|Everyone has personal possessions -- jewelry, family heirlooms, furniture, silverware, auto, boat and trailer, RV, paintings, collections, household linens, that antique lamp. Who gets these things when you die? Some of you are fortunate enough to have tangible fixed property such as homes, vacation condos or homes, land, and time-share residences. At your death, who gets the ownership title? If you are more fortunate, you have invested assets such as bank accounts, certificates of deposit (CDs), stocks, bonds, mutual funds, fixed or variable annuities, life insurance, IRAs, and other retirement plans. At your death, who should have ownership or be the beneficiary of these assets?
Estate planning answers all these questions, and your will and other documents provide the answer to who and what.
You need a will, even if you don't have a buck in the bank or your pocket. Simply naming your surviving spouse is not enough, since there is always the possibility of a disaster in common like a car accident, in which you are both killed. If you have children who are minors or disabled, your will spells out who is to be their guardian or tutor. It's not a good idea to leave this vital choice up to a state court judge, simply because he or she doesn't have the knowledge about the situation the way you do. And because of all that, you don't have to have an estate or death tax problem or over $675,000 in total assets to need a will.
A will is only one part of your estate plan, but it is the most basic and vital part. It must always be current and reflect the frequent changes in tax laws and regulations by Congress and the Internal Revenue Service (IRS).
You should keep your will and other documents together in a protected place, preferably in a fire-resistant filing cabinet, safe, or box. Storing them in a safe-deposit box in a bank can create inconveniences for your heirs, unless it is registered in a business name with signatures from family members from as far back as two generations. Banks are required to seal a personal safe-deposit box in the event of death of the owner or spouse. For someone to open this box and obtain the inventory, a lawyer and court order are necessary, both of which will cost time and money.
Here are the very minimum documents and papers that you should keep in your protected place:
1 Original copies of wills (both yours and your spouse's), properly witnessed in accordance with your state of domicile's requirements. You don't have to reside in that state, however. (Your "state of domicile" is the one you designate by filing your income tax from an address in that state, being registered to vote -- and actually vote in person -- have your driver's license from that state, and preferably register your personal car in that state. Owning property, sleeping in that state for so many days, having an actual residence -- whether rented, leased, or owned -- are not involved, contrary to widely held beliefs; an exception to this is if you actually have lived in a high estate-tax state and then claim another state as domicile -- for example, New York to Florida.)
2 Tangible personal property memo signed by you and your spouse. This should list all items of value -- monetary value as well as sentimental value -- along with the person who will receive each item. This memo is in addition to your will. Do not include this information in the will itself because items in the memo may change frequently. In addition, including such information in a will could trigger an Irs audit.
3 Copy of beneficiary designation form or letter including contingent beneficiaries for every IRA, annuity, life insurance policy, and retirement plan.
4 List of all bank accounts, broker or mutual fund accounts, the location of the box containing your will and a key, and the name of the person who can sign on the safe-deposit box.
5 Limited power of attorney or revocable living trust.
6 Funeral and burial instructions.
7 Any and all trust documents.
8 Advance medical directions. A medical power of attorney is necessary in case of incompetence, as well as a living will regarding the withdrawal of life support systems.
9 Location of all current insurance policies: life, accident and disability, homeowner's, automobile, liability, and so on.
10 List of all advisors -- doctors, lawyers, accountants, minister -- as well as auto mechanic, plumber, electrician, heating and cooling technician, appliance and television serviceperson,%A0 close friends, and so forth. When a common disaster strikes both husband and wife, anyone trying to pick up the pieces is helpless without this information.
11 Names and addresses of debtors and creditors with amounts and nature of transactions.
Be aware that wills and trust documents have no bearing or impact on Ira and retirement plans, annuities, or life insurance policies. Only the beneficiary designation for each has any legal standing to authorize proper distribution. Recently announced changes in IRA and retirement program distribution rules by the Irs may change this warning relative to IRAs.
Sit down with your children and grandchildren to explain your plans and the reasoning behind them. Allow them to express their interest in specific items in an initial discussion and get their requests out on the table. This will make your asset assignment task easier. After all, someone will have to do most of this after your death, so why put it off -- especially when you are in control? Family feuds and bitterness often surround the settlement of an estate, and usually over a $20 item!
Start creating a list of all your personal items, tangible assets, bank accounts, broker or mutual fund accounts, insurance and annuity policies, Iras and other retirement plans, cars, boats, and so on. Employ an attorney to draft wills. If you have a sizable estate, make sure you get a board-certified estate and probate attorney as well as a financial planner. If you don't do this, you might end up buying annuities, life insurance, and WRAP brokerage accounts with an incomplete estate plan.
Morley Hudson is a mechanical engineer and former Louisiana State Representative. He is a retired estate executor, trust manager, and investment manager.
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