Help your children with their planning!

If you have adult children, especially young adult children, the topic of estate planning likely does not come up in casual conversation. After all, twenty-somethings should have a long life ahead of themselves. Thinking about Wills and other morbid things is for “old people”. I probably thought that way when I was younger, but having lost a parent at a very early age, I know that death happens at all ages. So does incapacity.

We might even be worried about having types of conversations for fear that it might scar our children in some way. I don’t think that we give our children, even young ones, enough credit. Case in point: a short time ago, I was talking with my children about Wills. They have been to my office many times, but I did not think that they really understood what I did. Because they are ages 10 and 8, I tried to keep the conversation age appropriate. To my surprise, my younger daughter asked if I could write her Will! She wanted to be sure that her treasured stuffed animals passed to her sister when she died. While it won’t carry any legal weight, I am inclined to write that document. Sounds like a learning experience (for both of us)!

In Florida and in most states, when your child becomes an adult, he or she is no longer legally under your control. Therefore, if your child gets hurt, you may have a hard time accessing his or her bank account or talking with his or her medical providers. As simple as it may be, when your child reaches age 18, a great birthday present is to help him or her get a power of attorney and medical directives. As his or her life progresses, perhaps with marriage and children, those documents will likely change. Starting the conversation early in life will help to equip your children with the knowledge and strength to make decisions about their money and health care…and yours.


Tip 15: Naming your Real Estate Entities

Do you own investment real estate? If you do, chances are pretty good that you own those properties in a real estate entity, such as partnership, LLC or land trust.  When you own several properties, it may be advisable to set up a separate entity for each property. This type of planning has both pros and cons.

One important consideration is to come up with a name for each entity. Some of our clients come up with creative names, which is great. However, if you have more than one entity, using creative names can get confusing.

We suggest that our clients consider naming real estate holding entities by their street address (or street name). For example, if I own a rental at 123 Main Street, I might deed that property into “123 Main Street Land Trust.”

We like this approach because each entity usually has is own bank account and separate record keeping. If you get a lot of bank statements and/or bills (such as utility bills) in the mail, it’s easy to sort them by “address.” This makes tracking your properties a little easier each month and also helps your tax preparer match up your income and expenses.

Have a question about your investment real estate? Give us a call!

Per Stirpes or Per Capita: Which is right for you?

Sometimes we like to add a little Latin to a legal document. Good examples are “per stirpes” or “per capita” that are stated after the name of a person or group of people, such as to my children, per stirpes or to my children, per capita. These words are shorthand ways to define how would pass assets at the time of death. One little word make a big difference, so which one is right for you?

Per stirpes means by representation or by right of representation while per capita means according to the numbers. These concepts are better explained with examples:

Assume Fred is single and has two children, one boy and one girl. His son, Bill, has three children, and his daughter, Sally, has two children. Fred decides to leave his assets to his two children, per stirpes.  This would mean that each child would receive one-half of Fred’s assets at death. If his son, Bill, predeceases Fred, then Bill’s children would take Bill’s one-half of Fred’s estate equally (each of Bill’s children would receive one-sixth of the estate).

Let’s instead assume that Fred wishes to leave his assets to his children, per capita. This would mean that each child would receivce one-half of Fred’s assets at death. If his Bill, predeceases Fred, ALL of Fred’s assets would pass to his daughter, Sally. In other words, Bill’s family would receive nothing.

It might be easy to say I will choose “per capita” because I have young children and no grandchildren. When my children grow up and have families of their own, I will change my Will. That’s fine, but we find in our practice that clients do not want to talk about their estate plans very often. In fact, we review plans that are fifteen or twenty years old on a regular basis. So, if you are inclined to think down the road when you might have grandchildren, maybe “per stirpes” makes sense.  If your children predecease you without children of their own, your assets will pass to your surviving children.