Friday, September 23, 2011

The future is something which everyone reaches at the rate of 60 minutes an hour, whatever he does, whoever he is. ~ C.S. Lewis

From the Desk of Joe Rollins

Regardless of your financial situation, an estate plan at the time of your death, even the most basic one, will save your loved ones a lot of unnecessary time and money. Trying to figure out where to begin seems to be a concern for many of those without an existing one in place, so I thought I’d take a few minutes to just run through the basics. The following is not applicable to those with estates totaling $5 million or more, as legal advice should be sought.

Every dollar spent on probate is avoidable

The simplest way to get started would be to create a list of all your assets (retirement savings, IRAs, 401(k)’s, life insurance policies, real estate, etc.) and ensure that they are properly titled. When given the opportunity to appoint beneficiaries for accounts, always do so. These are known as ‘non-probate assets’ and will be passed on privately and automatically upon your death, typically without any involvement from the courts; naming a person as your beneficiary, as opposed to an estate, is also recommended in order to avoid probate costs. Assets that don’t require a named beneficiary, such as deeds, CDs and brokerage accounts, have caused countless problems that could be easily avoided by simply having a Transfer-on-Death or a joint tenancy with right of survivorship (JTWROS) agreement in place.

Where there’s a will there’s a way

Everybody needs to have a Last Will and Testament in place. This crucial document specifies exactly how your affairs will be handled in the event of your death. It also prevents your family members from having to take on the labor-intensive task of trying to track down all of your existing assets; a will allows you the opportunity to conveniently itemize all of your assets and specifically state how they are to be distributed. A will is also ideal for directing what you would like to have done with your remains, and, if relevant, establishing guardianship for your children.

The show must go on

In addition to your will, you should also assign a power of attorney to handle your finances should you no longer be able to do so yourself. Let’s face it, you’re more likely to become ill and incapacitated than face an instantaneous death and like it or not, the bills still have to be paid. Find someone you trust to deal with these financial matters on your behalf. Many people choose a trustworthy family member to take on such responsibilities, but you are not required to do so; just make sure it’s someone you can rely on to act in your best interest.

And while we’re on the subject of incapacitation, an advance healthcare directive should be put in place as well. This allows you to leave instructions regarding what type of medical care you want and also allows you to name a medical power of attorney to ensure that your treatment preferences are adhered to. These documents can easily be created along with your will; although the cost varies depending on the complexity, the price is usually very reasonable and well worth the peace of mind gained by knowing every decision made is your own.

Out of sight, out of mind

You would be amazed by how many people have no idea who they have listed as their beneficiaries. They most likely designated these people years and years ago and never gave it a second thought. You should always verify your listed beneficiaries upon life changing events (e.g., divorce, remarriage, death of spouse, etc.) and update them where necessary. The last thing you want is your ex-spouse laughing their way to the bank after you’re long gone because you forgot to revise your beneficiaries after the divorce.

In closing…

With the current Estate Tax in place ($5 million/person), the estates of very few individuals will be taxable; unfortunately, like all good things, this too will eventually come to an end so it is important that you remain aware of any changes that may have a direct effect on you.

For more in depth information about titling estate documents, please refer to our Q&A Series: Estate Planning under the Tax Relief Act of 2010 from June 13th. As always, we welcome the opportunity to meet with you personally to discuss any questions you may have regarding your individual estate plan.

Best regards,
Joe Rollins