Like your car, your estate plan needs regular maintenance. Your plan needs to be reviewed and updated to deal with the changes in your family and the constantly changing laws. If you do not spend the time and money now, your family will spend exponentially more when you are gone. Set aside a specific time each year (birthday, anniversary, family gathering) to review it. Keep it current, so it will work the way you want when you need it. Allow me to suggest seven estate planning to-dos that shouldn’t be ignored:
That trust that sits in your safety deposit box – yeah, we know – the one that names your sister Nancy to act as the Trustee and only names two of your three children desperately needs to be updated. Your family and financial circumstances have significantly changed since then – not to mention you no longer reside in Illinois, where it was drawn up. Have you thought about protection trusts for the kids to protect them from creditors and predators?
The Durable Power of Attorney document is the most important in your plan. If it is more than three years old, it does not address any of the new online and electronic rules now in place. Suppose you become incapacitated and don’t have a valid durable power of attorney document that names someone who can write checks, pays bills, and manage your financial and legal affairs. In that case, the alternative is court-ordered guardianship. That’s no fun and can be insanely expensive. If you think one lawyer is expensive, wait until you need two and a doctor.
Can you even find the form? It could be a real downer for your current spouse to discover that your former spouse is still named the primary beneficiary on your IRA and 401(k) accounts. Another bummer is when your stockbroker switched firms and forgot to have you update the beneficiary documents. When that happens, the Custodial Agreement controls who gets the IRA or 401(k). Have you ever read your Custodial Agreement? It’s the thin onion-skin paper-thingy that comes in the mail when you first open your account. The one you threw out along with the prospectus to all the mutual funds. The Custodial Agreement may say that your estate becomes the beneficiary if you don’t name one. Federal tax law – our friends at the IRS – shout with glee when your estate becomes your beneficiary because, upon your demise, your entire account becomes immediately taxable as income.
Unless you wish to become the next Terri Schiavo, you should strongly consider signing a new HIPAA consent, living will, and health care Power of Attorney. You may remember the Dunedin, Florida woman who was on life support for 15 years. Schaivo’s court case between her husband and her parents resulted in a political and media circus involving the United States Congress and the Supreme Court. Her husband insisted that she would want to have the food and water tubes removed, while her parents argued she wasn’t in a persistent vegetative state. I don’t know about you, but one of my lifetime goals does not include having my private health care matters mentioned by our esteemed congressmen and senators preening for votes on national television. Have you given copies to your doctor and your agents? Be sure to keep a copy in your luggage when you travel!
For many of the same reasons I mention in #4, it’s a good idea to dust off the beneficiary designations to your life insurance and annuities. If you have any chance of having a taxable estate for federal estate tax purposes, now may be a good time to investigate removing the life insurance from your taxable estate by using any number of strategies, including an irrevocable life insurance trust (ILIT). If you already have such trust but don’t have all your “Crummey notices” (the ones that made the contributions to the ILIT tax-free) saved in one place, gather them together and give them to your estate attorney so that they will have copies in case they are ever needed. When might they be needed? Not until your death when your estate tax return is audited. By then, you obviously won’t be around to tell everyone where they are. Save your friendly attorney (not to mention your family affected by the taxes that our friends at the IRS may impose when the Crummey letters can’t be verified) from the stress and organize the file.
Believe it or not, it’s usually not the money or real estate that the kids fight over. Those things can be divided up rather easily. It’s the heirlooms that cause the most strife. Dad’s guns. Mom’s engagement ring. The painting is on the wall. Creating a list of who is to get what can avoid some heated arguments in the stress of losing a parent. Take pictures and tell the story. Kids are more interested in the story!
Do those important to you know where your financial accounts are located or how to access your accounts online? Do your loved ones know which bank branch keeps your safety deposit box? All sorts of personal information might be challenging to find in the event of your incapacity or death. Unless your son is Sherlock Holmes, it’s a good idea to let them all know where these important documents and items can be found.
Do yourself (and your loved ones) a big favor. If you haven’t taken care of these matters, try your best to do so.
Ross Estate Planning, LLC serves Door County, Kewaunee County, Green Bay, and the northeast region of Wisconsin. We specialize in asset protection, estate planning, and commercial planning for individuals and families, businesses, and company owners with over 40 years of experience. Education of the client and obtaining correct information is critical since educating the customer and getting accurate information is a cornerstone of our quality estate planning services. We offer clients and interested clients a complimentary estate planning book and a complimentary consultation with an experienced attorney.