Understanding Losses: Property

Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. However, if property has appreciated and there isn’t sufficient insurance for replacement value, any losses must be paid out of pocket. To protect your wealth from these kinds of losses, it is important to determine replacement values so you will have adequate insurance.

 The Key Takeaways:

 Insuring for replacement value prevents having to use personal wealth to cover losses.

• Determining replacement values, and keeping them current, can guard against being over- and under-insured.

Replacement Value vs. Actual Value:

 Replacement value is the amount it would cost to replace an item or structure at its condition before the loss occurred. When an item is covered by a replacement value policy, the cost of a similar item when purchased today determines the compensation amount for that item, regardless of depreciation. For example, say an item purchased eight years ago for $2,000 was destroyed in a fire and a similar item today would cost $4,000. After being reimbursed the full replacement value of $4,000 by the insurer, the owner would pay nothing to replace the item.

Actual cash value coverage provides for replacement minus depreciation. For example, consider the same item purchased eight years ago for $2,000 and a similar item costs $4,000 today. The insurance company determines all such items have a useful life of ten years; the destroyed item had 20% of its life expectancy left. The actual cash value is equal to: $4,000 (replacement value) times 20% (useful life remaining)—or $800. After being reimbursed $800 from the insurer, the owner would have to pay an additional $3,200 to replace the item.

What You Need to Know:

Replacement value for your home is the building cost to repair or replace the entire structure; it does not include the cost of the land or the amount of any mortgage loans. A building contractor or professional replacement cost appraiser can give you estimated replacement costs. (Your insurance agent probably can give you some referrals.) Be sure to include the costs to rebuild any architectural details or unique features like upgraded bathrooms or kitchen, basement improvements, room additions, built-in cabinetry and so on.

 Actions to Consider:

1. Aim for comprehensive coverage equal to at least 100% of your home’s estimated replacement cost.

2. Be sure to increase your home’s estimated replacement cost when you remodel or improve your home.

3. Some insurance policies include an inflation provision that automatically adjusts each year for increases in construction costs in your area. Check with your insurance agent to see if you have this automatic increase or if you need to update your coverage amount each year.

4. Replacement coverage for household contents usually is calculated as a percentage of the value of the home. Items of exceptional value may need to be insured separately.

5. Consider scheduling an overall insurance review. At the Law Office of Matthew J. Tuller, we offer our client’s a comprehensive insurance review, when we create the client’s estate plan, and annually, during our estate plan maintenance meeting.

• Because our office does not sell insurance or any other financial products, we work with a select team of professional advisors who we work in conjunction with where appropriate and in the best interest of the client. 

 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 Stop Worrying About Running Out of Money in Retirement

Many retirees today worry about having enough money for their retirement. Of special concern is if there will be enough money to provide for the surviving spouse. This is called “shortfall risk,” and it is a valid concern. People are living longer and health care costs continue rising, especially long-term care, which many seniors will need. In addition, the recent recession has given us setbacks in investments and record low interest rates. When combined, these issues can have a serious effect on retirement savings and projected income. Nevertheless, there are some things you can do now to help manage your shortfall risk and protect your assets.

The Key Takeaways: 

• The fear of running out of money in retirement is a valid concern due to increased longevity, increasing health care costs, low interest rates and the recent recession.

• Using experienced advisors who specialize in certain areas can help you increase your retirement income as well as preserve, grow and protect your assets.

The Role of Specialists:

A retirement specialist can help you determine the best strategy for taking distributions from an IRA, 401(k) and other retirement accounts; the tax implications involved; how to continue to grow your savings; when to start taking Social Security benefits; and how to plan for out-of-pocket medical and long-term care costs. An estate planning attorney can help you shield your family and your assets from probate court interference at incapacity and death, unintended heirs, unnecessary taxes and lawsuits. Other specialists can be brought in, as needed, for example, when life insurance is used to provide an inheritance for a child who does not work in the family business.

What You Need to Know:

The financial advisor who helped you grow your retirement nest egg may not be the best choice to help you determine how to utilize that money. Likewise, your business attorney is probably not the best choice to do your estate plan. An innocent error by a well-meaning but inexperienced advisor can result in a costly and often irreversible mistake.

Actions to Consider:

1. Be open to new products and strategies that you may not have considered in the past. For example, consider trusts combined with investments and property to manage the conflicting demands of income, spending, taxes, distributions and transfers.

2.  Explore new long-term care options from insurance companies. These include: 1) Asset-based long-term care (a single deposit premium; if not needed for long-term care, the benefit amount is paid tax-free to your beneficiary); 2) Life insurance accelerated death benefit (allows you to access the death benefit before you die for long-term care expenses); and 3) Home health care doublers (a guaranteed lifetime income contract that doubles your income for up to five years if you need long-term care).

3. Delay taking Social Security benefits. If you delay benefits until age 70 and live past age 79, your lifetime income will be more than if you start taking benefits at Full Retirement Age (66-67).

4. A revocable living trust will avoid court interference at both incapacity and death. This is why more people prefer a living trust to a will.

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.

Recovering Emotionally from Past Financial Errors

Most of us will admit to having made some financial mistakes we regret—running up credit card debt, impulse buying, or making a bad investment or business decision. While there can be significant devastation, the key is to move beyond regret into productive action. What, then, are some strategies that can restore a person’s self-confidence and avoid financial failures in the future?

The Key Takeaways:

• It’s important to know that others make financial mistakes, including the most experienced investors and successful business people.

• Recognizing and learning from our mistakes can help us to avoid repeating them in the future.

Recognize and Learn from Past Mistakes:

Sometimes a financial setback is not our fault; for example, the recent recession that resulted in losses for many in the stock market, housing and even jobs. Some of the losses were on paper, but some were realized. Even when financial setbacks like these are out of our control, we can look back and see how we might have been better prepared or reacted in a different way that would have produced better results. For example, having a bigger nest egg or emergency fund might have prevented having to dip into retirement savings or sell real estate in a down market.

Most of the time, however, we make our own mistakes. Learning from these mistakes so we don’t continually repeat them takes some introspective examination. Do you make impulse purchases? Are you wasting money because you don’t comparison shop or you buy items you don’t need or use? Are you trying to make a quick fortune in the stock market or other investments?

What You Need to Know:

You probably will make more financial mistakes in the future. (Hopefully, they will be small ones and not big ones.) Instead of dwelling on your mistakes as personal failures, learn from them, accept them as part of growing and maturing, and determine not to make the same ones again.

Actions to Consider:

1. 1. The best way to avoid financial failures in the future is to become educated. Learn about basic principles of personal finance and investing, and invest for long-term growth instead of an instant fortune. Use your professional advisors as a sounding board to guide your thinking. Evaluate why you made financial mistakes in the past and think of ways to keep yourself from those situations. For example, if you overspend when you are bored or feeling low, find other ways to lift your spirits and occupy your time.

2. When you do make a mistake, don’t panic or get depressed. Take some time to think about what you did and why, and if you can correct it. If you can’t undo your error, think about how you can live with it; you may have to cut back in other areas. Don’t beat yourself up; just try to do better the next time.

3. 3. You can also gain by learning from others’ mistakes as well as giving back by sharing your own.

4. 4. Keep focused on your long-term financial goals. Periodically evaluate where you are and encourage yourself. While you may continue to make some mistakes, recognize how much you are learning and the improvements you are making.

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.

Recovering Emotionally from Past Financial Errors

Most of us will admit to having made some financial mistakes we regret—running up credit card debt, impulse buying, or making a bad investment or business decision. While there can be significant devastation, the key is to move beyond regret into productive action. What, then, are some strategies that can restore a person’s self-confidence and avoid financial failures in the future?

The Key Takeaways:

• It’s important to know that others make financial mistakes, including the most experienced investors and successful business people.

• Recognizing and learning from our mistakes can help us to avoid repeating them in the future.

Recognize and Learn from Past Mistakes:

Sometimes a financial setback is not our fault; for example, the recent recession that resulted in losses for many in the stock market, housing and even jobs. Some of the losses were on paper, but some were realized. Even when financial setbacks like these are out of our control, we can look back and see how we might have been better prepared or reacted in a different way that would have produced better results. For example, having a bigger nest egg or emergency fund might have prevented having to dip into retirement savings or sell real estate in a down market.

Most of the time, however, we make our own mistakes. Learning from these mistakes so we don’t continually repeat them takes some introspective examination. Do you make impulse purchases? Are you wasting money because you don’t comparison shop or you buy items you don’t need or use? Are you trying to make a quick fortune in the stock market or other investments?

What You Need to Know:

You probably will make more financial mistakes in the future. (Hopefully, they will be small ones and not big ones.) Instead of dwelling on your mistakes as personal failures, learn from them, accept them as part of growing and maturing, and determine not to make the same ones again.

Actions to Consider:

1. 1. The best way to avoid financial failures in the future is to become educated. Learn about basic principles of personal finance and investing, and invest for long-term growth instead of an instant fortune. Use your professional advisors as a sounding board to guide your thinking. Evaluate why you made financial mistakes in the past and think of ways to keep yourself from those situations. For example, if you overspend when you are bored or feeling low, find other ways to lift your spirits and occupy your time.

2. When you do make a mistake, don’t panic or get depressed. Take some time to think about what you did and why, and if you can correct it. If you can’t undo your error, think about how you can live with it; you may have to cut back in other areas. Don’t beat yourself up; just try to do better the next time.

3. 3. You can also gain by learning from others’ mistakes as well as giving back by sharing your own.

4. 4. Keep focused on your long-term financial goals. Periodically evaluate where you are and encourage yourself. While you may continue to make some mistakes, recognize how much you are learning and the improvements you are making.

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.

Passion Investing as a Spark to Your Life

Bill Gates, Warren Buffet and over 50% of the Fortune 400’s The Richest People in America list have decided to give away their wealth for charitable pursuits. Of course, not many of us have that kind of money or are inclined to give away all we own. However, giving to charitable organizations is something that anyone can do, and we can all derive a similar satisfaction by investing in causes that light our passion.

The Key Takeaways:

• Investing in a cause that we feel passionate about can give our lives new purpose.

• Even if we have limited finances, we can still find ways to contribute by giving of our time and/or talents.

• Our giving can influence subsequent generations and others around us by setting an example and communicating our values.

Finding Your Passion and Renewing Your Life:

Americans like helping people and giving back to our communities. You may have already found your passion and are doing what you can to help. But if you are still searching for a way to make a difference, give some thought to what inspires you or what you care about deeply. It could be the arts, reading, the elderly, our military, disadvantaged children, teen mothers, or a clean planet. There are many organizations that need volunteers and financial help to do their good works. And, of course, most churches and religious organizations offer numerous ways to volunteer in your community and around the world. 

What You Need to Know:

One traditional way to benefit a charity is to leave a donation through a will or trust. This is good, of course, but if you contribute while you are living, there is the additional benefit of seeing the results of your contributions. You can also network with others who share your passion, which often results in greater contributions.

Actions to Consider:

1. 1. If you have children at home, include them in your volunteer work. If you make a donation, deliver the check in person and take your children with you.

2. 2. If you are retired or nearing retirement, you have the benefit of extra time to donate to your favorite causes. Some people choose to work part time in retirement so they will have extra money for living expenses and for donations.

3. 3. Include all cash donations in your spending plan so they are part of your monthly expenses. Otherwise, you risk being an emotional or impulsive giver, which can have a negative impact on your finances.

4. 4. If you aren’t sure how to contribute, ask the organization you want to help. They are sure to have a number of suggestions with different time and money commitments.

5. 5. Whenever possible, work with local organizations that benefit your community. Get to know the people running the organization so you will know if they can be trusted with your contributions. This will also allow you to see the progress firsthand.

6. 6. If you have more substantial means, a charitable trust is an excellent way to give, and such a trust gives you many financial and non-financial benefits.

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 Leave Assets to Minor Children

Every parent wants to make sure their children are provided for in the event something happens to them while the children are still minors. Grandparents, aunts, uncles and other relatives often want to leave some of their assets to young children, too. But good intentions and poor planning often have unintended results.

For example, many parents think if they name a guardian for their minor children in their wills and something happens to them, the named person will automatically be able to use the inheritance to take care of the children. But that’s not what happens. When the will is probated, the court will appoint a guardian to raise the child; usually this is the person named by the parents. But the court, not the guardian, will control the inheritance until the child reaches legal age (18 or 21). At that time, the child will receive the entire inheritance. Most parents would prefer that their children inherit at a later age, but with a simple will, you have no choice; once the child reaches the age of majority, the court must distribute the entire inheritance in one lump sum. 

A court guardianship for a minor child is very similar to one for an incompetent adult. Things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court, and an attorney will need to represent the child. All of these expenses are paid from the inheritance, and because the court must do its best to treat everyone equally under the law, it is difficult to make exceptions for each child’s unique needs. 

Quite often children inherit money, real estate, stocks, CDs and other investments from grandparents and other relatives. If the child is still a minor when this person dies, the court will usually get involved, especially if the inheritance is significant. That’s because minor children can be on a title, but they cannot conduct business in their own names. So as soon as the owner’s signature is required to sell, refinance or transact other business, the court will have to get involved to protect the child’s interests.

Sometimes a custodial account is established for a minor child under the Uniform Transfer to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA). These are usually established through a bank and a custodian is named to manage the funds. But if the amount is significant (say, $10,000 or more), court approval may be required. In any event, the child will still receive the full amount at legal age.

A better option is to set up a children’s trust in a will. This would let you name someone to manage the inheritance instead of the court. You can also decide when the children will inherit. But the trust cannot be funded until the will has been probated, and that can take precious time and could reduce the assets. If you become incapacitated, this trust does not go into effect…because your will cannot go into effect until after you die.

Another option is a revocable living trust, the preferred option for many parents and grandparents. The person(s) you select, not the court, will be able to manage the inheritance for your minor children or grandchildren until they reach the age(s) you want them to inherit—even if you become incapacitated. Each child’s needs and circumstances can be accommodated, just as you would do. And assets that remain in the trust are protected from the courts, irresponsible spending and creditors (even divorce proceedings).

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 Leave Assets to Adult Children

When considering how to leave assets to adult children, the first step is to decide how much each one should receive. Most parents want to treat their children fairly, but this doesn’t necessarily mean they should receive equal shares of the estate. For example, it may be desirable to give more to a child who is a teacher than to one who has a successful business, or to compensate a child who has been a primary caregiver.

Some parents worry about leaving too much money to their children. They want their children to have enough to do whatever they wish, but not so much that they will be lazy and unproductive. Therefore, instead of giving everything to their children, some parents leave more to grandchildren and future generations through a trust, and/or make a generous charitable contribution.

When deciding how or when adult children are to receive their inheritances, consider these options.

Option 1: Give Some Now:

Those who can afford to give their children or grandchildren some of their inheritance now will experience the joy of seeing the results. Money given now can help a child buy a house, start a business, be a stay-at-home parent, or send the grandchildren to college—milestones that may not have happened without this help. It also provides insight into how a child might handle a larger inheritance.

Option 2: Lump Sum:

If the children are responsible adults, a lump sum distribution may seem like a good choice—especially if they are older and may not have many years left to enjoy the inheritance. However, once a beneficiary has possession of the assets, he or she could lose them to creditors, a lawsuit, or a divorce settlement. Even a current spouse can have access to assets that are placed in a joint account or if the recipient adds the spouse as a co-owner. For parents who are concerned that a son-or daughter-in law could end up with their assets, that a creditor could seize them, or that a child might spend irresponsibly, a lump sum distribution may not be the right choice.

Option 3: Installments:

Many parents like to give their children more than one opportunity to invest or use the inheritance wisely, which doesn’t always happen the first time around. Installments can be made at certain intervals (say, one-third upon the parent’s death, one-third five years later, and the final third five years after that) or when the heir reaches certain ages (say, age 25, age 30 and age 35). In either case, it is important to review the instructions from time to time and make changes as needed. For example, if the parent lives a very long time, the children might not live long enough to receive the full inheritance—or, they may have passed the distribution ages and, by default, will receive the entire inheritance in a lump sum.

Option 4: Keep Assets in a Trust:

Assets can be kept in a trust and provide for children and grandchildren, but not actually be given to them. Assets that remain in a trust are protected from a beneficiary’s creditors, lawsuits, irresponsible spending, and ex- and current spouses. The trust can provide for special needs dependent, or a child who might become incapacitated later, without jeopardizing valuable government benefits. If a child needs some incentive to earn a living, the trust can match the income he/she earns. (Be sure to allow for the possibility that this child might become unable to work or retires.) If a child is financially secure, assets can be kept in a trust for grandchildren and future generations, yet still provide a safety net should this child’s financial situation change.

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 in 2014 and Beyond under the New Tax Law

The recent tax legislation dealing with the “fiscal cliff”, which went into effect on January 1, 2013, included significant revisions to the estate tax law that will affect estate planning for the foreseeable future. While you may have previously read about these changes, the following serves as a summary of the exemption amounts for decedents passing away in 2014. These revisions include:

The federal gift, estate and generation-skipping transfer tax provisions were made permanent as of December 31, 2012. This is great news because, for more than ten years, we have been planning with uncertainty under legislation that contained expiration dates. Moreover, while “permanent” in Washington only means that this is the law until Congress decides to change it, at least we now have some certainty with which to plan.

Estate & Gift Tax Exemption:

The federal gift and estate tax exemption will remain at $5 million per person, adjusted annually for inflation. In 2012, the exemption (with the adjustment) was $5,120,000. The amount for decedent’s passing away in 2013 is $5,250,000. For those passing away in 2014, the exemption amount is $5,340,000. From a practical perspective, this means that individuals can make gifts during life or transfers at death up to this higher exclusion amount, and pay no federal estate tax. In addition, for married spouses, a surviving spouse can combine the deceased spouses unused credit amounts, and pass assets free of estate  tax on an estate up to $10.68 million at the death of the second spouse. This is true assuming that none  these credits or tax coupons were not used during either spouses lifetime. However, to utilize a deceased  spouses credit amount, a comprehensive estate plan must be in place to ensure these tax coupons are  preserved. Accordingly, it is crucial to have a properly drafted comprehensive estate plan in place so that you  do not pay more estate tax upon your passing.

Generation-Skipping Transfer Tax ("GST") Exemption:

The generation-skipping transfer (GST) tax exemption also remains at the same level as the gift and  estate tax exemption ($5 million, adjusted for inflation). This tax, which is in addition to the federal estate  tax, is imposed on amounts that are transferred (by gift or at death) to grandchildren and others who are  more than 37.5 years younger than you; in other words, transfers that “skip” a generation. Having this  exemption now be “permanent” allows for planning that will greatly benefit future generations. Accordingly,  for individuals with a properly drafted estate plan that includes GST planning, $5.34 million can be  transferred free from the GST tax. For married couples with estate plans where GST planning is utilized,  $10.68 million can be sheltered from the GST tax.

Annual Gifting Program:

Married couples can take advantage of these higher exemptions and, with proper planning, transfer up to $10.68 million through lifetime gifting and at death. Thus, implementing a well planned lifetime gifting programs offer a simple estate planning technique that can result in significant tax savings.

Prevailing Tax Rates:

The tax rate on estates larger than the exempt amounts increased from 35% to 40%.

Portability:

The “portability” provision was also made permanent. This allows the unused exemption of the first  spouse to die to transfer to the surviving spouse, without having to set up trust planning specifically for this purpose. However, there are still many benefits to using trusts, especially for those who want to ensure that their estate tax exemption will be fully utilized by the surviving spouse.

Annual Gift Tax Exclusion Amount:

Separate from the new tax law, the amount for annual tax-free gifts increased in 2013 to $14,000. This amount can be gifted annually, free from gift tax, to a single person or child each year. Moreover, parents can utilize an estate planning technique known as “gift splitting”, which allows parents to combine annual gifts that are free from gift taxes. Accordingly, with a properly drafted estate plan, a married couple can gift $28,000 to each child each year free from gift tax inclusion.

Annual Exclusion For Gifts To Non-U.S. Spouse:

For gifts made to a non-U.S. citizen spouse, the exclusion amount for annual gifts was $143,000 in  2014. In 2014, the annual exclusion amount for gifts made to a non-U.S. citizen spouse was increased to  $145,000.

Foreign Earned Income Exclusion:

The foreign earned income exclusion amount was increased from $97,600 in 2013, to $99,200 in 2014.

Therefore, for most Americans the 2012 Tax Act has removed the emphasis on estate tax planning and put it back on the real reasons to do estate planning: taking care of ourselves and our families the way we want. Those who might be tempted to skip estate planning because their estates are less than the $5 million range should remember that proper estate planning provides peace of mind by allowing Americans to:

1. Avoid state inheritance/death taxes that have lower exemptions than federal taxes;

2. Avoid probate, which can be quite expensive and time-consuming in some states;

3. Ensure their assets are distributed the way they want;

4. Protect an inheritance from irresponsible spending, “creditor’s and predator’s” which includes a child’s creditors, and from being part of a child’s divorce proceedings;

5. Provide for a loved one with special needs without losing valuable government benefits;

6. See that control of their assets remains in the hands of a trusted person;

7. Provide for minor children or grandchildren;

8. Help protect assets from creditors and frivolous lawsuits (especially important for professionals);

9. Protect themselves, their family and their assets in the event of incapacity; and

10. Help create meaningful charitable gifts.

For those with larger estates, ample opportunities remain to transfer large amounts tax-free to future generations. Nevertheless, with the increase in estate and income tax rates, it is critical that professional planning begins as soon as possible. In addition, with Congress looking for more ways to increase revenue, many reliable estate planning strategies may soon be restricted or eliminated. Thus, it is best to put these strategies into place now so that they are more likely to be grandfathered from future law changes.

For those who have been sitting on the sidelines, waiting to see what Congress would do, the wait is over. Now that we have some certainty with “permanent” laws, there is no excuse to postpone planning any longer. Finally, if you are taking the time to read this article, getting your affairs in order by executing a properly drafted estate plan is on your mind. Therefore, instead of making excuses as to why you are not creating your estate plan (i.e. not enough time, etc.) contact a competent estate planning attorney and unburden yourself from this concern—create a comprehensive estate plan—and obtain the piece of mind that you and your family will be taken care of even after you are no longer around. 

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 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.