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Thursday, Dec 7, 2023

CHAMBERLAIN ON MONEY–When Estate Planning, Dig Deeper Than a Seminar

Dear George: I think the time has come to do some serious estate planning. However, I’m not sure how to find a good attorney to help me. Any suggestions?

, Jim, Escondido

Dear Jim: These days just about anybody who owns a house, has a retirement plan at work, or owns any significant assets needs to consider the estate planning options available to them.

Hardly a day goes by that I fail to see an ad in the newspaper or hear one on the radio promoting some type of estate planning seminar or workshop. These events give you an opportunity to see an attorney or planner in action and get a sense of their manner and style. However, you need to dig a little deeper before hiring them to handle your estate.

A recent article published by the American Association of Individual Investors suggests that you ask some important questions before selecting a professional. For instance, more important than the number of estate plans (living trusts, etc.) that the attorney has prepared, how many of these plans has the attorney administered or settled when the clients became incapacitated or died.

It is also important to know who will actually write the trust document. In many cases the documents may be prepared by an assistant or

paralegal. While there is nothing wrong with this, be sure that the costs for this service reflect the fact that the documents were prepared by an associate and not the attorney.

Most estate planning professionals will give you a free consultation for 15-20 minutes. You should be able to determine if this is the right person to help you. It is also a good idea to contact the local bar association for referrals.

Dear George: I understand there have been some changes in the laws regarding minor custodial accounts. What’s the latest news?

, Mark, San Diego

Dear Mark: Investing money in your children’s name has many benefits and some negatives. Knowing the good and bad is important before making any decision.

The California Uniform Transfers to Minors Act established the rules for investing a child’s money with an adult custodian. As you may know, a minor cannot own assets such as stocks, bonds, and mutual funds in their own name. The money must be invested in an account controlled by an adult custodian.

One of the advantages of this type of account is the tax treatment of the income generated by investments. The first $700 is tax-free, the next $700 is taxed at the child’s rate, and any amount over that is taxed at the parent’s tax rate.

However, when the child reaches age 14 the full tax liability shifts to their tax status.

It is important to remember that the money truly does belong to the minor child. The Internal Revenue Service frowns severely on any situation where money is put into a minor account to shelter it from taxes and then gets pulled out for other purposes. Be prepared to justify any expenses if the IRS comes questioning.

One of the main criticisms of these accounts has been the fact that control of the money shifts over to the minor child when he or she reaches the age of majority. While these funds may be earmarked for college, junior may prefer a Corvette.

La Mesa attorney Ron Oberndorfer says the law now gives parents and custodians for flexibility in protecting the money in a custodial account. He says vesting of the gift to the child can be delayed until the age of 25. That allows the custodian to make sure the funds are used for the purpose they were intended.

It is a good idea to talk with a tax professional before setting up a minor account, especially if the money is intended for educational finances. Money held in a child’s name can significantly reduce eligibility for college financial aid. The modest short-term tax benefits of a custodial account may sabotage later financial needs. Again, get some professional advice.

Chamberlin is the host of “Money in the Morning,” heard weekdays from 9 a.m. to noon on Ksdo.com A/M 1130. Send letters to P.O. Box 1969, Carlsbad, CA 92018, or E-mail him at (george@,moneyinthemorning.com).


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