7 New Years Tips for Your Estate Plan

As we turn our calendars to 2020, tradition dictates that we make New Year’s resolutions.  What are yours this year?  Is it to lose weight? Give up self-destructive vices such as smoking or drinking? Allow me to suggest seven estate planning to-dos that shouldn’t be ignored:

  1. Update Your Will

That will which sits in your safety deposit box – yeah we know – the one that names your sister Nancy to act as the guardian for your children who are now in their forties – desperately needs to be updated. Your family and financial circumstances have significantly changed since then – notwithstanding the fact that you no longer reside in Michigan where it was drawn up.

  1. Sign a New Durable Power of Attorney 

This document needs updating just as much as your will does – and may be more important to you than your will! That is, att least if your will is a problem it doesn’t affect you – after all – you’ll be dead!  You’ll just leave a mess behind for your loved ones. But your durable power of attorney affects YOU!  If 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, the alternative is a court ordered guardianship. That’s no fun and can be insanely expensive.

  1. Take a Look at your IRA and 401(k) Beneficiary Designations

It could be a real downer for your current spouse to discover that your former spouse is still named as the primary beneficiary on your IRA and 401(k) accounts. Another bummer is when your stock broker 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 opened your account. The one you threw out along with the prospectus to all the mutual funds. What the Custodial Agreement may say is 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.

  1. Update Your Health Care Directives 

Unless you wish to become the next Terri Schiavo, you should strongly consider signing a new living will and health care surrogate. You may remember the Dunedin, Florida woman who was on life support for 15 years.  Schaivo’s court case between her husband who insisted that she would have wanted to remove the food and water tubes and her parents who argued she wasn’t in a persistent vegetative state – resulted in a political and media circus involving the United States Congress and the Supreme Court. I don’t know about you, but one of my lifetime goals does not include having my private health care matters being mentioned by our esteemed Congressmen and Senators preening for votes on national television.

  1. Dust off your Life Insurance and Annuity Beneficiary Designations

For many of the same reasons I mention in #5 above, 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 a 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 he 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.

  1. Make a Tangible Personal Property List 

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 baseball card collection. Mom’s engagement ring. The painting on the wall. Creating a list of who is to get what can avoid some heated arguments in the stress of losing a parent.

  1. Make General Lists 

Do those important to you know where your financial accounts are located, how to log onto your accounts online or which bank branch your safety deposit box is located? All sorts of personal information might be very difficult 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.

Just as most of us give up on our resolutions by January 2nd, do yourself (and your loved ones) a big favor.  If you haven’t taken care of these matters, try your best to do so. Unlike losing weight or getting more exercise, you can delegate most of these tasks among your advisors such as your friendly estate planning attorney, accountant and financial advisor.

Have a Happy and Healthy 2020!

© 2020 Craig R. Hersch. Originally published in the Sanibel Island Sun


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