Here is a chart to start you on your journey
Tuesday, June 30, 2015
Leave the government out of your business
Planning for the end of life also allows you to be in control and if done properly will make sure your wishes are followed and not those of well meaning relatives or friends or the government. Here are some ideas to help you keep control even though you are sans teeth, sans eyes, sans taste, sans everything. Always consult a lawyer and a financial expert as you build your estate plan.
Probate assets are assets that people hold in their own names at time of death. These assets pass on to heirs according to terms of a will, subject to court supervision.
The probate process often entails delays and costs, but some estate planning strategies can be used to mitigate those drawbacks by passing assets to heirs outside of probate. These strategies include joint ownership, beneficiary designations and transfer on death designations. (Trusts can also be used for this purpose.)
Joint ownership. This refers to assets like bank accounts jointly owned with another person. It is a common strategy for couples. The joint ownership makes it far easier for the surviving spouse to make financial decisions following the death of a loved one.
Unless spouses struggle with issues of trust, it usually makes sense for the two to own assets like bank accounts, investment accounts and houses on a joint basis, with the right of survivor-ship.
Beneficiary designations. Many financial accounts allow the account owner to indicate (designate) the person or persons to whom to transfer the asset upon the owner’s death. People can make such designations for retirement accounts like 401(k)s and IRAs, and also for annuities and life insurance policies.
When they specify a beneficiary, the assets will pass to the beneficiary outside of probate. (Note that beneficiary designations take precedence over any provisions in a will.) Many people name primary and secondary beneficiaries, so that if the first beneficiary dies before the owner, there is no question about who the new owner will be. Important: Retirees should review beneficiary designations periodically—perhaps once a year— to be sure they are up-to-date and that they continue to represent the account owner’s wishes.
The Health Care Proxy document is so important that experts generally recommend that several people have copies on file, including:
• Family members
• The family attorney
• The primary care physician
• The hospitals most often used
Naming beneficiaries is usually a straightforward process, but there are a few considerations to keep in mind.
For example, a common designation might be “my wife, if she survives me, and if not, equally to my children.” A potential problem with this is that grandchildren, if they exist, could be left out of the inheritance if their parent predeceases their grandparent. Adding the legal term, per stirpes, to the designation can overcome this problem. Per stirpes essentially says that equal shares of the inheritance will pass to branches of the family.
If family members have special needs, it is wise to use caution before naming them as beneficiaries. If they receive an inheritance, it may cause them to lose government benefits. An attorney should be consulted before designating beneficiaries in such cases.
Transfer on Death. For taxable accounts held at brokerage firms, the owner of the assets may want to have the brokerage set up a transfer on death (TOD) provision. Some bank accounts use TODs, too. A TOD acts like a beneficiary designation, so the assets pass directly, outside of probate. This is particularly helpful if the owner has no spouse or partner to name as joint owner.
Many retirees want to consider their close friends and charities in their estate planning. Wealthy individuals may set up charitable trusts to fund specific causes.
Those with less wealth who want to make significant contributions can invest in charitable funds offered through investment companies. The account owner can take tax deductions at the time of donation, and specify scheduled payouts from the fund.
Business ownership is another area for special consideration. The owner will want to plan carefully who will run the business upon the owner’s death. Specialized life insurance may need to be factored into the transition, so that ownership will transfer with minimal disruption. The assistance of a good attorney can be critical to the outcome.
Leaving Detailed Information
Standard estate planning documents do not cover all the information that survivors will need after the death of a loved one. Wills are usually quite general, covering disposition of major assets, but they typically do not mention lesser assets or family treasures and keepsakes.
If controversy is likely to erupt over the disposition of such lesser assets, the retiree may want to consider leaving a letter of instruction with the executor.
Letters of instruction do not have the legal standing of a will. They are, however, more flexible, and can be changed easily. Such letters should provide needed clarification for families whose members get along well with each other.
For contentious situations, it is wise to seek the assistance of an attorney who can set up legal documents that spell things out.
Retirees should also leave a detailed inventory of all bank accounts, investment accounts, retirement accounts, and insurance policies. This is of utmost importance for couples where one member handles most of the financial affairs.
Investment management is another important area. When one member of a couple handles all the investments, the couple should consider establishing an investment management plan. This plan would lay out how the surviving spouse should handle the investments after the more-informed spouse dies.
The investment plan should help the lesser-informed spouse avoid becoming a target of unscrupulous individuals who pose as investment professionals and then raid the couple’s accounts. It’s an excellent idea to set up financial relationships and services while both spouses are still alive, so that the surviving spouse has a trusted resource available when the other spouse dies.
Finally, people should make arrangements for a trusted person to have access to computer passwords. These may be necessary for accessing accounts, closing down electronic billing services and more. It’s wise to keep the passwords in a secure place, off the computer, at all times. When setting up an estate plan, people also need to decide whom to inform about the location of this important list.
As a rule, it is better to err on the side of leaving too much information rather than not enough. In addition, those who will be responsible for executing the estate plan should have the opportunity to read carefully through everything that applies to them. It is important to deal with any needed clarifications promptly so there will be no misunderstandings later on.
Families are often geographically dispersed. This can complicate management of an estate following death. It may help to provide family members with at least summary information about the estate plan. This will enable everyone to act immediately, when death occurs, without having to make a long trip to locate documents or find key financial advisors and institutions.
Here is a chart to start you on your journey