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The Future Of Retirement and The Importance Of The Revocable Trust

The Future Of Retirement and The Importance Of The Revocable Trust

The Future Of Retirement and The Importance Of The Revocable Trust

As an estate planning attorney, I have had an interesting viewpoint of how the Great Recession affected my estate planning clients. Over the last two or three years, I have noticed a consistent worry of clients during initial conferences. They seem to be more worried in some cases about their children’s ability to retire than their own.

It makes sense. The Great Recession had far reaching effects on our country’s economy and some of those effect are still being felt today. But those with investments, they have not only recovered their nest egg but since increased the size of it handsomely as the stock market has reached all time highs. Retirement age parents, however, are concerned about their children’s student loan debt, costs of housing, delayed family creation and just generally about their well being when they are gone.

I met with a client couple recently who told me that each of their children had graduate degrees from prestigious schools and were now out in the world. One found a job pretty quick since he is in software engineering, but is getting crushed by a $1,500 per month condo rental, plus $1,500 per month in student loans (for the next 30 years). The other child had graduated last year, could not find a job in our area in her chosen field (computer science) and had taken a job as an office assistant at a company in St. Louis. She lives with them.

Each of them told me that they had started watching their spending habits so that they could leave as much of an inheritance to their children as possible, despite their terrific educations and work habits. This is a sea change in estate planning for those with a decent amount of assets to leave to their children.  So what I recommended at the end of our initial conference was a living trust whereby they would each act as the trustees and then when the second spouse had passed away, a successor trustee would take over. In their case, that successor trustee was not their children but a younger brother of the husband.

When the second spouse dies, unlike is often the case in traditional revocable trust planning, the children will not inherit everything. The younger brother will manage the trust for a set number of years at which time the 50/50 split inheritance of each child would be distributed outright. That will be a considerable some based on the couple’s current assets. But the beauty of this delayed distribution is that since the inheritance of each child will not immediately be received it can be invested and grow.

In other words, we are creating a retirement plan for the children via their inheritance. Bills of the children can still be paid as a supplement by the trustee, but the principal remains invested. So upon the death of the second spouse, the balance of any student loans could be paid off but the significant money left can continue to grow. Meanwhile, since the kids have careers starting, they can continue to save for retirement themselves as well. If the inheritance was given to them right away, that may not be the case. The plan we created ensures the kids will have the best of both worlds: A retirement source via inheritance, which will grow from the delay of distribution and the retirement they create for themselves, which should be easier through the assistance of at least some of their bills being paid as needed by the trustee of the revocable trust.

As an aside, I am not a financial advisor but one significant way retirement planning has changed and will continue to change is the loss of guaranteed income. Pensions are largely a thing of the past and workers have to invest more into building a larger nest egg so that they can replace that lost pension check, if necessary, with a draw from the nest egg itself. Many of my clients still enjoy significantly high incomes from combined pensions and Social Security. This can leave their nest egg largely intact. However, their risk tolerance is much lower than someone like their children. This again reinforces the beauty of the plan I outlined above.

If you die without a will in Missouri what happens?

If you die without a will in Missouri, this is called dying intestate and your estate is divided according to Missouri law.

Here’s an example of why it’s important to have a will:

H and W are married in 2005.  H has two grown children from a prior marriage.  When H and W get married, they move into H’s house, which is a nice home and paid off.  But it’s also in H’s name.  H gets sick and dies.  W still lives at the house.  Under Missouri law, W inherits only half of the house and the other half is split equally between H’s children, who are unrelated to W.  W now must deal with H’s children.  Hopefully they get along.  If not, W may have to deal with a situation where they want the house also.  Since it’s 50/50, that could result in litigation.

If husband had a will, he could leave the house to his wife.  Even easier, he could have created a beneficiary deed naming wife beneficiary of the house when he passed away and the house would not only have passed to wife completely but would have avoided probate.

Having a will is not just a sales pitch.  It’s vitally important.  The illustration above is just one example of why.

8 Things to Know About Prenuptial Agreements in Missouri…

Prenuptial and Postnuptial agreements are two kinds of contract that can be entered into either before or after a marriage which set forth the rights of each party in the event of a divorce or death of the other party.   Here are 8 things you need to know about prenuptial agreements in Missouri.

1.  Prenuptial agreements in Missouri are often used by people with children from a previous marriage, who have been through a difficult divorce in the past and/or who are bringing significant assets into a marriage or are expecting a large inheritance from their family.

2.  Prenuptial agreements in Missouri commonly allows both spouses to keep the property they brought into the marriage and to split any property they acquire after the marriage.  But just about any arrangement is allowed as long as it is fair.   See below.

3.  With a prenuptial agreement, either spouse can waive alimony if there is later a divorce or can waive an inheritance if the other spouse dies.

4.  A prenuptial agreement should always be drafted by an attorney familiar with them and with the thought in mind that the document may later be challenged in court.

5.  In order to be upheld in a Missouri court, each spouse should be separately represented by an attorney.

6.  A prenuptial agreement should be signed well before the wedding day and one that is signed close to or on the day of the wedding could be unenforceable.

7.  Each spouse must understand the agreement and fully disclose their assets.  Failure to honestly disclose assets could lead to the document being unenforceable.

8.  The agreement, must be fair and not be unconscionable.  It can’t be one sided.

Call Legacy Law Center today for a free consultation to discuss prenuptial agreements in Missouri.

Missouri Adds Twist To Tax Reporting For Married Same-Sex Couples

Missouri adds a twist to tax reporting for married same-sex couples

Missouri does not recognize same-sex marriages.  In most states, while same-sex married couples would file a federal income tax return(s) as married, they would file their state income tax returns as unmarried individuals.

However, Missouri now requires same-sex couples who are validly married elsewhere to file their state income tax returns with the same status as their federal return. For example, Joe and Bob live in St. Louis and fly to New York and get married. They must file their federal return with a “married” status (per Rev. Rul. 2013-17), because their marriage was valid where performed (in New York), even though their residence is in Missouri, which does not recognize their same-sex marriage. If they file their federal income tax return as married filing jointly, Missouri will now require them to file their state income tax return as married filing jointly, notwithstanding the fact that Missouri does not recognize their same-sex marriage.

Here is the original STLToday.com story:  stltoday.com/news/local

Here is a link to the executive order:  governor.mo.gov/orders

Was looking for an O’Fallon attorney for Guardianship

Was looking for an O’Fallon attorney for Guardianship

I was referred to Legacy Law Center from a co-worker who had created an estate plan for her and her family.  We have a son with special needs and we learned a lot during our initial conference.  A hearing was set pretty quickly as they told us would happen and Legacy Law Center kept us in the loop throughout the process.  The hearing went very smoothly and we now have a lot of comfort knowing we are the guardians and conservators for our son. Highly recommend their services.  Will be calling them back for estate planning very soon.

Dale and Leta S.  (O’Fallon)