Thursday, January 21, 2010

The Importance of Leaving a Will

Here is a great reminder of how important it is for everyone to make out a will, based on an actual case I've seen recently. A brother and sister came to see me today about their father's estate. The conversation went something like this--dad didn't leave a will, but always said that he wanted his property to go to us. They went on to explain to me that dad also had another child--who is disabled and on Medicaid and SSI. I had the job of explaining to them that, regrettably, the disabled daughter is also an heir of the estate under Indiana law and, what's worse, her inheriting the property could jeopardize her benefits. Also, because dad named his son as joint owner of a large bank account (with the intention that the son split it with one of the sisters) the son could be subject to Indiana inheritance tax, a problem that could have been avoided if dad had simply named both children as TOD beneficiaries.

Obviously, none of this was dad's intention. There may be solutions to some of these problems, but getting there is going to be much more expensive and complicated than if dad had simply sat down with an attorney and had his will drawn up. The amount of money his kids are going to spend now on legal fees will probably be 10 times more expensive (at least) than the cost of a simple will!

The bottom line is this: the law will not honor your wishes regarding the disposition of your estate unless you make out a will or have appropriate beneficiary designations for your assets.

Tuesday, January 5, 2010

Welcome to 2010!

Happy New Year! It's January once again, and if you're like me, you've already started the new diet and are wondering how long it's going to be until it finally starts to warm up. Hopefully, you are also starting to think about another important matter--getting your affairs in order, and by this, I mean updating your estate plan (or starting one, for that matter!)

If you are one of those folks I see all the time who has a 20 year old will sitting in a drawer at home, made dutifully when the children were little and life seemed a little less complicated, now is the perfect time to pull out that old document and replace it with something more up to date. If your will is up to snuff, it's still important to make sure you've covered all the bases, like having a power of attorney and living will too.

Here are some other things to do now to make sure your family is protected if a death or disability occurs--

  • Check beneficiary designations. It is crucial to have appropriate beneficiary designations for assets like IRAs, life insurance policies and annuities. Otherwise, your estate can potentially owe lots of money in extra taxes. Make sure that you have up-to-date primary and contingent beneficiaries named for these types of assets.
  • Organize financial records. Take it from me, trying to probate a disorderly estate is a real pain in the neck! You can help out your future executor immensely by organizing your financial records. Keep a file listing all assets and major liabilities, including account numbers and contact information for all financial advisors. Dispose of old records that no longer need to be maintained (no, you don't still need to keep that light bill from 1978--for an idea of how long to keep important records, look here.) Make sure your future executor knows how to access your records and other key documents, including any kept on your computer.
  • Consider long term care insurance. This is a big topic, but if you are between ages 55-65, now is an excellent time to consider buying a long term care insurance policy. This coverage tends to be expensive, but for those who can afford it, it can be highly worthwhile in the event long term care is needed. Also, with the Indiana Partners Program, individuals who buy long term care insurance can exclude up to 100% of assets if they exhaust their benefits and have to go on Medicaid.
Having a basic estate plan doesn't need to be expensive or complicated, but it does need to be done. Resolve to make it part of your action plan for 2010!