Transfer on Death Deed

There are numerous proactive strategies to ensure your assets, at your passing, find their way into the right hands, just as you intended. In Texas, one such effective tool for the passing for real estate is called the Transfer on Death Deed (TODD). This simple yet powerful method lets you decide who inherits your real estate, bypassing the probate process entirely. How Does It Work?

A Transfer on Death Deed can be used to transfer land, residences, buildings, uncut timber, and mineral rights, among other real property. With a TODD, you would maintain full ownership rights during your lifetime, meaning you are able to sell the property or use it as collateral for a loan. The property never becomes a part of your estate because the Transfer on Death Deed takes effect upon your passing. The individual(s) you designate in the Transfer on Death Deed (the “beneficiary”) inherits your property interest upon your death, without the need for a probate procedure. Multiple beneficiaries may be named, and beneficiaries may be changed at any time by canceling or adding a new TODD. Any modifications you make to the Transfer on Death Deed are not required to be disclosed to the beneficiary.

 

Can I Use a TODD For Property Owned in Other States?

The answer is no. Although there are currently Transfer on Death Deeds in place in about half of the states in the United States, only real property located in Texas is eligible to use the TODD law and its related forms. To find out if the other states have laws that resemble this one, you will need to review  .

 

What If I Have a Will?

Property that passes to heirs via a will must go through the probate court system. Read more about the probate process in this previous blog post written by BentOak Capital advisor Hayden Hill.  A transfer on death deed, like other types of legal beneficiary designation documents, allows property to be transferred outside of probate. It’s important to note that a legal will is not entirely replaced by a Transfer on Death Deed. You may specify in your will exactly who will receive your personal property, such as your cars, jewelry, furniture, etc. To find out how a TODD can fit into your estate plan, consult with your attorney.

 

What are the Requirements for a Texas Transfer on Death Deed?

To be effective, the deed must:

  1. Contain the necessary components and requirements for a Texas recordable deed.
    1. It must be in writing.
    2. Contain the property’s legal description.
    3. Provide the name and address of the beneficiary or beneficiaries who have been designated.
  2. State that the Grantor’s (the property owner’s) interest will not be transferred to the designated beneficiary until the Grantor’s death.
  3. Be recorded prior to the Grantor’s passing in the deed records kept in the county clerk’s office of the county where the real property is located. Be signed by the Grantor in the presence of a Notary Public.

 

A TODD can be an affordable method of transferring property at death without probate. It does not, however, serve as a replacement for a will or legal counsel. To find out if a Transfer on Death Deed is appropriate for you, consult with your attorney. If you would like to reach out to our team for guidance on next steps, we’d love to help.

 


Please remember to contact BentOak Capital (“BentOak”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that BentOak to effect any specific transactions for your account. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.bentoakcapital.com.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Securities offered through LPL Financial, Member: FINRA/SIPC. Investment advice offered through BentOak Capital, a registered investment advisor and separate entity from LPL Financial.

Do I Need a Trust?

Many high net worth individuals will come to the point where they ask themselves the question, “Do I need a trust?” Estate laws can be confusing, and getting advice from an unqualified source can make that decision all but impossible. To some, trusts are a stigmatized embodiment of a silver spoon. To others, the concept of a trust is so complicated that the thought of looking into establishing one is insurmountable. To simplify the matter, we will discuss some trust basics including the main reasons one might establish a trust.

Trust Basics 

Trusts need not make your eyes cross. We will keep this simple. There are two main types of trusts to consider: revocable living trusts, and irrevocable trusts.  

A revocable living trust is established during the grantor’s life for the purpose of controlling the distribution of the assets within the trust both during and after the grantor’s life or for avoiding probate. These are the most common types of trust. The grantor, the person creating the trust and making the gift, may make gifts during their life or at their death through their will to the revocable trust. During their life they may serve as trustee to the trust, or they can appoint someone else to serve as trustee. They also name the trust beneficiaries to which the assets will pass.  

An irrevocable trust is established to remove assets from one’s estate with the main purpose of reducing estate tax liability. With the increase of the Unified Estate Tax Exemption from the Tax Cuts and Jobs Act of 2017, these types of trusts have become less common because fewer people are faced with a possible estate tax liability. In simple terms, one can reduce the size of their estate during their life by irrevocably gifting assets to the trust, hence the name. The downside of the irrevocable trust is that the grantor cannot retain any control over the assets in the trust. Instead, they appoint a trustee that controls the assets. 

Controlling the Distribution of Assets 

Many who have worked hard to build their wealth want to maintain some control over those assets both during their life and after. A grantor can set out the conditions under which the trust will distribute income or assets, who will make the distribution decisions, to whom those assets will be distributed, and when the trust will terminate. 

When establishing a trust, the grantor sets out the terms under which the trust can, or must, distribute income or principle and under which conditions the trust will be terminated. Additionally, the grantor names income beneficiaries who will receive the income while the trust is in place, and remainder beneficiaries who will receive the assets after the trust is terminated. Lastly, the grantor names primary and secondary trustees who will serve to distribute the assets according to the terms of the trust. 

The grantor of a revocable trust can directly control the assets both during and after their life. During the grantor’s life, he can name himself as trustee and an income beneficiary while he is alive. In fact, most do just that. To maintain control after his life, he will name remainder beneficiaries and secondary trustees. The naming of secondary trustees also serves the purpose of eliminating the need of financial powers of attorney for the assets owned by the trust.  

Irrevocable trusts can also provide some sense of control for a grantor, even though legally they must give up actual control of their assets. A grantor of an irrevocable trust is still able to name income and remainder beneficiaries of the trust but cannot serve as trustee and cannot name herself as a beneficiary. Simply put, the grantor gifts assets out of her estate to the trust and gives up all control to the trustee to make income and corpus distributions according to the trust terms that she established when she created the trust. That is where the control stops.

Avoiding Probate 

Another benefit of a trust is that it allows the assets within the trust to avoid probate. Probate is the legal process in which a deceased person’s property is distributed. Probate is also a public process. Many would prefer to avoid this process all together, largely due to reasons of privacy and simplicity. Gifting to a trust removes those specific assets from the probate process, keeping them out of the public eye. Please note that any assets within a revocable trust are still included in one’s taxable estate.

Another form of probate that many like to avoid is ancillary probate. This is the probating of one’s estate in a state in which the deceased owned assets but did not reside as their primary residence. One common example of this is someone living in one state and owning a vacation property in another state. In that case, the deceased person’s estate would have to go through probate in both states unless the vacation property was owned within a trust. If the property was owned within a trust, the vacation home would not be subject to probate and the executor of the deceased person’s estate would not have to travel to another state for a separate probate process.

Whether you own property in another state, want to avoid probate in the state in which you reside, wants to maintain control of your property during or after your life, or want to avoid estate taxes then a trust could be the estate planning tool for the job. Now you should be more equipped to decide whether or not a trust is right for you. 

If you would like to discuss whether a trust makes sense for your family’s situation, please contact BentOak Capital. We can discuss the pros and cons of trusts, relating them to your needs. Importantly, we have a strong list of very good estate planning attorneys we can recommend to you.


Please remember to contact BentOak Capital (“BentOak”), in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you want to impose, add, to modify any reasonable restrictions to our investment advisory services, or if you wish to direct that BentOak to effect any specific transactions for your account. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.bentoakcapital.com.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Securities offered through LPL Financial, Member: FINRA/SIPC. Investment advice offered through BentOak Capital, a registered investment advisor and separate entity from LPL Financial.

Bridging the Wealth Gap: How to Prepare Your Heirs for Multigenerational Wealth

Introduction

If you are struggling with the idea of your heirs being financially savvy enough to step into your shoes one day, this blog post is for you.  As the family patriarch or matriarch, it is imperative you help your heirs make sound financial decisions, which is accomplished most effectively by learning from your experiences.  Any gap they need to close to prepare for receiving significant wealth is most likely because they are lacking the experiences and firsthand knowledge required to be prepared for such a windfall, not necessarily because they simply don’t “get it.”  There was a time when you probably didn’t get it either, so I encourage you to be patient and open-minded with your heirs.  View any shortfall in their financial acumen as an opportunity for you to help them learn – not as a mark against them.

 

Thoughts on Prior Younger Generations

“The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise. Children are now tyrants, not the servants of their households. They no longer rise when elders enter the room. They contradict their parents, chatter before company, gobble up dainties at the table, cross their legs, and tyrannize their teachers.”

 

As you read those words, you may have thought to yourself how true that seems for Gen Z or Millennials.  Perhaps you are thinking of your own children, grandchildren, or nieces & nephews.  But what if I told you Socrates penned those words approximately 450 years before Jesus walked the earth?  That’s right – around 2,500 years ago, right about the time when the Spartans were taking their legendary last stand against King Leonidas, Socrates was grumbling over just how deplorable the youth of his time had become. Maybe today’s younger generations are lazy with a sense of entitlement, and coincidentally, so was the younger generation at the time of Socrates’ teachings?  Unlikely.

 

By now you are probably seeing the point I am getting at: every generation thinks they are the best, viewing the generation ahead of them as fuddy-duddies and the generations after them as self-absorbed and aloof.  Or, as the great English novelist George Orwell said, “Every generation imagines itself to be more intelligent than the one that went before it, and wiser than the one that comes after it.”  It’s just our nature.  It is important to be aware of this age-old, subtle bias when it comes to assessing and sizing up your heirs.  There’s a good chance they might be more capable than you think.

 

The Value of Perspective

We view others by their actions, but we judge ourselves by our own intentions.  And as luck would have it, our own intentions are always good (according to us).  You have likely made a misguided financial decision in your past, but because of your firsthand perspective on how and why you came to that decision, you may be fairly forgiving of yourself – rationalizing why what you did was okay, all the while potentially judging others in a similar situation.  We can easily see into the heart of our own intentions, but we can only witness the actions of others – we are often missing the information and circumstances that persuaded them to act as they did. So, to gain perspective, seek first to understand.

 

We also view the actions of younger people through adult shaded lenses.  Throughout life’s journey, you rack up a large number of experiences that shape your opinions and ultimately aid you in becoming more self-aware.  This in turn gives you tools you can use to discern the best path forward in future situations. Because young adults have fewer life experiences, an effective shortcut is learning from others’ experiences. So, to give perspective, share those experiences.

 

Helping Your Heirs Make the Grade

Sure, you can simply share your experiences & insights and empathize with your heirs to facilitate a successful long-term legacy plan, but doesn’t that only work for the picture perfect situation?  Maybe.  If you were to grade your heirs current financial and emotional capabilities like you would a student, it’s probably true that your A & B students only need some impactful conversations and mentorship to be adequately prepared to inherit wealth.  It’s the C, D, and F students that likely have your attention, and if you have more than a couple of heirs, you have all the above!

 

The A-B Grade Heir

You probably already know what this person looks like.  Some traits might be independently successful, entrepreneurial, balanced life, healthy relationships, etc. That doesn’t mean this person is a financial guru, or even financially savvy at all.  It means they have exhibited qualities in different areas of their life that would be congruent with prudent financial concepts such as restraint, contemplative decision making, and emotional stability.  These young adults can easily benefit from good stewardship with meaningful conversations, sharing resources such as books or podcasts, and watching you lead by example.

 

The C-D Grade Heir

This might be a child or grandchild that needs some remedial work.  Overspends, impulsive purchases, not goal focused.  Much like a below average student, this heir’s heart might be in the right place, or they may have tremendous potential yet are distracted, or maybe their environment (whether apparent to you or not) is not conducive for good financial decision making.  Spend more time mentoring these young adults because they need it!  Don’t just chalk it up to them falling short – help them close the gap.  Learn more about their motivations and reasoning behind their decisions, and in a graceful way guide them to fiscal responsibility.  You may have similar conversations with your C-D heir as you do your A-B heir, but with the C-D heirs, you may want to focus more on creating accountability. For example, agree to read a self-improvement finance-related book together and set a standing coffee date to share insights.  Ask questions and listen.  Don’t just tell, teach!

 

The F Grade Heir

Be careful not to paint one of your C-D heirs into the F corner by being overly critical or harsh. Admittedly, this might be where everyone wants to put their “strong-willed” child because they can be defiant or in the past have only looked to blaze a trail of their own.  That may drive you nuts, but it doesn’t necessarily have anything to do with money. At the end of the day, we believe most parents are chiefly concerned with their heirs’ well-being. The F-grade heir may have flown the coop. This isn’t just someone who is simply going to use money in the future differently than you.  This is not the hippie granddaughter that just wants to travel in a van and be an artist.  That may annoy the patriarch / matriarch.  They may not understand it.  But that’s not harmful to their well-being or others.  Your F-grade heir is dangerous.  This is someone you want to protect from themselves and/or others as a result of addiction, manipulation, or mental health issues.  You love these people in a big way, and it is okay to make boundaries.  If you haven’t already, this might include counseling, rehab, or family retreats to try to move them in the right direction.  If it is clear that this isn’t an option for this heir, you may want to plan for what life without you looks like for them.

 

An estate plan with more restrictive terms (such as trusts) might be an answer but take time to explore all avenues for this heir. Proactively working to strengthen relationships and nurture the inherent strengths of your heirs is much harder than drafting the strict terms of a trust, but seeds planted now could lead to more fruit generations down the family tree.

 

Conclusion: Your Role in Readying Future Generations

In closing, the role of preparing your heirs for financial stewardship is a responsibility that extends far beyond the numbers on a net-worth statement. It involves building a bridge between generations, imparting not just financial acumen but also the wisdom and values that helped you amass your wealth. Whether they’re A-B grade heirs who need minimal guidance, C-D grade heirs who require more focused mentorship, or F-grade heirs who pose significant challenges, each presents a unique opportunity for growth and education—both for them and for you. The way you engage with your heirs today will shape their approach to financial decision-making long after you’re gone, setting the stage for a legacy that could impact your family for generations to come.

 

Remember, it’s not just about preparing your heirs to be good stewards of the family wealth; it’s about enabling them to be good stewards of their own lives. By taking the time to understand their individual needs, struggles, and aspirations, you’ll be equipping them with far more than financial literacy. You’ll be giving them the tools they need to build fulfilling, responsible lives for themselves, creating a cycle of wisdom and financial well-being that can benefit your family for years to come. Be willing to move beyond easy cliches and generational biases to invest in what truly matters: nurturing the potential of the ones we love.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  

Per Stirpes vs Per Capita

When drafting your Will or Living Trust, are you concerned that you might unintentionally prevent one of your favorite family members from obtaining their inheritance? Or perhaps there is a relative you wouldn’t want to inherit anything from your estate. Would you be concerned about including them by mistake? If you don’t make the right decision while drafting your Will or Living Trust regarding how to divide your estate (money, property, and assets), both outcomes are feasible.

When drafting these documents with your attorney, you will name the beneficiaries who will receive property though these legal documents. In fact, you may be asked to take things a step further by stipulating whether these named beneficiaries will inherit these assets through a Per Capita or Per Stirpes distribution. Often, the decision between Per Stirpes vs. Per Capita can be confusing, and can have very different effects in terms of who inherits your estate. So, what’s the difference?

What is a Per Capita Designation?

Per Capita is a Latin term that translates to “by head.” Each designated beneficiary under a per capita designation is only entitled to their share of an inheritance if they are still alive at the time the testator of a will or the grantor of a trust passes away. If a designated beneficiary predeceases the testator of the will or the grantor of the trust, that named beneficiary’s share of inheritance is divided amongst the surviving named beneficiaries. Unless specifically named as beneficiaries within the estate documents, descendants (such as children or grandchildren) of the deceased beneficiary would not receive anything. It is important to note that per capita is typically the default option for beneficiaries on retirement accounts.

Example of Per Capita Distributions

As an example, let’s consider a will that designates a per capita distribution equally among the testator’s three children upon her death. Our testator is named Jane, and let’s assume her three children are Allie, Ben, and Carl. Allie has two children: Alex and Ann. Ben and Carl have no children, and neither do Alex and Ann at this time. If all three of Jane’s children survive her, upon her death, Allie, Ben, and Carl will all receive equal shares of one-third each of her estate. However, if Allie were to predecease her mother, upon Jane’s passing, her two surviving children, Ben and Carl, would each receive half of the estate. Under the per capita distribution election, Jane’s grandchildren Alex and Ann would not inherit their mother’s share of the estate.

What is a Per Stirpes Designation?

Per Stirpes is a Latin term that translates to “by branch.” If a named beneficiary predeceases the testator of a will under the per stirpes distribution method, their share of inheritance would transfer to their descendants, dividing the total assets of the estate equally among each branch of the family. Instead of naming only specific people to inherit property, per stirpes essentially names a class of beneficiaries to receive estate assets.

Example of Per Stirpes Distributions

Let’s look back to our previous example, with our testator, Jane, who has instead provided within her will for an equal per stirpes distribution among her three children. If all three of Jane’s children survive her, upon her death, Allie, Ben, and Carl would again all receive equal shares of one-third each of her estate. However, if Allie were to predecease her mother, upon Jane’s passing, Allie’s inheritance would instead pass to her two children Alex and Ann. Therefore, Alex and Ann would split the one-third share of Jane’s estate that would have belonged to Allie, even though they weren’t specifically named within Jane’s will.

Which to Choose?

First, it is important to remember that both per stirpes and per capita only become effective in the event a named beneficiary predeceases the testator or grantor of a trust.

A per capita distribution makes sure that only the persons you precisely name as beneficiaries receive shares of your estate. A per stirpes designation can ensure that future grandkids receive an inheritance from you, thus that can be a disadvantage. For this reason, unless they want to restrict which family members can get inheritance benefits, people with children frequently choose a per stirpes beneficiary designation.

One of the most significant decisions you make when creating your estate plan is whether to distribute money on a per capita or per stirpes basis. It is one of the most important reasons that consulting with a knowledgeable estate planning attorney is extremely necessary. At BentOak Capital, we strive to offer our clients the highest level of tailored solutions. By working closely with trusted estate attorneys and taking into account all aspects – from preferences and financials to family dynamics- We are confident that together, you’ll arrive at a decision best suited for everyone involved.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

What Is Probate?

At one point or another, many of us will face the difficult process of dealing with an estate left behind by a loved one. Navigating probate proceedings can be a lengthy, complicated and ultimately taxing experience. Unfortunately, not everyone is familiar with what the term ‘probate’ actually means – let alone how it works – and that is why we are bringing you this blog post to help give you clarity around this complex system.  

What is Probate?  

Probate is a legal process that occurs when a person dies that involves settling the decedent’s estate.  The first step is the validation of their will, then the appointment of an executor to settle the estate. One of the executor’s tasks in probate  is retitling the decedent’s assets. As advisors, in lieu of saying the probate process, we say the retitling process. When someone passes away, they generally leave assets such as bank accounts, investment accounts, real estate, business, etc., to persons or individuals listed in their will. Part of the probate process is to retitle assets per the decedent’s wishes as listed in their will. If the decedent does not have a will then the deceased person’s estate will still go through the probate process.  If the decedent did not create a legal record of how they wished to distribute their assets – that’s what a will does – then the executor and the probate court must distribute the estate according to state law.  This is called intestacy. 

How Probate Works  

When a person dies with a will, the will names an executor – someone who steps into the shoes of the deceased person. The executor is now responsible for initiating the probate process. The executor is responsible for filing the will with the probate court. In the state of Texas, once the will has been filed then the court will issue Letters Testamentary that then allow the executor to begin the duties that have been outlined in the decedent’s will. They will need to provide the county clerk with an inventory of the person’s assets and debts, and complete application of the decedent’s estate within 90 days. The executor is, among other things, responsible for filing income tax returns, estate returns (if necessary), and paying off outstanding debts. After debts have been cleared up, the executor can begin distributing the remaining assets from the estate.  Any assets or debts that go through the probate process are a matter of public record. 

Is the Probate Process Required?  

In Texas, technically no. However, if the descendant has a will the only way for the provisions in the will to be executed are through the probate process. Many types of assets can be transferred or retitled while avoiding the probate all together by things like a Lady Bird deed for a home, transfer on death instructions for investment assets, beneficiaries listed on retirement accounts, payable on death instructions for bank accounts, life insurance beneficiaries, and more. Additionally, assets held within a revocable living trust avoid going through probate. The caveat to this is if anything is missing (car, tractor, rental property, etc.), then in order to get this asset retitled appropriately it will then be required to be probated.  If you have a revocable trust, it is very important to make sure all your assets are titled appropriately. 

Here at BentOak Capital, we understand that the death of a loved one is already a traumatic and trying time. Dealing with their possessions and assets shouldn’t add to that stress. That’s why we’ve outlined some key points about what occurs during probate in the state of Texas. If you find yourself in this difficult situation, remember that you are not alone; reach out to us for questions or support through this tough journey. 


 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.   

Estate Document Basics

Estate planning can be a difficult process to navigate both conceptually and emotionally. Unfortunately, it often takes experiencing a death in the family to recognize the importance of having a proper estate plan. Having an estate plan will help ensure that your assets pass according to your wishes while also making the process a little smoother for your heirs. Below we have listed some estate document basics that everyone should have and how they work. This is not an exhaustive list, so it is important to discuss your wishes with an estate planning attorney to ensure your documents are set up accordingly.

Will

A will is a legally binding document that outlines your wishes for disposition of probate assets at death. Without a will you are considered to die intestate, which means that your property and assets will be distributed according to your state’s laws, which may not be fully aligned with what you would choose. Basically, a will helps to ensure that you are able to choose how you would like your assets to be dispersed whether it be to a family member, charities, etc.  

Within the will you will be able to designate an executor who will be responsible for overseeing and executing your estate. It is best practice to name a contingent executor in case your primary executor is unable to serve. 

Depending on your estate planning needs there are also a few typical clauses that can be added to your will. There are many more, but these are just a few of the most common. 

  • Guardianship Clause – If you currently have minor children or plan to have children in the future then your will should include a guardianship clause. A guardianship clause identifies who you would like to provide care to your minor children. 
  • Pet Clause – Similar to the guardianship clause above, a pet clause can be added to direct care for your pets. 
  • No Contest Clause – A no contest clause helps to discourage beneficiaries from contesting the instructions in your will. It can outline instructions to reduce the inheritance the beneficiary could receive if they try to contest the will. 
  • Simultaneous Death Clause – This clause helps to avoid going through the probate process twice if a married couple were to pass simultaneously.  
  • Survivorship Clause – Before any assets can be inherited this clause requires a beneficiary to outlive the decedent for a certain amount of time. Like the simultaneous death clause listed above, this clause helps to avoid going through the probate process twice in such a short amount of time. 

One thing to note about wills is that they instruct the disposition of probate assets only. This means that any assets that have a beneficiary designation assigned (IRA, 401k, Transfer on Death/Payable on Death, life insurance, etc.) will supersede the will. It is important to revisit your beneficiary titling regularly with your financial advisor to ensure all instructions are cohesive with the will. 

Financial Power of Attorney

A financial power of attorney (POA) directs who you would like to act on your behalf to oversee and manage financial affairs if you unable to do so. Note that this document is only effective during your lifetime and becomes void at death. Within the financial power of attorney document, you can specify the scope and duration of their appointment. 

  • Limited vs General Powers – Specifying the scale of power for your designated agent will let you limit the POA to act on your behalf for either a particular transaction or on a broader scale for all financial affairs. 
  • Durable vs Springing – A financial power of attorney can expire when you become incapacitated unless you specify the document as a durable power of attorney. This will ensure the power remains active until your death even if you are incapacitated. Instead, you can elect to draft a springing power of attorney while will only come into effect at a specified event/time.

Medical Power of Attorney

A medical power of attorney (POA) is very similar to the financial power of attorney listed above except it involves your healthcare. This document directs who you would like to make medical decisions on your behalf if you are unable to do so. This document is only effective during your lifetime and becomes null at death. Please note that you do not have to name the same person to act as the POA on both the financial and medical power of attorney.

Living Will (Directive to Physicians) vs Do Not Resuscitate (DNR)

A living will (Directive to Physicians) specifies what medical support you approve of for life sustaining measures. This document directs the care protocol while you are still alive but unable to make a decision yourself. 

A Do Not Resuscitate (DNR) declares that you do not wish for medical staff to attempt at resuscitating you. Unlike the living will, this document specifies the protocol while you are no longer alive and do not wish to be revived.

Estate Document Basics

As previously mentioned, the documents described above are not an exhaustive list but just the basics that everyone should consider having. Estate documents are many things to many people: they are a way to ensure your family’s well-being, they provide a sense of financial security, and they are a tangible representation of the work you have done in your life. While having an estate strategy is critical for any individual wanting to transfer their wealth from one generation to the next, ultimately, it is best to consult with an experienced estate attorney and financial planner. A financial planner can help you construct an estate planning strategy and coordinate with your attorney to ensure it is tailored and implemented to meet your specific needs and goals, where updates are often discussed during your planning meetings. Reviewing this strategy on a regular basis can help verify it stays relevant pending any changes to the tax code or major life events (marriage, divorce, children, grandchildren, etc.). At the end of the day, having control over your wealth – even after you are gone – is invaluable. Taking the time to thoughtfully plan now could have tremendous benefits for generations down the line.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Leaving a Legacy

So far this year, our 2022 theme of Planning with Purpose, has covered topics like how to get your financial life organized and why it’s important that you think about the impact of taxes year round. Over the next few months we’re going to talk about the financial, investment, and retirement planning process BentOak Capital uses with the families we serve. But today we’re going to skip to the end and talk about your legacy.

Planning During Life

We talked a few times last year about the importance of estate and legacy planning. In a few weeks, we will be discussing these ideas in more depth during our Leaving A Legacy webinar. Facing the future is mentally and emotionally difficult for many people, but we believe this is a critically important topic.

Why is it important?

It’s proactive. When you pass away, the only thing you take with you is the clothes you’re buried in. Everything else you own, you should have a plan for. There are only three places your estate assets can go once you pass away: your family or other heirs, charity, and the government (generally in the form of estate taxes). If you want to choose which family members get particular parts or amounts of your estate, or if you want to benefit one or more charities, you must proactively plan for that.

You can ensure your wishes. If you do not have a will, you are letting your state government and the court system decide what happens to at least a portion of your possessions or other things you care about and have an interest in. If that’s the case, particularly if you are not married or if you have no children, you should at least be aware of what’s going to happen.

You provide clarity for heirs. Accounting for and legally dividing an estate between heirs is, at best, a time-consuming job, even when it’s not actively difficult dealing with courts, creditors, and heirs. The person who is responsible for making that happen, often a surviving spouse or child, has to go through this obtuse legal process while simultaneously grieving the loss of a loved one. Additionally, it is not a stretch to say that inheriting money can easily strain personal and familial relationships. Having a comprehensive estate plan and a legacy plan can help alleviate some of the stress faced by heirs.

How do you go about doing this?

Your estate plan. There are three ways for assets to get transferred from you to your heirs at your death. Some assets, such as real estate, pass as a matter of law. How an asset is titled (community property, jointly with survivorship, and in trust are just three of the many options) determines who receives the inherited property. Other assets are transferred according to a pre-determined beneficiary designation. IRAs, life insurance, annuities, and bank accounts marked POD (Payable on Death) are examples. Any asset that does not get passed to heirs through one of the other two manners will be transferred according to your state’s probate process. What that process looks like depends entirely on whether you have a legally valid will or not.

Your legacy plan. Distinct from the legal estate planning documents, legacy planning is the intentional, personal preparation of your heirs to receive their inheritance. In large part, this is a practical discussion of the emotions, logistics, expectations, and values around the family’s wealth. Multiple studies have shown that “a lack of communication among family members” is consistently one of the top two reasons for why extended families break apart following the death of the older generations. On the other hand, “intentionally passing along values to the next generation” is one of the reasons most often cited by cohesive families with multi-generational wealth. Where the estate plan covers the “what” and “how” of an inheritance, the legacy plan covers the “why”: why is family important, why did we end up where are, why are these values important to our family?

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

BentOak Capital and LPL Financial do not provide legal or tax advice.

Legacy Planning vs. Estate Planning

Legacy planning and estate planning are two of the most frequently heard terms in conversations about comprehensive financial planning. However, the general public often confuses the two with each other.

Upon first glance, legacy planning and estate planning share quite a few similarities. For example, both deal with your assets on a holistic scale. In addition, both can impact not only yourself but your loved ones.

So, what exactly are the differences between legacy planning and estate planning? This article will shed light on what type of planning is right for you by taking a deep dive into their definition, importance, and the crowd they serve.

What is Legacy Planning

Legacy planning is considered end-of-life planning. Simply put, legacy planning prepares people to “bequeath their assets a loved one or next of kin after death.” However, death is a complicated and emotional process. Therefore, legacy often goes beyond mere asset planning and taps into the legal and emotional side.

Financial assets included in legacy planning could be:

  • Personal property and assets
  • Real estate investments
  • Other investments, such as stocks and bonds
  • Wealth and retirement accounts, such as savings
  • Valuables

Meanwhile, you should also consider adding items with significant emotional values to your legacy planning, such as explaining your core values, family heirlooms, and private gifts to each loved one. You can also include charitable giving instructions in your legacy planning and give back to the community.

Who Needs Legacy Planning

Our lives will all come to an end at some point. Therefore, everyone needs legacy planning. There is no need to avoid talking about planning your grand exit. Instead, legacy planning will leave your loved ones in good hands.

Meanwhile, legacy planning could be more critical to some individuals than others. For example, if you have an extensive family, going through all your assets and belongings by yourself could be exhausting. In other cases, you may want to include your own medical and funeral cost as part of your legacy planning.

And again, if you’d like to give to a foundation or charity, working with a legacy planner will make the process much easier and beneficial for both yourself and the cause you support.

Why is Legacy Planning Important

Losing a loved one is hard enough. The survivors shouldn’t need to be bothered further with inheritance, expenses, and potential conflicts. Investing in legacy planning makes the transition slightly easier for those left behind. It is your one last chance to take care of those who mean the most to you.

Legacy planning makes sure you complete your final life stage properly. It helps you sort through your matters and minimize the burden on your family. For example, a critical portion of legacy planning is learning to cover the cost of end-term care and the funeral.

Additionally, legacy planning also ensures your values are spoken, and your deeds remembered. For those choosing to make a legacy giving, their names are often announced and remembered by the foundation or organization they support. And for those who have an extensive family, the estate plan will distribute their assets among family and friends orderly, thus avoiding any potential conflict.

What is Estate Planning

In the meantime, estate planning is also about ensuring the proper management and handling of assets in the case of an accident, such as incarceration or death. But the core difference is that estate planning is more of a living matter.

Estate planning works with all your assets, including

  • Cash
  • Real estate
  • Assets, such as cars, boats, and other high-value items
  • Investments
  • Savings

Unlike legacy planning, estate planning often solely focuses on the assets. Therefore, an average estate plan usually covers the following aspects.

  • Tax advantages, or tax avoidance
  • Medicaid planning
  • Retirement planning
  • Incapacity planning

Estate planning is also an ongoing process. For example, having a second or third child will affect your existing estate plan. On the other hand, legacy planning is usually done once and for all.

Who Needs Estate Planning

A common misunderstanding is that only high-value individuals with a significant amount of assets need estate planning. In reality, almost everyone with a household and some sort of asset would benefit from estate planning.

Of course, the more complicated your asset structure is, the more critical it becomes to have a comprehensive estate plan. Also, as we’ve mentioned earlier, a larger household with many relatives and siblings naturally requires a more sophisticated estate plan.

Why is Estate Planning Important

Have you ever heard of the idiom “prepare for the rain before it rains?” Indeed, preparation and disaster readiness is the core value behind estate planning.

According to a recent survey, 68% of Americans do not have an up-to-date will. The main reason is often that the person didn’t think they had enough assets to be needing a will, or that they didn’t think they were old enough to be considering a will yet.

But life is unpredictable. And when the worst happens, estate planning is what safeguards your family members and ensures everyone, instead of only your direct heir, is taken care of. Furthermore, estate planning also allows you to distribute your assets in your desired way.

Start Planning for the Future

If you have never had a will or haven’t updated your living will, you should start looking into estate planning. On the other hand, if you believe you’re heading to the end of your life, then it’s time to talk about legacy planning.

Regardless, both types of planning fall into the category of comprehensive financial planning. Therefore, it would be the most efficient if you sought out a financial advisor specializing in estate and legacy planning. At BentOak Capital we are positioned to be able to assist you in both areas. We’d love the opportunity to speak with you a little more about what your goals and dreams are for your legacy and estate, so please contact us today.

 

Download BentOak Capital's free e-book titled Guide to Legacy Planning