How Dads and Moms Can Make Sure Their Families are Protected
Dads can protect their family with proper estate planning.

How Dads and Moms Can Make Sure Their Families are Protected

Forbes’ recent article, “How Fathers Can Make Sure Their Families Are Financially Protected” suggests that fathers consider taking the following steps to ensure their families are protected. The same advice applies to mothers too.

Do you have enough life insurance? Be sure you’re adequately insured, so your family won’t struggle to pay the bills without your income. Many employees only have enough life insurance from work to cover a year’s worth of salary, which may be enough for some families. However, if your spouse can’t make the mortgage payment on their own, and if they would be unwilling or unable to sell the home, you might want to at least make sure you have enough life insurance to pay off the mortgage. Once you know how much you need, buy a low-cost term policy for the maximum length of time you might need the coverage.

Are your beneficiaries updated on retirement accounts, annuities and life insurance policies? This is an often overlooked issue. An outdated beneficiary designation could result in your ex-spouse inheriting most of your assets, your latest child being disinherited, or your family having to pay higher taxes and probate fees than is necessary. Read more here.

Can you add a “payable on death” or a “transfer on death” form on any accounts? You can generally add beneficiaries to bank and investment accounts, saving your family from the time and cost of probate. In some states, you can add beneficiaries to your home and vehicles. Ask your bank for a “payable on death” form and your investment company for a “transfer on death” form.

Is your will drafted?  You need a will to name a guardian for your minor children in most states. It’s a good idea to have a qualified estate planning attorney help you.

Are you organized? Keep a record of where everything and everyone is. You can draft an “In Case of Emergency” folder that has copies of your will, revocable trust, life insurance policy and a summary of brokerage and bank accounts. Let your family know where to find it. You should also share your passwords to your digital accounts.

As a parent, you have an obligation to care for the financial well-being of your family. Part of this is making sure they’ll be protected, even if you’re not around.

Reference: Forbes (June 16, 2019) “How Fathers Can Make Sure Their Families Are Financially Protected”

 

What Debts Must Be Paid During Probate?
Which debts do I pay during probate?

What Debts Must Be Paid During Probate?

Everything that must be addressed in settling an estate becomes more complicated, when there is no will and no estate planning has taken place before the person dies. Debts are a particular area of concern for the estate and the executor. What has to be paid, and who gets paid first? These are explained in the article “Dealing with Debts and Mortgages in Probate” from The Balance.

Probate is the process of gaining court approval of the estate and paying off final bills and expenses, before property can be transferred to beneficiaries. Dealing with the debts of a deceased person can be started, before probate officially begins.

Start by making a list of all of the decedent’s liabilities and look for the following bills or statements:

  • Mortgages
  • Reverse mortgages
  • Home equity loans
  • Lines of credit
  • Condo fees
  • Property taxes
  • Federal and state income taxes
  • Car and boat loans
  • Personal loans
  • Loans against life insurance policies
  • Loans against retirement accounts
  • Credit card bills
  • Utility bills
  • Cell phone bills

Next, divide those items into two categories: those that will be ongoing during probate—consider them administrative expenses—and those that can be paid off after the probate estate is opened. These are considered “final bills.” Administrative bills include things like mortgages, condo fees, property taxes and utility bills. They must be kept current. Final bills include income taxes, personal loans, credit card bills, cell phone bills and loans against retirement accounts and/or life insurance policies.

The executors and heirs should not pay any bills out of their own pockets. The executor deals with all of these liabilities in the process of settling the estate.

For some of the liabilities, heirs may have a decision to make about whether to keep the assets with loans. If the beneficiary wants to keep the house or a car, they may, but they have to keep paying down the debt. Otherwise, these payments should be made only by the estate.

The executor decides what bills to pay and which assets should be liquidated to pay final bills.

A far better plan for your beneficiaries, is to create a comprehensive estate plan that includes a will that details how you want your assets distributed and addresses what your wishes are. If you want to leave a house to a loved one, your estate planning attorney will be able to explain how to make that happen, while minimizing taxes on your estate.

Reference: The Balance (March 21, 2019) “Dealing with Debts and Mortgages in Probate”

 

How Do I Make the Right Estate Planning Moves When I Divorce?

The Journal Enterprise explains in its recent article, “5 Estate Planning Moves If You Are Getting Divorced,” that the following tips will help you get your plans in order, so your final wishes will be carried out later.

Medical Power of Attorney. This is also called a healthcare proxy. This person is named to make decisions on your medical care, if you’re ill or injured and can’t state your medical care decisions. Unless you make the change, your ex-spouse will have this right.

Financial Power of Attorney. Like a healthcare proxy, this is someone you select to take charge, if you become incapacitated. This person has authority over your financial decisions, and it means they have the authority to pay your bills, access your bank and investment accounts, collect and cash your paychecks and make financial decisions for you. You want to be certain that your assets are protected, and your financial obligations are met, while you’re unable to act on your own behalf. Most people name a spouse, but if you get divorced and don’t switch this designation, your spouse will still be your financial power of attorney and will retain access to your finances.

Create a List of Things to Change After Your Divorce. A divorce can freeze some assets and accounts, which remains in effect until it’s finalized. Therefore, you won’t be able to change the beneficiary on life insurance policies, pensions and other types of accounts. Ask your estate planning attorney to find out exactly what accounts will be affected. Once you know which ones are frozen, you should make a list to ensure you won’t neglect to change them, when the divorce is finalized.

Modify Your Will. In some states, you may not be permitted to create a new will, but your attorney should still be able to help you make the necessary changes. You’ll want to review your heirs. If you do have minor children and you have sole custody, you may want to designate another person as their guardian. If you named your spouse as executor of your will, you may want to consider changing that.

Modify Your Trust. You may have a revocable living trust, in addition to a will. One of the advantages of a revocable trust is that it doesn’t go through probate, so your heirs get a bigger inheritance more quickly. If you have a revocable trust, talk to your attorney about changing it after your divorce.

If you don’t create a new estate plan after your divorce, your assets may not go to the right beneficiaries, or your ex-spouse may end up with rights you didn’t intend.

Reference: Journal Enterprise (March 20, 2019) “5 Estate Planning Moves If You Are Getting Divorced”

 

As a New Parent, Have You Updated (or Created) Your Estate Plan?
New parents

As a New Parent, Have You Updated (or Created) Your Estate Plan?

You just had a baby. Now you’re sleep-deprived, overwhelmed, and frazzled. Having a child dramatically changes one’s legacy plan and makes having a plan all the more necessary, says ThinkAdvisor’s recent article, “5 Legacy Planning Basics for New Parents.”

Take time to talk through two high-priority items. Create a staggered checklist—starting with today—and set attainable dates to complete the rest of the tasks. Here are five things to put on that list:

  1. Will. This gives the probate court your instructions on who will care for your children, if something happens to both you and your spouse. A will also should name a guardian to be responsible for the children. Parents also should think about how they want to share their personal belongings and financial assets. Without a will, the state decides what goes to whom. Lastly, a will must name an executor.
  2. Beneficiaries. Review your beneficiary designations when you create your will, because you don’t want your will and designations (on life insurance policies and investments) telling two different stories. If there’s an issue, the beneficiary designation overrides the will. All accounts with a beneficiary listed automatically avoid probate court.
  3. Trust. Created by an experienced estate planning attorney, a trust has some excellent benefits, particularly if you have young children. Everything in a trust is shielded from probate court, including property. This avoids court fees and hassle. A trust also provides some flexibility and customization to your plan. You can instruct that your children get a sum of money at 18, 25 or 30, and you can say that the money is for school, among other conditions. The trustee will distribute funds, according to your instructions.
  4. Power of Attorney and Health Care Proxy. These are two separate documents, but they’re both used in the event of incapacitation. Their power of attorney and health care proxy designees can make important financial and medical decisions, when you’re incapable of doing so.
  5. Life Insurance. Most people don’t think about purchasing life insurance, until they have children. Therefore, if you haven’t thought about it, you’re not alone. If you are among the few who bought a policy pre-child, consider increasing the amount so your child is covered, if something should happen.

Reference: ThinkAdvisor (March 7, 2019) “5 Legacy Planning Basics for New Parents”