your job would be to substitute her judgement when making a decision. Now that would be difficult.
The next time you think your estate plan is difficult, think again.
by Kristen Drake on February 20, 2009
Sex may be a difficult subject to discuss with your kids and it is understandable why parents aren’t always good at that conversation.
So, let’s change the subject to money. What is so hard about talking to your kids about money? Where do parents think their children are going to learn about balancing a checkbook, setting up a Roth IRA, saving eight months living expenses, living within their means, having a good credit score - the list goes on and on.
This is a great time to take an active role in educating your family about money. Maybe you know enough to start that conversation. If not, there are lots of great tools out there for you. Suze Orman has a talent for explaining everything you need to know about finance in a way that is easy to understand. Maybe her new book, 2009 Action Plan, would be a good read for the family.
The good news is that money isn’t as embarrassing to talk about as sex.
by Kristen Drake on February 19, 2009
How should you fill out your beneficiary designations for life insurance if you are single with minor children? People recommend all sorts of “good” ideas in terms of dealing with minor children.
One recommendation I hear is to name a sibling, or the person you want to act a guardian, as the beneficiary of the life insurance policy. The assumption you are making here is that this person will make sure the funds are used for the minor child. Now assume that you die, leaving a minor child. Also assume that you have designated your sister to be the guardian of your child and you have named her as the beneficiary of your life insurance policy. Here are just a few problems with this solution.
- A few months after you die, your sister dies. Your sister is single with adult children. Her will leaves her assets to her children. Part of her estate is your $1,000,000 life insurance proceeds that now are being distributed to her children.
- Your sister has a birthday party for your orphaned child. Another child is injured while at the party and your sister gets sued. The life insurance proceeds will be available to pay any awarded damages.
- Your sister gets a divorce. The funds will likely have an affect on the property distribution and alimony. In other words, she might get less money because of the life insurance proceeds.
- The court appoints someone else as guardian of your child. What happens now?
The best solution under normal conditions is to have a will in place that will distribute your assets in trust for the benefit of a minor child. The policy can name the testamentary trust as the beneficiary. Why is this a better plan?
- The assets will be held for the benefit of your child and no one else.
- The terms of the trust can be flexible, naming a trustee to manage the assets and holding the assets in trust until an appropriate age (not distributing to the child upon reaching majority as in the case with a guardianship).
- In some states, the life insurance proceeds will be exempt from the decedent’s creditors so long as the beneficiary is not the estate.
by Kristen Drake on February 17, 2009
by Kristen Drake on February 11, 2009
Community foundations are a wonderful tool in your bag of estate planning tricks. If you don’t know what a community foundation can offer you or your client, start here at the Council on Foundations. The National Philanthropic Trust has an excellent history on philanthropy here.
The good news is that even in our economy, clients are still discussing their philanthropic goals. There are a number of ways a person can be philanthropic. Your community foundation can broaden your options.
Why do people give to charity? What role does philanthropy play in our lives? How do we use it to teach our children about being good citizens?
It isn’t just the ultra wealthy that want to discuss philanthropy.
by Kristen Drake on February 9, 2009
I wonder if the new couple realizes how much their “legal” lives will change once they say “I do.” Depending on where you live, it will change a lot or perhaps just a little. You should know. Spouses have rights, both federal and state. More important perhaps to some, most of these rights can be waived (marital agreements).
Clients often discuss their sons in-law and daughters in-law very delicately. “Oh, she is just terrific, cute as a button” or “he is a wonderful father, BUT…” There is almost always that but. If you don’t already know it, your parents may not be completely wild about your spouse. When (not if) you get divorced, the parents want to make sure the ex cannot get the inheritance.
I am not sure how much parents talk to their children about picking the right spouse and how to work to keep a marriage strong. I do know they spend a good deal of money to keep their wealth out of the hands of their children’s future ex-spouses.
