Legacy Planning Law Group
Weekly Blog

Estate & Elder Law

Protect Your Family. Preserve Your Legacy

If you’re interested in learning more about our process and the solution for you and your family, please book your free 15-minute call with us today!

Review your Estate Plan

If You Haven’t Been Regularly Reviewing Your Estate Plan, Start When You Hit 60

If You Haven’t Been Regularly Reviewing Your Estate Plan, Start When You Hit 60

 March 19th, 2019

How frequently you should review your estate plan depends on how old you are and whether there has been a significant change in your circumstances. If you are over age 60 and you haven’t updated your estate plan in many decades, it’s almost certain that you need to update your documents. After that, you should review your plan every five years or so. But if you’re younger, you don’t need to do so nearly as often.

Age

Here are a few age ranges and what they mean in terms of estate planning:

18-30   Everyone needs a durable power of attorney, health care proxy and HIPAA release so that they have people they choose to step in and make decisions for them in the event of incapacity.

30-40   Once you begin accumulating assets, get married, and have children, it’s important to create an estate plan to care for your loved ones in the event of your death. It also can’t hurt to update your durable power of attorney, health care proxy and HIPAA release, since the people you may have appointed at 18 (your parents?) may not be the people you want in these roles at 35.

40-60   Unless there’s been a change in your circumstances, and assuming you’ve set a good plan in place during your 30s, you probably don’t need to review your estate plan during your 40s and 50s.

60-70   Once you’ve hit your 60s, it’s time to take a look. Your children are probably grown. You may have grandchildren. And, hopefully, you’ve accumulated some wealth. The people you appointed to step in in the event of incapacity when you were 35 may not be in a position to assist when you’re 65. You may have retired or are contemplating doing so. And, unfortunately, the chances of disability or death increase with every year.

70+   Now it’s time to review your plan every five years or so. Changes happen — to your health and that of your loved ones, to the tax laws, to the programs supporting long-term care or disability care. It’s important to have a plan in place and to adjust it as circumstances change.

Change in Circumstances

While the timeline above outlines when you should review and perhaps update your estate plan, it needs to be supplemented by the following potential changes in circumstances that would warrant a review of your plan to see if it still meets your goals and needs:

  • Marriage. You’re likely to want your assets to go to your spouse and to name him or her to be your agent in the event of incapacity.
  • Divorce. Likewise, if you get divorced, you probably won’t want your assets to go to your ex-spouse or to rely upon him or her to step in if you were to become incapacitated.
  • Children. Once you have children, you’ll want to provide for them and to name someone to step in as guardian in the event of your death or incapacity and that of their other parent, if any. Generally, once you have a plan in place you do not have to update it if you have more children.
  • Disability. If you or someone who would inherit from you becomes disabled, you will need to plan to protect and manage your assets, whether for yourself or for your beneficiaries.
  • Wealth. If you accumulate sufficient assets to exceed the thresholds for state and federal estate taxes — $11.4 million federally — you may want to plan to reduce or eliminate such taxes.
  • Moving. If you move to a new state or country, it will be important to have your estate plan reviewed to make sure it works in the new jurisdiction.

In short, until you reach age 60 or 70, reviewing your estate plan every five years probably is overkill. But do so whenever you have a change in circumstances such as those listed above. If you’re over 60 and haven’t updated your estate plan in many years, now’s the time. Then, having a review every five years is definitely a good rule of thumb. This is why If You Haven’t Been Regularly Reviewing Your Estate Plan, Start When You Hit 60

Read more related articles at:

4 Reasons to Review Your Will

7 Reasons It’s Time To Update Your Estate Plan

Also, read one of our previous blogs at:

Do You Think Everything Is All Set with Your Estate Plan?

Divorce and Estate Planning Changes

Revising Your Estate Plan After Divorce

Revising Your Estate Plan After Divorce

If you don’t update your will, trust, and beneficiary designations, your ex could inherit.

If you’re going through the emotional and financial turmoil of a divorce, estate planning may be the last thing on your mind. But after a divorce, you need to take steps to update your estate plan. If you don’t, then at your death your assets could be distributed in ways that you neither expect nor want—including to your ex-spouse. Here are three steps you can take to make sure your estate plan reflects your current life and wishes.

Nolo

Start by revoking your old Will  (literally tearing it up is the best way) and making a new one. If you don’t already have a will, now’s the time to make one. It isn’t difficult; hire a lawyer. The same is true if you made a living trust while you were married.

A will is where you:

  • Leave your property to the people of your choice.
  • Name an executor to wrap up your estate when the time comes.
  • Nominate a guardian to take care of young children if it’s ever necessary.

All of these choices may be affected by divorce. Let’s look at them one by one.

Leave property

If you’re like most people, if you made a will while you were married, you left everything to your spouse—probably not the result you want now. It’s best to start fresh with a new will, naming new beneficiaries and alternate beneficiaries, who would inherit if your first choice didn’t outlive you. In most states, if you get divorced after making a will, any gifts that your will makes to your former spouse are automatically revoked. For example, California law states that dissolution (divorce) or annulment of a marriage revokes any bequests that your will made to your former spouse. (Cal. Probate Code § 6122.) The rest of the will is not affected. But it’s not a good idea rely on state law. Not every state has a law like California’s, and laws can change. Also, the law doesn’t take effect until you have a final decree of divorce—if you’re still in the divorce process, gifts to your spouse are still valid. In some states, gifts to relatives of your former spouse are also revoked by divorce. For example, Arizona law revokes gifts in a will made to anyone related to your former spouse by blood, adoption, or affinity (marriage). (Ariz. Rev. Stat. § 14-2804.) If your state has such a law and your will leaves property to your former spouse’s child (your former stepchild), divorce would revoke the gift to the child. Relying on state law also can create some uncertainty about what happens to the property you left to your former spouse, if state law revokes that provision of your will. The general rule is that the property passes as though your former spouse had died before you did. So if your will named an alternate (contingent) beneficiary for that gift, that beneficiary inherits. If you didn’t name an alternate beneficiary, but did name a “residuary beneficiary,” then that beneficiary inherits. Otherwise the property passes under state law, as if there were no will, to your closest surviving relatives. Those potential complications underscore the importance of making a new will. That way, it will be clear about who you want to inherit, and you can name alternates as well.

Name an executor

If you don’t want your ex-spouse to inherit your property, you probably don’t want him or her in charge of your estate, either. But if you named your spouse as your executor (called your personal representative in some states), it could happen unless you make a new will. In many states, divorce revokes the appointment of a former spouse to serve as executor of the will or trustee of a trust. The alternate executor, if you named one in your will, would serve instead. Still, don’t count on state law—in your new will, appoint a new executor and an alternate.

Name a guardian for your minor children

A key reason that many parents of young children make wills is to name a guardian, who would raise their children in the unlikely event neither parent could. If you have kids under 18, that’s probably one reason you want to make a will. A court will appoint a guardian to care for a child only if both parents are deceased or unfit. (And courts find a parent unfit only if there is a serious and ongoing problem, such as a history of child abuse or addiction.) If you don’t want your ex-spouse to raise your children in the event of your untimely death because you don’t think he or she is a good person or a good parent, it’s probably not something you can prevent. In your will, however, you can name whomever you choose to serve as guardian, in case both you and the other parent aren’t available. (It is, thankfully, rare for both parents to be unavailable.) If you feel strongly that the other parent shouldn’t have custody of your children, write down your reasons in a letter and attach it to your will. It will at least give the judge something to consider.

2. Update Beneficiary Designations

As important as your will is, it might now cover some of your most valuable assets. Many assets pass outside of a will, to beneficiaries named on paperwork provided by a bank or insurance company. So be sure to update your beneficiary designations for:

  • Life insurance policies
  • Retirement accounts such as IRAs and 401(k)s
  • Pay-on Death Bank Accounts
  • Transfer-on-death brokerage accounts
  • To name a new person to inherit these assets, request new documents from your bank, brokerage company, or employer, and submit them as soon as possible. Don’t assume that state law (or even the terms of a divorce decree) will revoke any earlier designations you made naming your former spouse. Certain “qualified plans,” such as 401(k)s, pensions, and employer-provided life insurance policies, are governed by a federal law called ERISA (the Employee Retirement Income Security Act). And ERISA says that a plan administrator must turn funds over to the beneficiary named in the plan documents—no matter what state law says. So if your former spouse is still the named beneficiary, he or she will inherit unless you change the paperwork.

3. Make New Powers of Attorney

Powers of attorney—documents that give someone authority to act for you if it’s ever necessary—are a big part of an estate plan. You should have two powers of attorney: one for healthcare (medical decisions), and one for financial matters. If you already have powers of attorney that give your former spouse authority to make decisions on your behalf, revoke them and make new documents.

Read more related articles at:

Estate Planning Documents to Update When Getting a Divorce

8 Estate Planning Moves If You Are Getting Divorced

Also, Read one of our previous Blogs at:

What Does My Estate Plan Look Like after Divorce?

Click here to check out our On Demand Video about Estate Planning.

Protect your assets

Do You Need An Asset Protection Plan?

The Basics of Asset Protection Planning – The Rules You Need To Know

 | 

While working with clients for almost two decades one of the most pressing concerns shared among all of them was protecting the nest egg they had accumulated. Any news headline or market correction would evoke fear about losing their portfolio. It didn’t take long to realize that utilizing asset protection strategies was a must for my clients emotional well-being.

Read more related articles at:

How Does an Asset Protection Trust Work?

Annuity Asset Protection Strategies

Also, Read one of our previous Blogs at:

About Asset Protection Plans

Click here to check out our On Demand Video about Estate Planning.

Estate Planning

Estate Planning Meets Tax Planning

Estate Planning Meets Tax Planning

 

Estate Planning Meets Tax Planning.  Not keeping a close eye on tax implications, often costs families tens of thousands of dollars or more, according to a recent article from Forbes, “Who Gets What—A Guide To Tax-Savvy Charitable Bequests.” The smartest solution for donations or inheritances is to consider your wishes, then use a laser-focus on the tax implications to each future recipient.

After the SECURE Act destroyed the stretch IRA strategy, heirs now have to pay income taxes on the IRA they receive within ten years of your passing. An inherited Roth IRA has an advantage in that it can continue to grow for ten more years after your death, and then be withdrawn tax free. After-tax dollars and life insurance proceeds are generally not subject to income taxes. However, all of these different inheritances will have tax consequences for your beneficiary.

What if your beneficiary is a tax-exempt charity?

Charities recognized by the IRS as being tax exempt don’t care what form your donation takes. They don’t have to pay taxes on any donations. Bequests of traditional IRAs, Roth IRAs, after-tax dollars, or life insurance are all equally welcome.

However, your heirs will face different tax implications, depending upon the type of assets they receive.

Let’s say you want to leave $100,000 to charity after you and your spouse die. You both have traditional IRAs and some after-tax dollars. For this example, let’s say your child is in the 24% tax bracket. Most estate plans instruct charitable bequests be made from after-tax funds, which are usually in the will or given through a revocable trust. Remember, your will cannot control the disposition of the IRAs or retirement plans, unless it is the designated beneficiary.

By naming a charity as a beneficiary in a will or trust, the money will be after-tax. The charity gets $100,000.

If you leave $100,000 to the charity through a traditional IRA and/or your retirement plan beneficiary designation, the charity still gets $100,000.

If your heirs received that amount, they’d have to pay taxes on it—in this example, $24,000. If they live in a state that taxes inherited IRAs or if they are in a higher tax bracket, their share of the $100,000 is even less. However, you have options.

Here’s one way to accomplish this. Let’s say you leave $100,000 to charity through your IRA beneficiary designations and $100,000 to your heirs through a will or revocable trust. The charity receives $100,000 and pays no tax. Your heirs also receive $100,000 and pay no federal tax.

A simple switch of who gets what saves your heirs $24,000 in taxes. That’s a welcome savings for your heirs, while the charity receives the same amount you wanted.

When considering who gets what in your estate plan, consider how the bequests are being given and what the tax implications will be. Talk with your estate planning attorney about structuring your estate plan with an eye to tax planning.

Reference: Forbes (Jan. 26, 2021) “Who Gets What—A Guide To Tax-Savvy Charitable Bequests”

Read more related articles at:

5 Estate Planning Tips to Keep Your Money in the Family

Estate Planning Strategies to Reduce Estate Taxes

Also, Read one of our previous Blogs at:

Big News for Trust Taxation

Click here to check out our On Demand Video about Estate Planning.

Digital Assets

Estate Planning for the Digital Era

Estate Planning for the Digital Era

As owning digital property becomes the norm, estate plans need to employ new strategies.

Key takeaways

  • Many people own digital assets: everything from domain names and electronically stored photos and videos to email and social media accounts. It’s important to understand the terms of use regarding access and control of this data.
  • Make a list of your digital assets and passwords so other people you trust will know where to find them. Back up data stored in the cloud to a local computer or storage device.
  • To help protect your digital or online assets, work with an attorney to provide consent in legal documents.

You may have planned for your loved ones to eventually inherit your house, the Steinway grand piano, your dad’s 88-year-old Swiss watch, or other family heirlooms, but with life increasingly being lived online, you may be overlooking an increasingly important kind of property: digital assets.

If your estate plan doesn’t account for digital assets properly, your heirs may not be able to gain access to them. Family photos and videos could be lost forever, social media accounts could stay online long after you’ve passed, and your heirs may not receive all the money that you’d like to leave them.

Nick Beis, vice president of advanced planning at Fidelity, notes the increasing importance of digital assets in estate planning: “With more people living more of their lives online, a new kind of asset—a digital asset—needs to be understood and accounted for in the preparation and execution of estate plans.”

It has become the norm to store financial records in smartphones, computers, or the cloud, and to conduct financial transactions electronically. In addition to email and social media accounts, most people also own a trove of digital assets, which can include:

  • Bitcoin or other cryptocurrencies
  • Domain names for websites
  • Digital photos and videos
  • Digital rights to literary, musical composition, motion picture, or theatrical works
  • Digital accounts in an online betting account
  • Blog content
  • Online video channels where the content is monetized and producing an advertising revenue stream for its owner
  • Online gaming avatars that offer online goods or services that may be worth real-world money

The upshot: Accounting for digital property in your estate plan has become essential. Fortunately, it’s relatively simple to do.

Obstacles to digital access

From a legal point of view, digital property is like other kinds of property because it can be passed on to designated parties through estate plans. Yet the laws regarding digital property are still evolving, as are the practices of social media sites and online search engines. For these and other reasons, gaining access to digital assets, and to digitally encoded financial information, can present challenges for anyone other than the original owner. In general, there are 4 main obstacles faced by family members of someone who has recently died when trying to access the decedent’s digital assets and vital personal information:

  1. Passwords. If family members don’t know your passwords, they may not be able to access information or property stored in your smartphone, computer, online accounts, or the cloud. Some passwords, such as the one you enter to log in to your laptop or tablet, may be easy for experts to bypass; others are more difficult to bypass—and some are practically impossible.
  2. Data encryption. Digitally stored data may be encrypted, adding another layer of protection on top of your passwords. Encryption can scramble data in a particular location—in a single file, on a device, or in the cloud—so thoroughly that it is practically impossible for anyone without the proper passcode to unscramble it. Take cell phones, for example. “New technology in cell phones can be extremely difficult to decrypt,” says Beis. “Your content, memories, or personal data may exist on your phone or even in the cloud somewhere. But if you have not transferred them elsewhere, family members may not be able to access them unless they know your passcode.”
  3. Criminal laws. Laws on both state and federal levels prohibit unauthorized access to computer systems and private personal data. These laws serve to protect consumers against fraud and identity theft, but they also may create virtually insurmountable obstacles for family members trying to gain access to the digital assets and information of a deceased loved one. The law is evolving to keep up with the rapidly changing online world, but much in this area is still unclear. For that reason, it’s essential to ensure that your estate plan gives your fiduciaries the authorization they need to access any necessary digital data.
  4. Data privacy laws. Generally, federal data privacy laws prohibit online account service providers from turning over the contents of your electronic communications to anyone other than the owner without the owner’s lawful consent. That means social media sites or other companies may lock up your content unless you give express permission for others to access it. That might leave your heirs unable to gain access to photos, email messages, or other information stored in the cloud. Fighting for that access in court probably would be cost prohibitive, says Beis: “Attempting to gain access to a deceased person’s digital accounts without lawful consent may involve a court battle with an online account service provider, which has the potential to cost a lot of money.”

Make your estate plan digital-savvy

Fortunately, you can avoid these obstacles relatively easily by addressing digital property and information in your estate plan. By planning ahead, you can arrange for full access to your digital property, keep administration costs down, and ensure that no valuable or significant digital property is overlooked. Consider taking the following 4 steps:

  1. Make a list. Start by listing your digital assets so your loved ones know what you have and where they can find it. Include all your important passwords, online accounts (including email and social media accounts) and digital property (including domain names, virtual currency, and money transfer apps). Store your list in a secure location and make sure your family members know how to access it.Tip: Inexpensive password management apps such as 1PasswordOpens in a new window and LastPassOpens in a new window can help simplify this effort.
  2. Understand what you really own. There are instances where you may have thought you purchased a digital asset, but in fact you purchased a nontransferable license to use the asset. There may also be limitations restricting the number of times you can burn the music to a CD.Tip: Check the terms of agreement for vendors of music or other digital assets to see whether they sell the asset itself or simply a license to it.
  3. Back up data stored in the cloud. For starters, one layer of protection in the cloud to consider is FidSafe®Opens in a new window, a free, secure online safe deposit box, to save digital backups of electronically scanned essential documents such as bank and investment account statements, birth certificates, insurance policies, passwords, tax records, wills, and more.If you store any digital assets in the cloud, back them up to a local computer or storage device on a regular basis so that family members and fiduciaries can access them with fewer obstacles. “Some companies provide easy access,” says Beis. “Facebook, for example, has a One-Click Download option to download all your data to a computer.”Tip: Don’t just rely on the cloud for backup. Also back up your data to a local computer or personal storage device.
  4. Provide consent in legal documents. Work with an estate planning attorney to update your wills, powers of attorney, and any revocable living trusts. They should include language giving lawful consent for providers to divulge the contents of your electronic communications to the appropriate people. You also might consider exactly which information you want to make available, according to Beis. “A blanket authorization may not be appropriate,” he says. “You might not be comfortable making all digital assets accessible to your fiduciaries.”Tip: In your estate planning documents, specifically allow your fiduciaries to bypass, reset, or recover your passwords.

Since digital assets are still a relatively new phenomenon, the laws that deal with them are changing rapidly. Talk with your attorney about the steps you can take now, and check in regularly to update your estate plan to accommodate any changes in the law or in your digital property. Lastly, if you have significant digital assets, consider appointing a special executor who has business and legal experience just to deal with your digital assets (in addition to the executor of your general estate).

Read more related articles at:

Protect Digital Assets After Your Death

Protecting your digital assets after death.

Also, read one of our previous Blogs at:

Digital Assets Need to Be Protected In Estate Plans

Click here to check out our On Demand Video about Estate Planning.

Asset Protection

About Asset Protection Plans

About Asset Protection Plans

BY

With the economy slowly plugging along and credit remaining tight, asset protection is still a hot topic. So what is asset protection, and how can you make an asset protection plan that will work for you and your family?

 

Asset Protection

Asset protection means keeping your property safe from being taken by someone who wins a lawsuit against you. It can range from a lawsuit related to a negligent act that you performed, such as causing a car accident, to a lawsuit related to the foreclosure of property for which you have stopped paying the mortgage.

How can you protect your assets from lawsuits? It is achieved through the process of asset protection planning, which means taking assets that are subject to creditors’ claims, called nonexempt assets, and repositioning them as assets that are out of the reach of creditors’ claims, called exempt assets.

Asset protection planning cannot begin when a judgment creditor is already on the horizon. Why? Because each state has laws that protect a judgment creditor against people who transfer their assets out of their names with the intent to hinder, delay, or defraud a creditor. In these situations, a court will see right through these “fraudulent” transfers and simply order that the transfers are reversed, and the assets turned over to pay the creditor.1 Instead, asset protection planning must begin long before there is any sign of a lawsuit. Aside from this, to put together a comprehensive asset protection plan you will need to integrate two important goals:

  • Your short term and long term financial goals
  • Your estate planning goals.

 

Financial Goals

In examining your short term and long term financial goals, you will learn about your current and future sources of income, how much money you will need to retire, and how much will be left over to pass on to your heirs through your estate plan after you die. It will then lead you to a detailed financial plan. Once your financial goals have been examined, and your financial plan is in place, you can review your current assets to determine if they are exempt from creditors and, if they are not, then reposition them to become exempt. A financial plan will also allow you to plan for positioning assets that you intend to acquire in the future to be protected from potential creditors.

Once you have your financial plan in place, you will know your current net worth and an estimate of how much wealth you can expect to accumulate in the future. From this information, you will be able to create a comprehensive estate plan. This plan will address issues such as who will take care of you and your assets if you become mentally incapacitated, who will take care of your minor children if you die unexpectedly, and who will manage your assets and take care of your spouse or other family members after you die. Your estate plan can also encompass asset protection planning through the use of advanced estate-planning techniques such as family limited liability companies and irrevocable trusts for you, your spouse, and your children or other beneficiaries.

Financial and Estate Planning Results

Once you have integrated your financial goals with your estate planning goals and positioned or repositioned your assets to be protected from creditors, you will have a comprehensive asset protection plan in place. Then, if a creditor holding a judgment against you does show up at your front door, you will be in a better position to negotiate a quick settlement for pennies on the dollar instead of having all of your hard-earned money on the table.

Most Common Mistake

As I warned above, if you try to start asset protection planning after a lawsuit has been filed against you, or even if before the lawsuit is filed you anticipate it being filed, then you will be exposing any asset protection planning that you attempt to do to attacks and reversal by a judge or jury. Unfortunately, too many people are learning far too late that asset protection planning is also long-term planning not something that can be done as a quick or temporary fix. Thus, the time to put your asset protection plan together is long before a lawsuit is on the horizon.

Read more related articles at:

The Basics of Asset Protection Planning – The Rules You Need To Know

How Does an Asset Protection Trust Work?

Also, read one of our previous Blogs at:

How Can I Protect Assets from Creditors?

Click here to check out our On Demand Video about Estate Planning.

Advanced Estate Planning

Benefits of Advanced Estate Planning

Benefits of Advanced Estate Planning

Minimize taxes and protect your assets

BY

 

Advanced estate planning—something more than a simple will or basic living trust—can be critical for people with valuable, taxable estates. It goes above and beyond a basic foundation and provides options for minimizing or even eliminating estate taxes. Advanced estate planning can be used to perpetuate family values and protect assets for the benefit of future generations.

 

Advanced Estate Planning can reduce Estate Taxes

You can reduce or even eliminate estate taxes by gifting assets into an irrevocable trust or eventual transfer to your beneficiaries or even to charities. But the trust must be irrevocable. A simple revocable trust will allow your estate to avoid probate, but the Internal Revenue Service takes the position that you still own the assets you place into such a trust. You can revoke the revocable trust entity and take the assets back at any time. You remain in control of them. Not so with a more advanced irrevocable trust. Placing assets in an irrevocable trust is a permanent decision. You’re relinquishing ownership. Someone else—not you—must act as trustee. But if you can’t control them and you don’t legally own them at the time of your death, they don’t contribute to your taxable estate. It doesn’t have to be an all-or-nothing deal. If you own some significantly valuable assets that you know you want to transfer to a certain beneficiary, you can place them alone into an irrevocable trust and maintain control over your other property.

Different types of trusts can be established to create an ongoing legacy for future generations as well. Many states allow trusts to continue for hundreds of years or even into perpetuity so you can establish dynasty trusts for their current and future family members. You can also create a legacy in your community by setting up charitable trusts or a private foundation that will provide a self-perpetuating endowment for years to come.

Advanced Estate Planning Can Keep Assets Safe

For those who have accumulated even minimal wealth, the fear of losing it all in a lawsuit can be a great concern. Some professions are more prone to lawsuits than others and, of course, accidents can happen. Many advanced trusts such as spousal lifetime access trusts (SLATs) not only help to minimize or eliminate estate taxes but offer the added bonus of protecting the assets owned by the trust against lawsuits and in the event of divorce. Again, the trust must be irrevocable. What you no longer legally own is not accessible. Domestic asset protection trusts and certain offshore trusts are specifically designed to keep assets away from creditors and ex-spouses. Other advanced techniques, such as gifting through a family limited liability company, add an additional layer of asset protection for the property owned by the company.

These aren’t DIY Plans

You’ll most likely need the help of an attorney to formulate any estate plan that goes beyond a last will and testament or basic revocable living trust. Remember that irrevocable trusts cannot be undone if you change your mind after significant life changes. An attorney can help you plan for all eventualities and make sure your estate plan achieves exactly what you want it to achieve.

Read more related articles at:

Ten Advanced Estate Planning Techniques

9 Advanced Estate Planning Strategies

Also, read one of our previous Blogs at:

Why Everyone Needs an Estate Plan

Click here to check out our On Demand Video about Estate Planning.

financial house

Is Your Financial Information in Order?

Is Your Financial Information in Order?

Preparing and organizing your financial information for when you are no longer capable will bring peace of mind to you today and relieve your loved ones’ burden in the future. It will ensure proper management of your financial situation and afford control over your end of life and legacy. The goal is to make and maintain an accurate list of accounts and passwords and relevant contact names at financial institutions. Planners and books (“My Life Directory,” “I’m Dead. Now What?”) are available to help you understand the scope of the project and start the process of organizing all records and personal information. Whether you are a parent, near retirement, or both, informational instructions will spare your family a lot of work and heartache.

The assumption is that you already have an estate plan with necessary documents such as a will, living will, durable power of attorney and medical attorney, etc. If this is not the case, retain an attorney to create these most important legal documents. You can then focus your attention on the written steps your family should take if something happens to you. These steps should include a list of all salient information; names (think bankers, lawyers, insurance agents) and their contact information, digital and hard assets, accounts, bills, debts, credit cards, insurance policies, annuities, pensions, PINs, and passwords. Include a list of all companies and invoice types (monthly, quarterly, annually) that automatically debit money from your checking account. This list is about anyone and anything that is part of your financial life.

The numerous books, planners, and online free worksheets can help you identify those things that need inclusion in your financial information; this can be your starting point. Online websites or apps can store your data and instructions for a one time or recurring fee. These sites are typically referred to as estate-planning organizers, end-of-life planners, document storage, even “death apps.” While these options may sound intriguing, a self-directed approach is generally best. Turning over consolidated personal financial data opens you to the possibility of identity theft, hacking, misuse of your records, erasure, and loss using these services.

Digitize your information in a word editor or spreadsheet and store it on a flash drive.  Print hard copies of your instructions and information and leave them with other important documents like your will or the deed to your home. Are you low-tech? There is no shame in a binder or spiral notebook containing this information. It is a bit more cumbersome to update, but many people choose to leave instructions to family members in handwritten letters, notes, and notebooks. Be certain your handwritten instructions do not vary with multiple papers scattered and undated. Stick to a standard methodology and throw out old documents.

Keep these records accurate with annual updates or any fundamental shift in how your finances are managed and by whom. Be sure your executor and other relevant family members know the location of this information. If you want your wishes to remain private until you are incapacitated or die, seal flash drives and hard copies in envelopes.

Preparing your financial records for your family can be time-consuming, but it is not complicated. The true goal of this task is organization and consolidation. And it is one of the most important financial tasks you will undertake during your life. When you feel your project is near completion (other than annual updates), ensure nothing is being overlooked by consulting an estate planning attorney, who will make sure you have all of the necessary legal documents in place. We provide these services and would be happy to talk with you about your planning needs.

Read more related articles here:

The Shocking Reason Why Siblings Squabble Over Inheritance And How To Prevent It

How to stop a family fight over inheritance

Also, Read one of our previous Blogs at:

How Can I Avoid Family Fighting in My Estate Planning?

Click here to check out our On Demand Video about Estate Planning.

Selling your Life Insurance Policy

Should I Sell My Life Insurance Policy?

Should I Sell My Life Insurance Policy?

It is quite common to buy life insurance. It may have been to protect your family financially or as a vehicle to provide liquidity for estate taxes. As we grow older and laws change, it is critical to determine if your policy has outlived its intended purpose. The traditional strategy of “buy and hold” no longer applies to the ever-changing world. Today, it may be a good idea to consider selling your policy.

Forbes’ recent article entitled “What You Should Know Before Selling Your Old Life Insurance Policy” explains that a lesser-known alternative to abandoning or surrendering a policy is known as a life settlement. This gives the policy owners the chance to get a much bigger cash lump sum, than what is provided by the life insurance carrier’s cash surrender value.

Life settlements are not new. Third-party institutional buyers have now started to acquire ownership of policies, in exchange for paying the owner a lump sum of cash. As a consequence, the policy owner no longer needs to make future premium payments.

The policy buyer then owns the life insurance policy and takes on the responsibility of future premium payments. They also get the full death benefit payable from the life insurance carrier when the insured dies.

Research shows that, on average, the most successful life settlement deals are with policies where the insured is age 65 or older. Those who are younger than 65 usually require a health impairment to receive a life settlement offer.

Knowing what your life insurance policy is worth is important, and its value is based on two primary factors: (i) the future projected premiums of the policy; and (ii) the insured’s current health condition.

Many policy owners don’t have the required experience with technical life expectancies, actuarial tables and medical knowledge to properly evaluate their life settlement value policies. This knowledge gap makes for an imbalance, since inexperienced policy owners may try to negotiate against experienced and sophisticated policy buyers trying to acquire the policy at the lowest possible cost.

To address this imbalance, the policy owner should seek help from an experienced estate planning attorney to help them with the process to sell the policy for the highest possible price.

If you have an old life insurance policy that’s collecting dust, ask an experienced estate planning attorney to review the policy’s importance and purpose in your portfolio. This may be the right time to turn that unneeded life insurance policy into cash.

Reference: Forbes (Jan. 26, 2021) “What You Should Know Before Selling Your Old Life Insurance Policy”

Read more related articles at:

5 Tips for Selling Your Life Insurance

Can you sell your life insurance policy?

Also, Read one of our previous Blogs at :

Is Life Insurance a Good Idea for My Estate Plan?

Click here to check out our On Demand Video about Estate Planning.

DEATH OF SPOUSE

How Do You Plan for the Death of a Spouse?

How Do You Plan for the Death of a Spouse?

The COVID pandemic has become a painful lesson in how important it is to having estate plans in order, especially when a spouse becomes sick, incapacitated, or dies unexpectedly. With more than 400,000 Americans dead from the coronavirus, not every one of them had an estate plan and a financial plan in place, leaving loved ones to make sense of their estate while grieving. This recent article from Market Watch titled “How to get your affairs in order if your spouse is dying” offers five things to do before the worst occurs.

Start by gathering information. Make all of your accounts known and put together paperwork about each and every account. Look for documents that will become crucial, including a durable power of attorney, an advanced health care directive and a last will. Gather paperwork for life insurance policies, investment portfolios and retirement accounts. Create a list of contact information for your estate planning attorney, accountant, insurance agent, doctors and financial advisors and share it with the people who will be responsible for managing your life. In addition, call these people, so they have as much information as possible—this could make things easier for a surviving spouse. Consider making introductions, via phone or a video call, especially if you have been the key point person for these matters.

Create a hard copy binder for all of this information or a file, so your loved ones do not have to conduct a scavenger hunt.

If there is an estate plan in place, discuss it with your spouse and family members so everyone is clear about what is going to happen. If your estate plan has not been updated in several years, that needs to be done. There have been many big changes to tax law, and you may be missing important opportunities that will benefit those left behind.

If there is no estate plan, something is better than nothing. A trust can be done to transfer assets, as long as the trust is funded properly and promptly.

Confirm beneficiary designations. Check everything for accuracy. If ex-spouses, girlfriends, or boyfriends are named on accounts that have not been reviewed for decades, there will be a problem for the family. Problems also arise when no one is listed as a beneficiary. Beneficiary designations are used in many different accounts, including retirement accounts, life insurance policies, annuities, stock options, restricted stock and deferred compensation plans.

Many Americans die without a will, known as “intestate.” With no will, the court must rely on the state’s estate laws, which does not always result in the people you wanted receiving your property. Any immediate family or next of kin may become heirs, even if they were people you with whom you were not close or from whom you may even have been estranged. Having no will can lead to estate battles or having strangers claim part of your estate.

If there are minor children and no will to declare who their guardian should be, the court will decide that also. If you have minor children, you must have a will to protect them and a plan for their financial support.

Create a master list of digital assets. These assets range from photographs to financial accounts, utility bills and phone bills to URLs for websites. What would happen to your social media accounts, if you died and no one could access them? Some platforms provide for a legacy contact, but many do not. Prepare what information you can to avoid the loss of digital assets that have financial and sentimental value.

Gathering these materials and having these conversations is difficult, but they are a necessity if a family member receives a serious diagnosis. If there is no estate plan in place, have a conversation with an estate planning attorney who can advise what can be done, even in a limited amount of time.

Reference: Market Watch (Jan. 22, 2021) “How to get your affairs in order if your spouse is dying”

Read more related articles here:

‘When life goes sideways’ – how to prepare for the death of a spouse

Death Of A Spouse Planning Tips

Also, read one of our previous blogs here:

What Do I Need to Do after the Death of My Spouse?

Click here to check out our On Demand Video about Estate Planning.

Join Our eNews