Babies, Hospitals, and The Living Will

Last week my wife and I were temporarily living at children’s hospital with my 18 month old. She had a spell of the stomach virus that’s going around and she needed I.V. fluids for a few days to rehydrate because she could not keep anything down. She’s fine now. The virus ran its course and she’s back to chasing the dog and writing with crayon on the white furniture.

The reason I’m sharing this is because when I was filling out the hospital paperwork, there was a checkbox for “do you have a living will.” Obviously an 18 month old is not going to have that document, but the point here is that this has become a standard question from medical providers. So standard that it is even in use at the Children’s Hospital where most of the patients are under 18.

So, what is a Living Will and what does it do?

A Living Will applies when a person’s medical condition becomes irreversible and terminal. It is a declaration stating that if one is in a persistent vegetative state with no hope of regaining consciousness, then in such event he or she refuses artificially life-prolonging measures which serve only to prolong the process of dying (such as feeding tubes and respirators – pain killers are still administered). The intent expressed by the individual making the Living Will is that he or she wishes to die naturally. Below is actual language from a Living Will:

“For this declaration to take effect, my attending physician must determine that there can be no recovery from my terminal or vegetative condition, and that either my death is imminent or I can no longer experience a meaningful life.”

Many people remember the case of Terry Schiavo. Terry suffered extreme brain damage and became comatose. Her condition was found to be permanently vegetative with no hope of regaining consciousness. She was incapacitated and unable to survive without a feeding tube. Her husband, as her legal guardian, battled with her family for 15 years in the courts to allow Terry to die naturally. This became global news and a lead case in the estate planning arena. But here’s the thing most people don’t remember about Terry. She was 26 years old when she became incapacitated.

Key takeaways:
• Living Wills are for everyone over 18 – the leading cases in this area are mostly people in their 20’s
• Medical providers ranging from hospitals to primary physicians are now requesting this document as a standard question on intake forms.
• Living Wills are not standard forms and you should speak to an attorney specializing in this area to draft a Living Will that is consistent with your beliefs

An Estate Planning Checklist to Facilitate Wealth Transfer

Studies have shown that 70% of family wealth is lost by the end of the second generation and 90% by the end of the third.

Help your loved ones avoid becoming one of these statistics. You need to educate and update your heirs about your wealth transfer goals and the plan you have put in place to achieve these goals.

What Must You Communicate to Future Generations to Facilitate Transfer of Your Wealth?

You must communicate the following information to your family to ensure that they will have the information they need during a difficult time:

• Net worth statement, or at the very minimum a broad overview of your wealth

• Final wishes – burial or cremation, memorial services

• Estate planning documents that have been created and what purpose they serve:

o Durable Power of Attorney, Health Care Directive, Living Will – property management; avoiding guardianship; clarifying wishes regarding life-sustaining procedures

o Revocable Living Trust – avoiding guardianship; keeping final wishes private; avoiding probate; minimizing delays, costs and bureaucracy

o Last Will and Testament – a catch-all for assets not transferred into your Revocable Living Trust prior to death, or the primary means to transfer your wealth if you are not using a Revocable Living Trust

o Irrevocable Life Insurance Trust – removing life insurance from your taxable estate; providing immediate access to cash

o Advanced Estate Planning – protecting assets from creditors, predators, outside influences, and ex-spouses; charitable giving; minimizing taxes; creating dynasty trusts

• Who will be in charge if you become incapacitated or die – agent named in your Durable Power of Attorney and Health Care Directive; successor trustee of your Revocable Living Trust and other trusts you’ve created; personal representative named in your will

• Benefits of lifetime discretionary trusts created for your heirs:

o Fosters educational opportunities
o Provides asset, divorce, and remarriage protection
o Protects special needs beneficiaries (if properly drafted)
o Allows for professional asset management
o Minimizes estate taxes at each generation
o Creates a lasting legacy for future generations

• Overall goals and intentions for inheritance – what the money is, and is not, to be used for (in other words, education vs. charitable work vs. vacations vs. Ferraris vs. business opportunities vs. retirement), and who will be trustee of lifetime discretionary trusts created for your heirs and why you’ve selected them

• Where important documents are located – this should include how to access your “digital” assets

• Who your key advisors are and how to contact them

How Can Your Professional Advisors Help You Communicate Your Wealth Transfer Goals?

Your professional advisors are well-positioned to help you discover your wealth priorities, goals, and objectives and then communicate this information to your heirs. This, in turn, will prepare your heirs to receive your wealth instead of being left to figure it out on their own and, as statistics have shown, lose it all.

We are available to assist you with figuring out your wealth transfer goals, putting a plan in place to achieve these goals, and effectively communicating this information to your loved ones.

4 Tips for Avoiding a Will or Trust Contest

A will or trust contest can derail your final wishes, rapidly deplete your estate, and tear your loved ones apart. But with proper planning, you can help your family avoid a potentially disastrous will or trust contest.

If you are concerned about challenges to your estate plan, consider the following:

1. Do not attempt “do it yourself” solutions. If you are concerned about an heir contesting your estate plan, the last thing you want to do is attempt to write or update your will or trust on your own. Only an experienced estate planning attorney can help you put together and maintain an estate plan that will discourage lawsuits.

2. Let family members know about your estate plan. When it comes to estate planning, secrecy breeds contempt. While it is not necessary to let your family members know all of the intimate details of your estate plan, you should let them know that you have taken the time to create a plan that spells out your final wishes and who they should contact if you become incapacitated or die.

3. Use discretionary trusts for problem beneficiaries. You may feel that you have to completely disinherit a beneficiary because of concerns that a potential beneficiary will squander their inheritance or use it in a manner that is against your beliefs. However, there are other options than completely disinheriting someone. For example, you can require that the problem beneficiary’s share be held in a lifetime discretionary trust and name a third party, such as a bank or trust company, as trustee. This will insure that the beneficiary will only be entitled to receive trust distributions under terms and conditions you have dictated. You will also be able to control who will inherit the balance of the trust if the beneficiary dies before the funds are completely distributed.

4. Keep your estate plan up to date. Estate planning is not a one-time transaction – it is an ongoing process. Therefore, as your circumstances change, you should update your estate plan. An up to date estate plan shows that you have taken the time to review and revise your plan as your family and financial situations change. This, in turn, will discourage challenges since your plan will encompass your current estate planning goals.

By following these four tips, your heirs will be less likely to challenge your estate planning decisions and will be more inclined to fulfill your final wishes. If you are concerned about heirs contesting your will or trust, you should seek the professional advice now.

The Clock is Ticking on Maxing Out Your 2014 Retirement Plan Contributions

With the end of 2014 fast approaching, now is the time to take a look at your year-to-date retirement plan contributions to see where yours stand when compared with the 2014 contribution limits.

Summary of 2014 Retirement Plan Contributions Limits

Depending on how much you’ve already contributed, you may be able to contribute more to your retirement plan for 2014.

To help you determine whether you need to make some additional contributions, here is a summary of the 2014 retirement plan contributions limits. Please remember that some types of accounts require contributions before December 31, whereas other types of accounts allow contributions up to the April deadline for filing your tax return. Contact us now so we can offer you specific guidance about your account.

• The contribution limit for employees under age 50 who participate in a deferred contribution plan (401(k), 403(b), most 457 plans, or the federal government’s Thrift Savings Plan) is $17,500. These plans generally require contributions to be made on or before December 31.

• The contribution limit for employees age 50 and over who participate in a deferred contribution plan (401(k), 403(b), most 457 plans, or the federal government’s Thrift Savings Plan) is $23,000. These plans generally require contributions to be made on or before December 31.

• The contribution limit for employees under age 50 who participate in a Savings Incentive Match Plan for Employees of Small Employers (known as a SIMPLE plan) is $12,000. These plans generally require “employee” contributions to be made on or before December 31 and permit “employer” contributions to be made up to the filing deadline of your tax return on April 15.

• The contribution limit for employees age 50 and over who participate in a Savings Incentive Match Plan for Employees of Small Employers (known as a SIMPLE plan) is $14,500. These plans generally require “employee” contributions to be made before December 31 and permit “employer” contributions to be made up to the filing deadline of your tax return on April 15.

• The contribution limit for a Simplified Employee Pension Individual Retirement Account (i.e., SEP IRA) or Solo 401(k) is the lesser of (a) $52,000, or (b) 25% of the employee’s salary, and the compensation limit used in the savings calculation is $260,000. These plans generally permit contributions up to the filing deadline of your tax return on April 15.

• The contribution limit for individuals under age 50 to a traditional or Roth Individual Retirement Account (IRA) is $5,500. These plans generally permit contributions up to the filing deadline of your tax return on April 15.

• The contribution limit for individuals age 50 and over to a traditional or Roth Individual Retirement Account (IRA) is $6,500. These plans generally permit contributions up to the filing deadline of your tax return on April 15.

• While contributions to IRAs that apply to the 2014 tax year can be made up until April 15, 2015, the time is now to make contributions so that you can maximize your earnings inside the account.

• Before you make any contributions to a Roth IRA, make sure you’re not subject to the adjusted gross income (AGI) phase-out. If your income is greater than AGI phase-out amount for your filing status, then you’re not eligible to make contributions to a Roth IRA. The AGI phase-out amounts for taxpayers making contributions to a Roth IRA is $181,000 to $191,000 for married taxpayers filing jointly; $114,000 to $129,000 for single taxpayers and head of household taxpayers; and for a married taxpayer filing a separate return, the phase-out is not subject to an annual cost-of-living adjustment and is therefore $0 to $10,000. We can help you determine which phase-out, if any, applies to your situation.

What the 2015 Inflation Adjustments for the Estate Tax Exemption and Trust Income Tax Brackets Mean for You

The Internal Revenue Service has released the official inflation adjustments that will affect 2015 federal reporting for estate taxes, gift taxes, generation-skipping transfer taxes, and estate and trust income taxes.

2015 Federal Estate Tax Exemption

In 2015 the estate tax exemption will be $5,430,000. This is an increase of $90,000 above the 2014 exemption.

What this means is that when the value of the gross estate of a person who dies in 2015 exceeds $5,430,000, the estate will be required to file a federal estate tax return (IRS Form 706). Form 706 is due within nine months of the deceased person’s date of death.

The maximum federal estate tax rate remains unchanged at 40%.

2015 Federal Lifetime Gift Tax Exemption

In 2015 the lifetime gift tax exemption will also be $5,430,000. This is an increase of $90,000 above the 2014 exemption.

What this means is that if a person makes any taxable gifts in 2015 (in general a taxable gift is one that exceeds the annual gift tax exclusion – see more on that below), then they will need to file a federal gift tax return (IRS Form 709). For taxable gifts made in 2015, Form 709 is due on or before April 15, 2016.

The maximum federal gift tax rate remains unchanged at 40%.

2015 Federal Generation-Skipping Transfer Tax Exemption

In 2015 the exemption from generation-skipping transfer taxes (GSTT) will also be $5,430,000. This is an increase of $90,000 above the 2014 exemption.

What this means is that if a person makes any transfers that are subject to the GSTT in 2015, then they will need to file a federal gift tax return (Form 709). For generation-skipping transfers made during 2015, Form 709 is due on or before April 15, 2016.

Note that if the generation-skipping transfer does not exceed $5,430,000, then no GSTT will be due; instead, the transferor’s GSTT exemption will be reduced by the amount of the transfer.

For example, if Bob has not made any prior generation-skipping transfers and makes one of $500,000 in 2015, then his GSTT exemption will be reduced to $4,930,000 ($5,430,000 GSTT exemption – $500,000 generation-skipping transfer made in 2015 = $4,930,000 GSTT exemption remaining).

The maximum federal GSTT rate remains unchanged at 40%.

2015 Annual Gift Tax Exclusion

In 2015 the annual gift tax exclusion will be $14,000. This is the same as the 2014 exclusion.

What this means is that if a person makes any gifts to the same person that exceed $14,000 in 2015, then they will need to file a federal gift tax return (Form 709). For taxable gifts made in 2015, Form 709 is due on or before April 15, 2016.

Note that if the taxable gift does not exceed $5,430,000, then no gift tax will be due; instead, the lifetime gift tax exemption of the person who made the gift will be reduced by the amount of the taxable gift.

For example, if Bob has not made any taxable gifts in prior years and makes a gift of $500,000 to his daughter in 2015, then Bob’s lifetime gift tax exemption will be reduced to $4,944,000 ($500,000 gift – $14,000 annual exclusion = $486,000 taxable gift; $5,430,000 lifetime gift tax exemption – $486,000 taxable gift made in 2015 = $4,944,000 lifetime gift tax exemption remaining).

As mentioned above, the maximum federal gift tax rate remains unchanged at 40%.

2015 Estate and Trust Income Tax Brackets

Finally, estates and trusts will be subject to the following income tax brackets in 2015:

If Taxable Income Is:                                The Tax Is:

Not over $2,500                                         15% of the taxable income

Over $2,500 but                                        $375 plus 25% of
not over $5,900                                          the excess over $2,500

Over $5,900 but                                         $1,225 plus 28% of
not over $9,050                                          the excess over $5,900

Over $9,050 but                                         $2,107 plus 33% of
not over $12,300                                        the excess over $9,050

Over $12,300                                               $3,179.50 plus 39.6% of
the excess over $12,300

As you can see, an income of only $12,300 inside a trust could be taxed at a marginal rate of 39.6%. In addition, many trusts paying at the top bracket are also subject to the 3.8% net investment income tax, making the top marginal rate 43.4%. Many states also impose an income tax on trusts. So, depending on which state the trust pays income taxes, the marginal income tax rate could be over 50% for trusts earning just $12,300.

What this means is that Trustees should give careful consideration to the timing of income and deductions and whether distributions of income to beneficiaries should be made to avoid paying excessive trust income taxes. Any income tax planning, of course, has to be balanced against a Trustee’s fiduciary duties to the trust.

Year End Estate Planning Tip #3 – Check Your Mental Disability Plan

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is making sure their mental disability plan is up to date.

Three Areas of Your Mental Disability Plan That Are Likely Out of Date
If your estate plan is more than a few years old, then your mental disability plan is likely out of date for the following reasons:

1. Are your health care directives compliant with HIPAA? While the federal Health Insurance Portability and Accountability Act (known as “HIPAA” for short) was enacted in 1996, the rules governing it were not effective until April 14, 2003. Thus, if your estate plan was created before then and you have not updated it since, then you will definitely need to sign new health care directives (Living Will) so that they are in compliance with the HIPAA rules. With that said, it’s possible that health care directives signed in later years lack HIPAA language, so check with your estate planning attorney just to make sure that your estate plan documents reference and take into consideration the HIPAA rules.

2. Is your Power of Attorney stale? How old is your Power of Attorney? Banks and other financial institutions are often wary of accepting Powers of Attorney that are more than a couple of years old. This means that if you become incapacitated, your agent could have to jump through hoops to get your stale Power of Attorney honored, if it can be done at all. This could cost your family valuable time and money. Aside from this, Pennsylvania has enacted new laws governing Powers of Attorney, which become effective on January 1, 2015. If you want to increase the likelihood that your Power of Attorney will work without any hitches if you lose your mental capacity, update and redo your Power of Attorney every few years so that it doesn’t end up becoming a stale and useless piece of paper.

3. Does your estate plan adequately address mental disability? A will is something that only becomes effective when you die. With today’s longer life expectancies come increased probabilities that you will be mentally incapacitated before you die. A fully funded Revocable Living Trust is the best way to provide adequately for mental incapacity, but some older trusts do not. If you signed your Revocable Living Trust more than 8 to 10 years ago and haven’t updated it since or have assets that are outside your Revocable Living Trust, then it may well lack modern and appropriate provisions for what to do with you and your property if you become mentally incapacitated. Have your estate plan checked to ensure that it will work effectively and efficiently if you lose your mental capacity. Otherwise you and your loved ones may end up in front of a judge who will have to sort out your financial matters – at horrendous cost.

What Should You Do?
Estate planning is about much more than having a plan for who gets your stuff after you die – it should also include having a plan for what happens in case you lose your mental capacity. If your plan is more than a few years old or does not include a fully funded Revocable Living Trust, then chances are it lacks a good mental disability plan. Now is the time to meet with an experienced estate planning attorney to ensure that you have a mental disability plan that will work the way you expect it to work if it’s ever needed.

What to Do with an Inherited IRA

IRAs are among the largest assets inherited by heirs and beneficiaries. These accounts have been able to grow to such large amounts because income taxes are deferred until the owner begins to take distributions, usually after reaching age 70 ½.

Those who inherit an IRA must be very careful to follow the rules, which are complicated and often confusing. It is possible to keep an account growing tax-deferred for decades, but an innocent error can cause the recipient to lose the tax-deferred advantage and force her to pay tax now on the entire account balance. As a result, it is critical to talk with an expert before making any decision or taking any action, and to understand all available options. Here are some to consider.

Cash Out Option
Anyone who inherits an IRA can cash it out and withdraw the full amount. But because income taxes must be paid on the full amount at one time, this is not usually the best choice.

Spouse Options
A surviving spouse who inherits an IRA from his/her spouse can roll it into a new IRA or merge it with his/her own IRA. In either case, the account can continue to grow tax-deferred and the surviving spouse can continue to make contributions until he/she must start taking required distributions (after age 70 ½).

If it is rolled into a new IRA, the surviving spouse will name new beneficiaries. It is highly advantageous to name someone who is much younger (e.g., children and/or grandchildren) because after the surviving spouse’s death, distributions will be based on the beneficiary’s actual life expectancy. This will allow the account to continue to grow tax-deferred for decades. Under IRS rules, this rollover and stretch out can be done even if the original owner spouse had started taking required minimum distributions before he/she died.

Non-Spouse Options
If the original owner died before beginning to receive required distributions, a non-spouse beneficiary can establish a Beneficiary IRA and start taking annual distributions based on his/her own life expectancy, with the option to take a lump sum at any time. (This is called the “life expectancy option.”) This must be done by the end of the year following the original owner’s death. If the first distribution is not taken by then, all of the IRA must be withdrawn by December 31 of the fifth year after the owner’s death. (This is called the “five year rule.”)

If the original owner died after beginning to receive required distributions, a non-spouse beneficiary must take a distribution equal to the owner’s required minimum distribution for the year he/she died if one had not been taken. For subsequent years, distributions can be based on either the new owner’s life expectancy or the original owner’s remaining life expectancy (whichever is longer).

The original owner’s name must be listed on the title, but the inheriting beneficiary will name new beneficiary(ies). A non-spouse beneficiary cannot roll an inherited IRA into his/her own IRA or make contributions to an inherited IRA, as a spouse can. But when distributions are stretched out over a longer period of time, the tax payments are also stretched out. And by keeping more money in the IRA for as long as possible, the tax-deferred growth can be maximized…which will result in a much larger balance.

Thinga to Consider:

  • cashing out an IRA is generally always going to be the wrong choice because of the potential for disastrous tax consequences – consider not leaving this choice up to your heirs (who are likely to cash it out); rather, consider the continued tax deffered growth potential if that IRA is held in trust for your beneficiaries
  • spouses can roll over IRAs, but have the ability to name new beneficiaries when they do – in a second marriage situation, this could accidentally disinherit children from the first marraige if the surviving spouse rolls the account over and names new beneficiaries
  • Using a stand alone IRA trust for large IRAs can give your beneficiaries use and enjoyment of those funds while adding asset protection and retaining the tax deffered growth within such plans

For more on IRAs a beneficiaries of Trusts and Standalone IRA Trusts, See the previous post on Naming a Trust as Beneficiary of an IRA, andDiscretionary Trusts – How to Protect Your Beneficiaries from Bad Decisions.

Eight Reasons – NOT – to have an estate plan.

If this one is too long for you, by all means, skip directly to number 8!!

1. You enjoy paying taxes. Maybe you believe that giving 40+% of your life savings to the government is a good use of that money. Your family can probably live on the fraction of your money left over.

Most people have heard that the federal estate tax exemption is over $5 million ($5.34 in 2014 and $5.43 in 2015). So, if your estate is comfortably under that there will be no tax consequences, right? Pennsylvania has an inheritance tax that is separate from the federal estate tax (see #2 below for more on this)*. Also, if you have a appreciated assets or a retirement plan and your heirs cash it out, it could have disastrous capital gains and/or income tax consequences.

2. You believe that State representatives know how to plan your estate better than you do. You voted to elect these officials, so why not let them make laws that will distribute your estate.

In Pennsylvania, if you’re married with children and you die without your own estate plan, the government has decided how your estate will be distributed. So, let’s say your two kids are 3 years old and 1 years old, respectively. Under the law, the first $30,000 goes to your spouse. Then the balance is divided 50/50 between your spouse and your children. You want your minor children to get 50% of the balance of your estate immediately, right?

*The 50% that passes to your children will be subject to Pennsylvania Inheritance Tax. There will be no inheritance tax owed on the first $30,000 and 50% of the balance that goes to your spouse. Wouldn’t it be better if 100% of your estate was not subject to inheritance tax, which would give your spouse that much more money to take care of your children?

3. Your minor children will be in good hands with a state agency.   You don’t need to name a guardian for your children. The Department of Children and Youth Services will be fine.

Avoid this. If for no other reason, make an estate plan to name guardians for your children.

4. You don’t want to have any say in how your spouse and children use their inheritance, they can just have it and enjoy it.

Your spouse and children will enjoy their inheritance a lot more if you have a plan to preserve assets for them and protect those assets from creditors, predators, and the heirs themselves. With an estate plan, you can protect your assets from the bad things in the world and make sure they are available to your loved ones.

General Needs Trusts, Special Needs Trusts, Retirement Trusts, Generation Skipping Trusts, Asset Protection Planning, Charitable Planning, and Business Succession Planning can all be accomplished by putting a comprehensive estate plan in place.

5. You’ll just make all your accounts and real estate joint with your kids. Why should you have an estate plan when you can just do this?

Adding your children as joint owners of bank accounts and real estate can cause serious issues such as: gift tax consequences, capital gains tax issues, and subjecting all of your assets to your children’s creditors. This is also problematic with regard to Pennsylvania’s Inheritance Tax laws.

6. You made a will 20 years ago and just wrote in the changes you wanted to make.

Making any marks on your will can invalidate the will or make it inadmissible in whole or in part to probate. At the very least, it will complicate matters with the probate court and could lead to disharmony in the family.

Avoid probate altogether with a living trust. Probate is a very public affair. Anyone can get a copy of your will from the probate court. The probate process takes at least 12 months to complete, and can incur hefty legal fees.

Maintain privacy and family harmony by having a trust in place that passes your property outside of the probate court.

7. You don’t have a lot of money and own very few assets, so why bother?

Estate planning is not just for the rich. Estate planning is not just about death. Estate planning is as much about lifetime planning as it is about wealth transfer on death:

  • Incapacity/Disability Planning
  • Health Care Powers of Attorney
  • Durable General Powers of Attorney
  • Living Wills
  • HIPAA Authorizations
  • Guardian Designations

8. You don’t plan on dying anytime soon.  

I hear this one a lot. Here’s my counteroffer: Estate planning is not about dying; it’s an act of love. You make an estate plan because your loved ones need you to. Put a plan in place for your loved ones. You’ll feel good about doing it and they’ll be taken care of.

 

Estate Planning for Young Families

Many young families put off estate planning because they are young and healthy, or because they don’t think they can afford it. But even a healthy, young adult can be taken suddenly by an accident or illness. And while none of us expects to die while our family is young, planning for the possibility is prudent and responsible. Also, estate planning does not have to be expensive; a young family can start with the essential legal documents and term life insurance, then update and upgrade as their financial situation improves. A good estate plan for a young family will include the following:

Naming an Administrator
This person will be responsible for handling final financial affairs—locating and valuing assets, locating and paying bills, distributing assets, and hiring an attorney and other advisors. It should be someone who is trustworthy, willing and able to take on the responsibility.

Naming a Guardian for Minor Children
Deciding who will raise the children if something happens to both parents is often a difficult decision. But it is very important, because if the parents do not name a guardian, the court will have to appoint someone without knowing their wishes, the children or other family members.

Providing Instructions for Distribution of Assets
Most married couples want their assets to go to the surviving spouse if one of them dies. If both parents die and the children are young, they want their assets to be used to care for their children. Some assets will transfer automatically to the surviving spouse by beneficiary designations and how title is held. However, an estate plan is still needed in the event this spouse becomes disabled or dies, so that the assets can be used to provide for the children.

Naming Someone to Manage the Children’s Inheritance
Unless this in included in the estate plan, the court will appoint someone to oversee the children’s inheritance. This will likely be a friend of the judge and a stranger to the family. It will cost money (paid from the inheritance) and the children will receive their inheritances in equal shares when they reach legal age, usually age 18. Most parents prefer that their children inherit when they are older, and to keep the money in one “pot” so it can be used to provide for the children’s different needs. Establishing a trust for the children’s inheritance lets the parents accomplish these goals and select someone they know and trust to manage it.

Reviewing Insurance Needs
Income earned by one or both parents would need to be replaced, and someone may need to be hired to take over the responsibilities of a stay-at-home parent. Additional coverage may be needed to provide for the children until they are grown; even more if the parents want to pay for college.

Planning for Disability
There is the possibility that one or both parents could become disabled due to injury, illness or even a random act of violence. Both parents need medical powers of attorney that give someone legal authority to make health care decisions if they are unable to do so for themselves. (You would probably name your spouse to do this, but one or two others should be named in case your spouse is also unable to act.) HIPPA authorizations will give doctors permission to discuss your medical situation with others (parents, siblings and close friends). Disability income insurance should also be considered, because life insurance does not pay at disability.

Year End Estate Planning Tip #2 – Check Your Beneficiary Designations

With the end of the year fast approaching, now is the time to fine tune your estate plan before you get caught up in the chaos of the holiday season. One area of planning that many people overlook is their beneficiary designations.

Have You Checked Your Beneficiary Designations Lately?

Do you own any life insurance policies? If so, have you named both primary and secondary beneficiaries for your policies?

How about retirement accounts – are any of your assets held in an IRA, 401(k), 403(b) or annuity? Or how about a payable on death (“POD”) or a transfer on death (“TOD”) account? If so, have you named both primary and secondary beneficiaries for these assets?

What about your vehicle – do you have it registered with a TOD beneficiary? And your real estate – is it held under a TOD deed or beneficiary deed?

If you have gotten married or divorced, had any children or grandchildren, or any of the beneficiaries you have named have died or become incapacitated or seriously ill since you made beneficiary designations, it is time to review them all with your estate planning attorney.

Beneficiary Designations May Overrule Your Will or Trust

Speaking of estate planning attorneys, has yours been given and reviewed all of your beneficiary designations?

It is critically important for your estate planning attorney to review your beneficiary designations as your life changes because your beneficiary designations may overrule or conflict with the plan you have established in your will or trust. Also, naming your trust as a primary or secondary beneficiary can be tricky and should only be done in consultation with your estate planning attorney.

What Should You Do?
Whenever you experience a major life change (such as marriage or divorce, or a birth or death in the family) or a major financial change (such as receiving an inheritance or retiring) or are asked to make a beneficiary designation, your beneficiary designations should be reviewed by your estate planning attorney and, if necessary, updated or adjusted to insure that they conform with your estate planning goals.

If you have gone through any family or monetary changes recently and you’re not sure if you need to update your beneficiary designations, then consult with your estate planning attorney to ensure that all of your bases are covered.

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