Money Mistakes Philly Parents Make

Our guest (expert!) writer tells us how to avoid them … and how to best plan for the future Read more

steve zellinger estate planning

If you haven’t heard, the first Philly Baby & Family Expo is happening on October 16th. (The awesome event, put on by A Child Grows in Philly, is at the Marriott on 12th and Market streets.) This the kind of thing Philly has needed, in part because of the helpful local experts that you’ll meet there. One such in-the-know fella is estate-planning lawyer Steve Zelinger, who specializes in helping young families plan for the future, and who has some great tips below on tackling all the things that you’d rather not think about … but probably should. Interested in meeting more smarties like him? You can save 10 percent on tickets by using the code Wee10Off at checkout.

Oh, and it must be said: The information included here is not intended to be legal advice or form an attorney-client relationship. It is informational in nature only. It is essential to have an attorney review your specific situation before taking any action.

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So let’s be honest. You don’t want to deal with this. Contemplating death or a serious injury that leaves you unable to handle yourself is the last thing you want to think about. This is especially true with a toddler tugging at your leg as you read this. Also be honest with yourself: The thought of something happening to you (and/or your spouse or partner) terrifies you into a sense of paralysis. Which leads to the first common mistake people make when it comes time to planning for the future: 

Mistake One: The Freeze Effect
The freeze effect (a result of being overwhelmed, freaked out, bummed out … whatever) causes many people to do the opposite of what they should…NOTHING. The failure to plan leads to nightmare stories that would make your toes curl: the guy who dies with no will who had a woman on the side and the surviving wife needs to share the estate with the mistress; the older woman with Alzheimer’s who didn’t have a power of attorney and the family had to spend over $3,000 just to get money out of her IRA to pay for her basic care… It goes on, and on.
The fix: The bottom line is that if you get the right advice, from the right professionals, this process doesn’t have to be hard. You do have to make tough decisions (like picking one sister over the other to be your child’s guardian), but making a tough decision is better than not making one, thereby leaving a judge to decide. A good professional estate planner will know how to ask the right questions and in the end you’ll have one less thing to wake you up at night.

Mistake 2: Not naming official guardians for your kids.
Some people don’t plan at all (see above); others do a basic will that leaves a pretty gaping hole–the kids. Not to be macabre, but what happens to your children in the event of your untimely incapacity or death along with your spouse? As rare as this scenario is, we still should deal with it for peace of mind. Most parents would never imagine that a grandparent or family member might have trouble getting/keeping custody of the children (as opposed to social services) in an emergency situation, but I have seen that exact scenario play out.
The fix: The solution is to name standby guardians (“first responders”) to form a shield around your kids until the police arrive and allow for a hand-off to permanent guardians should the need arise, without intervention of authorities. This is surprisingly simple to do, but very few attorneys even know it can be done, and most parents are similarly unaware they can further protect their kids in this way.

Mistake 3: Not protecting the inheritance
When you think of the word “trust fund”, you think of hoity-toity rich people, but we all have a monetary legacy, which is actually about much more than just the money. You’ve worked and saved for your future; you bought life insurance; your grandparents left you something you wanted to help grow. It would suck to see that squandered.
The fix: A trust is simply a way to have your assets go into a protected place, where a trusted person (your trustee), can use it under your guidelines for the benefit of your kids (beneficiaries). It is really that simple–but too many people just buy life insurance and leave it at that, not thinking where those funds will go if there is no spouse to receive them. The bottom line is that without a proper trust to whom assets (such as life insurance) can be directed, the kids will end up with carte blanche when they’re 21 … or even 18. I made some pretty poor decisions even after age 21, didn’t you? A kid with half a million dollars is generally a pretty bad idea. This is why wealthy aristocrats back in the day thought of trusts–and now you can benefit from the same concept to protect your legacy.

Mistake 4: Not planning for incapacity
The really sad subject that’s at the heart of much of estate planning is incapacity. It might be as important as planning for death … sometimes more so. Without proper financial and healthcare powers of attorney, a judge will decide who looks out for your best interests. This process can also cost thousands of dollars … and it can be completely avoided.
The fix: Every living, breathing adult in this country needs power of attorney documents along with a document to memorialize end-of-life decisions (called an Advance Directive). One thing about powers of attorney is that 1.) sometimes the legal requirements change (in fact Pennsylvania just changed its power of attorney law effective 2015) and 2.) you have to make sure the documents are accessible when needed (like, say, if you’re at the hospital).

Mistake 5: Not having a “FAMILY” attorney
I don’t mean a family law attorney (i.e. for divorce and custody), but someone who’s fees you’re comfortable with — someone who you’d turn to if you need a new financial planner or CPA, if you are thinking of starting a business, or if you want to coordinate planning with your siblings and parents. Having a fully coordinated plan and having a “team” on your side can make life easier. While there are some bad service professionals out there, you can find good ones if you know who to ask.
The fix: You have to realize that estate planning is not do-it-yourself or “set it and forget it”. These matters are some of the biggest financial- and life-planning matters you deal with (bigger even than buying a house or sending a kid to college), so you want to work with someone who values your goals and is an expert. General practice attorneys who do criminal work and litigation probably aren’t the best choices, because they charge hourly rates – most estate planning can and should be done on a flat-fee basis with the understanding that updates are needed over the years as your situation–or even the law–changes. Most attorneys are not experts in the estate planning field and do not look at the engagement as a long-term relationship where fees should be anticipated and controlled so that attorney billing does not stop clients from updating the plan when needed.

When looking for an attorney, ask him or her how much time he/she really spends on estate-planning as opposed to litigation or criminal matters. The fact is, law is very specialized these days and over your lifetime you may have the need for several different types of attorneys, but you need a “quarterback.”  Also, ask if your prospective lawyer has a membership plan or a way to control costs for future changes. If you ask these questions and he/she doesn’t have a ready response, you’ll know to move on.

 

Steve ZellingerAbout out author: Steve Zelinger, Esq., is an estate-planning attorney w/ a solo practice who lives in Center City with his wife and two young kids. He specializes in assisting young families who are planning for their estates and is big believer in the old adage that “an ounce of prevention is worth a pound of cure.” (Bonus: He makes “house calls” to new parents!) When he’s not lawyering, he is busy serving as treasurer for the Friends of Chester Arthur Foundation, supporting his neighborhood public school.