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Give Your Trust an Annual 10 Point Checkup

Give Your Trust an Annual 10 Point Checkup

This is the check engine light on your estate plan.  I’m going to give you ten quick and easy things everyone can check off on their estate plan.

1. Banks

Trusts avoid probate because they are funded with your assets, and yes, that includes your bank accounts.  It is important that your successor trustee be able to instantly take on your responsibilities if you should become incapacitated or pass away.  If you have assets outside the trust, that hinders their ability to carry out the job you’ve given them.  If you’re wondering about adding your child to your bank account, read this first.

2. Real Estate

Have your purchased a new piece of property or refinanced?  If you have, you may have a significant asset outside your trust and exposed to probate.  Check your deed to see if it names you as trustees or if you’re holding title as something else - joint tenants for example.  Talk to your estate panning attorney about any real property not in your trust.

3. Beneficiary Designations

Life insurance and retirement plans are controlled not by a will or trust, but by the beneficiary designations, typically using a form provided by the company.  Most of the time these assets should not be placed in your trust, but there are exceptions for both life insurance and retirement plans.  If you aren’t sure, check with your attorney.

4. Other Assets

In California it is typical to leave vehicles outside of the trust, but have a general assignment to the trust.  Other assets such as business interests and individually held stock shares require specific steps to transfer into the trust.

5. Power of Attorney

Your financial decision maker should have a copy of the document.  In addition, your banks should have a copy as well.  Most financial institutions have a policy of rejecting Power of Attorney that are over 5 years old.  If you just let your power of attorney sit in your trust binder, and 10 or 15 or 20 or more years later your agent dusts it off and brings it into a bank,

6. Health Care Directive

Just like the Power of Attorney should go to the bank, your Health Care Directive should go to your doctor.  If there is an emergency, your family shouldn’t have to worry about finding your estate planning binder, digging out the Directive and bringing it to the emergency room.  If you give it to them ahead of time, the hospital can just look in their records.

7. Trustees

If you created your trust when you children were young, you probably named a trusted relative or friend as the trustee.  Now that your children are grown, it is time to review whether that should be changed.

8. Beneficiaries

How you distribute your estate is unique to every family, and should be something that is reviewed regularly.  Does your estate plan accurately reflect your current wishes of who gets what?

9. Financial Position

Some changes in financial situation can impact how your estate plan works.  In some instances recent changes in federal estate tax law can allow estate planning attorneys to simplify your estate plan.  If you’ve downsized and simplified, maybe your estate plan should be updated.  By the same token, if your proverbial ship has come in, and your estate is significantly larger than it was when you created your estate plan originally, you should review your plan for the best tax and asset protection strategies.

10. Changes in Family Dynamics

Some plans are built around assumptions about how children will react, or particular assets that one or two children care about that the others don’t.  You should review those assumptions regularly, and if they’ve changed, make sure your plan can either handle the change, or change your plan.

Your family is relying on having an effective estate plan to save them from legal headaches.  Spend a few minutes each year to run through this quick checklist to make sure everything will work the way you want it to work.

Tax Benefits of Buying a Second Home

Buying a second home can provide you with a place to relax, unwind, and escape from it all. It can also provide you with substantial savings if you take advantage of these tax benefits of buying a second home.

Mortgage Interest

Mortgage interest paid on up to $1.1 million in debt on your first and second homes is fully deductible. Typically, this rule only applies if you treat your second home as a home and not a rental property. But some mortgage interest may still be deductible if you occasionally rent out your second home. To benefit from this deduction, you must use the property for 14 days or more than 10% of the number of days you rent it out a year, whichever is longer.

Tax-Free Profit

You can take up to $500,000 in profit from the sale of a home tax-free if it is your primary residence and you meet the two-year ownership and use requirement. Typically, you do not get the same tax benefit from the sale of a second home. But people have taken advantage of this rule by converting their second home to their primary residence before the sale, thus reaping the tax-free profit.

But in 2009, Congress added a few more restrictions to limit the amount of tax-free profit you can take from a second home. Now, a portion of the profit from the sale of a second home is taxable. The portion is determined by the ratio of the amount of time after 2008 you treated the residence as a second home or rental property and the amount of time you owned it.

Buying a second home can offer many benefits. But to maximize the value of your investment, work with a lawyer to make sure you are not overlooking any potential legal, insurance, financial, or tax problems or opportunities. You must meet other requirements—such as living in the home for two years before you sell it—to take advantage of some of these tax benefits. A Personal Family Lawyer® can help you ensure you meet the requirements, so you can reap all the benefits of owning a second home.

4 Cryptocurrency Risks and Scams and How to Navigate Them — Part 2

Last week, we shared the first part of our series on cryptocurrency risks and scams, and if you haven’t read it yet, you can do so here. In part two, we discuss two more common traps to be wary of when investing in digital currency.

If you are considering using cryptocurrency as an investment vehicle, talk with us first.

3. Pyramid/Ponzi Schemes That Will Trade For You
Because dealing with cryptocurrency can be a complex affair, online scammers have developed complicated cons similar to traditional pyramid and ponzi schemes. People have lost a lot of money in such scams, and unless you’re well-versed in the technology, they can be difficult to spot.

One giant red flag to watch for is giving your money to others who invest/trade for you, or if you only get paid when you recruit new members.

Also avoid buying upfront “packages” (The Gold Package) promising varying returns. And if you see the words “This isn’t a pyramid scheme” in the marketing materials, you may want to look a little more closely!

Unless you get to hold the keys to your private wallet containing your crypto directly or trade via a reputable exchange like Coinbase, you very well could be dealing with a scammer. And while plenty of people will make money in cryptocurrency pyramid/ponzi schemes, many will lose. That could include you or people you care about, if you get involved in crypto this way.

4. Fake ICOs (Initial Coin Offerings)
While new cryptocurrency can be created without any public investment or offering, many use an Initial Coin Offering (ICO) to fund their startup initiative. ICOs are basically IPOs (Initial Public Offerings) for cryptocurrency and a highly effective way to crowdfund vast sums of money extremely quickly. In fact, recent ICOs have raised millions of dollars in mere minutes.

This speed comes from the fact that ICOs are barely regulated—a good thing if you’re looking to raise money quickly and avoid the rigorous and time-consuming regulations involved with traditional capital raising. But it can bad, too, as the lack of regulation is a big neon welcome sign to scammers.

The lack of legal oversight has resulted in numerous fake ICOs being created by crypto con men, who go to great lengths to convince potential investors of their fake coin’s legitimacy. If you’re just getting started with cryptocurrency, it’s probably best to avoid ICOs until you really understand what you are investing in. In fact, that’s a good rule of thumb with any crypto investment, if you don’t understand the technology beneath it, start by learning that—and understand “what this crypto actually does”—before you invest. Contact us if you’d like help with that.

Of course, not all ICOs are fake, and if you’re tech-savvy, they can be quite lucrative. In fact, many tout ICOs as the future of venture capitalism and fundraising.

But no venture capitalist would ever fund a startup without proper vetting, and the same applies to altcoins. Check the background of the people directly involved with the project and those serving as advisors. Use Google and social media like LinkedIn to verify these are real people with stellar reputations, and their advertised skills and knowledge match those found on online resumes and CVs. And make sure you understand what the cryptocurrency proposes to do and that you believe the team behind it can accomplish that goal, as with any business investment you would make.

And as with any investment, beware of deals that promise unrealistically high returns and/or just sound way too good to be true—that’s sign they likely are.

If you’re serious about adding cryptocurrency to your family’s investment portfolio, take the next step in your education by contacting your Personal Family Lawyer®. As your trusted advisor, we’ll help you incorporate cryptocurrency into your family’s financial and estate planning, so you can get the most bang for your crypto buck.

4 Cryptocurrency Risks and Scams and How to Navigate Them — Part 1

It’s no secret that Bitcoin and other brands of cryptocurrency are one of the hottest new investment opportunities. And if you’re not already invested, you may be considering how to get in, what exactly is the best way to get in, and you should definitely be considering risks and potential scams that are easy to get caught by if you’re not eyes wide open on the issues surrounding cryptocurrency.

Launched in 2009, Bitcoin was the first cryptocurrency, and since then, it has evolved from something only computer geeks and hackers talked about into a global phenomenon that’s transformed how the entire world views money.

Bitcoin is still the most popular—and valuable—digital currency. As of November 2017, a single Bitcoin was worth more than $10,000, with the currency’s total market capitalization at roughly $158 billion. Bitcoin’s smashing success spawned a legion of other coins, known as “altcoins,” such as Ethereum, Litecoin, and Ripple, and the global market value for all cryptocurrency is currently more than $300 billion.

The huge amounts of money transitioning into the world of cryptocurrency has attracted equally large numbers of investors, looking to tap into this seemingly boundless source of new money. However, because it’s largely unregulated, involves extremely complex technology, and offers significant anonymity, the cryptocurrency market has also garnered the attention of cyber criminals.

Indeed, cryptocurrency’s brief history is filled with stories of people losing major money through hacking and a variety of other traps and scams. As with any new investment opportunity, the key to safety with cryptocurrency is education. While you should always do your own research before investing, here are a few of the most common scams to watch for and how to know whether investing in or using cryptocurrency is right for you.

1. Shady Exchanges

A cryptocurrency exchange is an online platform for trading one cryptocurrency for another or for fiat currency like the U.S. dollar. These platforms are where you buy in and cash out your cryptocurrency, so they’re essential to the crypto market. Exchanges typically charge a fee for each transaction and are based on current market rates or rates set by sellers/brokers.

Bitcoin’s popularity has caused the number of exchanges to explode, but not all exchanges are trustworthy. In the past, major exchanges have disappeared overnight and taken all of the digital currency with them, while others offer horrible customer service, and/or make getting your money out extremely difficult.

Your best bet is to stick with the largest, most popular exchanges like Coinbase, Kraken, and Bittrex. That said, legitimate smaller exchanges are out there and can be used safely, provided you’ve done your research. Indeed, there are numerous websites that rank and review crypto exchanges for quality, security, and customer service. If the reviews are largely negative, note that it’s difficult to cash out your altcoins, or mention the customer service is exceptionally poor and/or slow, steer clear.

2. Picking Your Wallet

In order to store cryptocurrency, you’ll want a digital wallet, as that’s the safest way to hold your cryptocurrency. Exchanges are for buying and selling, but not the safest for storing.

Your cryptocurrency wallet doesn’t actually “store” money like a traditional wallet; rather, it stores passcodes, known as keys, that allow you to send and receive digital currency to and from the wallet. There are many different wallets available, but not all of them are totally secure.

Wallets come in two forms: hot and cold. A “hot” wallet stores your cryptocurrency in a location that’s connected to the internet—exchange-based wallets, desktop wallets, and mobile wallets. Because they’re connected to the internet, hot wallets are the most convenient, but that also makes them vulnerable to hacking. A “cold” wallet, conversely, stores your cryptocurrency in a location that’s completely offline. Ironically, the most secure type of wallet for storing digital currency is a cold “paper” wallet.

Paper wallets involve printing out your keys and storing them in a secure location. While paper wallets are the most secure option, if you lose the codes, it’s the same as losing paper currency—you’re screwed, meaning there is no way to recover your investment. Paper wallets are also inconvenient—you have to send your money back to an exchange to use it—which can be a pain if you’re using cryptocurrency on a daily basis.

If you primarily use cryptocurrency as a long-term investment, you should store all of your crypto in a paper wallet. If you’re receiving, spending, or trading frequently, however, you should use both a hot/online and paper/offline wallet. Like real-world wallets, store the money you need for the day in your hot/online wallet, but keep the majority of your funds in a paper/offline wallet for safekeeping.

In all cases, whether you have crypto in a hot wallet, paper wallet, or directly in an exchange, make sure you’ve given the details of where it’s stored and how to access it to the people who need to know in case you’re incapacitated or when you die. Otherwise, it’s completely lost. If the people you love don’t know how to find and access it, it’s the same as it not existing at all. Please talk with us about this if you have any cryptocurrency now that may not have been included in your estate plan, or if you do obtain any in the future. Remember: if your family doesn’t know how to access it, it will be lost if you become incapacitated or when you die.

In addition to safety, investing in cryptocurrency comes with an array of other legal, financial, and tax issues you’ll need to consider. The good news is, as your Personal Family Lawyer we can guide you through these challenges and help you incorporate cryptocurrency investments into your family’s overall financial and estate-planning strategies. Contact us today to get started.

Next week, we’ll continue with part two in this series on cryptocurrency risks and scams.