“These findings show that many Americans expect to leave an inheritance,” said Andy Ireland, head of premier banking and wealth management at HSBC. “However, it’s vital that people don’t rely on these potential windfalls to fund their retirement.”

When it comes to consideration of what an “inheritance” means today in America, there are difficult waters to navigate for those planning for their estates and those planning to inherit those estates.

According to a recent CNN Money article titled “Average American inheritance: $177,000,” it is a tale of two facts:

The good:

American retirees expect to leave an average inheritance of almost $177,000 to their heirs, the sixth highest of any country, according to an HSBC survey of more than 16,000 people in 15 countries.

And the tough to count on:

Around the world, 69% of retirees plan to leave an inheritance to their offspring, at an average of $148,000. Retirees in India were most likely to do so — with 86% expecting to leave money behind — while American retirees were the least likely, with only 56% expecting to give inheritances to their children.

You see, the math behind bequest and inheritance in the U.S. is an increasingly tricky one. There are a number of factors at play. These include such wild cards as the rising costs of late-age long-term care, unstable financial markets and the lack of wealth transfer maximization. Regardless, whether you are the one planning the wealth transfer or the one planning to receive it, this is a time to be realistic.

So, what should you do? Be sure to do the best with the financial resources you have. As a family, that means coming together to consider the issues and discussing a real plan for how it all ought to fall into place under a variety of “what if” scenarios.

Reference: CNN Money (December 13, 2013) “Average American inheritance: $177,000”

What if you like the idea of leaving your IRA to your kids—but worry that they’ll blow the tax advantages involved? Enter a tool called a trusteed IRA, a traditional individual retirement account with some of the estate-planning advantages of a trust that an increasing number of financial-services companies are aiming at aging baby boomers.

The common IRA is uncommonly powerful, but only if you know how to use it right. In fact, your IRA can actually serve estate planning purposes beyond simple retirement funding. Interested? If yes, then you need to consider a “trusteed IRA.”

A good place to start your education is a recent MarketWatch article titled “Trusteed IRAs Can Help Heirs Manage Inheritance.”

Basically, IRAs are fairly tidy little retirement accounts because they can be passed on to your heirs, thereby passing on some potentially nice tax advantages and a growing account outside the probate process. When inherited, IRAs still have to comply with a host of tax rules, and an heir can either take a lump sum upfront or figure out their own Required Minimum Distribution (RMD) pattern.

On the other hand, a trusteed IRA has that “trustee” – the same role that drives the engine of a full trust agreement – to watch over matters and guide the IRA from retirement account to a guided wealth transfer tool.

The trusteed IRA is an interesting option for a healthy middle slice of Americans planning their estates. Case in point, U.S. Bank describes the tool as best suited for accounts worth at least $2 million.

Whether or not it is right for you is another question. What is it you have to leave in terms of IRAs? Have you considered how and why you want to leave it to loved ones, even those who may not be as financially mature as you would like? How will you protect heirs from their own bad choices?  Furthermore, you must comply with the technical rules of the Internal Revenue Service in order to avoid significant tax consequences.

Fortunately, there are many ways to accomplish your goals. If a trusteed IRA is not the ticket for you, then there are other alternatives to evaluate, like the stand-alone IRA trust.

Reference: The Wall Street Journal (December 15, 2013) “Trusteed IRAs Can Help Heirs Manage Inheritance”

The economic downturn, steep health-care costs and longer lives may mean less money being left to boomers by their parents—but boomers are unlikely to complain about that. Why? It turns out it’s not about the money. Instead, baby boomers say personal keepsakes, family stories and last wishes are a far more important bequest than money.

Planning for your family and their well-being after you are gone is not an easy, or pleasant task. While it is easier to think about an inheritance as money or assets, one should never overlook one of the greatest gifts you can give to family: the gift of “family” itself in the form of history, stories, memories, and mementos. Do not leave it to folk-wisdom or word of mouth.  In fact sitting around the table with your children and grandchildren and discussing your family history may be the greatest gift of all.

For support of this notion, consider the findings of a recent survey of baby boomers, as reported in a recent article of MarketWatch titled “Your heirs want this even more than your money.”

You might say it comes down to legacy itself, and a legacy in the form of the family.

Fully 86% of baby boomers and 74% of Americans aged 72 and older said family stories and keeping their family history alive is the most important piece of their legacy, according to a 2012 survey conducted for Allianz Life Insurance Co. of North America. And 64% of boomers and 58% of elders said family mementos and heirlooms are a key inheritance. Just 9% of boomers said they’re eager to inherit money, and 14% of elders said financial assets are an important legacy to leave. The findings closely matched a similar Allianz survey in 2005.

As you can imagine, feelings can be hurt when it comes to one-of-a-kind items of family history significance.  While “stories” can be shared and enjoyed by everyone in the family, how should you handle family “artifacts”?

Well, what is the takeaway?

With the increased boomer interest in family legacies, do not neglect planning for the mementos and heirlooms and the verbal or written accounts of family history that are themselves tangible treasures of such legacies.

Reference: MarketWatch (December 16, 2013) “Your heirs want this even more than your money”

People who take good care of their children take good care of their money, and people who take good care of their money take good care of their children.

It has been said that money is at once the root of all potential and also the root of all evil. What is a concerned parent or grandparent to do for their young heirs when so much is at stake, especially when it comes to gifts and inheritances? For some timely insights, a recent Forbes article titled “What Can We Do With Money For Our Kids?” may be a good place to start.

As an alternative to gifting money outright to your children or grandchildren, the article explores Roth IRAs, 529 plans, annuitized gifts, and even UTMA/UGMA accounts. While there are many wealth transfer tools and methods, the key is asking yourself a few important questions upfront.

For starters, what is the purpose of your wealth transfer? Is it education? How involved do you want to be? Do you have specific educational purposes in mind and, perhaps, even limitations? After all, who wants to facilitate a perpetual student?

On the other hand, would you prefer flexibility beyond education alone? What about providing some assistance should your younger loved one ever need a home loan, capital to start a business, or other opportunity to get a leg up? However, could “bailing” a younger loved one out of a bad situation deprive him or her of some valuable life lessons? There is something to be said about the school of hard knocks.

Oftentimes a trust arrangement is an excellent solution for wealth transfers to a younger generation, whether funded now with gifting or later on through inheritance. With a trust you can, with far more particularity and power, articulate both your concrete hopes and goals as well as spell out the specific limitations behind the gift or inheritance. In addition, you may appoint a trustee to stand by and oversee the whole process in your stead.

Easy gifts now such as UTMA/UGMA transfers while have the benefit of transferring money making assets to a lower income tax bracket, have significant problems with flexibility, timing of distributions, and control by the parent. Careful analysis of the goals and objective of such a gift must be done in order to avoid the pitfalls of this type of gift.

If you want to ensure that your transfers are a blessing and not a curse, then it will take some legal work to get it right. You will need competent counsel to help you sort through the many legal options available and to chart a course to get there. Ultimately, however, before engaging such counsel, take time to consider your heirs, review your assets and consider your wealth transfer goals for both.

Reference: Forbes (December 23, 2013) “What Can We Do With Money For Our Kids?

All trusts should be reviewed every few years to make sure that they are up-to-date with the law and meet your goals today. Following is a checklist of trust features you can review yourself.

Trusts are powerful estate planning tools. However, it is precisely because of this power that they should be properly established, and then properly maintained. Nothing is worse than spending money to draft a trust only to have it fail to meet the needs of your changing life.   When it comes to revocable trusts, also known as “living” trusts, ElderLawAnswers offers a convenient and instructive checklist of the things to watch and the things that can go wrong in an article titled “9 (Potential) Problems with Your Trust.”

These nine (potential) problems reside in these questions:

1. Do you have the right successor trustees?
2. Who can remove trustees?
3. Can your spouse change the ultimate distribution of trust assets after you have passed away?
4. Does your trust protect your children and grandchildren from lawsuits and divorces?
5. Have you “funded” your trust?
6. Who is named as beneficiary of your retirement plans and other investments?
7. At what age will children and grandchildren receive their inheritance?
8. Does your trust have provisions providing for maximum tax deferral if it is named the beneficiary of a retirement plan?
9. Is your trust up-to-date for estate tax purposes?

Some of these nine questions touch on structural issues to get your trust right at the outset, while still others are “maintenance” matters to ensure your trust is still accomplishing the goals for which it was established. Remember: your life, the lives of your loved ones, and the relevant laws will likely change across the years. Consider the well drafted trust which has never been maintained, that provides for your wife who is now, 30 years later, your ex-wife.  Your current wife may not think of you kindly.

Either way, reflecting on these nine touch points are worth understanding if a trust is important to your estate plan. They certainly demonstrate just how vital competent counsel is in setting up, administering and guiding your trust.

So, is your existing trust still up-to-code? Are you ready to create your trust as part of your New Year’s resolutions for 2014?

Reference: Elder Law Answers (December 17, 2013) “9 (Potential) Problems with Your Trust