Set the end of the year as your deadline to finally get this completed. Figure out why you have been procrastinating and conquer your fears. If it’s because you don’t have an attorney, ask friends, and acquaintances for referrals. If it’s because you aren’t sure who you want to be the guardian for your minor children or who you want to be your executor or trustee, or how to divide your estate, your attorney can help you decide. (You can always change your mind later; don’t let these decisions keep you from putting a plan in place now.) If money is an issue, start with what you can afford (a will, power of attorney, health care documents) and upgrade later when you can. Your attorney may also be willing to accept a payment plan. Start the conversation and challenge yourself to follow through.
Personal and financial circumstances will change throughout your lifetime, and your plan needs to change with them. Revisions should be made any time there are changes in your family (birth, death, marriage, divorce, remarriage), finances, tax laws, or if a trustee or executor can no longer serve. Now is a perfect time to do this; if there are changes you want to share with family members, you can do that when they are home for the holidays (See #9 below). If your current plan is more than 3 years old, you need to revisit your current plan in light of major tax changes.
Roth IRA’s are fantastic investment tools to accompany your traditional retirement accounts. Unlike traditional IRAs, the growth of your Roth funds is not taxed when you withdraw it. As you open a Roth, or if you have an existing one, talk to your adviser about the advantages of Roth conversions and put them on notice that you are interested in completing conversions when market corrections occur. Roth IRA’s can only be opened when you are receiving income, so be sure you explore their benefits before you retire and learn how to use them as effective investment tools.
Under current federal law, you can give up to $15,000 to as many people as you wish each year. This is a great way to reduce your estate’s size (and potentially save estate taxes) over time. For example, if you give $15,000 per year to your two children and three grandchildren, you would remove $70,000 from your estate in just one year and $350,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited. So are gifts for tuition and medical expenses, provided you make payments directly to the institution or provider.
At the minimum, everyone over the age of 18 needs 1) a Durable Financial Power of Attorney, which empowers another person to make financial decisions on your behalf, 2) a Durable Power of Attorney for Health Care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 3) HIPPA Authorizations, which give written consent for doctors to discuss your medical situation with others, including family members. If you have had these documents prepared in the past, review the agents you name and talk with them about your wishes. Make sure they have a copy of these documents. Be sure you understand whether the Health Care Power of Attorney requires activation before it is effective. If you are using a state or clinic-provided form, review the predetermined decisions you made when you signed your Power of Attorney so that the document reflects your current desires.
Commonly the person you name as guardian for your children when they are very young will not be your first choice as they get older. This person could also change his/her mind, move away, or even become ill or die. Revisit your choice from time to time, and name more than one Guardian in case your first choice cannot serve. Remember, if you haven’t named a guardian who is able and willing to serve, and something happens to you, the court will decide who will raise your kids. Take some time to write down some of your thoughts about how you would want someone else to raise your child or children. Any guidance you give will make the Guardian’s job easier and will give you some peace of mind.
This is especially important if your beneficiary has died or if you are divorced. If such major changes have happened, be sure to review your prior designations so that new appropriate beneficiaries can be named. If your beneficiary is incapacitated or is a minor, setting up a trust for this person and naming the trust as beneficiary will prevent the court from taking control of the proceeds. If you are unsure of who your named beneficiaries are, this is a good time to find out and secure copies of your designation forms to review with your Estate Planning attorney.
Check the amount of your life insurance coverage and see if it meets your family’s current needs. If you haven’t secured a policy already, get a quote for long-term care insurance to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse require assisted or skilled nursing care in the future. Even if you’ve got a quote in the past, learn about new products, and have someone reevaluate your eligibility.
Without disclosing bank and financial statements, you can talk about what you are planning and why. The more they understand about your plan, the more likely they are to accept it readily—and that will help avoid discord after you are gone. You can also talk to them about your values and the opportunities that money can provide. Be sure they know where your planning documents are and that you have updated and organized a list of key advisers and account locations. Share your charitable inclinations with them – or better yet, spend some holiday time with them doing charitable work together.
It’s a mild shock when we learn we can’t see our college kids’ grades without their permission, even though we pay the tuition. It can be much worse if they become ill. Unmarried adults (18 and over) need to have a Durable Power of Attorney for Health Care and HIPPA Authorization so you can act on their behalf in a medical emergency. (See #5 above.) And, while you’re at it, go ahead and have your attorney prepare a Simple Will and Durable Power of Attorney. Hopefully, these will not be needed, but you will be glad you have them if an event does occur.
In the event of a medical emergency or a death, copies of vital information will be required. Be prepared by organizing these things and distributing them to the people who will need them. Include copies of the front a back of your driver’s license, copies of the front and back of medical insurance cards (Medicare and any supplemental policies), copies of birth certificates, copies of your marriage license, copies of your health care directives. If you don’t know where these things are, chances are that your loved ones will struggle to find them also, making an emotional time for them even more difficult.
Ross Estate Planning is here to help you reach all of these goals. It all starts with a conversation!