ESTATE PLANNING CHECKUP: ARE YOUR AFFAIRS IN ORDER?
- Do You Have a Will or Trust?
Each of us should have a valid will or living trust.
Your will or trust should be
Does your designated executor or successor trustee know what to do and where to find important papers when the time comes?
- Is your named executor (or successor trustee) still living and still willing
and able to serve?
- Do you have a backup executor/successor trustee named, just in case?
- Are all of your named beneficiaries still living, and do you still want to
leave them what the will (or trust) says they are to receive?
- Did you disinherit someone with whom you have since reconciled?
- Does your will or trust give someone a specific asset that you no longer own?
- [For revocable living trusts]: Is your trust properly funded? (Do you hold
title to your assets as trustee of your trust, or just in your own name?)
Are your beneficiary designations current?
The ultimate distribution of many assets will be determined by their beneficiary designations. Life insurance, IRAs and other tax-deferred retirement accounts, annuities, and U.S. Savings Bonds all allow for designated beneficiaries.
Do you know how property titling will affect your plan of distribution?
- Do you know who your designated beneficiaries are? Are they still alive?
- Have you named contingent (secondary) beneficiaries?
- Are any of your designated beneficiaries minor children (under 18)? Would
you prefer to restrict their access to these funds until a later age?
- Did you name your “estate” as a beneficiary on anything? (This can subject
the asset to probate, even if you might otherwise have avoided probate.)
- If you are leaving a gift to charity through your will or trust, have you
considered naming the charity as a designated beneficiary on a tax-deferred
annuity or retirement account (thereby eliminating the income tax liability)?
If your spouse has died, have your assets been properly re-titled?
- Joint Tenancy may avoid probate, but is it the ideal solution? (Community
Property With Right of Survivorship titling is now an option for spouses in California.)
- Don’t count on someone else to redistribute assets after you die if they were
already on title as a Joint Tenant. Even if they do carry out your wishes,
they may be making taxable gifts that could adversely impact their own estate.
- Consider “ITF” (“in trust for”) or “POD” (“pay on death”) designations on accounts as an alternative to joint tenancy.
Do you have a current valid Durable Power of Attorney?
- Joint tenancy assets should be in the name of the surviving spouse:
-- Real property requires the recording of an Affidavit of Death of Joint Tenant.
-- Bank and investment accounts should be titled in the surviving spouse’s
name and use that person’s Social Security number.
- Trust accounts should be retitled in the name of the surviving spouse as trustee;
if an A-B trust is involved, assets should be further re-titled into the subtrusts
and the irrevocable trust must have its own tax ID number; the trustee
must file annual federal and state trust returns in addition to the surviving
spouse’s personal income tax returns.
Do you have a current valid Health Care Directive/Power of Attorney?
- In the event of your incapacity, who will take care of things for you?
- Is your designated agent still living? Do you have an alternate agent named?
Are these people still the right folks for the job?
- Does your agent know that you have named him or her as your agent?
- Will your bank require you to do a separate power of attorney (on the bank’s
own forms) for your bank accounts?
Are you making gifts to family/friends/charity?
- Durable Powers of Attorney for Health Care executed prior to 1992 all have
expired and should be redone. (Old forms had 7-year expiration dates.)
- As of July 1, 2000, the Advance Health Care Directive is the standard form (although unexpired DPAHC’s are still valid, too).
- Are the people you named as your agent and alternates still the best people
for the job?
- Does your health care directive include a provision that waives the HIPAA
restrictions on access to your medical records? If not, you should get yours
updated to include this.
- Are the agents’ addresses and phone numbers in the document current?
- Do your agents each have a copy of the document?
- Does your doctor have a copy?
- If you have made arrangements for your burial or cremation, do your agents
know about this? Do they know where to find your contract or other papers?
If you own a business, what happens to it upon your death?
- The annual limit for gifts to individuals is now $13,000 per person per year –
the total of your gifts to any one person in one year over that amount
normally requires the filing of a gift tax return. [Note that if you make a gift
by naming someone as a Joint Tenant with you on real property or securities, this
results in a completed gift for gift tax purposes – if the value of what you give to
them is more than $13,000, you have made a taxable gift that must be reported.]
- Remember, too, that when you give an appreciated asset to a family member
or friend, they take the asset with your original cost basis. If you had a gain
in the value of the gifted asset and the other person sells it, they will be
responsible for paying a capital gain tax upon the sale.
- If you normally make cash gifts to your favorite charities, consider donating
appreciated securities (stocks, mutual funds) instead if you have such assets.
You get a full value charitable deduction, and no one pays tax on the capital
- Note: There is no limit on gift funds paid directly to an educational institution for
another’s tuition, or for payments to third parties for another’s health care.
What about estate taxes?
- Do you have a buy-sell agreement with someone or some other business
- Should you have life insurance to fund a buy-sell agreement?
- Will the business end with you?
- If a family member works in the business, have you arranged for that
person to inherit the business at your death?
- Does the business have debts that need to be paid off at your death?
- If you have a large estate (more than the allowable exemption*), how will
the taxes get paid? Do you have a plan for this?
- Do you have sufficient liquid assets to pay the taxes that will be due in cash
9 months after your death (assuming no surviving spouse)?
- Have you done all you can to minimize or eliminate estate taxes?
- Have you considered gifts to charity to reduce your taxable estate?
If you and your spouse have an “A-B” trust, but your combined assets do not exceed
$3,500,000 (the current exemption amount), do you still need the “A-B” trust
provisions? Will this create undue hassle and expense for the surviving spouse?
If you don’t know whether you have an A-B trust or not, you should have your
trust reviewed by a knowledgeable estate planning attorney.
* The historic estate tax exemption amounts are as follows:
||(no more estate tax?)*
* Note that the current estate tax law contains a “sunset provision” which terminates the current estate tax law in 2011, so the earlier estate tax law could be reinstated if Congress fails to change the current law before then. If the sunset provision takes effect, it will restore the estate tax and drop the exemption amount back down to $1,000,000. It is unlikely that Congress will allow the estate tax to go away, even for one year. Several bills currently pending in Congress would leave the individual exemption at $3,500,000 for 2010 and thereafter, while keeping the estate tax at 45%.
The Living Trust, by Henry W. Abts III, (latest edition) is an excellent resource for the lay person, written in plain English. Covers not only living trusts but also probate, joint tenancy, estate taxes and many other important estate planning topics.
Understanding Living Trusts, by Vickie and Jim Schumacher (latest edition), is another excellent resource in plain English.
How to Settle a Living Trust, by Henry W. Abts III.
What to Do When Someone Dies, by Milton Berry Scott.
The Executor’s Guide, by Mary Randolph (Nolo Press).
Nolo Press, 950 Parker Street, Berkeley, CA 94710 publishes numerous legal self-help books on a wide range of topics. Their publications are thorough, detailed and very well done, and they offer books on wills, living trusts, probating an estate, conservatorships, guardianships, powers of attorney, and many other topics. Write for a catalog or check your local bookstore.
Legal Services for Seniors, 915 Hilby Avenue, Ste. 2, Seaside, CA 93955. Phone: (831) 899-0492. Monday through Friday, 9AM to 5PM. LSS provides help to seniors age 60 and up who are Monterey County residents. Services are free, though tax-deductible contributions are welcome. They can help with:
- Social Security, SSI, and private pension problems
- Health care, Medicare, Medi-Cal and private health insurance problems
- Physical elder abuse
- Financial elder abuse/consumer fraud
- Housing rights, neighborhood disputes, and landlord/tenant issues
- Durable Powers of Attorney for Health Care/Advance Health Care Directives
and long-term care problems
- Simple wills and questions about living trusts
- Consumer and debt collection problems
- Problems with family members
- Review of contracts and other legal documents
- Many other types of legal problems (for some matters they will refer out)
QUESTIONS YOU SHOULD ANSWER FOR YOUR DESIGNATED EXECUTOR OR SUCCESSOR TRUSTEE
Your Executor/Successor Trustee needs to know answers to the following questions (as many as apply in your case):
- Where do you keep your will or trust?
- Do you have any special directions for them regarding how your assets are to be distributed (especially tangible personal property like jewelry, art, books, collectibles, furniture, etc.)?
- What sort of assets do you have? (Real estate, stocks, bonds, mutual funds, life insurance, annuities, U.S. savings bonds, bank accounts, partnerships, a business?)
- (If you have a living trust . . . ) Are all of your assets properly titled in trust name?
- Do any of your beneficiaries owe you money? If so, how should this be handled? Will this be considered a part of that person’s share of the estate, or what?
- Will there be enough cash available to deal with foreseeable expenses and taxes?
- If there will be estate taxes due and payable, what assets will be used to pay for this?
- Is there any life insurance? If so, who is the beneficiary? Where is the policy?
- Are there other assets that will pay death benefits? If so, how do I claim these?
- Who are the designated beneficiaries on IRAs, annuities, and other such assets?
- What are your debts/liabilities (and contingent liabilities) and how will these be paid?
- Will there be any ongoing support obligations for your dependents?
- Where are your important papers kept? [deeds, vehicle “pink slips”, savings bonds, stock certificates, investment and bank account statements, insurance policies, pension information, etc.]
- Do you have a safe or safe deposit box? If so, where is it located, and where is the key/combination kept?
- If there is a business involved, what is the plan for business continuation or transfer upon your death? Where are the business records kept?
- What are the names, addresses and phone numbers of all your beneficiaries?
- What are the names, addresses and phone numbers of your accountant, attorney, investment advisor, insurance agent?
- Do you have a cemetery plot or prepaid mortuary arrangements?
- Are there any special circumstances involving your beneficiaries that I should know about? [problem relationships, troubled marriages, substance abuse problems, physical or mental disability, financial irresponsibility, threatened lawsuits, etc.]
- If you keep your financial records on a computer, please give details and password.
INFORMATION REQUIRED FOR DEATH CERTIFICATE
This is the information that the State of California requires on a Death Certificate.
All too often, the person who dies is the only one who knows some of these details.
- Your Full Legal Name
- Your Date of Birth
- Social Security #
- State (or Country) where you were born
- Military Service (Yes / No)
- Marital Status
- Education (# of years completed/highest degree earned)
- Usual Employer
- Kind of Business
- Years in Occupation [or, what year did you start in this occupation?]
- Years Residing in County of Residence [i.e., what year did you originally move to this County?]
- Usual Residence Address
- Full Name of Surviving Spouse (if applicable)
- Full Name of Your Father
- Full Name of Your Mother
- Father's Birth State (or Country)
- Mother's Birth State (or Country)
- Burial/Cremation Specifics and Place of Final Disposition [if known ahead of time]