Most people start thinking about planning their estates when they reach retirement age.

After all, the "normal" progression of life is to get out of school, get a job, get married, have kids, get your kids through college, retire, become grandparents, enjoy life…and then, after a long and fulfilling life, we know that we will eventually die.

But we all know that real life rarely happens this way. People have children and don't get married, people get divorced, they marry more than once, they may never marry or have a family. Real life is full of options, choices, and twists of fate.

Dying, of course, is not an option. Nor do most of us choose how or when it will happen to us. Every time we leave our homes and get in our cars, we are at risk of being in a fatal car accident. Some people never have to leave their homes. Fires and carbon monoxide poisoning take hundreds of lives every year. In some parts of the country, drive-by shootings have taken the lives of innocents, young and old. Athletes in top physical condition die on the practice field. People of all ages are dying of cancer and other illnesses. And now that terrorism has reached our shores, hard-working people in the prime of their lives have died just because they went to work, like any other day.

We take precautions to try and extend our lives for as long as possible. We make sure our cars are in working order. We inspect our homes for fire hazards, and use smoke and carbon monoxide detectors. We eat healthier foods, exercise, and have regular checkups. And, since 9/11, we have all become more aware of our surroundings. No guarantees, but we are doing the best we can.

But what if that is not enough? What if you don't make it to the end of the "normal" road of life? What would happen to your loved ones if you died today? Will there be enough money to provide for them the way you would want? Will they even be able to get to the assets you leave behind, or will your assets be tied up in courts, held ransom by attorney fees and court calendars? How long will they have to wait? And how much will they really get?

Wouldn't it be better to make sure that the people you care about will be taken care of the way you want, especially if your life were to end suddenly and unexpectedly?

Or, let's say you do live until a ripe old age. You could gamble, and wait until the last possible minute to plan your estate. You could be like those people who make estate planning decisions from their death beds in the hospital. But all too often, those hasty decisions are unwise and wrought with error. Wouldn't it be better to put a plan in place now (so you're covered, just in case), and then possibly have years to think about it, polish it and fine tune it until it's just right?

Planning your estate now doesn't mean you will die tomorrow, just as buying homeowner's insurance doesn't mean your house will burn down tomorrow. But if you act now, you won't have to worry about what could happen to your family if your life doesn't follow the normal progression…or about making bad decisions when you've run out of time.

It's called peace of mind...and you can have it. So, when's the best time to plan your estate? Right now!

Believe it or not, you have an estate. In fact, nearly everyone does. Your estate is comprised of everything you own— your car, home, other real estate, checking and savings accounts, investments, life insurance, furniture, personal possessions. No matter how large or how modest, everyone has an estate and something in common—you can’t take it with you when you die.

When that happens—and it is a “when” and not an “if”—you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.

That is estate planning—making a plan in advance and naming whom you want to receive the things you own after you die. However, good estate planning is much more than that. It should also:

• Include instructions for passing your values (religion, education, hard work, etc.) in addition to your valuables.
• Include instructions for your care if you become disabled before you die.
• Name a guardian and an inheritance manager for minor children.
• Provide for family members with special needs without disrupting government benefits.
• Provide for loved ones who might be irresponsible with money or who may need future protection from creditors or divorce.
• Include life insurance to provide for your family at your death, disability income insurance to replace your income if you cannot work due to illness or injury, and long-term care insurance to help pay for your care in case of an extended illness or injury.
• Provide for the transfer of your business at your retirement, disability, or death.
• Minimize taxes, court costs, and unnecessary legal fees.
• Be an ongoing process, not a one-time event. Your plan should be reviewed and updated as your family and financial situations (and laws) change over your lifetime.

Estate planning is for everyone.
It is not just for “retired” people, although people do tend to think about it more as they get older. Unfortunately, we can’t successfully predict how long we will live, and illness and accidents happen to people of all ages.

Estate planning is not just for “the wealthy,” either, although people who have built some wealth do often think more about how to preserve it. Good estate planning often means more to families with modest assets, because they can afford to lose the least.

Too many people don’t plan.
Individuals put off estate planning because they think they don’t own enough, they’re not old enough, they’re busy, think they have plenty of time, they’re confused and don’t know who can help them, or they just don’t want to think it. Then, when something happens to them, their families have to pick up the pieces.

If you don’t have a plan, your state has one for you, but you probably won’t like it.
At disability: If your name is on the title of your assets and you can’t conduct business due to mental or physical incapacity, only a court appointee can sign for you. The court, not your family, will control how your assets are used to care for you through a conservatorship or guardianship (depending on the term used in your state). It can become expensive and time consuming, it is open to the public, and it can be difficult to end even if you recover.

At your death: If you die without an intentional estate plan, your assets will be distributed according to the probate laws in your state. In many states, if you are married and have children, your spouse and children will each receive a share. That means your spouse could receive only a fraction of your estate, which may not be enough to live on. If you have minor children, the court will control their inheritance. If both parents die (i.e., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.

Given the choice—and you do have the choice—wouldn’t you prefer these matters be handled privately by your family, not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?

An estate plan begins with a will or living trust.
A will provides your instructions, but it does not avoid probate. Any assets titled in your name or directed by your will must go through your state’s probate process before they can be distributed to your heirs. (If you own property in other states, your family will probably face multiple probates, each one according to the laws in that state.) The process varies greatly from state to state, but it can become expensive with legal fees, executor fees, and court costs. It can also take anywhere from nine months to two years or longer. With rare exception, probate files are open to the public and excluded heirs are encouraged to come forward and seek a share of your estate. In short, the court system, not your family, controls the process.

Not everything you own will go through probate. Jointly-owned property and assets that let you name a beneficiary (for example, life insurance, IRAs, 401(k)s, annuities, etc.) are not controlled by your will and usually will transfer to the new owner or beneficiary without probate. But there are many problems with joint ownership, and avoidance of probate is not guaranteed. For example, if a valid beneficiary is not named, the assets will have to go through probate and will be distributed along with the rest of your estate. If you name a minor as a beneficiary, the court will probably insist on a guardianship until the child legally becomes an adult.

For these reasons a revocable living trust is preferred by many families and professionals. It can avoid probate at death (including multiple probates if you own property in other states), prevent court control of assets at incapacity, bring all of your assets (even those with beneficiary designations) together into one plan, provide maximum privacy, is valid in every state, and can be changed by you at any time. It can also reflect your love and values to your family and future generations.

Unlike a will, a trust doesn’t have to die with you. Assets can stay in your trust, managed by the trustee you selected, until your beneficiaries reach the age you want them to inherit. Your trust can continue longer to provide for a loved one with special needs, or to protect the assets from beneficiaries’ creditors, spouses, and irresponsible spending.

A living trust is more expensive initially than a will, but considering it can avoid court interference at incapacity and death, many people consider it to be a bargain.

Planning your estate will help you organize your records and correct titles and beneficiary designations.
Would your family know where to find your financial records, titles, and insurance policies if something happened to you? Planning your estate now will help you organize your records, locate titles and beneficiary designations, and find and correct errors.

Most people don’t give much thought to the wording they put on titles and beneficiary designations. You may have good intentions, but an innocent error can create all kinds of problems for your family at your disability and/or death. Beneficiary designations are often out-of-date or otherwise invalid. Naming the wrong beneficiary on your tax-deferred plan can lead to devastating tax consequences. It is much better for you to take the time to do this correctly now than for your family to pay an attorney to try to fix things later.

Estate planning does not have to be expensive.
If you don’t think you can afford a complex estate plan now, start with what you can afford. For a young family or single adult, that may mean a will, term life insurance, and powers of attorney for your assets and health care decisions. Then, let your planning develop and expand as your needs change and your financial situation improves. Don’t try to do this yourself to save money. An experienced attorney will be able to provide critical guidance and peace of mind that your documents are prepared properly.

The best time to plan your estate is now.
None of us really likes to think about our own mortality or the possibility of being unable to make decisions for ourselves. This is exactly why so many families are caught off-guard and unprepared when incapacity or death does strike. Don’t wait. You can put something in place now and change it later…which is exactly the way estate planning should be done.

The best benefit is peace of mind.
Knowing you have a properly prepared plan in place - one that contains your instructions and will protect your family - will give you and your family peace of mind. This is one of the most thoughtful and considerate things you can do for yourself and for those you love.

When considering how to leave assets to your adult children, first decide how much you want each one to receive. Most parents want to treat their children fairly, but this doesn’t necessarily mean they should receive equal shares of your estate. For example, you may want to give more to a child who is a teacher than to one who has a successful business. Or you may want to compensate a child who has taken care of you during an illness or your later years.

Some parents worry about leaving too much money to their children. They want their children to have enough to do whatever they wish, but not so much that they will be lazy and unproductive. Well, no one said you have to give everything to your children. You may prefer to leave more to your grandchildren and future generations through a trust, and/or make a generous charitable contribution.

Next, decide how you want your children to receive their inheritances. You have several options from which to choose.

Option 1: Give Some Now
If you can afford to give your children or grandchildren some of their inheritance now, you will experience the joy of seeing the results. You could help a child buy a house, start a business, be a stay-at-home parent to your grandchildren, or even see your grandchildren go to college—and know that it may not have happened without your help. This would also let you see how each child might handle a larger inheritance.

Option 2: Lump Sum
If your children are responsible adults, this may seem like a good choice—especially if they are older and you are concerned that they may not have many years left to enjoy the inheritance. However, once a beneficiary has possession of the assets, he or she could lose them to creditors, a lawsuit, or a divorce settlement. Even a current spouse can have access to assets that are placed in a joint account or if your child adds his/her spouse as a co-owner. If it bothers you that a son-or daughter-in law could end up with your assets, or that a creditor could seize them, or that a child might spend irresponsibly, a lump sum distribution may not be the right choice.

Option 3: Installments
Many parents like to give their children more than one opportunity to invest or use the inheritance wisely, which doesn’t always happen the first time around. Installments can be made at certain intervals (say, one-third upon your death, one-third five years later, and the final third five years after that) or at certain ages (say, age 25, age 30 and age 35). In either case, be sure to review your instructions from time to time and make changes as needed. For example, if you live a very long time, your children might not live long enough to receive the full inheritance—or, they may have passed the distribution ages and, by default, receive the entire inheritance in a lump sum.

Option 4: Keep Assets in a Trust
You can keep your assets in a trust and provide for your children, but not actually give the assets to them. Assets that remain in a trust are protected from a beneficiary’s creditors, lawsuits, irresponsible spending, and ex- and current spouses. If you have a special needs dependent, or if a child should become incapacitated, the trust can provide for this child without jeopardizing valuable government benefits. If you have a child who might need some incentive to earn a living, you can match the income he/she earns. (Be sure to allow for the possibility that this child might become unable to work or retires.) If you have a child who is financially secure, you can keep the assets in trust for your grandchildren and future generations, and still provide a safety net if this child’s situation changes and he/she needs financial help. This option gives you the most flexibility, control and protection over the assets you worked a lifetime to accumulate and build.

While there is no one right choice for how to leave assets to all adult children, given many individuals’ concerns over protecting inheritances from creditors (particularly ex son or daughters in law), many choose leaving their assets in trust for the benefit of their children and/or grandchildren. Regardless of your ultimate choice, this is an important decision that should be considered with input from your estate planning professional.


See EstatePlanning.com for more information.

If you own a car, then you know it requires regular servicing in order to perform well and be reliable. More than likely, your car came with a recommended schedule for service, based on how many miles it has been driven; after a certain number of miles, you need to change the oil, replace the brake pads, rotate the tires, and so on.

If you have a newer car, you probably have an irritating dash light that comes on when it's time for service and stays on until the mechanic resets it. Either way, whether you pay attention to the odometer or rely on that dash light, it's pretty easy to know when it's time to service your car. And if you keep driving it without servicing it, it's a sure bet your car will let you down.

Like your car, your estate plan needs "servicing" if it is going to perform the way you want when you need it. Your estate plan is a snapshot of you, your family, your assets and the tax laws in effect at the time it was created. All of these change over time, and so should your plan. It is unreasonable to expect the simple will written when you were a newlywed to be effective now that you have a growing family, or now that you are divorced from your spouse, or now that you are retired and have an ever-increasing swarm of grandchildren! Over the course of your lifetime, your estate plan will need check-ups, maintenance, tweaking, maybe even replacing.

So, how do you know when it's time to give your estate plan a check-up? Well, instead of havingmileage checkpoints, your estate plan has event checkpoints. Generally, any change in your personal, family, financial or health situation, or a change in the tax laws, could prompt a change in your estate plan. Use the following list to guide you.

It's a good idea to review your estate plan every year. Set aside a specific time every year (your birthday, anniversary, family gathering) to review it.
 
Event Checkpoints for Your Estate Plan

You and Your Spouse, If Married

• You marry, divorce or separate
• Your or your spouse's health declines
• Your spouse dies
• Value of assets changes dramatically
• Change in business interests
• You buy real estate in another state

Your Family

• Birth or adoption
• Marriage or divorce
• Finances change
• Parent or relative becomes dependent on you
• Minor becomes adult
• Attitude toward you changes
• Health declines
• Family member dies

Other

• Federal or state tax laws change (which just happened at the beginning of 2013)
• You plan to move to a different state
• Your successor trustee, guardian or administrator moves, becomes ill, changes mind
• You change your mind

Source: EstatePlanning.com

Your home is probably the most valuable asset you own. Yet most people don't think about how to hold title until the title company poses the question when you buy or refinance. But this deserves careful consideration, because how you hold title to real estate has far-reaching effects. Let's look at some common ways to hold title.

Individual Name: You can hold title in just your name even if you are married. However, there are some drawbacks you should know about.

First, what would happen if you become mentally or physically incapacitated due to illness or injury and the property needs to be refinanced, or a line of credit needs to be opened or increased? If you are unable to conduct business, the court will need to appoint someone to act for you.

"But, I have a will," you say. A will can't help; it only goes into effect after you die, not if you are incapacitated.

"But, I have a power of attorney," you say. Most powers of attorney end at incapacity. Adurable power of attorney is valid at incapacity. However, many financial institutions will not accept one unless it is on their form. And if accepted, it may work too well, giving the person the ability to do whatever he or she wants with your assets. You could recover to find the property mismanaged or even sold and the proceeds gone.

The court's job is to provide supervision to protect your assets. But once the court gets involved, it will stay involved until you recover or die. The court, not your family or friends, will control how your assets are used to care for you. It is a public process that can be expensive, embarrassing, time consuming and difficult to end if you recover.

Next, what happens when you die? If yours is the only name on the title, the property will almost certainly have to go through the probate court system before it can be distributed to your heirs, even if you have a will. Think about it: if your name is the only one on the title, and you have died, you can't sign your name to transfer title. While there can be exceptions, in most cases the only way to remove your name and put the new owner's name on is through the probate court.

Joint Tenants with Right of Survivorship: This is how most married couples hold title, because it seems fair, it's easy and it's free. Parents and their adult children also often hold title this way, as do unmarried couples.

Indeed, when one owner dies, full ownership does transfer automatically to the surviving owner without probate. But usually this just postpones probate. If the surviving owner dies without adding another owner (which often happens), or if both owners die at the same time, the property will almost certainly have to go through probate before it can go to the heirs.

There are other problems, too. When you add a co-owner, you lose control. With real estate, all owners must sign to sell or refinance. If your co-owner disagrees with you, you could end up in court. If your co-owner is incapacitated, the court will probably get involved to protect your co-owner's interest...even if the ill owner is your spouse.

You expose the property to your co-owner's debts and obligations; you could even lose your home to your co-owner's creditors if he or she is successfully sued. There could also be gift and/or income tax problems if your co-owner is not your spouse.

Finally, because a will does not control jointly owned assets, you could disinherit your family when your co-owner inherits your share. Sadly, and all too often, children from a previous marriage are disinherited when a new spouse is the surviving owner.

Tenants-In-Common: With this kind of ownership, each owner's share will be distributed as directed in his or her will. If there is no will, the property will go to the owner's heirs.

Community Property: Nine states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) have a form of joint ownership between spouses commonly called community property. When you die, your share of community property automatically goes to your surviving spouse, unless your will says otherwise.

The problem with both tenants-in-common and community property is that you could find yourself with several new co-owners when your co-owner dies and the heirs inherit the property. Imagine how difficult it could be to get several owners to reach an agreement, especially if you are trying to sell the property.

You can also run into the other problems (incapacity, lawsuits, etc.) as explained under joint tenants with right of survivorship, but with several owners involved, your risks and problems are multiplied.

Tenants-by-the-Entirety: This form of joint ownership, available between spouses in some states, is similar to joint tenants with right of survivorship in that when one spouse dies, his/her share automatically goes to the surviving spouse, even if the will says otherwise. So you have many of the same risks, including unintentional disinheriting and court interference if one spouse becomes incapacitated.

However, as tenants-by-the-entirety, neither spouse can transfer his/her half to someone else without the other's approval - something joint tenants with right of survivorship and tenants-in-common can both do.

Revocable Living Trust: When you have a living trust, the title of your real estate can be held in the name of the trustee of your trust. Usually you will be your own trustee, so you keep full control of the property. You can buy, sell and refinance real estate just as you can when the property is not in your trust.

If you become incapacitated, the successor trustee you named when you set up your trust will be able to step in and act for you. Because the title is no longer in your individual name (or joint names if married), there will be no need for court interference. If you are married, you and your spouse can be co-trustees, in which case your successor trustee would step in only after you have both become incapacitated or have died.

Your successor is legally obligated to follow the instructions you put in your trust. If you recover, your successor simply steps aside and lets you resume control. When you die, the property will be distributed without probate according to the instructions in your trust, so you don't have to worry about unintentionally disinheriting someone.

SUMMARY: How you hold title to real estate should be given careful consideration. Check your titles and make any changes now while you can.


Source: EstatePlanning.com

Most young adults think they are invincible. But the reality is that anyone, at any time, can become seriously ill or be injured in an accident or a random act of violence. And far too many of us know the tragedy of a promising young life that was abruptly cut short.
 
Once a child turns 18, parents lose the legal ability to make decisions for their child or even to find out basic information. Learning you will not be able to see your college student’s grades without his/her permission can be mildly frustrating. But a medical emergency can take this frustration to a completely different level. The parents (or a sibling or another person) will probably have to go to court and ask for permission to obtain information about the student’s medical condition, be able to make decisions about treatment, and have access to the student’s financial records and accounts.
 
The following legal documents, prepared by an estate planning attorney, allow you to name another person to make medical and financial decisions for you if you are unable to make them for yourself. The person(s) you select should be someone you know and trust, and a candid discussion should occur now so they know what your wishes would be. These documents are not expensive, and everyone over the age of 18 should have them.
 
Parents should consider scheduling a visit with their estate planning attorney after each child’s 18th birthday, and encourage other parents to do the same with their young adults. Having these documents in place does not mean anyone expects to use them, but everyone will be glad to have them should they be needed.
 
In the Event of Incapacity

• A Durable Power of Attorney for Heath Care gives another person legal authority to make health care decisions (including life and death decisions) if you are unable to make them for yourself.
• A Durable Financial Power of Attorney gives another person legal authority to manage your assets without court interference. (A “regular” power of attorney ends at incapacity; a “durable” power of attorney remains valid through incapacity.) Your attorney can write it in such a way that it does not go into effect until you become incapacitated.
• HIPPA Authorizations give your doctors permission to discuss your medical situation with others, including family members and other loved ones.

In the Event of Death
Most young adults do not have substantial assets, so a simple will is probably all that is needed at this time. It will let the young adult designate who should receive his/her assets and belongings in the event of death. Otherwise, the laws of the state in which the young adult lives will determine this, and that may not be what anyone would want.
 
After the Documents Have Been Signed
A little housecleaning may be in order. It is important that the designated person knows where to find financial records and passwords if needed. Tidy up your computer’s desktop. Make a list of accounts and passwords (including your computer’s password), print the list and put it in a safe place; a hard copy is important in case your computer is lost or stolen. If you use an online back-up system, be sure to include it. Don’t forget online accounts and social media. If there is anything you don’t want someone (think, parents) to see, either get rid of it now or ask a friend to delete files or remove things if something happens to you. Finally, update your documents as your life changes.

Source: EstatePlanning.com

If you are concerned that your children’s inheritance is being reduced by the collapse of the housing and investment markets, rising medical costs, a sluggish economy and a longer-than-expected lifetime, you needn’t be. According to a recent study, family values, traditions and history still mean more than money as an inheritance.
 
These results are from the 2012 Allianz Life American Legacies Pulse Study* which surveyed baby boomers (age 47 to 66) and “elders” (age 72 and older). Allianz Life conducted a similar study in 2005. Interestingly, despite the financial crises that occurred between 2005 and 2012, the results were strikingly similar, with a high percentage of both boomers (86%) and elders (74%) agreeing that family stories, values and life lessons are the most important part of a family’s legacy.
 
In addition, in both studies, only four percent of boomers said that an inheritance is “owed” to them. By contrast, the number of elders who felt an inheritance is owed to their children dropped from 22% in 2005 to 14% in 2012; this may be a result of their concern about having to use more of their savings for living expenses, compounded by loss of savings from lower market values.
 
While the size of the financial inheritance is not seen as important, planning is. A high percentage of both groups (82-84%) emphasized having instructions in place in the event a parent were to become terminally ill or permanently unconscious. Both have strong desires to avoid family conflicts when it comes to estate planning and legacy issues. Younger people also believe that keeping family possessions is important.
 
Elders also want to impress upon their children the importance of personal responsibility. About three-fourths of elders surveyed have obtained some professional assistance with estate planning and have initiated discussions with their children about end-of-life and inheritance issues. By contrast, only about a quarter of the boomers have planned their estates and less than half have had discussions with their own children about these issues. That may be partly due to boomers being less frugal in general than their parents, or that they simply feel they have plenty of time left to plan.
 
Wondering how to ensure your family values, traditions and history are passed on to future generations? Here are some ideas to help you get started.

• Encourage elders to tell stories about their family and their own lives and experiences. Family gatherings when multiple generations are present are perfect, but one-on-one conversations work well, too. Videotape as much as possible to capture not only words, but also the storyteller’s personality and mannerisms. No need to have a formal interview; just put the camera on and let it roll. Don’t tape too long at a time, though; the storyteller could tire easily. If you don’t have video, assign someone to take notes and share the stories with other family members.
• Scrapbooking and photo albums are great ways to document family history by themes and occasions. Just be sure photos are identified with names, dates and places.
• Write your memoirs or autobiography, family history, or a collection of essays about your relatives or what life was like when you were growing up.
• Write letters to your children or young grandchildren about life lessons you would like them to learn from you.
• Share your faith and/or testimony with family members in person or in writing.
• Create a family medical history. Include date and location of births and deaths, cause of death, burial location, marriages and children, notable illnesses and medical conditions.
• Make an inventory of special family heirlooms and possessions. Take a photo of each and document its story. If you want a certain person to receive a certain item, include that in your estate plan. Better yet, if you can bear to part with it, go ahead and give it to that person now.
• Use the internet to share family history and traditions with other members of your family. Create a family website. Post stories or videos of your elder storytellers and old family photos. Document family reunions, marriages, births and passings.

Note: If you store information on your computer or online, be sure to provide access for someone else in the event something happens to you. Include specific information about where files or accounts are located and passwords that might be needed to access them.
 
Most importantly, talk with your parents or children about end-of-life issues (incapacity and health care directives, location of important financial documents, estate planning) and what is important to them and to you. Do this now, before illness or aging interfere and prevent you from having these discussions.
 
* 2012 Allianz Life American Legacies Pulse Study, sponsored by Allianz Life Insurance Co. of North American, surveyed 1,000 “boomers” (age 44-67) and 1,007 “elders” (age 72+). The online survey was conducted January 12-19, 2012. For more information about the survey, go to https://www.allianzlife.com/about/news_and_events/news_releases.aspx?articleID=106

Source: EstatePlanning.com

From time to time, it’s good to review why having a complete, up-to-date estate plan is so important. In addition to confirming our own actions, it can provide us with valuable information to pass along to friends and family who, for whatever reasons, have yet to act. So, here are five common estate planning mistakes to avoid.

1. Not having a plan. Every state has laws for distributing the property of someone who dies without an estate plan—but not very many people would be pleased with the results. State laws vary, but generally they leave a percentage of the deceased’s assets to family members. (Non-family members, like an unmarried partner, will not receive any assets.) It is common for the surviving spouse and children to each receive a share, which often means the surviving spouse will not have enough money to live on. If the children are minors, the court will control their inheritances until they reach legal age (usually 18), at which time they will receive the full amount. (Most parents prefer their children inherit later, when they are more mature.)

2. Not naming a guardian for minor children. A guardian for minor children can only be named through a will. If the parents have not done this, and both die before the children reach legal age, the court will have to name someone to raise them without knowing whom the parents would have chosen.

3. Relying on joint ownership. Many older people add an adult child to the title of their assets (especially their home), often to avoid probate. But this can create all kinds of problems. When you add a co-owner, you lose control. Jointly-owned assets are now exposed to the co-owner’s creditors, divorce proceedings and possible misuse of the assets, and the co-owner must agree to all business transactions. There could be gift and/or income tax issues. And if you have more than one child but only name one to be co-owner with you, fluctuating values could cause your children to receive unbalanced/unintended inheritances.

4. Not planning for incapacity. If someone cannot conduct business due to mental or physical incapacity, only a court appointee can sign for this person—even if a valid will exists. (A will only goes into effect after death.) The court usually stays involved until the person recovers or dies and the court, not the family, will control how their assets are used to provide for their care. The process is public and can become expensive, embarrassing, time consuming and difficult to end.

Giving someone power of attorney as a way to avoid the court process can be risky because that person can do anything they want with your assets with no real restrictions. For this reason, a living trust is often preferred for incapacity planning. With a trust, the person(s) you choose to act for you can do so without court interference, yet they are held to a higher standard as a trustee; if they misuse their power, they can be held accountable.

Someone also needs to be given the power to make health care decisions for you (including life and death decisions) if you are unable to make them for yourself. Without a designated health care agent, you could be kept alive by artificial means for an indefinite period of time. (Remember Terri Schiavo? Terri’s story and information about the Terri Schiavo Foundation can be found at http://www.terrisfight.org/, ) The exorbitant costs of long term care, most of which are not covered by health insurance or Medicare, must also be part of incapacity planning. Consider long term care insurance to protect your assets.

5. Not keeping your plan up to date. Every estate plan is based on the personal, family and financial situations, and tax laws, in effect at the time it was created. All of these will change over time, and your plan needs to change with them. It’s a good idea to review your plan every couple of years or so and make sure it still does what you want it to do. Your attorney will let you know when a tax law change might affect your plan, but you need to let your attorney know about other changes that could affect it.


If you need help with your estate planning, please contact our office. We will be happy to help you create the plan you desire or update the one you already have.

IRAs are among the largest assets inherited by heirs and beneficiaries. These accounts have been able to grow to such large amounts because income taxes are deferred until the owner begins to take distributions, usually after reaching age 70 ½.

Those who inherit an IRA must be very careful to follow the rules, which are complicated and often confusing. It is possible to keep an account growing tax-deferred for decades, but an innocent error can cause the recipient to lose the tax-deferred advantage and force her to pay tax now on the entire account balance. As a result, it is critical to talk with an expert before making any decision or taking any action, and to understand all available options. Here are some to consider.

Cash Out Option

Anyone who inherits an IRA can cash it out and withdraw the full amount. But because income taxes must be paid on the full amount at one time, this is not usually the best choice.

Spouse Options

A surviving spouse who inherits an IRA from his/her spouse can roll it into a new IRA or merge it with his/her own IRA. In either case, the account can continue to grow tax-deferred and the surviving spouse can continue to make contributions until he/she must start taking required distributions (after age 70 ½).

If it is rolled into a new IRA, the surviving spouse will name new beneficiaries. It is highly advantageous to name someone who is much younger (e.g., children and/or grandchildren) because after the surviving spouse’s death, distributions will be based on the beneficiary’s actual life expectancy. This will allow the account to continue to grow tax-deferred for decades. Under IRS rules, this rollover and stretch out can be done even if the original owner spouse had started taking required minimum distributions before he/she died.

Non-Spouse Options

If the original owner died before beginning to receive required distributions, a non-spouse beneficiary can establish a Beneficiary IRA and start taking annual distributions based on his/her own life expectancy, with the option to take a lump sum at any time. (This is called the “life expectancy option.”) This must be done by the end of the year following the original owner’s death. If the first distribution is not taken by then, all of the IRA must be withdrawn by December 31 of the fifth year after the owner’s death. (This is called the “five year rule.”)

If the original owner died after beginning to receive required distributions, a non-spouse beneficiary must take a distribution equal to the owner’s required minimum distribution for the year he/she died if one had not been taken. For subsequent years, distributions can be based on either the new owner’s life expectancy or the original owner’s remaining life expectancy (whichever is longer).

The original owner’s name must be listed on the title, but the inheriting beneficiary will name new beneficiary(ies). A non-spouse beneficiary cannot roll an inherited IRA into his/her own IRA or make contributions to an inherited IRA, as a spouse can. But when distributions are stretched out over a longer period of time, the tax payments are also stretched out. And by keeping more money in the IRA for as long as possible, the tax-deferred growth can be maximized…which will result in a much larger balance.