QUOTE OF THE WEEK
“I learned a long time ago that worrying is like a rocking chair. It gives you something to do but it doesn’t get you anywhere” –
TECH CORNER
The New Year is upon us and it is time for a very important New Year’s Resolution.
This resolution is not to lose weight or train for a marathon. It is time to take care of issues in the event of your death or incapacity.
I have a friend whose daughter passed away suddenly. She had a will but no other estate planning documents. She owned two homes out of state and even though she had a will, those two properties had to go through probate in each state. Proper estate planning would have avoided the expensive probate. I have another friend whose sister owns a house, has a will, but upon her death the house would go through probate. She has set up a beneficiary deed on the house to avoid probate. I have a client that didn’t have a will and now the children are fighting over the estate assets.
The point I am trying to make is that by doing proper planning in advance, these costly problems can be avoided.
Lynne and I have revisited our estate planning documents which were last done in 2010. We made the decision to alter beneficiaries, changed successor trustees on our living trust, appoint a fiduciary, and up- date the documents due to some changes in the law.
Before I get into the pieces of the puzzle of proper estate planning we have done something that most people don’t consider. We have appointed a licensed fiduciary to address all issues relating to when we die or become incapacitated. We feel that we don’t want to put that burden on our children. The fiduciary acts as a quarterback and works with our children in dealing with settling the estate and or help finding appropriate services if we were to become incapacitated. The fiduciary has learned all about our situation and is at the ready to step in when needed. The fiduciary is only paid on an hourly basis when they perform any services needed.
Let’s talk about the necessary documents needed to do proper planning.
The Will
Everyone NEEDS a will. The will is a document that ensures that assets are passed to designated beneficiaries in accordance with your wishes. The will is generally used to pass personal items, arrange final decisions such as funeral arrangements, who will have custody of minor children, or who will take care of any other wishes. If you do not have a trust or have not titled your assets to pass avoiding probate, the Will, will pass those assets. In the state of Arizona, if your probate assets are valued under $75,000, they will not go through the probate process. Generally, an executor is named in the will if you have not made other arrangements.
Health Care Power of Attorney
This document gives trusted people or person the authority to make healthcare decisions in the event you are unable to make them yourself. This document also defines your wishes as to what measures to employ to keep you alive if you become incapacitated and can’t make that decision.
Financial Power or General Power of Attorney
This document gives a trusted person or persons the authority to act in your absence to make financial decisions or sign financial documents on your behalf. An example would be signing a tax return or buying or selling stock.
Revocable Living Trust
This document acts in the nature of an investment account with instructions. Lynne and I are co-trustees and can make financial decisions as to how our assets are to be managed and distributed upon our death. It can be changed at any time because it is revocable. Lynne and I have titled all our financial assets in the name of the trust. It is especially important to title the assets in the name of the trust because if you don’t, those assets are subject to probate. The nice benefit of a living trust is that it avoids probate. If you choose not to create a trust you can title assets with a “transfer on death designation or “beneficiary deed” for real estate to avoid probate.
The last thing I have done is create a file with all the statements for our investments: bank accounts, website addresses, passwords and other pertinent information that will be helpful to anyone succeeding us. You can go online and print any number is forms or booklets to help you create this necessary information.
Lynne and I made the decision to engage an estate planning attorney because we didn’t want any mistakes. If you are a “do it yourself” person there are many companies on line that provide “fill in the blank” forms for your state that you can use.
As to the portfolios, we are maintaining a conservative allocation. This stock market is in the top 1% of high valuation as it relates to company earnings. It may go up from here but as the saying goes, “What can’t go on forever, won’t” Remember, “stock markets go up like an escalator and down like an elevator”. The downside risk is too scary at the moment.
