Estate Planning Reminders for This Tax Season

Feb 8th 2016
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The tax laws and other laws relating to property change – as do your circumstances and your beneficiaries. So, review your overall estate plans.

How long has it been since you last checked your will? Are all named beneficiaries and executors still alive? Rather than have property eventually wind up with persons in whom you aren't particularly interested, name contingent beneficiaries. Why run the risk that a court might have to name a substitute if your executor dies or becomes disabled? Name alternative executors.

Other typical events that may signal the need to go over your will:

  • Your family becomes bigger.
  • A substantial change in your financial situation.
  • Changes in your family status.
  • Sale of an asset mentioned in your will.
  • Change of guardian for children.
  • A move to another state.

Remember to update beneficiary designations for insurance policies and 401(k)s, IRAs, and other retirement plans. Otherwise, proceeds might wind up with a former spouse or someone you now consider unworthy.

Prepare a will or make sure an existing will is current. When you die without a will (intestate, in legalese), your assets pass in accordance with your state's intestacy laws. The absence of a will often means that your estate will be burdened with unnecessary administrative expenses and taxes.

When you make out a will or update an existing one, also prepare a letter of instructions. This is the legal term for an informal document in which, among other things, you list the location of your important per­sonal papers and assets.

Your heirs need to know what your assets are – traditional or Roth IRAs, 401(k)s and other retire­ment plans from your employer or your business, insurance policies, bank accounts, mutual funds, brokerage accounts and other holdings like real estate, jewelry, or art works – and how to dispose of them. Advance planning can help ensure that your intentions are carried out and that your heirs aren't taken advantage of by incompetent or dishonest advisors during a vulnerable time.

Living trusts. Consider the use of a living trust. With this kind of trust (also known as a “grantor” or “revocable” trust), it is possible to transfer property in a simple and relatively painless way that avoids some of the headache of probate. Unlike other types of trusts that are designed primarily to save income or estate taxes, you gain no income or estate tax advantages with a living trust. But assets channeled into a living trust go directly to your heirs. Thus, those assets usually escape what can be lengthy and costly proceedings.

Savings bonds. The US Treasury Department recommends that owners of savings bonds prepare a list that records serial numbers, issuance dates, and the name and address on each bond, along with the Social Security number of the owner. That list will make it possible for the Treasury to speed up the usual waiting period of at least six weeks for free-of-charge replacement of bonds that are lost, stolen, mutilated, or destroyed. Just make sure to keep that list in a safe place, such as a safety deposit box.

Seminars for seniors. Seniors should be wary of invitations to free lunch seminars hosted by retirement planning services and estate planners. Those kinds of free lunches frequently prove to be prohibitively expensive. An AARP survey of more than 1,000 people age 55 and older found that many who attended seminars on retirement and estate planning were “pitched investments that were unsuitable for them or were asked for information that could expose them to financial fraud.”

The invitations consistently offer the same enticements: “a free gourmet meal and tips on how to earn excellent returns on your investments, eliminate market risk, grow your retirement funds, and spouses are urged to attend. These words should be red flags for investors,” cautions the North American Securities Administrators Association (NASAA) on its website. The NASAA is an international organization devoted to investor protection.

Related articles:

Choose an Executor for Your Estate Carefully
Letter of Final Instructions: Why Writers Should Have One