pink inflatable flamingo on clear water during vacation

4 Critical Estate Planning Tasks to Complete Before Going on Vacation

February 25, 2020

Going on vacation entails lots of planning: packing luggage, buying plane tickets, making hotel reservations, and confirming rental vehicles. But one thing many people forget to do is plan for the worst. Traveling, especially in foreign destinations, means you’ll likely be at greater risk than usual for illness, injury, and even death. In light of this reality, you must have a legally sound and updated estate plan in place before taking your next trip. If not, your loved ones can face a legal nightmare if something should happen to you while you’re away. The following are 5 critical estate planning tasks to take care of before departing. Make sure your beneficiary designations are up-to-date Some of your most valuable assets, like life insurance policies and retirement accounts, do not transfer via a will or trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. It’s vital you name a primary beneficiary and at least one alternate beneficiary in case the primary dies before you. Moreover, these designations must be regularly reviewed and updated, especially following major life events like marriage, divorce, and having children. Create power of attorney documents Outside of death, unforeseen illness and injury can leave you incapacitated and unable to make critical decisions about your own well-being. Given this, you must grant someone the legal authority to make those decisions on your behalf through power of attorney. You need two such documents: medical power of attorney and financial durable power of attorney. Medical power of attorney gives the person of your choice the authority to make your healthcare decisions for you, while durable financial power of attorney gives someone the authority to manage your finances. As with beneficiary designations, these decision makers can change over time, so before you leave for vacation, be sure both documents are up to date. Name guardians for your minor children If you’re the parent of minor children, your most important planning task is to legally document guardians to care for your kids in the event of your death or incapacity. These are the people whom you trust to care for your children—and potentially raise them to adulthood—if something should happen to you. Given the monumental importance of this decision, we’ve created a comprehensive system called the Kids Protection Plan that guides you step-by-step through the process of creating the legal documents naming these guardians. You can get started with this process right now for free by visiting our user-friendly website https://propaplaw.kidsprotectionplan.com/ Organize your digital assets If you’re like most people, you probably have dozens of digital accounts like email, social media, cloud storage, and cryptocurrency. If these assets aren’t properly inventoried and accounted for, they’ll likely be lost forever if something happens to you. At minimum, you should write down the location and passwords for each account, and ensure someone you trust knows what to do with these digital assets in the event of your death or incapacity. To make this process easier, consider using LastPass or a similar service that stores and organizes your passwords. Complete […]

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The SECURE Act’s Impact On Estate and Retirement Planning—Part 2

February 12, 2020

In the first part of this series, we discussed the potential ramifications the SECURE ACT has for your estate and retirement planning. Here, we’ll look more deeply into additional strategies you may want to consider in light of the new legislation. On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and it could have big implications for both your retirement and estate planning strategies—and not all of them are positive. Last week, we discussed three of the SECURE Act’s most impactful provisions. Specifically, we looked at the SECURE Act’s new requirements for the distribution of assets from inherited retirement accounts to your beneficiaries following your death. Under the new law, your heirs could end up paying far more in income taxes than necessary when they inherit the assets in your retirement account. Moreover, the assets your heirs inherit could also end up at risk from creditors, lawsuits, or divorce. And this is true even for retirement assets held in certain protective trusts designed to shield those assets from such threats and maximize tax savings. Here, we’ll cover the SECURE Act’s impact on your financial planning for retirement, offering strategies for maximizing your retirement account’s potential for growth, while minimizing tax liabilities and other risks that could arise in light of the legislation’s legal changes. Tax-advantaged retirement planning If your retirement account assets are held in a traditional IRA, you received a tax deduction when you put funds into that account, and now the investments in that account grow tax free as long as they remain in the account. When you eventually withdraw funds from the account, you’ll pay income taxes on that money based on your tax rate at the time. If you withdraw those funds during retirement, your tax rate will likely be quite low because you typically have much less income in your retirement years. The combination of the upfront tax deduction on your initial investment with the lower tax rate on your withdrawal is what makes traditional IRAs such an attractive option for retirement planning. Thanks to the SECURE Act, these retirement vehicles now come with even more benefits. Previously, you were required to start taking distributions from retirement accounts at age 70 ½. But under the SECURE Act, you are not required to start taking distributions until you reach 72, giving you an additional year-and-a-half to grow your retirement savings tax free. The SECURE Act also eliminated the age restriction on contributions to traditional IRAs. Under prior law, those who continued working could not contribute to a traditional IRA once they reached 70 ½. Now you can continue making contributions to your IRA for as long as you and/or your spouse are still working. From a financial-planning perspective, you’ll want to consider the effect these new rules could have on the goal for your retirement account assets. For example, will you need the assets you’ve been accumulating in your retirement account for your own use during retirement, or do you plan to pass those assets to your heirs? From there, you’ll want to consider the potential income-tax […]

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The SECURE Act’s Impact On Estate and Retirement Planning—Part 1

February 11, 2020

On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and it represents the most significant retirement-planning legislation in decades. Indeed, the changes ushered in by the SECURE Act have dramatic implications for both your retirement and estate planning strategies—and not all of them are positive. While the law includes a number of taxpayer-friendly measures to boost your ability to save for retirement, it also contains provisions that could have disastrous effects on planning strategies families have used for years to protect and pass on assets contained in retirement accounts. Given this, if you hold assets in a retirement account you need  to review your financial plan and estate plan as soon as possible. To help you with this process, here we’ll cover three of the SECURE Act’s biggest changes and how they stand to affect your retirement account both during your lifetime and after your death. Next week, we’ll look more deeply into a couple of additional strategies you may want to consider. 1. Increased age for Required Minimum Distributions (RMD) Prior to the SECURE Act, the law required you to start making withdrawals from your retirement account at age 70 ½. But for people who haven’t reached 70 ½ by the end of 2019, the SECURE Act pushes back the RMD start date until age 72. 2. Repeal of the maximum age for IRA contributions Under previous law, those who continued working could not contribute to a traditional IRA once they reached 70 ½. Starting in 2020, the SECURE Act removed that cap, so you can continue making contributions to your IRA for as long as you and/or your spouse are still working. These two changes are positive because with our increased life spans people are now staying in the workforce longer than ever before, and the new rules allow you to continue contributing to your retirement accounts and accumulating tax-free growth for as long as possible. However, to offset the tax revenue lost due to these beneficial changes, as you’ll see below, the SECURE Act also includes some less-favorable changes to the distribution requirements for retirement accounts after your death. Elimination of stretch provisions for inherited retirement accounts The part of the SECURE Act that’s likely to have the most significant impact on your heirs is a provision that makes significant changes to distribution requirements for inherited retirement accounts, and effectively ends the so-called “stretch IRA.”Under prior law, beneficiaries of your retirement account could choose to stretch out distributions—and, therefore, the income taxes owed on those distributions—over their own life expectancy. For example, an 18-year old beneficiary expected to live an additional 65 years could inherit an IRA and stretch out the distributions for 65 years, paying income tax on just a small amount of their inheritance every year. And in that case, the income tax law would encourage the child to not withdraw and spend the inherited assets all at once.Under the SECURE Act, however, most designated beneficiaries will now be required to withdraw all the assets from the inherited account—and pay income taxes on them—within 10 years […]

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Kobe Bryant’s Untimely Death Highlights the Vital Need for Estate Planning at All Ages

February 4, 2020

As you no doubt already know, on January 26, 2020, basketball legend Kobe Bryant was killed in a helicopter crash on a wooded hillside 30 miles north of Los Angeles. Also killed in the tragic accident was his 13-year-old daughter Gianna, and seven other passengers, who were friends and colleagues of Kobe and his family. The exact cause of the crash remains under investigation. The 41-year-old former Los Angeles Laker was flying to Mamba Sports Academy, a youth sports center Kobe founded in Thousand Oaks, where his daughter Gianna was set to play in a basketball tournament. Fortunately, none of Kobe’s other family members were on the flight, and he’s survived by his wife Vanessa and three other daughters: Natalia, 17, Bianka, 3, and Capri, 7 months. Kobe’s sudden death at such a young age has led to a huge outpouring of grief from fans across the world. Whenever someone so beloved dies so young, it highlights just how critical it is for every adult—but especially those with young children—to create an estate plan to ensure their loved ones are properly protected and provided for when they die or in the event of their incapacity. While it’s too early to know the exact details of Kobe’s estate plan (and he may have planning vehicles in place to keep the public from ever knowing the full details), we can still learn from the issues his family and estate are likely to face in the aftermath of his death. We cover these issues in hopes that it will inspire you to remember that life is not guaranteed, death can come at any moment, and your loved ones are counting on you to do the right thing for them now. Kobe’s sports and business empire Between his salary and endorsements during his 20-year career with the L.A. Lakers, Kobe earned an estimated $680 million. And that’s not counting the money he made from his numerous business ventures, licensing rights for his likeness, and extensive venture capital investments following his retirement from the NBA. That said, by all estimates, his estate has the potential to be the most valuable of any modern athlete. Given his business acumen and length of time in the spotlight, it’s highly unlikely Kobe died without at least some planning in place to protect his assets and his family. But even if Kobe did have a plan, when someone so young, wealthy, and successful passes away this unexpectedly in such a terrible accident, his family and estate will almost certainly face some potential threats and complications. For example, due to his extreme wealth, Kobe likely created trusts and other planning strategies to remove some of his assets from his estate in order to reduce his federal estate-tax liability. However, because he was so young and still actively involved in numerous business ventures, it’s quite unlikely that all—or even the majority—of his assets had been fully transferred into those protective planning vehicles. And seeing that Kobe owned the helicopter and the weather at the time was poor (many other flights had already been grounded), there’s also the real potential that the […]

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5 Updates you must make to your estate plan if you’re getting divorced - Part II

5 Estate Planning Must-Dos if You’re Getting Divorced – Part 2

January 28, 2020

In the first part of this series, we discussed a couple of the most critical updates you must make to your estate plan if you’re getting divorced. Here, we’ll cover the last three of these must-do planning tasks. Because getting divorced can be overwhelming on so many different levels, updating your estate plan often takes a back seat to other seemingly more-pressing priorities. But failing to update your plan for divorce can have potentially tragic consequences, some of which you may have never even considered before. In fact, it’s critical that you update your plan not only after the divorce is final, but as soon as you know the split is inevitable. Until your divorce is final, your marriage is legally in full effect, so if you die or become incapacitated while the divorce is still ongoing and you haven’t updated your plan, your soon-to-be ex-spouse could end up with complete control over your life and assets. For example, if you suddenly die of a heart attack while the divorce is ongoing and never got around to changing your estate plan, it’s quite likely that your future ex would inherit everything. And if that’s not bad enough, if you were to become incapacitated in a car accident during the divorce, the very person you’re paying big money to legally remove from your life could be granted complete authority over all of your legal, financial, and healthcare decisions. This is something your divorce attorney won’t think to bring up, but it’s literally one of the most critical matters you need to handle if you’re ending your marriage. Last week, we discussed the first two estate planning changes you must make—updating your power of attorney documents and beneficiary designations—and today we’ll share the remaining three. Create a new will You should create a new will as soon as you decide to get divorced, because once you file, you may not be able to change your will. Rethink how you want your assets divided upon your death. This most likely means naming new beneficiaries for any assets that you’d previously left to your future ex and his or her family. And unless it’s your wish, you’ll probably no longer want your ex—or any of his or her family—listed as your will’s executor or administrator, either. Some states have community-property statutes that entitle your surviving spouse to a certain percentage of the marital estate upon your death, regardless of what’s in your will. This means if you die before the divorce is final, you probably won’t be able to entirely disinherit your surviving spouse through the new will. However, it’s almost certain you wouldn’t want him or her to get everything. Given this, you should update your will as soon as possible once divorce is inevitable to ensure the proper individuals inherit the remaining percentage of your estate should you pass away while your divorce is still ongoing. And should you choose not to create a new will during the divorce process, don’t assume that your old will is automatically revoked once the divorce is final. State laws vary widely in regards to how […]

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5 Updates you must make to your estate plan if you’re getting divorced - Part II

5 Estate Planning Must-Dos if You’re Getting Divorced – Part 1

January 21, 2020

Divorce can be traumatic for the whole family. Even if the process is amicable, it involves many tough decisions, legal hassles, and painful emotions that can drag out over several months, or even years. That said, while you probably don’t want to add any more items to your to-do list during this trying time, it’s absolutely critical that you review and update your estate plan—not only after the divorce is final, but as soon as possible once you know the split is inevitable. Even after you file for divorce, your marriage is legally in full effect until your divorce is finalized. That means if you die while the divorce is still ongoing and you haven’t updated your estate plan, your soon-to-be-ex spouse could end up inheriting everything. Maybe even worse, in the event you’re incapacitated before the divorce is final, your ex would be in complete control of your legal, financial, and healthcare decisions. Given the fact you’re ending the relationship, you probably wouldn’t want him or her having that much control over your life and assets. If that’s the case, you must take action, and chances are, your divorce attorney is not thinking about these matters on your behalf. While some state laws limit your ability to completely change your estate plan once your divorce has been filed, the following are a few of the most important updates you should consider making as soon as possible when divorce is on the horizon. 1. Update your power of attorney documents for healthcare, financial, and legal decisions If you are incapacitated by illness or injury during the divorce, who would you want making life-and-death healthcare decisions on your behalf? If you’re in the midst of divorce, chances are you’ll want someone other than your soon-to-be ex making these important decisions for you. If that’s the case, you must take action. Contact us now; don’t wait. Similarly, who would you want managing your finances and making legal decisions for you? In light of the impending split, you’ll most likely want to select another individual, particularly if things are anything less than friendly between the two of you. Again, you have to take action if you do not want your spouse making these decisions for you. Don’t wait, contact us if you know divorce is coming. Update your beneficiary designations Failing to update beneficiary designations for assets that do not pass through a will or trust, such as life insurance policies and retirement accounts, is one of the most frequent—and tragic—planning mistakes made by those who get divorced. If you get remarried following your divorce, for example, but haven’t changed your IRA beneficiary designation to name your new spouse, the ex you divorced 10 years ago could end up with your retirement savings upon your death. That said, in most states, once either spouse files divorce papers with the court, neither party can legally amend their beneficiaries without the other’s permission until the divorce is final. Given this, if you’re anticipating a divorce, you may want to consider changing your beneficiaries prior to filing divorce papers. If your divorce is already filed, you […]

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Lifetime Asset Protection Trust with hand holding roll of cash

Safeguard Your Children’s Inheritance With a Lifetime Asset Protection Trust

January 14, 2020

Last week, we discussed the benefits of a unique estate planning vehicle known as a Lifetime Asset Protection Trust (LAPT). We referenced this planning tool in the context of how it could have protected Clare Bronfman, the heiress to the multi-billion-dollar Seagram’s fortune, who was manipulated into blowing much of her $200 million inheritance by financing the cult-like group known as Nxivm. Yet Clare’s case was quite extreme in terms of both the amount of her inheritance and the circumstances that wiped out her wealth. Though an LAPT would have almost undoubtedly protected both her and her family’s fortune, this planning vehicle can benefit families with far less wealth than Clare’s—and offer asset protection from far less outlandish threats. Indeed, LAPTs are primarily designed to protect your loved ones and their inheritance from much more common threats, such as divorce, serious debt, devastating illness, and unfortunate accidents. At the same time, LAPTs can provide your heirs with a unique educational opportunity in which they gain valuable experience managing and growing their inheritance, while enjoying airtight asset protection. To demonstrate how LAPTs can provide protection to families of all asset profiles, here we’ll describe another true story involving a tragic—yet much more relatable—life scenario. While the following events are entirely true, the individual’s name has been changed for privacy protection. The flooded penthouse Eric was staying at a friend’s apartment in New York City. The apartment was the penthouse of the building, and Eric decided to run himself a bath. While the bath was running, another friend called and invited Eric to go out with him, which he did. At about 2 a.m., Eric came back to the apartment and discovered he made a huge mistake and left the bath running when he left the apartment. The resulting flood caused more than $400,000 in damage to the apartment and the one below it. While there was insurance to cover the damage, the insurance company sued Eric for what’s known as “subrogation,” meaning the company sought to collect the $400,000 they paid out to repair the damage Eric caused to the property. Because the flood was due to his negligence in leaving the bath running—a simple, but costly mistake—Eric was responsible for the damage. Now here’s where the inheritance piece comes into play and why it’s so important to leave whatever you’re passing on to your heirs in a protected trust. If Eric had received an inheritance outright in his own name, he would have lost $400,000 of it to this unfortunate mishap. However, if Eric had received an inheritance in an LAPT, instead of an outright distribution, his inheritance would be completely protected from such a lawsuit—and just about any other threat imaginable. Safeguarding your children’s inheritance If you’re like most people, you hope to leave an inheritance for your children. Indeed, it may even be one of the primary motivations driving your life’s work. Yet if you don’t take the proper precautions, the wealth you pass down can easily be lost or squandered. And in certain cases, such as Clare’s, the inheritance can even end up doing more harm than […]

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Lifetime Asset Protection Trust with man holding shield next to kid icon

Protect Your Family From Wealth’s Dark Side With a Lifetime Asset Protection Trust

January 7, 2020

When you create your estate plan, the idea that one of your adult children would ever use their inheritance to bankroll a cult is probably something you’d never dream of, much less anticipate. Yet that’s exactly what 40-year-old Clare Bronfman, heiress to the multi-billion-dollar Seagram’s fortune, did with hers. In the end, with her inheritance—and the power that came with it—she was led down a dark path that seems almost too outlandish to be true. In May, Clare pled guilty to felony charges of harboring an illegal alien and fraudulent use of a deceased person’s identity as part of a plea deal with federal prosecutors. The charges stem from her role as an executive board member of Nxivm (pronounced NEX-ee-um), a group that prosecutors described as a “deeply manipulative pyramid scheme” that forced some of its members to endure slave-like conditions and even have sex with the group’s leader and founder, Keith Raniere. Had she gone to trial for her involvement with Nxivm, Clare would have faced up to 25 years in prison. But given her plea, she’ll likely serve just over two years. Her sentencing is scheduled for July 25. Following Clare’s plea, Raniere, 58, was found guilty in June on seven felony counts, including racketeering and sex trafficking. He faces up to life in prison when he’s sentenced on September 25. His conviction comes following a six-week trial that exposed the world to Nxivm’s sordid inner workings and put wealth’s dark side on full display. Unforeseen threats Clare’s sad story highlights just how risky it can be to leave money outright to your children. Indeed, bestowing significant wealth upon your children or grandchildren can turn out to be a blessing—or it can just as easily be a curse. Fortunately, there are proactive estate planning solutions designed to safeguard your adult children from such scenarios. And these planning protections aren’t just for the extraordinarily rich like Clare’s family—inheriting even relatively modest amounts of wealth can lead to similar issues. Regardless of your asset profile, we can help you put the proper planning vehicles in place to help prevent your heirs from falling prey to wealth’s darkest temptations—or even losing their inheritance to simple mistakes. Indeed, the planning strategies we describe here can safeguard your child’s inheritance from being depleted out by other, less devious events, such as a divorce, a catastrophic medical expense, or even a simple accident. You just never know what life has in store for your heirs, and our planning protections can ensure their inheritance is protected from practically all potential threats—even those you could never possibly imagine. From self-help to self-sabotage Clare joined Nxivm, which was billed as a life-coaching program, in 2002 at age 23. She reportedly joined the group in hopes that its mentoring might help her fulfill her dream of making the U.S. Olympic equestrian team. In large part due to her substantial financial contributions, Clare quickly rose to the top ranks of the organization and became increasingly close with Raniere. According to a recent Forbes article, Raniere took advantage of Clare’s estranged relationship with her elderly father, Edgar Bronfman Sr., and […]

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Don’t Let Your Kids Move Out Without Signing These Documents

December 31, 2019

Watching your kids leave home to attend college or start their career can be an emotional time for you as a parent. On one hand, moving out on their own is a major accomplishment that should make you proud. On the other hand, having your kids leave the nest and face the world can also induce anxiety and fear. Regardless of your feelings, once they reach age 18, your kids become legal adults, and many areas of their lives that were once under your control will be solely their responsibility. And one of the very first items on their to-do list as new adults should be estate planning. While you may believe that planning is the last thing your kids need to be thinking about, it’s actually the first, because once they turn 18, you no longer have automatic access to their medical records and/or financial accounts should anything happen to them. Before your kids head out on their own, you should discuss and have them sign the following three documents: 1. Medical Power of Attorney Medical power of attorney is an advance directive that allows your child to grant you (or someone else) the legal authority to make healthcare decisions for them in the event they become incapacitated and cannot make such decisions for themselves. For example, medical power of attorney would allow you to make decisions about your child’s medical treatment if he or she is knocked unconscious in a car accident or falls into a coma due to an illness. And with a properly drafted medical power of attorney, you will be able to access your child’s medical records, whereas without one you would not. Should they become incapacitated without a properly executed medical power of attorney, you’d have to petition the court to become their legal guardian. While a parent is typically the court’s first choice for guardian, the court process can be slow—and in medical emergencies, every second counts. 2. Living Will Whereas medical power of attorney allows you to make healthcare decisions on your child’s behalf during their incapacity, a living will provides specific guidance about how your child’s medical decisions should be made while they’re incapacitated, particularly at the end of life. For example, a living will allows your child to let you know if and when they want life support removed, if they ever require it. In addition to documenting how your child wants their medical care handled, a living will can also include instructions about who should be able to visit them in the hospital and even what kind of food they should be fed. For example, if your child is a vegan, vegetarian, gluten-free, or takes specific supplements, these things should be noted in their living will. If your child has certain wishes for their medical care, it’s important you discuss these decisions with them and have those wishes documented in a living will to ensure they’re properly carried out. 3. Durable Financial Power of Attorney Should your child become incapacitated, you’ll also need the ability to access and manage their finances, and this requires your child to grant you […]

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Buyer Beware: The Hidden Dangers of DIY Estate Planning – Part 2

December 24, 2019

Last week, we shared the first part of this series on the dangers of do-it-yourself estate planning. Here, we’ll look at how online legal documents can even put your minor children at risk.  Given how far web-based technology has evolved, you might think online legal document services like LegalZoom® and WillsandTrusts.com have advanced to the point where they’re a suitable alternative to having your estate plan prepared by a lawyer. After all, you’ve been able to prepare and file your taxes online for years, so what makes estate planning so much different? Aren’t lawyers using the very same forms you find on these document websites? This kind of reasoning is exactly what do-it-yourself (DIY) planning services would like you to believe—but it’s far from true. Indeed, relying on generic, fill-in-blank planning documents can be one of the costliest planning mistakes you can make for your loved ones. Online planning documents may appear to save you time and money, but keep in mind, just because you created “legal” documents doesn’t mean they will actually work when you (or most importantly, the people you love) need them. Without a thorough understanding of how the legal process works and impacts family dynamics upon your death or incapacity, you’ll likely make serious mistakes when creating a DIY plan. Even worse, these mistakes won’t be discovered until it’s too late—and the loved ones you were trying to protect will be the very ones forced to clean up your mess or get stuck with a huge nightmare. In part one, we discussed the numerous ways DIY estate planning can go wrong, and here we’ll explain how these generic documents can put the people you love most of all—your children—at risk. Putting your children at risk Knowing that your DIY plan could fail and force your family into court and conflict is distressing enough. But imagine how you’d feel if you knew that your attempt to save money on your estate plan caused your children to be taken into the care of strangers, even temporarily. Yet this is exactly what could happen if you rely on a generic will and/or other legal documents you find online to name legal guardians for your kids. In fact, this could happen even if you create a plan with a lawyer who isn’t trained to plan for the unique needs of parents with minor children. Naming and legally documenting guardians for your kids might seem like a fairly straightforward process, but it entails a number of complexities most people aren’t aware of. Even lawyers with decades of experience typically make at least one of six mistakes when naming long-term legal guardians. If estate plans created with the assistance of an attorney are likely to leave your children at risk, do you really think that you’re going to get things right on your own? What’s so complicated about naming guardians? Some DIY wills allow you to name legal guardians for your kids in the event of your death, and that’s a good start. But does it allow you to name back-up candidates in case your first choice is unable to serve? If […]

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