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ESTATE PLANNING CHECKUP: ARE YOUR AFFAIRS IN ORDER?
- Do You Have a Will or Trust?
Each of us should have a valid will or living trust. Your will or trust should be current:
Is your named executor (or successor trustee) still living and still willing and able to serve?
Do you have a backup executor/successor trustee named, just in case?
Are all of your named beneficiaries still living, and do you still want to leave them what the will (or trust) says they are to receive?
Did you disinherit someone with whom you have since reconciled?
Does your will or trust give someone a specific asset that you no longer own?
- Does your designated executor or successor trustee know what to do and where to find important papers when the time comes?
Are your beneficiary designations current?
The ultimate distribution of many assets will be determined by their beneficiary designations. Life insurance, IRAs and other tax-deferred retirement accounts, annuities, and U.S. Savings Bonds all allow for designated beneficiaries.
Do you know who your designated beneficiaries are? Are they still alive?
Have you named contingent (secondary) beneficiaries?
Are any of your designated beneficiaries minor children (under 18)? Would you prefer to restrict their access to these funds until a later age?
Did you name your “estate” as a beneficiary on anything? (This can subject the asset to probate, even if you might otherwise have avoided probate.)
If you are leaving a gift to charity through your will or trust, have you considered naming the charity as a designated beneficiary on a tax-deferred annuity or retirement account (thereby eliminating the income tax liability)?
- Do you know how property titling will affect your plan of distribution?
Joint Tenancy may avoid probate, but is it the ideal solution?
Don’t count on someone else to redistribute assets after you die if they were already on title as a Joint Tenant. Even if they do carry out your wishes, they may be making taxable gifts that could adversely impact their own estate.
Consider “ITF” (“in trust for”) or “POD” (“pay on death”) designations on accounts as an alternative to joint tenancy.
- If your spouse has died, have your assets been properly re-titled?
Joint tenancy assets should be in the name of the surviving spouse: — Real property requires the recording of an Affidavit of Death of Joint Tenant. — Bank and investment accounts should be titled in the surviving spouse’s name and use that person’s Social Security number.
Trust accounts should be re-titled in the name of the surviving spouse as trustee; if an A-B trust is involved, assets should be further re-titled into the sub-trusts and the irrevocable trust must have its own tax ID number; the trustee must file annual federal and state trust returns in addition to the surviving spouse’s personal income tax returns.
- Do you have a current valid Durable Power of Attorney?
In the event of your incapacity, who will take care of things for you?
Is your designated agent still living? Do you have an alternate agent named? Are these people still the right folks for the job?
Does your agent know that you have named him or her as your agent?
Will your bank require you to do a separate power of attorney (on the bank’s own forms) for your bank accounts?
- Do you have a current valid Health Care Directive/Power of Attorney?
Durable Powers of Attorney for Health Care executed prior to 1992 all have expired and should be redone. (Old forms had 7-year expiration dates.)
As of July 1, 2000, the Advance Health Care Directive is the standard form (although unexpired DPAHC’s are still valid, too).
Are the people you named as your agent and alternate still the best people for the job?
Does your health care directive include a provision that waives the HIPAA restrictions on access to your medical records? If not, you should get yours updated to include this.
Are the agents’ addresses and phone numbers in the document current?
Do your agents each have a copy of the document?
Does your doctor have a copy?
If you have made arrangements for your burial or cremation, do your agents know about this? Do they know where to find your contract or other papers?
- Are you making gifts to family/friends/charity?
The annual limit for gifts to individuals is now $13,000 per person per year – the total of your gifts to any one person in one year over that amount normally requires the filing of a gift tax return. [Note that if you make a gift by naming someone as a Joint Tenant with you on real property or securities, this results in a completed gift for gift tax purposes – if the value of what you give to them is more than $13,000, you have made a taxable gift that must be reported.]
Remember, too, that when you give an appreciated asset to a family member or friend, they take the asset with your original cost basis. If you had a gain in the value of the gifted asset and the other person sells it, they will be responsible for paying a capital gain tax upon the sale.
If you normally make cash gifts to your favorite charities, consider donating appreciated securities (stocks, mutual funds) instead if you have such assets. You get a full value charitable deduction, and no one pays tax on the capital gain.
Note: There is no limit on gift funds paid directly to an educational institution for another’s tuition, or for payments to third parties for another’s health care.
- If you own a business, what happens to it upon your death?
Do you have a buy-sell agreement with someone or some other business continuation plan?
Should you have life insurance to fund a buy-sell agreement?
Will the business end with you?
If a family member works in the business, have you arranged for that person to inherit the business at your death?
Does the business have debts that need to be paid off at your death?
- What about estate taxes?
If you have a large estate (more than the allowable exemption*), how will the taxes get paid? Do you have a plan for this?
Do you have sufficient liquid assets to pay the taxes that will be due in cash 9 months after your death (assuming no surviving spouse)?
Have you done all you can to minimize or eliminate estate taxes?
Have you considered gifts to charity to reduce your taxable estate?
QUESTIONS YOU SHOULD ANSWER FOR YOUR DESIGNATED EXECUTOR OR SUCCESSOR TRUSTEE
Your Executor/Successor Trustee needs to know answers to the following questions (as many as apply in your case):
Where do you keep your will or trust?
Do you have any special directions for them regarding how your assets are to be distributed (especially tangible personal property like jewelry, art, books, collectibles, furniture, etc.)?
What sort of assets do you have? (Real estate, stocks, bonds, mutual funds, life insurance, annuities, U.S. savings bonds, bank accounts, partnerships, a business?)
(If you have a living trust . . . ) Are all of your assets properly titled in trust name?
Do any of your beneficiaries owe you money? If so, how should this be handled? Will this be considered a part of that person’s share of the estate, or what?
Will there be enough cash available to deal with foreseeable expenses and taxes?
If there will be estate taxes due and payable, what assets will be used to pay for this?
Is there any life insurance? If so, who is the beneficiary? Where is the policy?
Are there other assets that will pay death benefits? If so, how do I claim these?
Who are the designated beneficiaries on IRAs, annuities, and other such assets?
What are your debts/liabilities (and contingent liabilities) and how will these be paid?
Will there be any ongoing support obligations for your dependents?
Where are your important papers kept? [deeds, vehicle “pink slips”, savings bonds, stock certificates, investment and bank account statements, insurance policies, pension information, etc.]
Do you have a safe or safe deposit box? If so, where is it located, and where is the key/combination kept?
If there is a business involved, what is the plan for business continuation or transfer upon your death? Where are the business records kept?
What are the names, addresses and phone numbers of all your beneficiaries?
What are the names, addresses and phone numbers of your accountant, attorney, investment advisor, insurance agent?
Do you have a cemetery plot or prepaid mortuary arrangements?
Are there any special circumstances involving your beneficiaries that I should know about? [problem relationships, troubled marriages, substance abuse problems, physical or mental disability, financial irresponsibility, threatened lawsuits, etc.]
If you keep your financial records on a computer, please give details and password.
For more information regarding divorce, we recommend that you contact us at the Law Office of Alice Pare at 301-515-1190 or visit our website at: https://www.alicelaw.com
Do not at any time take the risky move of going at it alone. We have a wide choice when it comes to going it alone but with the professional advice, you will need.