Estate Planning Yearly Review
Every year, you should review what’s changed in your assets, liabilities, goals, and planning for the future. This is Your Yearly Estate Review Checklist, or series of issues, and should help guide that discussion for your estate plan.
ESTATE PLAN CHECKLIST FOR OUR CLIENTS
Have you recently reviewed beneficiaries on your bank accounts, life
insurance, Pension, IRA? As your life progresses, you might want to change your beneficiaries. I
remember a highly publicized news item last year – a married woman died and left nearly $1
million in her pension account, which she opened when she was still single, and named her
mother, uncle and sister as beneficiaries. She later got married but never changed the
beneficiary to her husband. The couple was happily married for nearly 20 years when the wife
died suddenly of a massive heart attack. The husband said he never doubted he’d be entitled to
the lump-sum payment because they received annual statements that indicated no beneficiary
was named, which would make him, as her husband, the beneficiary. But after she died,
officials found a form which had been filled out 27 years ago. Her mother and uncle were
already gone and her sister received the whole amount. The husband received not one single
dime. Please take some time to make sure your beneficiary forms are updated.
2. Title of your assets:
Do you know how you hold the title to your property? If your property
is owned by more than 2 persons, there are several different ways to hold the title and that
makes a difference in how the inheritance will be handled and taxed upon one of the owner’s
death. If you have a Trust, make sure that your assets are titled in the name of your Trust.
Failing to title your assets correctly will result in an unnecessary and wasteful court process.
3. Medical Insurance: Is your medical insurance coverage appropriate to your current
situation? Choosing the correct insurance plan is not an easy task. When premiums went up,
people usually switch to the plan with higher deductible in order to reduce their premium. But
there are so many plans out there and you might find the plan with same or lower premium
with better coverage. It might be cheaper to cover your child in a separate account. If you need
prescription medicine regularly, changing to the plan that will cover generic medicine without a
deductible might save you money.
4. Life Insurance:
Is your life insurance appropriate to your current situation? Most of us buy
life insurance to cover dependants’ living cost or mortgage payments in case the wage earner of
the family dies prematurely. Once children grow up, you may not need life insurance anymore.
But there are other ways to utilize life insurance for estate planning purposes and as an
5. Preparation for Incapacity:
Review your estate plan for your health and finance in case of
your incapacity. You are more likely to face incapacity in a given year than you are to die. What
happens if you become incapacitated? Does your plan provide for the appointment of a cotrustee
if you decide you no longer want to serve on your own? Does your plan define
incapacity? Healthcare Directives and Powers of Attorney are the documents your family will
need if you become incapacitated and someone needs to make medical, financial or legal
decisions on your behalf. These documents must be updated on a regular basis to reflect
changes in the law.
6. Your investment portfolio:
Review the performance of your Mutual Funds, IRA, 401(k), Variable Annuities. Global economic situations fluctuate. Your investment allocation should be modified from time to time accordingly so that your nest egg will achieve maximum possible growth while avoiding loss as much as possible. Depending on your stage of life, consider changing your allocation to a more conservative or aggressive one. Also, if you are receiving social security income and paying income tax on it, you might want to consider selling your mutual fund portfolio and buy Annuities in order to reduce your income to the level that yoursocial security income will not be taxed.
7. Retirement Accounts:
Have you funded your retirement account to the maximum allowed amount for this year? If not, fund it now if you still can. IRA and Roth IRA can be funded until 4/15 for this year’s contribution but most others can’t.
8. Estate Taxes:
Review your asset list. If the current value of your assets is more than $2M, you need to do something to avoid estate taxes. Not knowing how to avoid estate tax is an expensive mistake but easily avoidable. A bad plan can result in a 46% estate tax on assets over $2M. This adds up to $460,000 on a $3M estate.
9. Your Trust Documents and your Will:
Make sure they are still consistent with your wishes. And don’t store your estate planning documents in your safe deposit box. After someone’s death, accessing a safe deposit box can be extremely difficult, especially if the papers specifying who is authorized to enter are inside the safe deposit box. This mistake can result in an otherwise-avoidable court hearing and cost. Store your important documents where they will be readily accessible.
10. Talk to your family:
Make time to talk with your family members about your estate plan. It
can be very difficult for your children to start estate planning discussions with you. I’m sure
they will appreciate it very much when you openly discuss it with them.
Your Yearly Estate Review Checklist is a review for your assistance.
You can also talk to us anytime about any questions about your estate plan. Our Orange County Estate Planning Lawyers are here to help guide you through this process.