San Antonio, TX Estate Planning

You Just Inherited Some Money - Now What?

The biggest mistake people make when they inherit a chunk of money is not thinking it through, said Meg Green, a certified financial planner and CEO of Meg Green and Associates in Miami. “People who don’t have means often squander the money on things they have been dying to have all these years, and then it’s gone.”

You just received a large inheritance from a family member and you have no clue what to do with it. Spend it? Invest it? Decisions, decisions. It's sort of like winning the lottery, yet you know how those stories have turned out in the past. You don't want to be a "when wealth goes bad" statistic.

There is a well known phenomenon concerning lottery winners. A few years after they win the big jackpot, they have usually spent all their winnings and are no better off financially than they were before they won. This is because people who have never had a lot of money do not have the experience or knowledge about how to handle it when they receive a lot of it at once. People who inherit a lot of wealth often go through the same process.

The Miami Herald recently published some advice about what to do with an inheritance in an article titled "Inherit? Invest." The article presents a long list of advice about what to do with a sudden inheritance. However, the advice can be boiled down to essentially this: do not spend all the money right away, seek good advice and invest the money wisely. Of course the problem for many people is they do not know where to go for good financial advice. People who are not used to dealing with financial advisors do not necessarily have the experience to tell the good advisors from the bad.

If you have inherited a lot of money, then the good news is that you are most likely already in contact with someone who can assist you and give you some advice about how to preserve your inheritance. That someone is your estate planning attorney. Ask your attorney to recommend advisors and about setting up legal entities to protect your new assets.

Reference: Miami Herald (August 22, 2014) "Inherit? Invest"

New Hampshire's New Law Allows Probating a Will Before You Pass

"I saw an alarming increase in the number of probate and trust litigation cases. It was just devastating families, and the attorneys' fee were just consuming whatever estate was there," said Sally Mulhern, whose office is at 155 Fleet St. "I didn't want to see this trend continue. I wanted to do something to get this under control."

Is the probate process something that could be addressed before death occurs? Some legislators think this may prevent a lot of estate headaches in regards to will disputes.

When a wealthy person does something unexpected with his or her will, it is not unusual for the will to be challenged during the probate process. For example, if someone makes an unequal division of assets between his children, the children who received less might decide to challenge the division even if the assets were divided unequally for a good reason. This leads to long and costly court battles between family members as they argue about what the deceased really intended to do. The dispute could possibly be resolved faster if the deceased could testify about those intentions.

As reported by Seacoast Online in "New Granite State estate law designed to end shenanigans," a new law in New Hampshire should help alleviate the problem of the inability of the will-maker to testify. No, New Hampshire has not found a way for the deceased to testify. Instead, they have made it possible for someone to probate a will before they pass away. If someone thinks that his or her will could lead to disputes, a probate judge can look at it before the person passes away and give the estate plan a judicial seal of approval.

The law just went into effect and very few other states have similar laws. It will be interesting to track how the process works in New Hampshire and whether or not it actually does lead to fewer and less costly disputes over estates. If it does, other states might enact similar laws.

Reference: Seacoast Online (August 25, 2014) "New Granite State estate law designed to end shenanigans"

Keep Your Heirs from Being Spoiled

One of the perennial issues high-net worth families worry about is how they can pass their wealth to the next generation without spoiling their kids or destroying their drive or ambition.

If you are afraid your heirs may become spoiled by their inheritances, your fear is justified. Many people are apprehensive when deciding how to pass down their estate for this very reason.

When people suddenly receive a lot of wealth, one of their first instincts is to use it to buy all of the things they want but previously could not afford. While it might be okay to indulge in one or two purchases, the spending rarely stops there. Instead, it often continues until the money is all gone. Other people will use the money so they no longer have to work again. They will prefer to live off the inheritance.

The Globe and Mailrecently published an article about what you can do to make sure your children are not spoiled by an inheritance. The article, titled "Three ways to pass your wealth to your children without spoiling them," includes these ideas:

• Teach Them Values - Tell your children how you earned the money and how hard you had to work for it. Instill the value of hard work in your children.
• Delay the Transfer - Plan your estate so your children inherit the bulk of the assets when they are old enough to be established in their own careers.
• Think Outside the Box - There might be unusual strategies you can employ to make sure your children do not get spoiled. The article mentions one plan that puts money in a trust and gives it to the children as a dollar-for-dollar matching of their own salary.

Inheritance does not have to spoil your children. If that is a concern, then talk to your estate planning attorney about how you can set up your estate to minimize the risk. You might be surprised about the many options your attorney can provide.

Reference: Globe and Mail (August 22, 2014) "Three ways to pass your wealth to your children without spoiling them"

Very Few Americans Use Trusts

If the SCF represents a good cross section of the country (it really tries), that means that overall about 0.95 percent of Americans have a trust fund from their parents.

Have you set up a trust fund for your kids? If not, you might think trusts don't apply to your financial situation. But what if they do?

Revocable living trusts offer a great way to distribute your assets after you pass away without the hassle and expense of probate. They are a relatively simple tool most estate planning attorneys suggest to solve a wide variety of estate planning issues. Despite that, very few Americans actually use trusts. Recently, FiveThirtyEightlooked at the numbers in an article titled "Dear Mona, How Many Kids Have Trust Funds?"

Using data from the 2010 Survey of Consumer Finances, the article notes that only 1.3 percent of Americans have inherited money through a trust fund. One of the reasons that trusts might not be used very often is that people tend to think you need to be extremely wealthy to use one as part of an estate plan. However, the survey shows that is not the case. The median inheritance received through a trust by those surveyed was $285,000. Although the average amount was much higher, the median value shows that trusts have been used to give modest inheritances.

The truth is that anyone can set up a trust. They are not just for the very wealthy. Of course, trusts for the extremely wealthy and trusts for those of more modest means will often look different, but an estate planning attorney can set up a revocable living trust that is appropriate regardless of the size of your estate.

Reference: FiveThirtyEight (August 21, 2014) "Dear Mona, How Many Kids Have Trust Funds?"