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Why Estate Planning Is The Secret To Building Generational Wealth In Our Community

The wealth gap is one of the biggest challenges of our generation. This might change that.

Finance

For Blacks in America, even more important than creating wealth is passing that wealth down to the next generation. According to a study by Prosperity Now and the Institute For Policy Studies, the estimated median wealth for Blacks in America will fall to $0 by 2053. Researchers concluded, "As long as a substantial racial wealth gap persists, White households will continue to enjoy greater advantages than their Black and Latino neighbors in meeting the financial challenges of everyday life and will be able to make greater investments in their children, passing economic advantages on."

Confronting the wealth gap and the associated public policies that help fuel it will be one of the biggest challenges of our current generation.

Lawyer Art Steele is trying to change this narrative. As the host of the InkSecure Podcast, she educates entrepreneurs about the legal aspects of their business and how to use the law to grow their business. As a Trusts and Estates attorney, she's also a fierce estate planning advocate with a mission to educate as many minorities about the necessity of proper long-term estate planning. "It's not sexy [and] so easy for people to ignore. When it becomes relevant, it's way too late," says Art. "Personal behavior does not close the wealth gap. We can make as much money as we want. We can be our own bosses. We can build these million-dollar entrepreneurial businesses as much as we want. Yes, it's important that we create wealth, but we need to pass it down and pass it down the correct way. If we don't, every single generation is starting from scratch," states Art.

Avoiding the financial vacuums that are created when someone dies and providing financial gifts for the future, is the key to building wealth in our communities. xoNecole spoke to Art about the benefits of estate planning and some of the key things to keep in mind when beginning the estate planning process.

1. The ability to pass down wealth efficiently.

Black multi-generation family counting coins

Getty Images

Instead of leaving it up to the probate process, estate planning allows you to set up how your wealth is passed down and in a cost-effective and timely manner. Oftentimes, death is unexpected and can leave families with immediate financial obligations. If one's estate is not properly set up, getting access to funds can be a long, drawn-out and costly process. "When you create an estate plan and keep your estate out of probate, you save money. More money goes to your heirs," recommends Art.

While having a will can be useful, setting up a trust is the next step in ensuring what you leave behind gets disposed of in a timely manner. "If you only have a will and not a trust, your entire estate goes through the probate (legal process)," warns Art. To expedite the process, "you should create a will (to be filed in court), but dispose of all your property through a trust. This method avoids probate because the trust agreement is a private contract between you and the trustee (someone you've named). You can get as detailed as possible," explains Art. The value of setting up a trust is the trustee's ability to start working immediately to take care of your family, carry out your wishes and dispose of your assets without having to wait on the court system.

In order to truly build generational wealth, Art recommends thinking beyond lump-sum payouts, where money and assets can be squandered quickly. "When creating an estate plan, think about two to three generations down the line. For example, you may give your children access to a trust fund for life (in the form of monetary distributions) and when they die, the trust funds pass on to the next generation." Though trusts cannot be passed on for an eternity, ensuring there is something left to give to the next generation is more powerful than not having anything passed down at all.

Another key thing to keep in mind is investing in life insurance--especially if you don't have physical assets or money to leave behind. It's important to list beneficiaries even if you don't have a dependent, and it is usually cheaper the younger you are. "Life insurance helps keep things at status quo. No one has to pay for your funeral. You can leave money behind to a niece, brother, or partner, etc." says Art.

2. The ability to have your affairs handled more cost-effectively. 

Estate planning also involves creating a plan and designating someone to handle your affairs in the event you become incapacitated, which is done in the form of a power of attorney. "This immediately gives someone access to all of your financials and ability to take money out of your bank account. Your Power of Attorney (POA) can also sign contracts, real estate documents, enter into business contracts, or talk to the IRS on your behalf," explains Art. Your POA can legally tend to immediate financial concerns such as paying your rent, mortgage, or child care should you become incompacitated or die.

If you don't have a power of attorney, loved ones will have to "hire a lawyer, go to court, get a bond and have the court appoint [someone] as the custodian or conservator of your money," warns Art. The process is very expensive and usually prohibitive for most families because it requires hiring a lawyer on an emergency basis because of the urgent needs. Investing in hiring a lawyer to draft a state-recognized Power of Attorney document is worthwhile. Many banks and some states have their own power of attorney documents available for free.

Having an advanced medical directive is also extremely important and allows individuals to designate someone to make medical decisions on their behalf in case they become incapacitated. Advanced medical directives should "have instructions on what should be done to your body, access to medical records, and contain a HIPPA release," says Art. Oftentimes important medical decisions need to be made in traumatic circumstances. Taking the time to think about who you entrust to make important medical decisions on your behalf could be a life or death matter. Why leave it up to chance?

3. The ability to make your final wishes clear.

Getty Images

Estate planning protects against speculation and disputes concerning the unknown that can usually follow death or incapacitation. It allows you to avoid confusion and answer questions in advance for heirs such as "How, when, and where will my property and assets be disposed? Who will take care of my children?"

Take celebrities Nipsey Hussle and Prince as examples - both prolific musicians who died without a will at different stages of their career. Nipsey's $2 million estate is currently being petitioned to be administered by his older brother Samiel Asghedom. Three years after Prince's death, his estate, valued between $200-300 million, is still unsettled.

Estate planning is also critical for business owners. "If you have a business that has inventory, what happens to that? Who gets it? Does the business continue on [if you die]? Who has the authority to continue on? Can they sell the business? Who do you want to manage the business?" An estate attorney will work with you to legally set up the answers to these questions to ensure your business doesn't die as well.

4. The ability to protect who manages your intellectual property.

Being that we live in a digital world, we all have some form of intellectual property, which Art describes as "property that can produce income long after you're gone." Who is going to manage that income? Where does that income go? Who manages the property so that it actually continues to produce income? Art recognizes, "A lot of entrepreneurs are developing intellectual property through e-books, online courses, blogs. What happens to your creations?" For instance, for musicians especially, leaving behind clear instructions on how one's masters, image and likeness and trademarks can be used is important for protecting one's artistic legacy.

Towards the end of our chat, Art confesses that estate planning can often be a "tough thing to spend money on" because the person setting up their estate plan doesn't receive an immediate benefit. However, "it's the only step we can take to close the generational wealth gap," she urges readers. "Even if you do not have children, you should leave something behind. We should look at estate planning as a way to create wealth for our community."

No one wants to think about their ultimate demise, but making sure the next generation of Blacks in America are set up for success by our ability to pass wealth down is one the most urgent duties of our time. Stop waiting. Start now.

To learn more about getting started on planning your estate and get a FREE copy of Art's estate planning worksheets, click here.

Be sure to follow Art on Instagram @artsteele_esq for more estate planning tips.

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Featured image by Getty Images

ACLU By ACLUSponsored

Over the past four years, we grew accustomed to a regular barrage of blatant, segregationist-style racism from the White House. Donald Trump tweeted that “the Squad," four Democratic Congresswomen who are Black, Latinx, and South Asian, should “go back" to the “corrupt" countries they came from; that same year, he called Elizabeth Warren “Pocahontas," mocking her belief that she might be descended from Native American ancestors.

But as outrageous as the racist comments Trump regularly spewed were, the racially unjust governmental actions his administration took and, in the case of COVID-19, didn't take, impacted millions more — especially Black and Brown people.

To begin to heal and move toward real racial justice, we must address not only the harms of the past four years, but also the harms tracing back to this country's origins. Racism has played an active role in the creation of our systems of education, health care, ownership, and employment, and virtually every other facet of life since this nation's founding.

Our history has shown us that it's not enough to take racist policies off the books if we are going to achieve true justice. Those past policies have structured our society and created deeply-rooted patterns and practices that can only be disrupted and reformed with new policies of similar strength and efficacy. In short, a systemic problem requires a systemic solution. To combat systemic racism, we must pursue systemic equality.

What is Systemic Racism?

A system is a collection of elements that are organized for a common purpose. Racism in America is a system that combines economic, political, and social components. That system specifically disempowers and disenfranchises Black people, while maintaining and expanding implicit and explicit advantages for white people, leading to better opportunities in jobs, education, and housing, and discrimination in the criminal legal system. For example, the country's voting systems empower white voters at the expense of voters of color, resulting in an unequal system of governance in which those communities have little voice and representation, even in policies that directly impact them.

Systemic Equality is a Systemic Solution

In the years ahead, the ACLU will pursue administrative and legislative campaigns targeting the Biden-Harris administration and Congress. We will leverage legal advocacy to dismantle systemic barriers, and will work with our affiliates to change policies nearer to the communities most harmed by these legacies. The goal is to build a nation where every person can achieve their highest potential, unhampered by structural and institutional racism.

To begin, in 2021, we believe the Biden administration and Congress should take the following crucial steps to advance systemic equality:

Voting Rights

The administration must issue an executive order creating a Justice Department lead staff position on voting rights violations in every U.S. Attorney office. We are seeing a flood of unlawful restrictions on voting across the country, and at every level of state and local government. This nationwide problem requires nationwide investigatory and enforcement resources. Even if it requires new training and approval protocols, a new voting rights enforcement program with the participation of all 93 U.S. Attorney offices is the best way to help ensure nationwide enforcement of voting rights laws.

These assistant U.S. attorneys should begin by ensuring that every American in the custody of the Bureau of Prisons who is eligible to vote can vote, and monitor the Census and redistricting process to fight the dilution of voting power in communities of color.

We are also calling on Congress to pass the John Lewis Voting Rights Advancement Act to finally create a fair and equal national voting system, the cause for which John Lewis devoted his life.

Student Debt

Black borrowers pay more than other students for the same degrees, and graduate with an average of $7,400 more in debt than their white peers. In the years following graduation, the debt gap more than triples. Nearly half of Black borrowers will default within 12 years. In other words, for Black Americans, the American dream costs more. Last week, Majority Leader Chuck Schumer and Sen. Elizabeth Warren, along with House Reps. Ayanna Pressley, Maxine Waters, and others, called on President Biden to cancel up to $50,000 in federal student loan debt per borrower.

We couldn't agree more. By forgiving $50,000 of student debt, President Biden can unleash pent up economic potential in Black communities, while relieving them of a burden that forestalls so many hopes and dreams. Black women in particular will benefit from this executive action, as they are proportionately the most indebted group of all Americans.

Postal Banking

In both low and high income majority-Black communities, traditional bank branches are 50 percent more likely to close than in white communities. The result is that nearly 50 percent of Black Americans are unbanked or underbanked, and many pay more than $2,000 in fees associated with subprime financial institutions. Over their lifetime, those fees can add up to as much as two years of annual income for the average Black family.

The U.S. Postal Service can and should meet this crisis by providing competitive, low-cost financial services to help advance economic equality. We call on President Biden to appoint new members to the Postal Board of Governors so that the Post Office can do the work of providing essential services to every American.

Fair Housing

Across the country, millions of people are living in communities of concentrated poverty, including 26 percent of all Black children. The Biden administration should again implement the 2015 Affirmatively Furthering Fair Housing rule, which required localities that receive federal funds for housing to investigate and address barriers to fair housing and patterns or practices that promote bias. In 1980, the average Black person lived in a neighborhood that was 62 percent Black and 31 percent white. By 2010, the average Black person's neighborhood was 48 percent Black and 34 percent white. Reinstating the Obama-era Fair Housing Rule will combat this ongoing segregation and set us on a path to true integration.

Congress should also pass the American Housing and Economic Mobility Act, or a similar measure, to finally redress the legacy of redlining and break down the walls of segregation once and for all.

Broadband Access

To realize broadband's potential to benefit our democracy and connect us to one another, all people in the United States must have equal access and broadband must be made affordable for the most vulnerable. Yet today, 15 percent of American households with school-age children do not have subscriptions to any form of broadband, including one-quarter of Black households (an additional 23 percent of African Americans are “smartphone-only" internet users, meaning they lack traditional home broadband service but do own a smartphone, which is insufficient to attend class, do homework, or apply for a job). The Biden administration, Federal Communications Commission, and Congress must develop and implement plans to increase funding for broadband to expand universal access.

Enhanced, Refundable Child Tax Credits

The United States faces a crisis of child poverty. Seventeen percent of all American children are impoverished — a rate higher than not just peer nations like Canada and the U.K., but Mexico and Russia as well. Currently, more than 50 percent of Black and Latinx children in the U.S. do not qualify for the full benefit, compared to 23 percent of white children, and nearly one in five Black children do not receive any credit at all.

To combat this crisis, President Biden and Congress should enhance the child tax credit and make it fully refundable. If we enhance the child tax credit, we can cut child poverty by 40 percent and instantly lift over 50 percent of Black children out of poverty.

Reparations

We cannot repair harms that we have not fully diagnosed. We must commit to a thorough examination of the impact of the legacy of chattel slavery on racial inequality today. In 2021, Congress must pass H.R. 40, which would establish a commission to study reparations and make recommendations for Black Americans.

The Long View

For the past century, the ACLU has fought for racial justice in legislatures and in courts, including through several landmark Supreme Court cases. While the court has not always ruled in favor of racial justice, incremental wins throughout history have helped to chip away at different forms of racism such as school segregation ( Brown v. Board), racial bias in the criminal legal system (Powell v. Alabama, i.e. the Scottsboro Boys), and marriage inequality (Loving v. Virginia). While these landmark victories initiated necessary reforms, they were only a starting point.

Systemic racism continues to pervade the lives of Black people through voter suppression, lack of financial services, housing discrimination, and other areas. More than anything, doing this work has taught the ACLU that we must fight on every front in order to overcome our country's legacies of racism. That is what our Systemic Equality agenda is all about.

In the weeks ahead, we will both expand on our views of why these campaigns are crucial to systemic equality and signal the path this country must take. We will also dive into our work to build organizing, advocacy, and legal power in the South — a region with a unique history of racial oppression and violence alongside a rich history of antiracist organizing and advocacy. We are committed to four principles throughout this campaign: reconciliation, access, prosperity, and empowerment. We hope that our actions can meet our ambition to, as Dr. King said, lead this nation to live out the true meaning of its creed.

What you can do:
Take the pledge: Systemic Equality Agenda
Sign up

Featured image by Shutterstock

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