• ARE YOU PREPARED TO RETIRE

    A Primer for Estate Planning

     

    Things to check and double-check.

     

    Provided by MidAmerica Financial Resources

                                                                                                                                               

    Estate planning is a task that people tend to put off, as any discussion of “the end” tends to be off-putting. However, people without their financial affairs in good order risk leaving their heirs some significant problems along with their legacies.

     

    No matter what your age, here are some things you may want to accomplish this year regarding estate planning.

     

    Create a will if you don’t have one. Many people never get around to creating a will, not even buying a will-in-a-box at a stationery store or setting one up online.

     

    A solid will drafted with the guidance of an estate planning attorney may cost you more than a will-in-a-box, but it may prove to be some of the best money you have ever spent. A valid will may save your heirs from some expensive headaches linked to probate and ambiguity.

     

    Complement your will with related documents. Depending on your estate planning needs, this could include a trust (or multiple trusts), durable financial and medical powers of attorney, a living will, and other items.

     

    You should know that a living will is not the same thing as a durable medical power of attorney. A living will makes your wishes known when it comes to life-prolonging medical treatments, and it takes the form of a directive. A durable medical power of attorney authorizes another party to make medical decisions for you (including end-of-life decisions) if you become incapacitated or otherwise unable to make these decisions.

     

    Review your beneficiary designations. Who is the beneficiary of your IRA? How about your 401(k)? How about your annuity or life insurance policy? If you aren’t sure, then be sure to check the documents and verify who is the designated beneficiary.

     

    When it comes to retirement accounts and life insurance, many people don’t know that beneficiary designations take priority over bequests made in wills and living trusts. If you long ago named a child now estranged from you as the beneficiary of your life insurance policy, he or she will receive the death benefit when you die, regardless of what your will states.1

     

    Time has a way of altering our beneficiary decisions. This is why some estate planners recommend that you review your beneficiaries every two years.

     

    In some states, you can authorize transfer-on-death (payable-on-death) designations. This is a tactic against probate: TOD designations may permit the ownership transfer of securities (and in a few states, forms of real property and other assets) immediately at your death to the person designated.2

     

    Create asset and debt lists. Does this sound like a lot of work? It may not be. You should provide your heirs with an asset and debt “map” they can follow should you pass away, so that they will be aware of the little details of your wealth.

     

    * One list should detail your real property and personal property assets. It should list any real estate you own and its worth; it should also list personal property items in your home, garage, backyard, warehouse, storage unit, or small business that have notable monetary worth.

    * Another list should detail your bank and brokerage accounts, your retirement accounts, and any other forms of investment, plus any insurance policies.

    * A third list should detail your credit card debts, your mortgage and/or HELOC, and any other outstanding consumer loans.

     

    Think about consolidating your “stray” IRAs and bank accounts. This could make one of your lists a little shorter. Consolidation means fewer account statements, less paperwork for your heirs, and fewer administrative fees to bear.

     

    Let your heirs know the causes and charities that mean the most to you. Have you ever seen bereavement notices requesting that donations be made to an organization or charity in lieu of flowers? If that’s something you would like to happen, write down the associations you belong to and the organizations you support.
     

    Select a reliable executor. Who have you chosen to administer your estate when the time comes? The choice may seem obvious, but consider a few factors. Is there a possibility that your named executor might die before you do? How well does he or she comprehend financial matters or the basic principles of estate law? What if you change your mind about the way you want your assets distributed – can you easily communicate those wishes to that person?

     

    Your executor should have copies of your will, forms of power of attorney, and any kind of health care proxy or living will. In fact, any of your loved ones referenced in these documents should also receive copies of them.

     

    Talk to the professionals. Do-it-yourself estate planning is not recommended, especially if your estate is complex enough to trigger financial, legal, and/or emotional issues among your heirs upon your passing.

     

    Many people have the idea that they don’t need an estate plan because they aren’t “wealthy.” Keep in mind: money isn’t the only reason for an estate plan. You may not be a multimillionaire yet, but if you own a business, have a blended family, have kids with special needs, worry about dementia, or cannot stand the thought of probate delays, plus probate fees whittling away at assets you have amassed, these are all good reasons to create and maintain an estate planning strategy.

      

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com www.mid-america.us

     

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

     

    Securities and advisory services offered through National Planning Corporation (NPC), Member FINRA/SIPC, a Registered Investment Adviser.
    MidAmerica Financial Resources and Malan Financial Group are separate and unrelated companies to NPC.

      

    Citations.

    1 - thebalance.com/why-beneficiary-designations-override-your-will-2388824 [10/8/16]

    2 - fool.com/retirement/2017/03/03/3-ways-to-keep-your-estate-out-of-probate.aspx [3/3/17]

     

     

     

     

     

     

  • The Importance of TOD & JTWROS Designations

    A convenient move that could ward off probate on your accounts.

     

    Provided by MidAmerica Financial Resources

       

    TOD, JTWROS...what do these obscure acronyms signify? They are shorthand for transfer on death and joint tenancy with right of survivorship – two designations that permit automatic transfer of bank or investment accounts from a deceased spouse to a surviving spouse.

     

    This automatic transfer of assets reflects a legal tenet called the right of survivorship the idea that the surviving spouse should be the default beneficiary of the account. In some states, a TOD or JTWROS beneficiary designation is even allowed for real property.1

     

    When an account or asset has a TOD or JTWROS designation, the right of survivorship precedes any beneficiary designations made in a will or trust.1,2

     

    There are advantages to having TOD and JTWROS accounts ... and disadvantages as well.

     

    TOD & JTWROS accounts can usually avoid probate. As TOD and JTWROS beneficiary designations define a direct route for account transfer, there is rarely any need for such assets to be probated. The involved financial institution has a contractual requirement (per the TOD or JTWROS designation) to pay the balance of the account funds to the surviving spouse.1

     

    In unusual instances, an exception may apply: if the deceased account owner has actually outlived the designated TOD beneficiary or beneficiaries, then the account faces probate.3 

      

    What happens if both owners of a JTWROS account pass away at the same time? In such cases, a TOD designation applies (for any named contingent beneficiary).3 

     

    To be technically clear, transfer on death signifies a route of asset transfer while joint tenancy with right of survivorship signifies a form of asset ownership. In a variation on JTWROS called tenants by entirety, both spouses are legally deemed as equal owners of the asset or account while living, with the asset or account eventually transferring to the longer-living spouse.3

     

    Does a TOD or JTWROS designation remove an account from your taxable estate? No. A TOD or JTWROS designation makes those assets non-probate assets, and that will save your executor a little money and time – but it doesn’t take them out of your gross taxable estate.

     

    In fact, 100% of the value of an account with a TOD beneficiary designation will be included in your taxable estate. It varies for accounts titled as JTWROS. If you hold title to a JTWROS account with your spouse, 50% of its value will be included in your taxable estate. If it is titled as JTWROS with someone besides your spouse, the entire value of the account will go into your taxable estate unless the other owner has made contributions to the account.4

        

    How about capital gains? JTWROS accounts in common law states typically get a 50% step-up in basis upon the death of one owner. In community property states, the step-up is 100%.5

     

    Could gift tax become a concern? Yes, if the other owner of a JTWROS account is not your spouse. If you change the title on an account to permit JTWROS, you are giving away a percentage of your assets; the non-spouse receives a gift from you. If the amount of the gift exceeds the annual gift tax exclusion, you will need to file a gift tax return for that year. If you retitle the account in the future so that you are again the sole owner, that constitutes a gift to you on behalf of the former co-owner; he or she will need to file a gift tax return if the amount of the gift tops the annual exclusion.5

     

    TOD & JTWROS designations do make account transfer easy. They simplify an element of estate planning. You just want to be careful not to try and make things too simple.

     

    TOD or JTWROS accounts are not cheap substitutes for wills or trusts. If you have multiple children and name one of them as the TOD beneficiary of an account, that child will get the entire account balance and the other kids will get nothing. The TOD beneficiary can of course divvy up those assets equally among siblings, but in doing so, that TOD beneficiary may run afoul of the yearly gift tax exclusion.2

     

    JTWROS accounts have a potential a drawback while you are alive. As they are jointly owned, you have a second party fully capable of accessing and using the whole account balance.2

     

    As you plan your estate, respect the power of TOD & JTWROS designations. Since they override any beneficiary designations made in wills and trusts, you want to double-check any will and trust(s) you have to make sure that you aren’t sending conflicting messages to your heirs.2

        

    That aside, TOD & JTWROS designations represent convenient ways to arrange the smooth, orderly transfer of account balances when original account owners pass away.

      

    MidAmerica Financial Resources may be reached at 618.548.4777 or greg.malan@natplan.com www.mid-america.us

       

    This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

         

    Citations.

    1 - dummies.com/how-to/content/bypassing-probate-with-beneficiary-designations.navId-323700.html [5/5/14]

    2 - galaw.com/the-dangers-of-pod-and-tod-accounts/ [2/4/14]

    3 - fidelity.com/estate-planning-inheritance/estate-planning/asset-strategies/brokerage [5/13/14]

    4 - theyeshivaworld.com/news/headlines-breaking-stories/167700/what-is-probate.html [5/10/13]

    5 - newsobserver.com/2013/06/08/2944839/advice-on-joint-tenancy-with-rights.html [6/8/13]