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You should have an estate plan. If you
have one, maybe its time to revise your present estate plan.
Whom do you want
to protect financially? Maybe your recently divorced or widowed?
There are several immediate steps you can take
to independently control your own plan. All of them require attention and
time, but none of them are complicated.
Make a list of whom you want to name as heirs
and what you want them to inherit.
You can always change your mind later. Wills,
revocable trusts (will substitutes that avoid probate), and designations
of beneficiaries are always revocable. Listing beneficiaries is not
enough.
Decide who will handle your affairs upon your
death.
Be sure to name successors, should one refuse to
serve.
If professional representation is needed because
of the complexity of your assets, or because there is no one close to you
to take over the helm, you can ask your Newbridge Financial Consultant
to act as your representative. The downside to this is the cost. Expect a
management fee each year if you set up a trust that continues after your
death. Or, if your estate has no trusts to manage, the trustee will charge
a percentage of the estate’s value to administer it when you die. Most
of these fees are fixed by state statute, although you can negotiate.
Update your power of attorney and health-care
proxy documents.
Your power of attorney and health-care proxy can
profoundly affect the quality of your life. Usually you designate your
main beneficiary to act in your stead if you become mentally or physically
disabled. For such personal issues as health care and bill paying while
you’re ill, try to select a close confidante and make him or her aware
of your wishes.
If necessary, your Newbridge Financial
Consultant will recommend a lawyer, an accountant, bank or trust
company who will act on your behalf. But, again, there is a fee and they
will only do so if they also handle your estate matters. As with wills,
both of these documents can be changed.
Both health-care proxies and powers of attorney
are routine documents available through your lawyer, software programs or
in bookstores. Be sure that the power is "durable." It should
have a clause that keeps it in effect even if you become incompetent.
Update your will and other documents
If you’re recently widowed or divorced, many
of your assets may still be in the name of your spouse, naming you as
beneficiary. You must retitle the ownership on everything from your bank
statements and brokerage accounts to motor vehicle registration, deeds,
co-ops, wills and all other property. Make your list. Then call the
custodian or person in charge of the paperwork. Ask him or her to send you
the change of ownership and beneficiary forms.
The procedures vary by asset and custodian. In
most cases, you will need a death certificate and proof that you represent
the estate. For the latter, you will need a letter testamentary if your
spouse made a will, or a letter of administration if there was no will.
Both are obtained through probate procedures in the court.
If your spouse’s assets are held in a living
trust, or jointly with you, you’re automatically authorized to represent
the estate. But you may still need an estate tax waiver.
If you’re divorced, you'll need certified
copies of the divorce decree and the cooperation of your spouse. He or she
must sign over marital property that now belongs to you or face a court
order. The divorce attorneys usually "mop up" this paperwork end
game.
Here are some "do's" to follow:
Do designate beneficiaries
Once you own the asset, go back and rethink your
initial "bounty list." If it's the same, change the
beneficiaries on insurance policies and accounts. When you do so, put in
more than the name. Be sure the custodian knows what to do if the
beneficiary dies before you.
Do take extra care with pension designations
Minors can be beneficiaries of all types of
insurance or retirement plans without creating a trust. A custodian must
be named. Without a trust, the children get the money immediately upon
reaching the age of majority in the state where they reside.
As for retirement accounts, a non-spouse
beneficiary must either take out all the money and pay taxes on it in the
first five years after your death, or, if you already started to take out
money, the beneficiary must withdraw on the same schedule as if you lived.
If you have not started to withdraw funds from a
pension, do meet with an accountant or estate planner to determine the
best withdrawal election for you and your heirs. Even if withdrawals have
begun, there may be ways to stretch the withdrawal period for your heirs.
Do use insurance
You can buy a life insurance policy and name a
loved one as beneficiary. But you should also consider a
"second-to-die" insurance policy.
The underwriting of second-to-die policies is
cheaper, because both of the insured must die before the death benefit is
paid.
While this strategy is usually presented to
couples, it also works for singles. Simply make the measuring lives yours
and your adult child's. Your grandchild can be the beneficiary. You may
find that a small premium can result in a dynamite legacy to a loved one
or a charity.
Do make your own will or set up a trust,
which can avoid probate court.
If you have assets in several states, your
estate will be subject to multiple probates, so a trust is a good idea.
Aside from that, choose between a will and a trust based on the difficulty
of probate in your state, and your interest in the extra privacy a trust
affords.
Do consider charities
The most creative estate planning for singles is
through charitable remainder and lead trusts. With the former, you
transfer an appreciated asset to a charity. The charity will sell it for
you and invest the entire proceeds (no reduction for capital gains). You
get a tax deduction equal to the fair market value of the gift when given,
not when you acquired it. And you enjoy a lifetime annuity from the
investment.
With the lead trust, you leave a sum to charity
in your will. The charity invests it for an annuity to a beneficiary named
by you. Upon the beneficiary's death, the charity gets the remainder. In
this way, you funnel money to heirs, but get an estate-tax savings
according to an IRS table that takes into account the age of the
beneficiary.
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