BLOG

OUR BLOG

Johnson Law Practice in Reno, NV provides blog posts covering many legal topics. Read them below.

BLOG POSTS

Our Blog

14 Oct, 2013
Many parents wisely decide to buy life insurance to cover the outstanding mortgage on the house or provide a surviving spouse security in the event of the untimely death of one parent. In addition, parents understand that it is important to plan for the financial future of their young children in the event of the untimely death of both parents. Equally important in this process is the proper designation of a beneficiary for minor children. The following imaginary couples illustrate the consequences of choosing the correct or incorrect beneficiary for life insurance proceeds: 1. Max and Maureen designate their minor children as contingent beneficiaries. Max and Maureen are married and have two children, Millie and Martin. Millie is ten and Martin is twelve. Max and Maureen have no will but each has a life insurance policy in the amount of $250,000. They are reciprocal beneficiaries on the policies, with their children named as contingent beneficiaries. Sadly, Max and Maureen die in a car accident while the children are staying with Aunt Matilda. Because the children are minors, Aunt Matilda must hire an attorney to petition the court to establish that she is the guardian of the children, and enable her to receive the life insurance proceeds on behalf of the children. She is a good aunt and is meticulous with preserving the children’s money. When the children turn 18, they each get over $200,000 in their bank account. Martin immediately buys a $60,000 car and decides he is not going to college after all. Millie decides to go on a shopping spree in Europe. Max and Maureen just rolled over in their graves. 2. Hope and Harold designate a friend as the contingent beneficiary to use the proceeds for the children. Hope and Harold have two year old twins, Henry and Harris. Hope and Harold have a nice home and a mortgage, so they have decided to each take out a life insurance policy in the amount of $350,000. They know they should designate a contingent beneficiary on the policies, so they talk to their friend, John Trust, and ask him if he would be the contingent beneficiary and use the money to support their children if something every happens to them. John is happy to oblige. Unfortunately, Hope and Harold meet their untimely death in a plane crash. John, meanwhile, caused a ten car pile-up on the freeway and has a judgment against him in the amount of $500,000. As soon as the life insurance proceeds are transferred to John’s bank account, his creditors garnish it to satisfy their judgment. John uses the remaining money to take care of the children, but the funds run out before they turn 18. 3. Diana and Don designate “my estate” as the contingent beneficiary. Diana and Don have a little girl, Debra, and reciprocal life insurance policies. They know they need a contingent beneficiary, so they designate, “my estate.” As a result, if they both die, the proceeds will be paid to the court-appointed representative of the probate estate, and the proceeds will be subject to any probate creditors, including Diana and Don’s medical bills and credit card debt. Little Debra will need to wait at least a year before she sees any of the money to provide for her care. Then, when Debra turns 18, she will be entitled to any and all funds that remain, to spend at her eighteen-year-old discretion. 4. Carl and Christine designate a UTMA custodian. Carl and Christine have two teenage children and reciprocal life insurance policies. They know they cannot name their minor children as contingent beneficiaries. They talked to their friend who is a lawyer who suggested that they name an adult custodian pursuant to the Nevada Uniform Transfers to Minors Act (“UTMA”). Under the UTMA, the executor of Carl and Christine’s estate can make an irrevocable transfer to a custodian for the benefit of a minor as authorized by their wills. However, each policy must be allocated to a custodian to benefit one child, so if Carl and Christine have a third child, the third child would receive none of the life insurance proceeds. In addition, unless Carl and Christine each state on their contingent beneficiary forms that payment is delayed until the child turns 21, the child will receive all proceeds at 18. 5. William and Wanda designate their testamentary trust as the beneficiary. William and Wanda follow the advice of their financial planner and hire an attorney to prepare their wills. Because they have three young children, their attorney advises them to have a testamentary trust to benefit their minor children, Wendy, Warren, Wess. William and Wanda designate the trustee of the testamentary trust as the contingent beneficiary on their life insurance policies. Because the trust is testamentary, i.e., effective upon death by terms of the will, their estates will be probated before the trust can be funded with the life insurance proceeds, which will cause delay of funds. However, if something happens to William and Wanda, they know that their children will be provided for by someone they trust, and their children will not come into large sums of money at age 18, because they have specified that the proceeds be distributed at intervals until the youngest child turns 30. William and Wanda do not need to worry about Wendy dropping out of college or Warren buying an overpriced car at age 18 because they inherited a large sum of money. 6. Tina and Troy designate their revocable living trust. Tina and Troy have a three year old girl, Tessa, and a six year old, Tom. They have wisely hired an attorney to prepare a revocable living trust. In the trust, Tina’s brother is designated as the successor trustee, and, if something should happen to both Tina and Troy, he will manage all the financial matters for the children until the youngest child turns 25. Tina and Troy have designated their trust as the beneficiary for their life insurance proceeds, and, as a result, probate proceedings will not delay distribution of the life insurance proceeds. Like William and Wanda, Tina and Troy have a peace of mind with regard to Tessa and Tom, and they need not worry about their children receiving their inheritance all at once with no controls. As demonstrated above, the ideal choice for a beneficiary is a revocable living trust. A trust gives parents control of the financial future of their children after their death, and it prevents delay by avoiding probate. A testamentary trust will work, but there will be delay in receipt of the funds due to probate. Beneficiary designation is an important part of the estate plan process that should not be ignored, and anyone with young children and life insurance policies should discuss their options with their financial planner and attorney. Disclaimer --Nothing herein should be construed to create an attorney-client relationship. Please consult with your attorney with regard to your specific estate planning needs.
17 Jun, 2013
People always seem to have a good excuse or explanation as to why they do not have an estate plan. Sometimes I hear, “well doesn’t everything just go to my spouse and kids anyway?” Most people are vaguely aware that if they do not have an estate plan, their assets will pass to their relatives or next of kin when they die pursuant to state law. Dying without a will is called intestacy. Under Nevada law, if you die intestate with assets, your assets are first applied to any of your debts, and then are distributed in accordance with the “directions” found in the intestacy statutes. For example, if you die and your spouse survives you, and you have one child, then your estate is divided equally between your spouse and your child. Or, if you die with a spouse and more than one child, then your spouse only receives one third of the estate, with the remainder being equally divided among your children. If you have no children and a spouse, then one half of the estate goes to the spouse, and one fourth goes to your father and one fourth goes to your mother, if they are living at the time of your death. If you are divorced with no spouse but have children, then your estate is shared equally by your children. There are many other scenarios accounted for in the statutes, but the above are the most common. Many people do not realize that their estate does not go entirely to their spouse under intestacy, and in most cases, people want their spouse to have the marital residence, and generally all the other marital assets. If the children and surviving spouse are on good terms, the children can disclaim interest in the assets, but this is not always the case. Perhaps you are on your second marriage and your children do not like your new spouse. Or perhaps your children have a bad relationship with your spouse. Or maybe you do not have any children, but your parents do not approve of your spouse. In any one of these scenarios, you could have a child or a parent willing to have the marital residence sold to be paid their share of the estate, unless your spouse can come up with the funds. While the intestacy statutes try to be fair, they are a one-size fits all to estate distribution, and therefore can create many problems in various scenarios. If you do not have an estate plan, think about how well intestacy would work out for your loved ones. In most cases, you are going to want to get your estate plan done. [This blog is for informational purposes only and is not intended to create an attorney-client relationship. If you have questions regarding your own specific circumstances, please contact me or another attorney.]

CALL US TODAY

Johnson Law Practice in Reno, NV can be reached at 775-737-9927.

Our Blog

14 Oct, 2013
Many parents wisely decide to buy life insurance to cover the outstanding mortgage on the house or provide a surviving spouse security in the event of the untimely death of one parent. In addition, parents understand that it is important to plan for the financial future of their young children in the event of the untimely death of both parents. Equally important in this process is the proper designation of a beneficiary for minor children. The following imaginary couples illustrate the consequences of choosing the correct or incorrect beneficiary for life insurance proceeds: 1. Max and Maureen designate their minor children as contingent beneficiaries. Max and Maureen are married and have two children, Millie and Martin. Millie is ten and Martin is twelve. Max and Maureen have no will but each has a life insurance policy in the amount of $250,000. They are reciprocal beneficiaries on the policies, with their children named as contingent beneficiaries. Sadly, Max and Maureen die in a car accident while the children are staying with Aunt Matilda. Because the children are minors, Aunt Matilda must hire an attorney to petition the court to establish that she is the guardian of the children, and enable her to receive the life insurance proceeds on behalf of the children. She is a good aunt and is meticulous with preserving the children’s money. When the children turn 18, they each get over $200,000 in their bank account. Martin immediately buys a $60,000 car and decides he is not going to college after all. Millie decides to go on a shopping spree in Europe. Max and Maureen just rolled over in their graves. 2. Hope and Harold designate a friend as the contingent beneficiary to use the proceeds for the children. Hope and Harold have two year old twins, Henry and Harris. Hope and Harold have a nice home and a mortgage, so they have decided to each take out a life insurance policy in the amount of $350,000. They know they should designate a contingent beneficiary on the policies, so they talk to their friend, John Trust, and ask him if he would be the contingent beneficiary and use the money to support their children if something every happens to them. John is happy to oblige. Unfortunately, Hope and Harold meet their untimely death in a plane crash. John, meanwhile, caused a ten car pile-up on the freeway and has a judgment against him in the amount of $500,000. As soon as the life insurance proceeds are transferred to John’s bank account, his creditors garnish it to satisfy their judgment. John uses the remaining money to take care of the children, but the funds run out before they turn 18. 3. Diana and Don designate “my estate” as the contingent beneficiary. Diana and Don have a little girl, Debra, and reciprocal life insurance policies. They know they need a contingent beneficiary, so they designate, “my estate.” As a result, if they both die, the proceeds will be paid to the court-appointed representative of the probate estate, and the proceeds will be subject to any probate creditors, including Diana and Don’s medical bills and credit card debt. Little Debra will need to wait at least a year before she sees any of the money to provide for her care. Then, when Debra turns 18, she will be entitled to any and all funds that remain, to spend at her eighteen-year-old discretion. 4. Carl and Christine designate a UTMA custodian. Carl and Christine have two teenage children and reciprocal life insurance policies. They know they cannot name their minor children as contingent beneficiaries. They talked to their friend who is a lawyer who suggested that they name an adult custodian pursuant to the Nevada Uniform Transfers to Minors Act (“UTMA”). Under the UTMA, the executor of Carl and Christine’s estate can make an irrevocable transfer to a custodian for the benefit of a minor as authorized by their wills. However, each policy must be allocated to a custodian to benefit one child, so if Carl and Christine have a third child, the third child would receive none of the life insurance proceeds. In addition, unless Carl and Christine each state on their contingent beneficiary forms that payment is delayed until the child turns 21, the child will receive all proceeds at 18. 5. William and Wanda designate their testamentary trust as the beneficiary. William and Wanda follow the advice of their financial planner and hire an attorney to prepare their wills. Because they have three young children, their attorney advises them to have a testamentary trust to benefit their minor children, Wendy, Warren, Wess. William and Wanda designate the trustee of the testamentary trust as the contingent beneficiary on their life insurance policies. Because the trust is testamentary, i.e., effective upon death by terms of the will, their estates will be probated before the trust can be funded with the life insurance proceeds, which will cause delay of funds. However, if something happens to William and Wanda, they know that their children will be provided for by someone they trust, and their children will not come into large sums of money at age 18, because they have specified that the proceeds be distributed at intervals until the youngest child turns 30. William and Wanda do not need to worry about Wendy dropping out of college or Warren buying an overpriced car at age 18 because they inherited a large sum of money. 6. Tina and Troy designate their revocable living trust. Tina and Troy have a three year old girl, Tessa, and a six year old, Tom. They have wisely hired an attorney to prepare a revocable living trust. In the trust, Tina’s brother is designated as the successor trustee, and, if something should happen to both Tina and Troy, he will manage all the financial matters for the children until the youngest child turns 25. Tina and Troy have designated their trust as the beneficiary for their life insurance proceeds, and, as a result, probate proceedings will not delay distribution of the life insurance proceeds. Like William and Wanda, Tina and Troy have a peace of mind with regard to Tessa and Tom, and they need not worry about their children receiving their inheritance all at once with no controls. As demonstrated above, the ideal choice for a beneficiary is a revocable living trust. A trust gives parents control of the financial future of their children after their death, and it prevents delay by avoiding probate. A testamentary trust will work, but there will be delay in receipt of the funds due to probate. Beneficiary designation is an important part of the estate plan process that should not be ignored, and anyone with young children and life insurance policies should discuss their options with their financial planner and attorney. Disclaimer --Nothing herein should be construed to create an attorney-client relationship. Please consult with your attorney with regard to your specific estate planning needs.
17 Jun, 2013
People always seem to have a good excuse or explanation as to why they do not have an estate plan. Sometimes I hear, “well doesn’t everything just go to my spouse and kids anyway?” Most people are vaguely aware that if they do not have an estate plan, their assets will pass to their relatives or next of kin when they die pursuant to state law. Dying without a will is called intestacy. Under Nevada law, if you die intestate with assets, your assets are first applied to any of your debts, and then are distributed in accordance with the “directions” found in the intestacy statutes. For example, if you die and your spouse survives you, and you have one child, then your estate is divided equally between your spouse and your child. Or, if you die with a spouse and more than one child, then your spouse only receives one third of the estate, with the remainder being equally divided among your children. If you have no children and a spouse, then one half of the estate goes to the spouse, and one fourth goes to your father and one fourth goes to your mother, if they are living at the time of your death. If you are divorced with no spouse but have children, then your estate is shared equally by your children. There are many other scenarios accounted for in the statutes, but the above are the most common. Many people do not realize that their estate does not go entirely to their spouse under intestacy, and in most cases, people want their spouse to have the marital residence, and generally all the other marital assets. If the children and surviving spouse are on good terms, the children can disclaim interest in the assets, but this is not always the case. Perhaps you are on your second marriage and your children do not like your new spouse. Or perhaps your children have a bad relationship with your spouse. Or maybe you do not have any children, but your parents do not approve of your spouse. In any one of these scenarios, you could have a child or a parent willing to have the marital residence sold to be paid their share of the estate, unless your spouse can come up with the funds. While the intestacy statutes try to be fair, they are a one-size fits all to estate distribution, and therefore can create many problems in various scenarios. If you do not have an estate plan, think about how well intestacy would work out for your loved ones. In most cases, you are going to want to get your estate plan done. [This blog is for informational purposes only and is not intended to create an attorney-client relationship. If you have questions regarding your own specific circumstances, please contact me or another attorney.]
Share by:
Contact
Let's Talk!
Thanks for stopping by! We're here to help, please don't hesitate to reach out.