Building a Strong Foundation

It is very important to have a strong foundation for asset protection and estate planning.  Estate planning and asset protection are comparable to building a house – you must have a strong foundation to have a house that will withstand the test of time.  If your house is built on sand, then it will collapse!   The biggest trap is setting up plans over many years through different advisors, bankers, insurance agents and brokers without ever going to an experienced planner to make your decisions work together.  Few people can rely on the separate decisions and designations that they have put in place over time to work together so that you maintain control of your property for the long term benefit of your family.

There are several key pieces to building a solid foundation. Legal documents properly drafted by an attorney are a good starting point.  It helps if the attorney is an estate planner with experience in elderlaw and asset protection.  Few attorneys fit that description.  Most people do not have good legal documents, and very few people realize that how they own their home, how they set up their bank accounts, and how they set up their investments, insurance, and retirement accounts impact whether your legal documents will even work at all.  Generally legal documents are drafted after a client has purchased their home and set up all their accounts.  All of that needs to be reviewed by an estate planning attorney which often results in changes to how property is titled.

Unfortunately, most people are crisis planners.  They are optimistic about the future and just procrastinate until something bad happens, at which point they must act.  This is not planning – it is simply reacting, rather than taking control and putting yourself and your family in the very best situation.  It is not a matter of wealth or education—it’s human nature to procrastinate about planning for an unknown future.  Many well educated and well-to-do people have very messy plans; some folks are do-it-yourselfers.  Some just  believe that they will never need a will, financial planner, or insurance. What they end up with instead is whatever is thrown at them when they’re in need.  For example, their banker will tell them to set their bank account up a certain way, and then their financial planner will advise them on their investments with a plan that is inconsistent with the banker’s plan. Finally, an insurance broker will come along with a plan for the client that is different from the previous two.  Their attorney, last of all, will draft them a will that fails to work with how the client has set up the previous “plans.”  When a client’s basic documents do not work, it is because he or she has not built a holistic plan, or a strong foundation, where all of the pieces work together.

Another important part of building a good foundation depends on your particular age and circumstances.  A plan for young parents is very different from middle age parents and/or elderly parents.  Plans for a couple without children can be very different from those with children.  Plans for a single person or widow/widower will be different.  Plans for a second marriage or folks with children by previous marriage often require significant departures from other married couples.  Every family is different in their needs, their fears, their goals, and their dreams for themselves and their loved ones.

Parents with young children should be sure to set up trusts for their children as part of an important piece to their foundation. Parents can set up a trust to name a trusted person to take care of young children in the event that they are unable do so themselves.  Through a trust, they can designate where they would like their children to live, go to school, and how to handle their finances until the children reach the age of majority stated in the trust. The trust will also determine how the finances are invested and distributed for the benefit of their children.  The person named in the trust will control all of these decisions, giving the parents peace of mind if something catastrophic were to happen to them.

Now that you have planning in place, it is easy to forget about some of the things that you have done. If you truly want to control your property for your spouse, children, and grandchildren, oftentimes the plans that other institutions have put in place, such as a bank account with right of survivorship, can be detrimental to your overarching estate planning and asset protection goals.  Many assets require beneficiary designations, which can counteract plans laid out in a will, as some types of property pass outside of probate.  Examples of assets that require a beneficiary designation are life insurance and retirement plans, such as IRAs, 401ks, and 403(b) accounts.  People forget about these beneficiary designations and don’t update them when their circumstances change. What if your spouse, who is listed as the primary beneficiary, has passed away, but your secondary beneficiary is a young child? You would not want a young child to inherit without his or her money being placed in trust. Or, you would not want your spouse to be the beneficiary, he or she pass away, and then have no alternate beneficiary designation. Finally, if you do not change your beneficiary designation after you divorce, your ex-spouse may remain the beneficiary, and your estate will be forced to pay estate taxes for what goes to your ex-spouse.  For this reason and many other reasons, make sure that your property is titled properly and that your plan works.

As a firm that works in asset protection, we know the importance of having documents that work the way you want them to work with your insurance, retirement plans, bank accounts, and financial plans. The majority of people do not have holistic planning, and it is unfortunate. You need a plan where all of the pieces work together, as opposed to whatever is given to you as you set up accounts or property interests.  In addition, you need to know how the pieces of your plan work together.  At W.G. Alexander & Associates, we can show you how all the pieces work together, as well as make sure that your documents are consistent with your plan. In addition, we handle cases involving elder care, government assistance, as well as asset protection, which include having the right kind of insurance protection, having beneficiary designations that are correct, and having bank accounts and financial accounts set up the right way so that they work with all of your other planning that is put in place. To find out more information, contact us today!

Attorney Bill Alexander discussed these issues and more this past Tuesday on W.G. Alexander & Associates’ radio program, “Asset Protection Today,” on TalkRadio 850 WPTK (AM). Be sure to listen every Tuesday morning from 9:00-10:00 AM.  To listen to this week’s show, please visit WPTF’s on demand show blog by clicking here.