Money with calculator

How to “SECURE” Your Retirement Savings

Earlier this summer, the House of Representatives nearly unanimously passed the Setting Every Community Up for Retirement Enhancement Act, aka the “SECURE Act.” This legislation proposes some of the biggest changes to retirement savings plan legislation since the 2006 Pension Protection Act. After passing the House with a 417-3 vote, proponents were hoping the SECURE Act would pass the Senate by unanimous consent. The Senate, however, failed to address the SECURE Act before Congress’ August recess. 

The Senate was, however, considering its own retirement reform legislation through two similar plans: The Retirement Enhancement and Savings Act of 2019, “RESA,” introduced in April and the “Retirement Security and Savings Act” introduced in May. 

Why is this important information? Because some form of retirement savings “reform legislation” is likely to pass and it will affect your retirement strategy—the real question is to what extent. Some of the key changes under consideration include the following points and you should keep these on your radar so you are ready to adjust your strategy in accordance with your priorities.

RMD’s Starting at Age 72: This may seem like a minor change, but bumping the age for taking Required Minimum Distributions from 70½ to 72 could significantly boost the value of retirement savings for many people. Allowing additional time for your money to accrue is always favorable.

Eliminating Age Restrictions for Contributions: If you continue to work beyond age 70½, you could continue contributing to your traditional IRA. Like the idea of extending the age for taking RMD’s, this change allows you to keep putting money into your retirement savings as long as you are working, which is definitely favorable. 

Part-time Employees Get 401K Access: With several caveats, part-timers who work at least 500 hours a year would be eligible to participate in their employer’s 401K. This definitely opens retirement opportunities in a favorable way.

The Down Side: A significant drawback of the SECURE Act (and the Senate alternatives) is its elimination of “stretch” distributions for inherited assets. Instead of being able to take money out of an inherited IRA over one’s lifetime, the SECURE Act would require distributions to be completed within 10 years. For non-spousal beneficiaries, this will significantly reduce the long-term growth opportunities of receiving an inheritance and has significant income tax implications. By some calculations, a 45-year-old inheriting a $1M traditional IRA would have $0 remaining at age 86, compared to the opportunity of having $2M at age 86 if allowed to stretch the distributions. 

The Up Side: This new distribution rule would give you the opportunity to easily analyze the benefit of using a trust as the beneficiary of your traditional IRA. A trust beneficiary allows for asset protection and may become the best tool for meeting your goals in leaving retirement assets to your loved ones. 

Whichever new set of rules is enacted, we will be ready to help you understand your options and devise a plan that satisfies your goals and desires. Call us today for a free consultation to discuss your estate planning options.

Heir spelled out in blocks

Protect Against Unintentionally Disinheriting Children

We hope you all know that parents are not required to leave their children an inheritance. Doing so, however, is a common goal and can be an integral part of family connections across generations. Our desire to pass on wealth, family treasures, and the property is the reason estate planning exists. When parents divorce, it is important to consider the changed spousal relationship while understanding that both parents (generally) maintain relationships with their children. As such, divorced parents should consider these intentional steps to take to prevent children from being unintentionally disinherited. 

First, remember that Nevada is a Community Property state. This means income earned, and property acquired, by either spouse during the marriage belongs to both equally and would be split equally in the event of a divorce. Thus, if you remarry, you and your new spouse should define how you will treat income and assets in the marriage through a pre- or post-nuptial agreement.

Next, you and your new spouse should decide how your estate will be handled after one of you passes away. Instead of relying on a surviving spouse to “do the right thing,” we suggest you and your spouse plan the right thing for your family and execute estate planning documents to make sure those plans become reality.

This often includes preparing a “family trust.” A properly designed trust can hold a portion of marital assets after the first spouse passes away, allowing that portion of your estate to be set aside for “your” children (as opposed to your spouse’s children, or other beneficiaries). This is a way to ensure your children will receive at least the designated portion of your estate.

It is usually also wise to hold property in a trust. The trust can allow your surviving spouse to live in a primary residence for his/her lifetime. Then, that property can be sold, and its value divided among designated beneficiaries. Vacation properties can also be held in trust, then sold or inherited, according to your wishes. Using a trust in this manner means decisions made during your lifetime will be carried out after you pass away, eliminating the chance for a surviving spouse to change the plan.

You should also take a close look at your retirement accounts, life insurance policies, and other assets controlled by beneficiary designations. Whoever is the named beneficiary will receive the asset with no obligation to share its value. Under federal laws controlling 401K and similar pension accounts, your spouse is automatically the beneficiary unless he or she signs a waiver and you name someone else to inherit (your children or a trust, for example).

While estate planning for a second marriage can be a delicate balance of goals, not planning creates risks for both the surviving spouse and children from prior marriages. At Kling Law Offices, we offer a free consultation to discuss the tools available for helping balance these interests. Our goal is to help you achieve the peace of mind you deserve, so contact us today for an appointment.

The Value of Organizing Your Important Documents

As we like to say, a great value of estate planning is “giving you the peace of mind you deserve.” Knowing your estate is set up to protect you and your loved ones at a difficult and vulnerable time should give you that peace. Keeping and organizing the information you gather in preparing your estate plan is another way to make the most of the process. Compiling your documents when preparing your estate plan is an opportunity to take inventory of your assets, identify accounts and passwords, and confirm the whereabouts of important records (like deeds and car titles).

Organizing your vital documents serves a purpose beyond helping with your estate planning. Consider the risk of natural disasters and the loss of information that may occur in a fire, flood, or tornado. Such events can destroy records, leaving you to face the additional stress of reestablishing rights, access, benefits, and even identity at a difficult time.

In creating your estate plan, we ask you to document your assets, including bank accounts, brokerage accounts, retirement accounts, life insurance policies, vehicles owned, real estate owned, and significant personal property. Cryptocurrency is another important asset to document, especially since crypto-assets can be completely lost without passwords and access to “wallets” that hold their value. While you are locating these records, it can be useful to also locate your marriage certificate, birth certificates, social security cards, voter registration cards, driver’s licenses, and passports. Additionally, make note of your debit and credit card accounts, including the issuing entity and who is on each account. Once you start gathering information, begin a master list of accounts and documents, and be sure to note passwords for online access.

Once you have gathered key information and documents, you can decide what goes into a safe deposit box, what should be kept in a fireproof lockbox (consider waterproofing these items, too), and what should be copied or listed in a convenient place for future reference—something like a 3-ring binder. It is helpful to make copies of the documents in your safe deposit box and fireproof lockbox to include in your binder, so you have an inventory of the boxes’ contents. You can even make an electronic record by scanning documents and keeping a CD, flash drive, or cloud storage file for future reference.

In compiling and securing your vital documents, you will have the chance to review the status, accuracy, and adequacy of your personal and financial records. Organizing these documents and information as part of your estate planning process will streamline the work and ensure you get the greatest value from your efforts. Having your estate plan in place will give you peace of mind, and organizing your important documents will ensure you or your loved ones can navigate more easily through even the most difficult situations. At Kling Law Offices, we are happy to help lead you through this process. Contact our office today for your free consultation.

Shop owner standing in doorway

Plan for Your Business, Too

If you have read our articles before, you know we believe in what we do. Although you might see it as a bit boring, helping people plan what happens to their estates is incredibly rewarding. In our view, planning and making decisions about your future will give you peace of mind – we call it the “peace of mind you deserve.”

What happens if you don’t plan? The short answer is that your state of residency has a plan for you. Every state has “intestate succession” laws that dictate what happens to your property if you die without a will or trust. As much as we all trust our politicians, wouldn’t you rather decide how your assets, belongings, and business interests are passed on when you die?

There are some surprising examples of a lack of planning by wealthy celebrities.  Consider Aretha Franklin, who died without a will or trust. Her $80 million estate is being administered under Michigan’s intestate succession laws. She failed to plan for the smooth and orderly transition of her business interests, including substantial intellectual property rights. Her ex-husband is now reportedly making a claim to royalties that her four children would otherwise inherit. Further complicating matters is the fact that one of Ms. Franklin’s children is disabled and may be unable to independently manage the business or financial matters.

Similarly, the roughly $300 million empire Prince left when he died suddenly at age 57 is being administered according to Minnesota’s intestate succession laws. Heirs are fighting over business interests, intellectual property rights, and ownership of material found in Prince’s vaults. The fight over music rights could have been avoided with proper estate planning. Instead, family members continue to litigate their claims and it is unclear whether anyone will come out a “winner.”

As a business owner, your estate plan should be more than a simple will. You need to create a plan for what happens in your business if something happens to you. This includes considering disability insurance, life insurance, and creating a succession plan for your business. Making these decisions while you are competent and active in your business means you can plan for your business to survive and to thrive well beyond your lifetime.

It is crucial that you consult a qualified attorney to discuss your wishes and options. You must also follow through with having your documents prepared and properly executed. Failing to do so means Nevada’s intestate succession laws will determine how your business will be divided up upon your passing. To avoid having the “State of Nevada estate plan” apply to your business, you should consider having a will and a trust, health care directives, financial powers of attorney, confirming your beneficiary designations, and formalizing your business succession plan.

Your business is an important asset that should be carefully incorporated into your estate plan. At Kling Law Offices, we enjoy helping our clients create estate plans that will preserve businesses in a manner that generates both confidence and peace of mind for the future.

dominoes falling on a model house

Defending Your Estate Plan

Fighting over trust terms or inheritance is divisive and expensive. Family members become enemies, and wealth that might have been passed on goes instead toward attorneys’ fees. In most cases, avoiding future disputes is a significant reason the settlor (the person setting up a trust) completed his/her estate plan in the first place. What can you do to prevent, or defend against, a dispute that might arise? The long-standing adage that “the best defense is a good offense” gives helpful direction. If you have a good offense in the form of properly drafted and updated documents, your estate plan can withstand legal challenges and effectively distribute your estate according to your wishes.

In shoring up your offense, start with finding a qualified attorney who will help you develop an estate plan specifically tailored to your needs and desires. It is the attorney’s job to make sure you understand how the pieces of your estate plan work together and to properly draft the necessary documents.

Your attorney can also guide you in selecting fiduciaries and funding your trust. It is important to pick the right person(s) for the job—your trustee and agent for financial matters might have different talents than someone you name as a health care agent. Naming the right person for the job is more important than appeasing others by trying to be “fair.” This is especially important if your family dynamics are complicated, or strained, in any way. It is equally important to title assets in the name of your trust so they will be transferred in the manner you wish.

Once your plan is in place, keep it updated. As you age and your life changes, make sure your estate plan reflects those changes. If your children have grown up into responsible adults, you may not want to restrict their access to inherited funds. If you have divorced and remarried, you should ensure your ex-spouse and current spouse are both receiving what you intend. Failing to update your estate plan to reflect your desires and your updated family situation is a leading reason family members sue over estate issues.

When creating your estate plan, you will have the opportunity to write a list of designating beneficiaries for personal property items. For this list, remember that sentimental objects are equally important as those with significant monetary value. Along these lines, make sure to outline your funeral and burial preferences. Fighting over a sentimental item or a deceased loved one’s ashes is common and leads to litigation more often than you would imagine. Families have been known to spend far more in a fight than an item is worth.

To avoid the heartache and expense of future legal disputes over your estate, we urge you to plan well and to plan ahead. While you can’t stop someone from suing, if you stay on the offense, your attorney will have an easy time defending your plan and preserving your estate to be distributed according to your wishes. Contact our office today.