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10 Lessons from 2017 to Make Your Plan Work Better

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Posted on Jan 31, 2018 | Share this post: Like Us on Facebook Join Us on Google Follow Us on Twitter

Every year, we survey the Bogutz & Gordon staff and compile ten lessons learned from the prior year (supplemented by the rumor mill) that could help all of us plan a bit better.  In no particular order:

  1. Communicate. Clients often want to minimize conflict among their beneficiaries, and the best way is to talk about your decisions while you are here to explain them.  You absolutely should discuss with your agents under power of attorney the fact that they are named (it shouldn’t come as a surprise) and your wishes for health care and finances.  Your Living Will spells out a lot of detail, but can’t cover every situation. Talking is important.
  2. Don’t communicate. Your Will or Trust might be different.  If you tend to change your bequests, consider keeping mum.  Really mum.   That means don’t talk about changes you are thinking about making.  If different family members have different tales about what was said or promised, conflict is almost guaranteed.  Consider a letter of explanation to be opened after your death.  Consider clear documentation of your capacity to make decisions if your plan is outside the norm, which could include a letter from your physician confirming you are of sound mind.
  3. Understand your documents. Read them.  Ask questions.  Enlist a second opinion to provide an analysis.  With the increased exemption under the new tax law, some provisions might no longer be needed or you may want more to make your existing provisions more beneficial.  Consider a consultation with your estate planning attorney.  It may be impossible to understand every last detail in legalese, but you should understand the important substantive concepts of what happens at your death or incapacity.
  4. Use names. Wills and trusts should, whenever possible, eliminate any ambiguity.  Which means using people’s names.  If you say, for instance, “my son,” and you have two, a court proceeding may be needed to determine what you meant — even if one has been estranged for many, many years.
  5. Sign the Will. A lot of people feel tremendous relief after visiting an estate planning attorney and formulating a plan – and some never come back to sign the documents.  The plan won’t work if it’s not signed.
  6. Take your RMDs. If you inherit a tax-deferred account (such as a traditional IRA or 401(k)), it’s your responsibility to take the decedent’s RMD for the year they died if they didn’t take it.  Whoever administers the estate might help you, but it’s not their job, so don’t rely on them.  Contact the custodian, which should provide instructions.  However, before you take any money out, consider seeking advice from your own attorney, financial advisor, or tax professional, so you understand your choices and the tax implications.
  7. Don’t put kids on as joint tenant. Joint ownership with right of survivorship can cause lots of confusion and hurt feelings.  Often, neither parents nor children understand that, legally, a surviving joint owner owns the asset at the joint owner’s death.  Many times, parents trust that the child they’ve “put on the account” will divide it among their siblings.  Many times, the child doesn’t, legally doesn’t have to, and the other children have little recourse. This short cut may be workable for very small accounts, but not for assets of significant value.
  8. Contain disruptive beneficiaries. If you know one (or more) of your beneficiaries is likely to cause problems for the administrator of your estate, consider naming a neutral person or entity to handle your affairs.  Arizona has licensed fiduciaries who can help, and though they’ll charge a fee, the potential for retaining some family harmony and estate assets that may be spent if a dispute goes to court are often worth it.
  9. Add mental health powers. If you fear or know that you or a loved one might suffer from dementia or a mental illness, make sure you or that loved one has signed “mental health care powers” as part of their health-care power of attorney.  Doing so can save the heartache and expense of a court proceeding should inpatient treatment be needed. These provisions may not be used that frequently, but sometimes they are necessary even with someone who has had no history of mental illness.
  10. Hire an attorney. If a family member wants you to sign off on a plan that might affect your future interest – such as a parent gifting to create eligibility for VA benefits or Medicaid, hire an attorney to review the plan to ensure your interests are protected.  It might sound great for mom or dad, but you need to look out for you, too.

Runners up:

  • Revisit ALL beneficiary designations to ensure they match your wishes.
  • Make sure you head back to your attorney if you are married, divorced, or any important parties in your estate plan die.
  • If you have a trust, make sure it’s funded.