The Crucial Importance Of Passing Organized & Updated Information To Your Family

Think for a few moments about what would happen if you suddenly became incapacitated or died. Would your spouse or family know what to do? Would they know where to find important records, assets and insurance documents? Would they be able to access (or even know about) online accounts or files on your computer? Would they know whom to ask if they need help?  Putting the effort in now to establish a formal document inventory can alleviate unnecessary anxiety and turmoil in the future.

The Key Takeaways:

1. If you should suddenly become incapacitated or die, your family would need to know where to find the information they would need.

2. Let your key relationships know where to find your document inventory.

3. Do not assume your process will be readily understood by others; have a trial run to make sure they can find and understand your records.

4. Keep your inventory current with an annual review.

What Information Would They Need?

There is a large volume of documents and information that your family would need during a calamitous event such as incapacitation (even temporary) or death. This basic list will help you start thinking of the critical information you would want your family to have.

• Legal documents (will, living trust, health care documents);

• List of medications you are taking;

• List of your advisors (attorney, CPA, banker, insurance agent, financial advisor, physicians);

• Insurance policies (health and life);

• Year-end bank and investment account statements;

• Storage facility location, access method, and inventory;

• List of other assets, including location, account numbers, date purchased and purchase price;

• Safe deposit box location, list of contents and location of key;

• List of people to whom you owe money (mortgage, credit cards, etc.);

• List of people who owe you money;

• Death or disability benefits from organizations; and

• Past tax returns.

Additionally, many of your records are probably on a computer or stored online. If you scan documents or receive financial statements electronically, someone else may not even know they exist. If you use a computer accounting program such as Quicken, QuickBooks or Mint, those records would be on your computer. Family photos may be stored digitally or online. Much of this information is password protected.

What You Need to Know: 

Your document inventory requires a methodical listing of both hard copy and digital forms.  While the effort will be more challenging at the start, the maintenance of the inventory is much simpler.  Be mindful that your digital footprint will likely grow much faster in the future than it has in the past.

Actions to Consider:

1. Give current copies of your health care documents to your physicians and designated agent(s).

2. Keep your original documents in one safe place, like a fireproof safe or safe deposit box. Make copies for the notebook described next.

3. Buy one or two three-ring binders to organize your personal and financial information. You can enter it by hand or create spreadsheets on your computer, but having it all in one or two binders will make it easy for your family to find and use. (If you leave it on your computer, they may never find it.) Include locations, contact information, account numbers and amounts.

4. Include a list of online accounts and how to access them (including passwords).

5. Clean up your computer desktop and put important files in an easy-to-find desktop folder.

6. Have a trial run. Ask your spouse or other family member (or your successor trustee or executor) to pretend that he or she needs to access needed information.

7. At least once a year, review and update your notebook, computer desktop files and passwords for online accounts.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Budgeting, Part 3: Instilling Money Values in Children and Grandchildren

Money values can be a guiding light that is a component of your legacy. If communicated frequently and purposefully, these values can be an important reference for your loved ones as they learn to handle money.

The Key Takeaways:

• Having regular family discussions about household finances, shared money goals and general money concepts will, over time, communicate your values to your children and help them learn to be financially responsible adults. These discussions can also bring family members closer.

• Even young children can learn about setting spending priorities, working within a budget, saving for a larger purchase, and giving to others.

Family Meetings About Money:

Money discussions can start when children are as young as ten years old. While there is no need to go into detail about income and specific expenses, you can explain that there is only a certain amount of money and everyone needs to be careful with how it is spent. You can talk about your budget in general terms and let them know that some things, like housing and food, are at the top of your priority list. You could let the family decide how to spend the monthly entertainment budget or which charity (or even a friend) should benefit from your giving budget. You can discuss where to go on a family vacation and how everyone could help save money for it. And, by your example, you can illustrate the importance of saving.

As your children mature, you can start to teach them money management principles—how to balance a checkbook; how credit cards work; how companies make money; how simple and compound interest works; how to make and follow a budget.

What You Need to Know:

Parents often don’t want their children to know how much or how little money they have. But kids spend time in other kids’ homes, and they are quick to pick up on the differences. How you earn your money—and how you prioritize spending, saving and giving—says a lot about your values. Talking about this with your children and including them in the process will help them learn your values and guide them as they mature.

Actions to Consider:

1. Create a plan to purchase an item for your family, like a new TV or camping equipment. Include your children as you shop and compare prices in stores or online. Figure out how much your family would need to save each month to reach your goal, and encourage everyone to find ways to save. This will show your children how to plan to make large purchases without going into debt.

2. Give your children allowances so they can learn to handle their own money. Some families give each child a small allowance just for being part of the family, with opportunities to perform household chores to earn more. You could give teenagers their clothing allowance for each school semester and let them make their own purchases. However, resist the temptation to bail them out if they overspend and run short of funds—you want them to learn responsibility and make smarter purchases next time.

3. Have monthly family meetings. The regular frequency lets everyone feel they are truly involved with the family finances, gives them opportunities to ask questions, and lets them see progress and make adjustments in spending.

4. If you see your finances are going to suffer (for example, if you are laid off or incur unexpected medical expenses), let your family know right away so they will all understand the situation. They may even have some creative ways to help cut expenses or increase income. 

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Budgeting, Part 2: A Fulfilling Method for Setting Spending Priorities

Setting spending priorities will allow you to process your income in a rational way, while giving you the satisfaction that your wealth objectives are on their way to fulfillment.

The Key Takeaways:

• How you spend your money shows what you value in life.

• Setting spending priorities will help you align your spending with your values, resulting in a much more fulfilling life—financially, emotionally and spiritually.

How to Set Spending Priorities:

Determine what is most important to you. Envision how you would like to see yourself living life. What kind of example do you want to be for your children? You may want to have enough money for retirement so you won’t be a burden to your children. Paying for your kids’ college may be a priority for you. You may want to pay off your mortgage, or pay off credit cards and live debt-free. Tithing may be important to you. Maybe you want to travel.

Next, look at how you are currently spending your money. Look for areas you currently spend money on that are not as important as your desires. Could you stop eating out as much and pay an extra $100 a month on your mortgage? Could you drive your current car a few years longer and apply the amount of a new car payment toward paying off credit card debt?

Now you are ready to work on a budget. Reallocate your income in ways that meet your priorities and values. What may have seemed impossible may actually be within reach, once you have your priorities and spending in synch.

What You Need to Know:

If your income is reduced or your expenses increase (due to loss of a job, illness or medical emergency), set new spending priorities right away. Discretionary spending will probably have to be reduced in order to meet necessary expenses. Some necessary expenses may even need to be reduced, for example by moving to less expensive housing or temporarily sharing a car. Cutting expenses to match your income instead of running up credit card debt will be much more rewarding in the long run. Being frank with your family will help them understand the situation and give them opportunities to help save money and/or increase income.

Actions to Consider:

1. If you don’t know what you are currently spending, go back through credit card statements and checkbook registers and tally your spending by category. Using a computer or online accounting program, which can make it easier to track your expenses.

2. Separate necessary expenses (like rent or mortgage, insurance, groceries, utilities) from discretionary expenses (clothing, dining out, entertainment, personal care, etc.).

3. Annual expenses (like insurance or property taxes) should be broken down into monthly amounts and those amounts set aside into a separate account so the money will be available when needed.

4. Look around your home and in your closets. How much do you think you have spent on clothing and furnishings? How much of that was unnecessarily spent? Could you do better in the future?

5. Spouses need to talk openly about spending priorities; some compromises may need to be made, but sharing the same values, priorities and goals will help alleviate tensions about finances.

 If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Budgeting, Part 1: Budgeting as a Friend and not a Foe

Budgets do control spending behavior. However, budgets also allocate resources to the areas of highest impact or interest. When a budget is structured based on priorities and values, much of the controlling element is removed.

Using budgets at work is understood and expected. A company has a limited amount of money and so must allocate that money based on priorities—by budgeting. But often the discipline workers use at work does not carry over at home. The result is often overspending, debt, arguments between spouses/partners, loss of control, and unrealized dreams and goals.

The Key Takeaways:

• Using a budget helps to allocate limited resources to the areas that matter the most.

• The same discipline used to follow budgets at work can be used for budgets at home.

Making a Budget Your Friend:

Creating and staying on budget can empower you and help you feel in control of your earnings, your spending and your future. When you and your spouse/partner are in agreement about spending priorities and have shared goals, your relationship is likely to be more harmonious and less stressful.

What You Need to Know:

You probably already have the skills needed to set and follow a budget. Use your common sense to create a budget that helps you.

Actions to Consider:

1. Draw upon your work experience with budgets.

2. Determine spending priorities with your spouse or partner.

3. Include dreams or goals to save toward together.

4. Include fun in your budget. Everyone needs some fun, even if your budget is tight. Having separate fun money for each spouse/partner (with no questions or accountability) provides a little freedom and independence for both of you.

5. Look for ways to reign in impulse spending and unnecessary expenses to fund your spending priorities.

6. Don’t spend more than you bring in. If you cannot cut your budget enough to live within your means, think of ways to earn extra money.

7. Start saving. Even small amounts saved consistently will grow into larger amounts.

8. Review your budget and finances periodically to see how you are doing. Seeing progress toward your goals will make you proud of your accomplishment!

9. Reward yourself for staying on or under budget. Think of inexpensive or free ways to celebrate.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

How to Make a Family Meeting a Successful Part of the Estate Planning Process

You’ve made the hard decisions, your documents are signed, your trust is funded, and a business succession plan is in place. Congratulations, you’ve finished your estate planning. But have you, really? Have you explained your planning to your family? Will they understand how your plan will work and what they may need to do if you become ill or when you die? Will they wonder why you made certain decisions?

The Key Takeaways:

1. Having a well-run family meeting in which your plans are explained will help prevent misunderstandings and confusion in the future; this is an important benefit for executing a comprehensive plan in the first place.

2. Ask your estate planning attorney and financial advisor to participate. They will be able to explain how your plan works and why key decisions were made. They will be able to answer family members’ questions on the spot. In addition, it helps to introduce your advisory team to family members now so they will be more comfortable working together in your absence.

3. Open discussion is important, but having an agenda will help keep the meeting on track.

Setting the Agenda:

The agenda for the meeting should cover your objectives, purposes, plans and expected outcomes. Make a list of the topics you want to cover; otherwise, if the meeting becomes emotional, you may forget something important. No specific financial information or values of assets needs to be disclosed at this time. This meeting should be a general explanation of what you have planned and why, in order to prepare family members for what they can expect and may need to do if you become disabled or die. Allow for and encourage questions and discussion.

What You Need to Know:

Expect there to be some anxiety as the meeting begins, for these are often sensitive issues. You may find additional challenges if you have a blended family. Or there may be a child that you do not feel is financially ready to handle an inheritance. Putting these issues out in the open can be difficult at first, but it often leads to greater understanding and acceptance.

Actions to Consider:

1. Select an appropriate place. A crowded restaurant is not suitable for a serious discussion. The room should encourage discussion but also convey the seriousness of the meeting. Your attorney or financial advisor will probably have access to a meeting room. A family room that accommodates everyone also can work.

2. Select a date that is convenient for everyone. A traditional family gathering time, like the Thanksgiving weekend, may be convenient, but be mindful that conducting the meeting before the actual holiday may spoil an important family gathering if your situation involves difficult topics.

3. Let everyone know in advance that the meeting is scheduled to begin and end at specific times in order to put boundaries on the agenda. A couple of hours should be plenty of time to cover everything.

4. Limit the meeting to adults. Make arrangements for the care of young children so you have the parents’ full attention.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Awkward Financial Discussions—Strategies For Diminishing The Ackwardness:

There may be people close to you (spouse, parents, children) who are practicing financial behaviors that are unproductive or destructive. You want to help them get back on track, but you don’t want to come across as judgmental or condescending, or put them on the defensive.

The Key Takeaways:

1. Living within one’s means liberates spending for high-priority purchases.

2. Financial discipline, and correcting bad behaviors, leads to financial security.

Correcting Bad Behavior Leads to Financial Security:

Financial security falls squarely on living within one’s means. If financial security is desired, being financially irresponsible works against the person’s own interest. People often waste money a little here and a little there, and this lack of discipline can sabotage their primary spending goals. Correcting these bad behaviors can help the person meet their top spending priorities. Through budgeting, and avoiding trivial spending, the person can see that important goals can be met.

What You Need to Know:

The core issue is often psychological. People often overspend out of insecurity, low self-esteem, or a deeper need that is not being filled. Addressing the core issue can be helpful in changing spending habits.

How to Begin

Sometimes having a meeting to address the entire family’s finances can be less confrontational than singling out one family member. In either case, you can bring up the subject by mentioning a situation you have seen on the news or that has happened to someone you know and suggesting that a conversation could be helpful to your family before a problem occurs. Realizing that other people are also having financial worries or difficulties can make it easier for a family member to talk about their own struggles.

Actions to Consider:

• Be an enthusiastic example. Tell others about ways you have found to save money (like inexpensive sources for food, clothing and household items; restaurant coupons and bargain movies) and what you are doing with the savings (paying off debt or saving for college, a vacation, or retirement)—and how good it feels!

• Don’t co-sign a loan; if the person defaults, your credit score could take a hit. Also, be very careful about lending money to family or friends. If you feel you must, write an agreement, set a reasonable interest rate and be clear about repayment—then consider it a gift. (Chances are you won’t be repaid.) Never give more than you can afford.

• Instead of giving money, offer to help go over income and expenses and find ways to cut expenses. Most people in financial trouble have a money management problem. But if more income really is needed, you could pay the person for work you might hire someone else to do or help them find a part-time job, in parallel with your coaching.

• Once someone agrees to discuss their finances with you, schedule time to convey the importance of the subject.

• Start with an education session. Explain how interest is added to a credit card balance. Calculate how much interest was added to the balance in the last couple of years. Questions you can ask:

  • “What could you buy or what bill could you pay if you didn’t have to pay the interest on your balance?”

  • “What did you buy with your credit card? How meaningful are those things to you now?”

  • “If I could give you, in a lump sum, the balance on your credit card plus the interest you have been paying, what would you want to buy that would have real meaning to you?”

• Describe how every company works through a budget. Questions you can ask:

  • “Why does a company have employees operate on a budget?”

  • “How does a budget help a company manage effectively?”

  • “At the end of the year, what do you think happens to those companies that met their budgets compared to those that didn’t?”

• Describe the structure of a budget process including net income, current obligations, amount spent by category and the remaining amount.

• Help the person determine and list spending priorities. Questions you can ask:

  • “What’s most important to you?”

  • “What can you live without?”

  • “What do you want that can be purchased less frequently or at a lower cost?”

• Discuss the rewards that come with good financial management by asking:

  • “If you’re able to meet or beat your budget, how do you think you’ll feel?”

  • “How would you reward yourself if you did so?”

 If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Are You Wasting Money?—Part Three: Taxes, Insurance, Not Bidding and/or Negotiating

So far in this series on wasting money, we have looked at how people may overpay for housing, interest, transportation, food, clothing and entertainment. In this last part, we will look at a few more areas in which we may pay more than necessary—taxes, insurance, not obtaining bids for services, and not negotiating for large purchases.

While you may already be astute in these areas, sharing good financial practices like these with your children and/or grandchildren can be part of your legacy, as you help them prepare to be prudent and responsible beneficiaries. And, for tax management and risk management (via insurance coverage), your legal and advisory team can produce integrated tools to assist you in keeping more of your money within the family than having it leak out unnecessarily.

The Key Takeaways:

• Any time you pay more for something than you have to, money is wasted.

• Reviewing tax deductions and insurance coverage, comparison shopping, bidding out services and repairs, and negotiating—these take time, but they can help save significantly.

• Any time you save money, you are being financially responsible and will find more money for the expenses in life that are really important to you. 

Where People Waste Money…And Actions to Consider

 1.              Taxes. Take every deduction to which you are entitled. Even if a professional prepares your tax returns, it is a good idea to become familiar with allowable deductions. For example, charitable deductions, even small ones, add up—if you volunteer, keep track of your mileage and financial contributions; fill out the form when you make clothing and household donations; and instead of dropping cash into the offering box at your place of worship, write a check or set up automatic payments.  Of course, if you have significant charitable interests, trust-based strategies offer you cost effectiveness and a disciplined structure.

 2.              Insurance. Review your policies every year. Property values change, and it’s important to not over- (or under-) insure. For example, an older car may not need collision insurance. Increasing deductibles will save on premiums. Bundling various policies (home, autos, personal liability, jewelry) under one insurer will probably earn you discounts and save time.

 3.              Not getting bids when hiring workers. Asking friends and neighbors for references is a good start, but it is also important to get at least three estimates. And remember, the lowest price is not always the best value.

 4.              Not periodically rebidding current products and services. Being loyal is commendable, but not if it causes you to pay more than necessary. If you are able to find a lower price, your current provider may match it to keep you as a customer.

 5.              Not negotiating for large purchases. We all know there is profit margin built into pricing, and there is usually a larger margin on expensive items. Some vendors actually expect to negotiate. Learning how to negotiate fairly and respectfully will frequently save you some money.

What You Need to Know: It’s easy to get caught up in the current culture of instant gratification and impulse spending. We could all benefit from slowing down a bit and becoming better consumers. Taking the time to evaluate purchases and comparison shop will not only help avoid overspending and wasting money, but it results in satisfaction from being responsible and efficient with money.

More Actions to Consider:

1. Evaluate how you may be overspending in these areas. Commit to following through on some of these suggestions and note how much money you save.

2. Think where you could use that extra money. Would you like to pay off some debt, or save for a family vacation, car, home, college, or charitable gift?

3. Start to prioritize spending and set some money-saving goals. Creating a budget and monitoring spending on a regular basis will help avoid wasting money and start meeting goals you set. (For more on this, read the previous blogs on budgeting and setting spending priorities.) 

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Are You Wasting Money?—Part Two: Food, Clothing and Entertainment:

In Part One of this series on wasting money, we looked at housing, interest and transportation—areas in which you or your loved ones may be wasting larger amounts of money. In Part Two, we will look at how money can be wasted in everyday areas of life—specifically food, clothing and entertainment. 

In many ways, it is the routine purchases that occur without planning that subsequently accumulate to large amounts. An area of high importance when making beneficiary distributions is for the money to be used in meaningful ways such as home purchases, education, and investing and not simply to cover shortfalls in month-to-month expenditures. These simple lessons are helpful reminders for everyone.

The Key Takeaways:

• Money is wasted when we pay more for convenience, excess, impulse buying and bad habits.

• While this may be okay if it happens occasionally, living a lifestyle that consistently wastes money can cause people to live beyond their means and incur debt, which causes more money to be wasted by paying interest on that debt.

• Recognizing areas in which money is wasted, and taking steps to change buying habits, helps keep people out of debt and give more money to spend on the things that really matter.

Where People Waste Money…And Actions to Consider:

Groceries:

We’ve all been guilty of buying more at the grocery store than we intended. Here are a few tips that will likely fit within a current routine:

1. Plan meals for a week, make a shopping list and stick with it. Make an exception only if something regularly used is on sale.

2. Use coupons only for items regularly purchased (and don’t buy things you don’t normally use, just to use the coupon).

3. Buy in bulk; split the purchases with a friend if storage space is lacking.

4. Shop without young children whenever possible to save money, time and frustration.

Eating out:

If the amount of money spent in this area is unknown, track it for a month or two and consider other ways that this money could be spent. Socializing with friends over meals is important, but this is one area that usually can be reined in. Meet over lunch or an early dinner. Watch the alcohol; bar drinks are expensive, add up quickly and make an affordable meal completely unaffordable. Consider entertaining at home; it is less expensive and more personal.

Clothing:

Look at how much is spent on clothing, especially on items purchased and not worn. Avoid shopping as a hobby or because of boredom; retailers are great at making people think something is needed.

Entertainment:

Evaluate cable or satellite TV subscriptions and drop the premium channels not being used. Monitor cell phone bills. Investigate bundling phone, Internet and TV services under one carrier. When going to the movie theater, go to early showings, buy discounted tickets, shop for bargain-priced theaters, and bring snacks. Check out community theater productions. 

What You Need to Know:

Cash expenditures are usually the most difficult to track. Consider the envelope system (cash set aside in envelopes marked for specific cash purchases); place the receipts inside the envelope so it is easy to remember how cash was spent. Alternatively, use a debit card for even the smallest purchases.

More Actions to Consider:

1. Review how money is currently spent. If not using a personal accounting program like Quicken to track spending—now would be a good time to start. Carefully evaluate areas where overspending occurs.

2. Start comparison-shopping. Make a list of items bought regularly, including size and the last price paid. Keep the list handy for other shopping trips and compare prices. Then make a new shopping list for items at the stores with the best prices.

3.  Keep a running grocery list. As an item gets in short supply, add it to the list. This will make grocery shopping more efficient and save time by not having to make frequent trips.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Are You Wasting Money?—Part One: Housing, Interest and Transportation:

Most of us are guilty of wasting money in one way or another. Often we are so busy that we pay too much for convenience, and we don’t comparison shop or look for bargains. Sometimes we waste money because we just stay in the same routines—shopping at the same stores, eating at the same places, using the same services. And sometimes, especially if we don’t keep good records of how we spend our money, we may not even realize how much money we are wasting.

In this three-part series, we look at ways that money is wasted. While it may not apply to you, there are others in your life such as children or grandchildren that will benefit from these lessons. For those with budgeting discipline, an element of your financial legacy is to teach and train others to live within their means. And, as these disciplines are learned by your beneficiaries, you gain greater comfort that valued purposes will be pursued with distributions.

The Key Takeaways:

• Tracking and evaluating how money is spent helps illustrate areas of waste.

• Overspending can drive people into debt and prevent them from having money for things that really matter.

• Reducing wasteful spending helps people to live within their means and provide more money for things that are most important.

Major Spending Areas—And Actions to Consider:

1. Housing. Living close to where one works definitely can save time and money on a commute, but moving to a neighborhood that is just a little farther out can save a bundle. If someone is retired or works from home, moving to a less expensive part of the country is an attractive option.

2. Interest. Credit cards, student loans, car loans, home mortgage, home equity line of credit, other consumer loans—any time money is borrowed, interest payments accumulate. The most expensive of all is credit card debt. By renegotiating interest rates, not only are monthly payments reduced but considerable amounts of accumulated interest are also saved. Of course, great care needs to be taken when considering buying anything via debt.

3. Transportation. Car payments, insurance, gas, maintenance and repairs are necessary expenses, but there may be ways to economize. Some people can work from home one or two days a week. Since a new car depreciates the minute it is driven off the lot, buying a previously owned car can save thousands.

What You Need to Know:

Eliminating wasteful spending is especially important for people who need to watch their expenses—retirees who may be on a fixed budget, those who have been laid off or are working part time, young families, and college graduates who are trying to start a career while repaying student loans. But even if plenty of money is at hand for living expenses, being a careful consumer helps money go further and adds important lessons to be passed to loved ones as a component of a financial legacy.

Other Actions to Consider:

1. Evaluate housing, interest and transportation expenses.

2. Determine how much to spend in these high-cost areas and how much can be cut.

3. Check out different neighborhoods and transportation options and see how much money can be saved.

4. Call lenders and their competitors to see if better interest rates can be negotiated.

5. Pay off debt as soon as possible. 

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Personal Risk Management Part 2: Using Trusts in Estate Planning

Paying insurance premiums to protect against potential losses frees us mentally to enjoy driving a car, leave our house empty while on vacation and receive medical treatment for an injury or illness. In the same way, the use of trusts acts like insurance and can shift anxiety to comfort, turmoil to peace, and complexity to understanding.

The Key Takeaways:

• Trusts provide a protective cure for many of the financial anxieties, concerns, frustrations and hassles we fear for ourselves and loved ones.

• Trusts also provide similar assurances for business owners and for those with considerable assets.

• The benefit of planning is peace of mind for you and your family now.

What Are Risks Related to Estate Planning?

Proper estate planning can protect you against awful things that can happen to you, your family and your assets. These can include: a costly and public court guardianship/conservatorship if you or your spouse becomes incapacitated; being kept in a vegetative state; a potentially costly and time consuming probate process after you die; federal and state estate taxes; a will contest or heirs fighting over your assets; your surviving spouse not having enough money to live on; irresponsible spending by a beneficiary; an inheritance becoming part of a beneficiary’s divorce proceedings; an inheritance not making it to the intended beneficiary (i.e., left to an adult for the benefit of a minor); and an inheritance not being used according to your values and beliefs.

What You Need to Know: Not addressing these risks can cause you pain, worry, frustration, anxiety, fear and anguish. And, if any of these awful things should happen to you or a loved one, your quality of life can suffer.

Why Use Trusts for Your Broader Financial and Wealth Planning?

There are many different trusts that can be used to address a wide range of your circumstances, needs, anxieties, and aspirations. Take a simple but important example of trusts’ capabilities:  the living trust. Most people want to avoid court interference at incapacity (i.e., disability) and at death, and a living trust solves this worry. When you establish a living trust, you transfer your assets to it and select someone to step in and manage them for you when you are not able to do so. Because the assets are no longer in your name, the court has no reason to get involved at either incapacity or death; your successor can manage your assets according to your instructions for as long as necessary.

More broadly, trusts can hold investments, property and insurance policies, with benefits of reducing various taxes and protecting your wealth from lawsuits and creditors. A trust can continue beyond your lifetime—assets can be kept in a trust until your beneficiaries reach the age(s) you want them to inherit, to provide for a loved one with special needs, or to protect an inheritance from beneficiaries’ creditors, spouses and future death taxes. A trust will also let you provide for your surviving spouse without disinheriting your children.

What You Need to Know:

Trusts, in their various forms, offer you a robust package of dollar and quality-of-life benefits. And, trusts are fully compatible with your various investments and assets, from mutual funds to stocks (both public and private) to insurance policies to property.

Actions to Consider:

• Become aware of the financial, wealth and estate planning risks you and your family face, and how they can be managed or completely avoided with the use of trusts.

  • An advisor and trust/estate planning attorney will be able to help you become an informed consumer.

• List the fears and anxieties you have for yourself and your loved ones concerning your wealth.

• Compare the costs associated with planning and implementation to the financial and emotional value you will receive.

  • Keep in mind that while trusts have set-up costs, overall costs can be less over time by avoiding court expenses and delays, saving on a variety of taxes, eliminating exposure to legal costs, and so forth.

• Life insurance inside a trust is an excellent way to provide a larger inheritance for your loved ones.

• If you are a business owner, investigate the many benefits that trusts can provide for your business wealth.

• Don’t procrastinate. Trusts have as much application for the living as for those who pass on. Put your plan into effect now based on your current circumstances, and then make changes as needed. Acting now will give you the peace of mind you desire.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Personal Risk Management, Part 1: Insurance

Simply put, personal risk management is being aware of the risks in your home and in your life, and then planning how to handle those risks. Insurance plays a big part in managing risk. Most people don’t like paying insurance premiums, but when something happens and the insurance pays for a covered expense, they are relieved they had it.

The Key Takeaways:

• Not recognizing and managing risk can set your family up for financial ruin.

• Recognizing and managing risk will give you and your family the freedom to live life, without worrying about how you would handle a catastrophic loss.

What kinds of risks should I be aware of?

Property and casualty risks include your car and other vehicles, home and furnishings, jewelry, cameras, and so forth. You would want to protect these from accidents, theft, fire, flood, and earthquake damage. Health and long-term care insurance help protect your finances if you become ill or injured. Disability income and life insurance help replace income in the event of a long-term illness or death. If you volunteer with children or youth, you may need personal liability insurance. An increase to your umbrella policy is warranted once you have teenage drivers. If you are a business owner, you may need insurance as part of a buy-sell agreement with a key employee or business partner in addition to business liability insurance. If you are in a high-risk profession (like health care, construction or real estate), you will probably need additional asset protection planning.

How much insurance do I need?

You need enough insurance to protect your assets in the worst-case scenario. At the same time, the premiums should be an amount you can comfortably afford in your budget. Decide what you need to insure, how much to insure it for, and how much you are able and willing to pay in deductibles and premiums.

What You Need to Know:

Your family’s needs for insurance will change over time and will reflect your values at each stage in life. For example, you may need more life insurance when your children are young; you may want long-term care insurance as you near retirement (although it is less expensive when you are younger); you may not need as much personal liability insurance if you retire from volunteering or once your children become independent; and you may not need business insurance if you sell your business.

Actions to Consider:

1. Look at ways you can reduce premiums. For example, installing a home security alarm system or trimming shrubbery may save on your homeowner’s insurance. If you drive an older car, you may not need collision insurance. If you can handle higher deductibles, your premiums will likely be lower.

2. Look for ways to reduce risk entirely. For example, you may want to sell a property that is high risk or even retire from a high-risk profession.

3. Some risk may be perfectly acceptable to you. Consider what you might lose if the worst happens and see if you could live with the loss. This is called risk budgeting.

4. Keep good records on personal property. Review the values and your insurance coverage annually. Values fluctuate, and you don’t want to over- or under-insure.

5. Determine what you would lose if someone sued you with a liability claim. You worked hard to build your net worth and you do not want to lose wealth if someone files a claim against you. Even if it is a frivolous claim, you may have to spend a small fortune to defend yourself. Take action to protect your assets for yourself and your family.

6. Health care and long-term care costs are increasing at an alarming pace, people are living longer, and many older Americans have seen their retirement savings decline in recent down markets. A professional can help you evaluate your health care risks and determine how to plan for them.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

How to Choose a Trustee

When you establish a trust, you name someone to be the trustee. A trustee basically does what you do right now with your financial affairs—collect income, pay bills and taxes, save and invest for the future, buy and sell assets, provide for your loved ones, keep accurate records and generally keep things organized and in good order.

The Key Takeaways:

• You can be trustee of your revocable living trust. If you are married, your spouse can be co-trustee.

• Most irrevocable trusts do not allow you to be trustee.

• Even though you may be allowed to be your own trustee, you may not be the best choice.

• You can also choose an adult child, trusted friend or a professional or corporate trustee.

• Naming someone else to be co-trustee with you helps them become familiar with your trust, allows them to learn firsthand how you want the trust to operate, and lets you evaluate the co-trustee’s abilities.

Who Can Be Your Trustee:

If you have a revocable living trust, you can be your own trustee. If you are married, your spouse can be trustee with you. This way, if either of you become incapacitated or die, the other can continue to handle your financial affairs without interruption. Most married couples who own assets together, especially those who have been married for some time, are usually co-trustees.

You don’t have to be your own trustee. Some people choose an adult son or daughter, a trusted friend or another relative. Some like having the experience and investment skills of a professional or corporate trustee (e.g., a bank trust department or trust company). Naming someone else as trustee or co-trustee with you does not mean you lose control. The trustee you name must follow the instructions in your trust and report to you. You can even replace your trustee should you change your mind.

When to Consider a Professional or Corporate Trustee:

You may be elderly, widowed, and/or in declining health and have no children or other trusted relatives living nearby. Or your candidates may not have the time or ability to manage your trust. You may simply not have the time, desire or experience to manage your investments by yourself. Also, certain irrevocable trusts will not allow you to be trustee. In these situations, a professional or corporate trustee may be exactly what you need: they have the experience, time and resources to manage your trust and help you meet your investment goals.

What You Need to Know:

Professional or corporate trustees will charge a fee to manage your trust, but generally the fee it is quite reasonable, especially when you consider their experience, services provided and investment returns.

Actions to Consider:

1. Honestly evaluate if you are the best choice to be your own trustee. Someone else may truly do a better job than you, especially in managing your assets.

3. Name someone to be co-trustee with you now. This would eliminate the time a successor would need to become knowledgeable about your trust, your assets, and the needs and personalities of your beneficiaries. It would also let you evaluate if the co-trustee is the right choice to manage the trust in your absence.

5. Evaluate your trustee candidates carefully and realistically.

7. If you are considering a professional or corporate trustee, talk to several. Compare their services, investment returns and fees.

 If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

The Advisory Team Approach to Estate Planning

Estate planning is not simply the documents prepared by an attorney, nor is it the insurance and financial plan recommended by a financial advisor. Properly done, estate planning encompasses at least the legal and financial elements, but it may include more, as estate planning often points out the need to plan in other areas.

These other areas often include planning for asset protection for the client’s lifetime and for the heirs; retirement; providing for a surviving spouse in the event of disability and/or death; providing for a parent or a child with special needs; long-term health care costs; estate taxes; and/or a business succession plan at retirement, disability and/or death.

To meet a client’s needs and goals, it may be necessary to grow a business, increase or adjust insurance, and manage investments in a certain way. No one professional has all the answers; a team of qualified advisors, however, can provide the diverse skills and experience that are necessary for the best result. Instead of consulting with various professionals at different times and stages in the planning (often getting different opinions from each one), many people find they benefit from having a team of advisors involved in the process from the beginning. The team approach also minimizes time and costs and, with everyone involved from planning through implementation, the advisors can work together and hold each other accountable.

An advisory team will likely include the estate planning attorney; accountant/CPA; insurance agent/broker; investment advisor; and possibly a professional trustee. For business owners, a business attorney and valuation expert will probably be needed, as well as a business broker if the plan calls for the business to be sold at some point. Other advisors may also be included, depending on specific circumstances and needs.

Several meetings are usually needed. The advisory team will first meet with the client to help identify goals and set priorities. At this stage, the advisors should be asking more questions than providing answers. Usually the advisors will then meet without the client to discuss how best to meet these goals, bringing their areas of expertise into the planning as they consider various legal and financial solutions. Then the team will present its recommended plan to the client and, once approved, will begin to implement the plan. From time to time, the team will meet to monitor the progress and make any needed revisions as needs and goals change.

Involving family members will acquaint them with the members of the advisory team, help them to understand what is being done and why, and avoid confusion and distrust later. An advisory team can also provide continuity if planning provides for minor children and/or grandchildren, those with special needs and even for generations to come.

If the advisory team approach interests you, please contact our office. We will be happy to discuss our process with you.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

Estate Planning Today Must Include Digital Assets and Social Media

It wasn’t very long ago that we had only paper for financial and tax records. We could simply point to a file cabinet or drawer and tell someone, “Everything is in there when the time comes.” Now we have computers and the internet, and so much of our lives are online. Unless we include our digital assets and social media in our estate planning, our family or administrator may not be able to find critical documents.

For example, if you scan documents or receive financial statements electronically, someone else may not even know these exist. If you use a program like Quicken or QuickBooks and tax preparation software, those records are on your computer. Facebook pages, blogs, email accounts and photos stored digitally on a computer or an online account would certainly have special meaning to your family.

Much of this information is password protected. Unless we make arrangements in advance, family members or administrators may not be able to access these and the information could be lost forever.

Estate planning for digital assets and social media accounts is similar to estate planning for other assets. You need to make a list of what you have and where it is located, name someone (with computer and social media know-how) to step in for you, provide that person with access, and provide some direction for what you want to happen to these assets.

Listing your digital assets by category (hardware, software, social media/online presence, online accounts) will help make the task less daunting. Next to each one, add user names, passwords, PIN numbers and the site’s domain name. Keep this list in a safe place and tell your successor where it is. (Do not store it unprotected on your computer; if it were stolen, the thief would have all of your passwords. If you store it on your computer, passwords protect the file and give that information to your successor.)

Think about what you want to happen to these assets. For example, if you have a website or blog and you want it to continue, you need to leave instructions for keeping it up or having someone take it over and continue it. If a site is currently producing or could produce income (e-books, photography, videos, blogs), make sure your successor knows this. If there are things on your computer or hard drive that you want to pass on (scanned family photos, ancestry research, a book you have been writing), put them in a “Do Not Delete” folder and include it on your inventory list.

Closing down accounts that are no longer needed will help to protect your family from identity theft after you are gone. The person you name as your successor will need a death certificate to do this. Consider naming this person as a co-trustee or co-executor with responsibilities limited to this area to give them legal authority to act for you.

Yes, this will take some time and thought. But, just like “other” estate planning, the more we can do now to put things in order, the easier it will be for our families later.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.

What and When Should You Tell Your Children About Their Inheritance?

Not many parents like to talk to their children about their wealth. How much money people have is usually considered a private matter, something it’s not polite to talk about. But not talking to children about how much they may inherit can leave them unprepared to handle even a modest amount.

This is becoming especially important because children of baby boomers are due to inherit more wealth than ever before. It has been estimated that baby boomers will inherit $12 trillion from their parents, and they will leave an additional $30 trillion to their own children over the next 30 to 40 years.

Many who have substantial wealth are concerned that letting their children know how much they have will take away any motivation for the children to be productive and involved citizens. They often want their children to learn how to live in the world as “normal” people, and to be productive and successful in their own right.

Even those who are not as wealthy may not want their children to know how much they have. They may be concerned that all of their savings will be needed for retirement, medical expenses and end-of-life expenses. If that turns out to be the case, their kids would not receive an inheritance they may have been counting on.

But not knowing what they may inherit leaves children in the dark and can actually hinder their ability to handle money wisely. Those who inherit a substantial amount may be unprepared for what to do with that much money. Many find they suddenly feel separated from their friends, isolated, even confused about how to handle relationships; some will be wasteful and lazy. Those who inherit even a modest amount are likely to be just as irresponsible; stories of inheritances being squandered on an expensive sports car, lavish vacations and fast living are all too common.

Experts agree it is important to talk to children about money and wealth, at least in generalities. There is no need to show them bank and financial statements. Instead of concentrating on money and material things, talk to them about your values, the opportunities money can provide and what you want to accomplish with it. Most parents want their children to think about others, and many want to encourage entrepreneurship. Some give their children a small amount of money at a young age, and teach them how to save and invest, give a certain amount to charity and spend wisely.

Of course, the most effective way to teach children about money is to be an example; let them see you using your money in ways that reinforce your values. Many parents show how they value family relationships by spending their money on family vacations or buying a second home where the entire family can gather for summers and holidays. If your children see you being charitable and helping others, chances are they will become charitable, too.

If you are interested in ensuring that your family is cared for after you have passed away, please call our office at 415-625-0773 to schedule your free estate planning consultation with San Francisco’s premiere estate planning attorney, Matthew J. Tuller.