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The Wealth & Wisdom Blog

Information on Estate Planning, Estate and Trust Administration and Unique Asset Planning

Annual Exclusion Gifts

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Do your givin’ while your livin’ so your know’n where its goin’.  Unknown Poet and Estate Planner

Many of my clients share with me their pleasure in seeing their family use and enjoy gifts made by them. Whether it is paying for a nice dinner out with the family (remember those days?), a vacation adventure with the grandkids, or even paying some of a grandchild’s staggering educational costs, my clients generally feel that making such significant lifetime gifts are a good use of hard-earned assets.  For my part, I am glad to remind them of the tax planning benefits of making such lifetime gifts. In last month’s update, I provided a brief overview of the policy position of Biden and Trump and how those positions would impact estate planning.  Ahead of the tax law changes I believe to be on the horizon, this month’s update provides a brief summary of “annual exclusion gifts.”

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An Estate Planner’s Perspective on the Election

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“The only thing constant in life is change.”  Heraclitus, Greek philosopher.

Ahead of the upcoming November election, this month’s update provides a brief overview of those policy positions of Joe Biden and Donald Trump that impact estate planning decisions.  I am by no means attempting to endorse a candidate, to or to predict the outcome. I am predicting, however, that federal tax law changes will occur in the coming four to five years. As a result, clients will need to carefully consider how these federal tax law changes impact their estate planning.

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Distributing Tangible Property

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Grandpa, who is going to get your fishing boat when you die?

Apparently my estate planning mind started early—at around age 6 or 7.  After a beautiful afternoon of fishing with my grandfather on a rural Minnesota lake, I broke the silence of the car ride home with the most indelicate of questions.  My grandfather not only laughed it off, but decided to reward my frank question by updating his estate plan to distribute the boat to me.  In memory of that fine day (we caught our maximum allowance of sunfish, I am sure of it), and with all the fishing tackle being put to good use this summer, this month’s update provides a few thoughts related to the transfer of personal property.

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Controlling the Narrative of Your Legacy

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How will you like to be remembered?  What will be the defining element of your legacy?

Since his death, George Floyd’s name has become synonymous with a global call to address systemic racism.  Millions of people around the world have spoken out and marched in an effort to address systematic racism.  At a personal level, our oldest son Micah Wessman died unexpectedly in 2009.  Following his death, my wife and I founded a nonprofit organization now called Hope for the Mourning to help fellow grieving parents.  While both George Floyd and Micah Wessman have a legacy beyond their own lifetimes, neither of them had a choice in creating that legacy.

Many of us will, however, have the opportunity to control the narrative of our legacy. Especially in these difficult days of the global pandemic, I have had the opportunity to discuss with some of my clients the legacy we hope to leave.  The preparation of a “Legacy Letter,” also known as an Ethical Will, allows us to articulate those desires.  While holding no legal significance, a Legacy Letter can serve as an autobiographical narrative, a proclamation for family and friends of one’s deeply-held beliefs.  You and your clients might consider writing a Legacy Letter for the following reasons:

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Cory Wessman Legacy Letter

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I have encouraged many of my clients to create a Legacy Letter, also known as an Ethical Wil. As of Summer, 2020, I thought I would share mine as an example.

I want to be remembered as a follower of Jesus Christ.  I also want to be remembered as a kind and gentle husband and father, a generous giver of time and resources, a patient and wise legal counselor, and an athlete who lacked talent but not desire.

It is my hope that my single greatest legacy is to spur my family, friends and clients towards a life-long journey with Jesus Christ.  I hope that I used my time and finances to show the surpassing worth of Jesus Christ, and to love Heather, Micah, Owen, Brendan and Kinsley with my whole being.  I hope that my love for the Lord came through in my personal relationships, including my relationships with my work colleagues, clients, and fellow grieving parents.

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Legacy Letters

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A family legacy letter, also known as an “Ethical Will,” is a non-legal document that provides surviving family members with one’s wishes and directions for leaving behind a relational, spiritual, and family legacy.  While it is critically important to have one’s legal and financial affairs in order, creating a legal estate plan is only one element of planning well.  In addition to creating a good legal estate plan, we believe that all of us should be working to leave a legacy within our families and communities.  For that reason, clients might prepare a statement, which I call a “Legacy Letter,” also known as an “Ethical Will,” to accompany their legal documents and that provides family members your thoughts on your own legacy in your own words.

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Lowered Hurdle Height for Asset Transfers to Children

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In last month’s update, I shared how our family has documented our memories of the 2020 pandemic.  One of my lasting memories will be of the virtual learning assignments for our children. As the self-appointed physical education teacher, I took it upon myself a few weeks ago to create an obstacle course in our front yard. I used a few of our unending supply of cardboard boxes–itself another pandemic memory–to create a hurdle course, a sight that I am sure drew the attention of the board members of our homeowners association.  My youngest son initially experienced difficulty in clearing the cardboard box hurdles, by reason of both his diminutive stature (blame his mother’s genes) and his poor flexibility (blame his father’s genes).  As a result, I took it upon myself to improve his confidence by cutting down the height of the hurdles, and his performance improved significantly at the new and lower hurdle height.

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Grantor Retained Annuity Trust (“GRAT”)

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A “Grantor Retained Annuity Trust” (“GRAT”) is a planning strategy used to transfer wealth without necessarily using any federal gift tax exemption.  Under this strategy, a donor irrevocably transfers assets to an irrevocable trust, but purposely retains a fixed annuity amount for a fixed period of years (called the “annuity period.”) While the donor will benefit from the fixed annuity amounts received back from the GRAT during the annuity period, the donor irrevocably gives up the right to benefit from the remaining assets (if any) that are remaining in the GRAT after the payments made to himself or herself following the end of the annuity period.

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Documenting Asset Transfers to Adult Children

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How are you going to remember these tumultuous days of the 2020 coronavirus pandemic?  My three kids were each given a writing journal by my mother, who encouraged each of them to write about daily life in the midst of a pandemic, both for themselves and for future generations.  Earlier this week, I also helped my kids bury a time capsule—a shoe box full of items that my kids envision would be of interest to future generations who are trying to understand how a family of five is living through a 2020 pandemic.  Over these past few weeks, I have interacted with a few clients who have decided that, by reason of the most significant economic downtown in our lifetimes, now is the time to provide financial assistance to their adult children.  Some clients are helping a child with an intra-family loan, while others are gifting assets to the child.  In this month’s update, I provide a brief overview of the tax and legal implications of transferring assets to adult children, either by loan or gift, and stress the importance of documenting the client’s intentions in this regard.

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Signing Legal Documents Under Self-Quarantine

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Over the past few weeks, our firm has continued to operate as normal.  We have hosted face-to-face meetings in our office, as well as video calls, telephone calls and emails.  We have, however, observed an increase in the number of new or existing clients who are addressing while in a “self-quarantine” or “shelter in place” situation.  In this month’s update, I provide a brief summary of the signing formalities associated with the four “basic” estate planning documents.

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This blog is intended to provide the reader with assistance in understanding various estate planning and trust estate planning concepts. In an effort to keep things as digestible as possible, I have tried to keep each blog post as short as possible.  As a result, an astute reader would see that I often fail to address various exceptions to rules or principals, or how various principles relate to one another.  There are a number of moving parts associated with various planning structures summarized on this blog.  In order to achieve your estate planning objectives, it is important that you receive the assistance of an experienced estate planning attorney.  Otherwise, your family may be in a worse position for your having attempted these strategies on your own.  Until we form an attorney-client relationship, you should be aware that your visiting this blog has not formed an attorney-client relationship, and none of this information can be taken as legal advice.  To contact my office about scheduling an appointment, contact us at 612-465-0080.