Archive for the ‘Estate Plan’ Category

Have You Checked Your Beneficiary Designation Lately?

Sunday, July 10th, 2011

I encourage my clients to review their estate planning documents on a regular basis, and an annual checkup seems like something that can be scheduled and easy to remember.

But what about things that aren’t part of the documents that I help to create? What about your individual IRA? or your life insurance policy? or your company retirement plan? or your investment portfolio?

These types of plans are contractual in nature and the contract is between you and the insurance carrier or the plan administrator, or….whomever.

It is also important to make sure that these beneficiaries are up to date. If the beneficiary is a minor child, do you have the person you want today as the trustee of these funds? Have the children now become adults and you want them to have access to the funds immediately? Have you created a trust and just never got around to changing the beneficiary of your insurance so that the funds will go into the trust to be distributed the way you wanted?

One of the biggest problems is selecting a beneficiary and just forgetting about it. What happens if that person has died before you? What happens if that person is no longer the one that you want to have access to the funds? Maybe they got married to someone you hate. Maybe they ran off to join a commune. Maybe receiving the funds will make them ineligible (for just a little while) for medicaid benefits they are receiving now? Maybe…. (fill in the blank).

I had a very personal example of this. My mother had a life insurance policy that she got when she was working. Her plan was that we could use her life insurance proceeds to pay for the funeral and then there would be a little left over for each of us (I’m the oldest of 7 children). We all knew she had the life insurance and we all knew what she wanted us to do with the proceeds, but what we didn’t know was that she hadn’t really named a beneficiary at all. I know she meant to have the beneficiary set to ‘all of my children equally’, but it never got recorded at the life insurance company. The funeral home would have taken an assignment of the insurance proceeds, but that assignment had to be signed by all of the named beneficiaries and there were no named beneficiaries!

That meant that we needed to get a certified copy of her divorce papers, and all 7 of us had to sign affidavits that we were indeed her children before we could get access to the funds. Of course we needed to have this done on the forms provided by the insurance company, which took time. And somebody had to pay the funeral home right away. So mom’s plan to use the insurance proceeds to pay for the funeral only ‘kinda’ worked. One of us had to pay the funeral home and then each of the other 6 had to reimburse the one that paid when they got their one-seventh of the proceeds.

I have a great family and it worked out fine, but I’ve heard lots of examples of where one child has been ‘stuck’ with the entire funeral bill and the others refused to reimburse the sibling that paid the funeral home itself.

Please, take a few minutes and double check your beneficiary designations on all of those ‘contractual’ assets.

If you have any questions about this or any other legal subject, please feel free to give us a call at 757-234-4650 or visit our website at http://www.BeaversLaw.com.

What is a probate estate?

Thursday, January 13th, 2011

Your Will tells the world how you want to distribute your probate estate. So, the question becomes ‘What is a probate estate?’

In general, your probate estate consists of anything you own the instant after your death.

Your probate estate does not include life insurance proceeds where the beneficiary of the policy is a person or anything other than ‘the estate of the insured’ because an insurance policy is a contract with the insurance company to pay the proceeds to your beneficiary after your death. So, the instant after your death, the proceeds now belong to the beneficiary.

Your probate estate does not include property you own with someone else that is titled ‘jointly with right of survivorship’ because ownership of your interest in that property is automatically transferred to the other owner at the instant of your death.

At first glance, it would seem that the best option would be to re-title your assets (e.g., home, bank accounts) to be held jointly with right of survivorship. However, there are big potential problems with that option that should be considered before you make your final decision.

You should contact an estate planning attorney for more information.

Are you 70 1/2 years young?

Thursday, December 16th, 2010

Did you know there is a required minimum withdrawal from your IRA and/or 401(k) before December 31, 2010?

The required minimum withdrawal was suspended in 2009 and you have had all of 2010 to get it done this year, but time is running out. Especially since the penalty is 50% of the amount that you should have withdrawn!

So, if you are over 70 1/2 and you haven’t made your mandatory withdrawal yet, you still have some time to contact your financial advisor to get it done before the end of the year. But don’t wait too long. Many advisors and/or plan administrators are going to be closed for the holidays and it may take a few days to get the withdrawal completed. You might also need help in calculating how much you have to withdraw.

Unfortunately, the penalty will hit unless the withdrawal has been completed before midnight on December 31, 2010.

Do I need a Power of Attorney?

Sunday, October 31st, 2010

Most people think they need a Will (or perhaps a Trust). A Will describes what to do with your ‘stuff’ after you die, and yes, we are all going to die.

But, what happens to your ‘stuff’ if you are still alive but incapacitated in some way? How will your bills be paid if you are in a coma? Who will make decisions if you suffer from dementia or have a heart attack and end up in the hospital for awhile?

If you have a Power of Attorney, you get to choose who will make those decisions, and those decisions can be made as soon as needed. If you do not have a Power of Attorney, someone can petition the Court to appoint a conservator. It might be the same person you would have chosen, but the Court might appoint someone else. Someone you would not have wanted to have that control over your affairs. And it won’t be done immediately because it just takes time. So your perfect credit rating can be tarnished when your payments don’t get processed before they are late.

Also, if you have a Power of Attorney, you get to decide what your Agent can do. For example, you get to decide if you want your Agent to make gifts above the tax free limit each year if that’s in your best interest.

In fact, the Power of Attorney can be the most important document in your Estate Plan. And the answer is Yes, I think you do need a Power of Attorney.