The Estate Planning Wake-Up Call: Why Today’s News Headlines May Change Your Plan

Estate Planning Lawyer, Peter Klenk

The Estate Planning Wake-Up Call: Why Today’s News Headlines May 

Hello, everybody. It’s Peter Klenk from Klenk Law. Here to once again talk to you about death and taxes. Yes. The subject that everybody wants to know about but nobody wants to talk about. But that’s what we’re gonna do today.

Again, I got my cup of coffee and looking out the window. It’s beautiful, and why not talk about death and taxes? Today’s subject is a state planning wake-up call. Why today’s headlines? They change your plan.

Now, we’re not gonna get political here. We’re just talking about what happens inevitably. I think everybody knows that things have been kind of turbulent lately—mark it up, mark it down. What’s the law gonna be next year? I don’t know. What’s the law gonna be tomorrow? How do you address that uncertainty and the flexibility you need in your plan?

Really, this is just a microcosm of the long haul. Because look, if you’re doing your planning right, you’re probably planning to protect your assets in the long haul, or whoever you’re leaving them to—unless you think they’re gonna spend it right away. So you really should be planning for the long haul, because things go up and down anyway.

It’s just that usually these things happen over a very long period of time. The economy goes up for a while, the economy goes down. We just don’t usually see the market going up and down so quickly. So it’s good that this is happening, and that you’re planning and thinking about it, because things are gonna change, and your plan should reflect that.

It’s inevitable. So how do you do that? Do you plan for the future? Well, it has to do with flexibility. It really does have to do with flexibility.

And that’s a great thing. I’m—you know, if you’ve listened to my podcast, you know I’m always pitching the use of trusts to protect assets. But you also have to think of it not only as a way of protection, but as a way to handle flexibility for the future. Because the trust does protect your heirs when you die from divorce, lawsuits, and bankruptcies, but it also allows them to look at their overall plan, their investments, and think about how things should be held.

Because if you think about it, maybe you’re lucky enough that your parents set up a trust for you and you had some experience with this, but if you don’t, just think about it: you have a pool of money that, let’s say, a parent left you that’s in the trust. You control it and invest it, but nobody can take it from you.

Then you have your assets, which maybe are protected from creditors—your 401(k), your IRA—but not from divorce. Or maybe you have some assets and investments that aren’t protected from anybody. Or maybe your assets are subject to tax or restrictions, like if you own a house or a co-op in New York City. There are just certain rules you have to follow.

So now you have to sit down and say, “Well, my overall plan—how should I invest my assets?” Now you have this pool of money that nobody can take from you. Maybe that’s what you invest for the long haul. If you’re gonna hold certain assets, why invest that trust money exactly the same as everything else? Maybe you want to invest it in something that will come to fruition in the future or just hold it long-term. And then you hold the assets in your name for things you might need to liquidate—buy a house, put a kid through college. And you start giving up the assets so that when inevitable changes come, you have funds available.

If you’re dipping into money you own in your name, creditors could take it someday. But if you’re dipping into the trust for an emergency, the money can’t go back in. That’s the way these trusts protect assets. So you keep flexible assets outside, and the long-haul assets inside.

Well, there you go. You’ve been given this gift—if you’re the child, or if you’re thinking about your child, you’re setting up this gift for them. It protects their assets and gives them a way to invest with some comfort. There’s nothing wrong with having a bunch of assets in a trust that you know nobody can take. That’s a nice way to sleep at night.

So that flexibility is there. But remember, things go up and down—not just the marketplace, but life. You might get sick, or need things sold, or need help in a nursing home or hospice. You need somebody to step in when you might not be in control. Be realistic. If someone told you, “You only have so long to live,” would you be in the best headspace? Maybe not.

Plan ahead to make sure the people you’ve chosen can really step in. I preach this often because people pick their kids and are blind to reality. Maybe their kids don’t get along, or maybe decisions can’t be made because they cancel each other out. Or maybe the eldest child is picked, and they’re not the right person for the job. People pick based on birth order sometimes, not ability. Stop and take a look at your plan. If you couldn’t take care of yourself today, would the people you picked be able to step in?

There are many factors: markets, illness, house sales, bills, decisions. Can the person you picked handle these? And the harder part—can they handle family politics? It’s almost inevitable that someone will try to step in or control things. Some kids can’t help themselves. They’ve been trying to control your life since they were kids. That’s what they’ll do if you can’t stand up to them anymore.

Who have you given this power to? Are they the right person? Is it time to make changes? Change is inevitable. You need someone who can carry out your plan even if they don’t agree with it.

It’s the structure of the documents, the people you put in charge, and whether the plan allows flexibility. Are the people you selected capable of stepping up when things are in flux? Will they be able to do it? These are key things to consider. In the long run, if you’re leaving things to your kids, hard times will happen. Life throws curveballs. Your plan should give them the flexibility to protect themselves and respond.

These are things to ponder and discuss with your trusted estate planning advisor. Give me a call. We can talk, brainstorm, and make sure there’s a better way to hold and structure things for your family.

So that’s a little about death, taxes, and planning. If you’d like to, please like and subscribe. That way, when I release new content, you’ll know. I look forward to talking to you again about another tax or estate planning topic.

Take care. Bye now.