Hanover, NH office 603.643.6072
Woodstock, VT office 802.457.9492
January 25, 2011 Newsletter Archive
So... Why Should You Review Your Estate Plan?
We have received many calls from our clients about the new Tax Act's impact on their estate plans. Although the new legislation has created a situation in which fewer families will pay estate taxes, effectively implementing your wishes still takes thoughtful planning.
Often we suggest that even if you have completed your estate planning in an effort to minimize your estate tax consequences, you should have it reviewed to ensure that it is still relevant in light of the new tax law. Traditionally, many trusts for married individuals include a structure designed to take advantage of former tax code regulations. However, given the recent changes such planning may result in unintended consequences. For example, your will may prescribe that an amount equal to the estate tax exemption be placed into a trust for your children, with the remainder passing to your spouse. With the exemption soaring from just $675,000 in 2001 to $5 million today, wills with these provisions may leave no remainder for a spouse — disinheriting the wife or husband altogether. We are sure that this is not a result that most of us intend.
Estate planning should always have at its heart the goals of the individual. Estate tax minimization is just one aspect, but in order to be most complete, a full discussion of your wishes for your loved ones after your death is essential to the process. It is really less relevant whether you have a small fortune or a small savings account. We have seen a number of unanticipated difficulties evolve when even a small estate has not been carefully planned.
We are aware that there is not a one size fits all answer. There is no magic template which captures everyone in the same way. Not only do we all have varied assets and goals for these assets, we also have diverse families. Candid discussions about family harmony or disharmony are fundamental to any comprehensive estate plan. We have seen too many matters come to us on the estate administration side of our work to remain nonchalant about this point. The more solid and complete you can be about your planning during your life time, the easier the management and security of your loved ones will be after your death.
Even seemingly minor life changes deserve a review of your estate plan. We encourage you to stay in touch and let us know of these life changes so we can continue to provide legal counseling for a more secure future.
What Should My Estate Plan Include?
Many people do not believe they need an estate plan. For some of us, the idea that we are planning for our death is an irreconcilable thought, and for others we think that estate planning is only for the wealthy.
We like to think that estate planning is about planning for life. In fact, many of the planning instruments are the ones that are utilized only while you are alive. Our legal counseling is a form of client education which helps our clients understand the benefits and protections that estate planning can afford them.
As a reminder to you we include below what instruments are in most estate plans:
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A Will. This legal instrument includes instructions for distributing all of your assets (your personal property, real estate, investment assets) after your death. It also allows you to name an executor to manage the estate administration, and can name a guardian for your minor children.
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A Health Care Power of Attorney /Living Will. These documents (sometimes combined and known as an advance directive, allow you to express your end of life wishes such as whether you would like certain measures to extend your life. You consider these decisions and name an agent while you are well so that you can think through the pros and cons. The agent you name has the authority to carry out your decisions.
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A Durable Power of Attorney. The agent you name will have authority to make legal and financial decisions for you. This is particularly important should you become incapacitated.
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HIPAA Release. In the event that you become incapacitated, the privacy act makes it almost impossible for loved ones to see your medical records without your permission. Again, while you are healthy you may designate your family members or friends that you think should be allowed to have access to your medical records.
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A Revocable Trust. A trust allows you to create asset distributions much like a will, but because the trust may hold many of your assets, these pass directly to the beneficiaries as opposed to becoming tied up in the probate process. A trust also provides that even if you become incapacitated during your life, your plans will go into effect.
Additionally, review assets such as bank accounts, CDs and money market accounts. Sometimes for convenience we name a child on those accounts. However, later this may lead to uneven distribution of your assets. Check your beneficiary designations to ensure that your IRAs, other retirement accounts, and life insurance policies reflect your current wishes for beneficiary designations.
Get Organized for Tax Season
Although a great system of organization may not end up minimizing your taxes, you may reap ancillary benefits, some financial. Getting all of our documents together can be stressful. Many of us do not always know where we placed last year's tax return, let alone all of the receipts of the past year. Collecting W-2s and 1099s makes us feel like we all could use a personal assistant throughout the year.
If tax season disarray is something of a pattern for you, resolving to use a personal finance program like Quick Books or Quicken throughout the year may make the dash to April 15th go a bit more smoothly. Such a system will allow you have easy access to all the information you need.
Just how should you begin your efforts to get organized?
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First, print out a tax checklist to help you gather the documents needed to complete your return (we have included one courtesy of the H&R Block web site for your review below)
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Get an accordion file and label it with the items on the tax checklist.
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When going through your January mail make sure you do not throw out any tax-related documents. Keep your W-2s, 1099s and mortgage interest statements you receive in January and place these in your accordion file.
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Throughout the year keep receipts and other information that is noted on your tax checklist and place these in your accordion file.
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Make sure you know the price you paid for any stocks or fund you have sold. If you don't, call your broker before you begin preparing your tax return. Have details on income from any rental properties.
Check out this site to find a handy and simple tax checklist.
Melendy Moritz PLLC is a client centered boutique firm. We focus on your unique needs by providing the individualized legal counseling and advising tailored to your specific situation.
We concentrate on the planning that matters to you.
Call us at 603.643.6072 or 802.457.9492