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10 Planning Lessons to Learn from 2014

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Posted on Jan 30, 2015 | Share this post: Like Us on Facebook Join Us on Google Follow Us on Twitter

At the end of each year, we survey Bogutz & Gordon staffers to determine how clients might improve their estate planning, based on stumbles they have observed or heard about over the past year.  Here are the top 10, in no particular order, for 2014:

1) Know how you hold your accounts.  If you added a child to your bank account, are they a joint owner?  If so, the account will pass to only that child upon your death.  Or are they an authorized signer?  That would allow the account to pass to your named beneficiaries.  Or you could make the child agent under power of attorney and leave his/her name off of your accounts entirely.  Understand the legal effect of each option.

2) Know how you hold title to real estate.  If you are married, do you hold title as community property with right of survivorship?  This is preferred because the property passes to the survivor outside of probate and the survivor gets a step up in basis for the value of the entire property.  If you hold title as only community property — no right of survivorship — the deceased owner’s half does not pass automatically and a proate proceeding may be needed. Confused?  Check your title, and discuss how the titling affects your estate plan with your attorney.

3) Be VERY wary of drafting changes to your estate plan yourself.  Any changes to your will and/or trust need to follow certain formalities, and if such formalities are not followed, your change might not be valid — or it might spark a long, expensive court fight to determine whether it is.  Attorneys typically do not charge that much for simple changes; look into it before you go it alone.

4) Also be wary of using document preparers or DIY software.  Neither offers any legal advice for your specific situation.  If there’s a problem, neither will be able to tell you.  With document preparers, even if you point out a possible issue, they can’t answer your questions or advise you; they are barred from giving legal advice.  So you’ll be heading off to a lawyer anyway.  And from what we have seen, document preparers don’t charge significantly less, and in our (admittedly self-serving) view, it’s not worth the minimal savings. 

5) Re-visit your plan.  Estate and income tax laws have changed dramatically in the past several years.  Older techniques to avoid estate tax — such as trusts with an A-B split, qualified personal residence trusts, irrevocable life insurance trusts, and irrevocable trusts — might have scary income tax consequences. Visit with your estate planner and/or your CPA to evaluate your situation and your options.  (Even irrevocable trusts can be terminated if certain conditions are met.)

6) If you make changes, be thorough.  Remember to revoke old documents, and then change beneficiary designations to remove old beneficiaries, including that trust with your former spouse!

7) Revisit ALL beneficiary designations.  Dig through your drawers.  Check designations on all policies.  

8) Read your documents.  Make sure everything you asked for is in them.  Does your current plan still suit you, given the changes in the estate tax and any developments in your family situation? 

9) Consider charities.  Are there causes you believe in or organizations that have helped you or other loved ones?  Think about giving back, especially with tax-deferred assets such as 401(k)’s or traditional IRAs.  The charity won’t pay tax, so your money goes a lot farther.   

10) Take the job of agent under power of attorney, personal representative, trustee, guardian, conservator seriously.  If you are named in these roles, understand that it’s a job with serious consequences if you make mistakes.  Get legal advice and help early if you’re not sure what you are doing.