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Estate Planning Review for 2019

Your estate plan has a big impact on your finances and should be considered as important as your investment portfolio, says Wealth Management in the recent article “Eight Simple Estate Planning Review Items for 2019.”

Here are the items that may need your attention:

Beneficiary designations

When was the last time you checked these? Beneficiary designations are usually created when an account is initially opened, and often that’s the last time people see them. That is a huge mistake, because those beneficiary designations control what happens to the asset after the owner passes away. Look at beneficiary designations for financial accounts of all types, including bank, stock brokerage, retirement assets,  and life insurance products.

Digital asset designations

This is a relatively new area, but very important. Even if you don’t own any cryptocurrency, chances are you have assets like photos, reward points, websites and more. Each social media platform has a different policy for how accounts are treated on the death of the owner. You’ll need an inventory and may want to use an online service for managing your digital assets after you die.

Trust funding

This is where many estate plans fall apart. Funding trusts often requires changing titles on bank accounts, homes and other assets into the name of the trust. Major purchases, like a new home, also need to have their titling corrected so they are owned by the trustee of the trust.

Documents for adult children

When your children turn 18, they are legally adults and you do not have the legal right to get information or make decisions on their behalf. If you don’t have HIPAA releases (for protected medical information), Powers of Attorney and other documents, you may find yourself unable to help in an emergency. Oh and by the way, you will definitely need those documents for yourself as well, so that your loved ones are able to act on your behalf if you are unable to act due to incapacity. 

Keep up with life changes

Review your estate plan with an eye to major changes in your life or that of your loved ones: births, deaths, marriages, divorces, big purchases, etc. If you haven’t met with your estate planning attorney or had a phone conversation in a few years, make an appointment now for a review.

Keep up with changes in the law

The Federal Estate Tax exemption is currently $11.4 million, up from $11.18 million in 2018. For married couples, the exemption (whether through “portability” or through a properly drafted trust) for married couples is $22.8 million.  Those gigantic exemptions mean that many old AB trusts (also referred to as bypass or exemption trusts)  are no longer needed for estate tax avoidance. Moreover, outdated AB trusts may also:

  1. Unnecessarily complicate the administration process after the death of the first spouse; and/or

  2. Cause the loss of the “double step-up in basis” at the first spouse’s death, which would have been available through either a simple probate avoidance trust or marital deduction trust (or QTIP Trust). That means the loss of potentially big tax savings for a surviving spouse who decides she wants to sell the house following the first spouse’s death. In and near the Bay area and other parts of California, that can be a devastating amount of tax that otherwise could have been avoided. 

Secure photos and memories

How many times have we watched dramatic images of fires, floods, and earthquakes in 2018? Videos, photos, family heirlooms, and artifacts and other irreplaceable items should be stored in some digital format, or in the cloud. If the family includes artists, take photos of paintings or sculptures so at least you have an image of the item should it be destroyed.

Discuss wishes with loved ones

One of the biggest challenges after someone passes, is knowing what they wanted to be done with their personal possessions. If you have every Beatles album, unopened, what do you want to happen to your collection? Make inventories and then tell your family what you’d like to have happen with your possessions. You can create a “Legacy Letter” and put it down on paper. It’s not legally binding, but it will give your family some direction and can work especially well when paired with a trust as a guideline for the trustee in exercising their judgment and discretion in fulfillment of your wishes.

Prepare for incapacity

This is not everyone’s favorite task, but necessary. I just can’t emphasize enough how much this one saves in terms of future stress. Think about it, if you were alve but unable to communicate, what information would your family need? Work with your estate planning attorney to create the necessary legal documents, including medical directives and powers of attorney, and tell your family members where they are located. Some families keep certain documents (like a Do Not Resuscitate or lists of medications) out in plain view, so that Emergency Responders can gain access to important medical information quickly in an emergency. Legal documents should be kept in a place where they can be retrieved by the family members or other persons named in those documents. For example, both of my parents found themselves in the hospital with serious issues in 2017-2018. When the attending physicians asked about their advance medical directive, I knew where to locate them later that night when I dropped by their house. When their bank asked a power of attorney document so I could pay for their needed expenses, I knew where to look. I can’t imagine how challenging and stressful it would have been if none of that was in place.  

Yes, it’s admittedly a good-sized list of to-dos’, and it’s a process. However, start in January 2019, so you and your loved ones enjoy the protection you need.

Reference: Wealth Management (Dec. 12, 2018) “Eight Simple Estate Planning Review Items for 2019”


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