Women and Finances: How Estate Planning Can Help
August 26, 2010
When it comes to family matters, women are often the head (and sometimes the sole member) of the planning committee. Vacations, dinner parties, school activities and celebrations… many of these wouldn’t happen at all if the women of the family didn’t take the lead. Estate Planning tends to be no different: Many first phone calls, appointments, and attendance at estate planning or elder law seminars are initiated by women. However, studies suggest that this tendency in women to plan ahead may not apply to financial planning.
A recent article from CBS news suggests that although women are actively involved in family and household finances, they are less likely to be involved in long-term financial decisions. According to the article, although many women “know how to spend and get by on a short term basis… they have a time getting a grip on their long term saving and planning.” Of course this is a generalization, and won’t apply to everyone; but considering the importance of the topic, it is definitely a worthwhile subject for discussion.
Here are a few statistics to consider that impact women and their long-term financial decisions:
- Older women (65+) outnumber older men by 22.4 million to 16.5 million. (Administration on Aging)
- Poverty rates are higher among older women than older men by 20.4 to 13.1. (U.S. Census Bureau)
- The median weekly earnings of full-time wage-earning women is $657, or 80 percent of men’s $819. (U.S. Dept. of Labor)
- Not to mention that on average, it is the woman of the family who will end up putting her career on hold for caregiving duties at various times in her life (either to care for young children or aging parents.)
Put all of this together and it means that women need to take control of their finances, not the other way around! Luckily, this may not be as difficult as you think. The CBS news article mentioned above has some suggestions on how to take charge of your finances; but beyond that, planning your estate can be a huge step toward planning for your financial future as well, because any estate planning includes taking stock of of your financial assets—including savings accounts, retirement assets, individually owned assets as well as those owned jointly by a married couple.
We encourage women (and their families) to let their estate planning contribute to their financial future—it’s not just about how your assets will be distributed after your death, but also what steps you’d like to take to preserve those assets during your lifetime.
No Estate Tax Means No Need to Plan, Right? . . . Wrong.
July 19, 2010
Since the estate tax was repealed at the beginning of this year many people have rejoiced in the thought that there’s no need to create an estate plan. While it may be true that for the moment, at least, your assets don’t need to be protected from outrageous estate taxes, there are still a number of reasons why it is not only beneficial but essential to have a plan in place for your finances after you pass away.
Attorney and accountant Bob Carlson has written an article in InvestingDaily.com in which he enumerates four reasons to create an estate plan even without the motivating factor of estate taxes (he calls this Legacy Planning):
- Financial Security
- Continuing management and caretaking
- Protection (from creditors, predators and lawsuits, if not from taxes)
- Other tax burdens (such as state taxes, capital gains taxes, gift taxes, etc.)
There are many things we do in our lives not because we have to, but because we know it’s the right thing to do. Estate planning is no different. Creating an estate plan is not just about taxes, it’s about you and your family planning for the future. Creating an estate plan is about being there for your children even after you’ve passed away; it’s about protecting them, providing for them, and even teaching them fiscal responsibility.
Will the lack of estate taxes in 2010 lead you to ignore these other important reasons to protect your family and plan for the future?
Take Action in the Face of Estate Tax Uncertainty
May 13, 2010
If you’ve been reading our blog regularly then you know that the 2010 estate tax repeal has caused no end of confusion and uncertainty; not only for those who have been dealing with probate and trust administration since the tax was first repealed, but also for those who are trying to think ahead and do the right thing for their spouses and children. Many people have come to the erroneous conclusion that they have no choice but to stand by and wait until the Washington politicians make up their minds about whether or not to restore the estate tax retroactively—but we’re here to tell you that you don’t have to wait to protect your assets and your family.
Forbes.com recently published an article entitled How to Protect Your Family From Estate Tax Uncertainty. This article suggests that there are a number of steps you can take right now to protect your heirs and your assets, even if you don’t know what changes lawmakers may enact tomorrow or 2 months from now. Their suggestions include everything from working with your estate planning attorney on contingency plans to account for anomalies such as no estate tax or minimum exemptions, to common sense action items such as taking the time now to track your cost basis for assets (to help your executor and heirs determine the change in value for tax purposes.) The Forbes article also suggests that some people may want to plan to save by giving—taking advantage of the gift tax exemption amounts. For more on a special technique involving the use of “Disclaimers” in the current estate tax climate, see Attorney Osofsky’s recently published article.
There are always steps you can take to ensure that your estate plan is up to date, our firm can be your compass and your guide; we can help your family prepare for whatever the future may have in store.
Living in a Digital World
February 8, 2010
Do you have an e-mail account?
Do you participate in Facebook or other Social Networking sites?
Do you do any of your banking, bill paying or investing online?
If you answered yes to any of these questions then you might want to think about this next question… what will happen to all of your online assets and accounts when you die?
As we move further into the 21st century more and more of our lives are moving into the digital realm. This includes friendships, networking, business and banking. The beauty of this is that it gives us unprecedented freedom and global access; the downside is that huge portions of our lives are locked away behind password protected accounts, many of which our friends and relatives aren’t even aware of. Online accounts are incredibly convenient, but they can create huge problems if your executor or agent has no way to retrieve your online passwords, assets or contacts after you die.
Some large online service providers are developing policies to deal with the transfer of accounts upon the death of the user, as noted in this article by Alejandro Martínez-Cabrera, “but the process is rarely a simple one.” Some companies require a death certificate before they will agree to shut down an account or turn over the contents, but rarely will an online company transfer actual ownership. It could take months or years of headaches and frustration before your heirs have access to any assets or information locked behind these online protections.
What this means for estate planning is that when you talk to your attorney about your will or your trust it’s not just about physical assets anymore; digital and online accounts and assets must be part of the conversation.
Another Kind of “Bucket List”: the New “Carry-Over Basis” Rule
January 20, 2010
Among the many changes in tax law to go into effect in 2010 was the change in cost basis for inherited assets. Previously, all inherited assets were “stepped-up” from their original value at date of purchase to their fair market value at date of death. In this way, if inherited assets were sold shortly after death, litttle or no capital gains tax was owed. However, in 2010 inherited assets do not receive this automatic “step-up”; instead they will be valued at the lesser of the decedent’s basis or the fair market value as of date of death. The result is that for decedents dying in 2010, the decedent’s tax basis and the fair market value as of date of death will have to be determined for every asset. As you can imagine, this will cause paperwork nightmares for heirs.
What we suggest is making a list of your assets and their values and tax basis information now, while you are still alive and your memory is fresh. This is not a list that has to be shared with anybody until after your death, but the mere existence of your list of assets will save your family and heirs hours of headaches (and heartache) later on.
If the thought of taking the time and energy to sort through files and records to gather this information makes you want to run for the hills, imagine how your heirs will feel! To ease the burden, try making your list one asset at a time, over the course of many days. However you choose to create your list, you can be sure your heirs will thank you.
(Note: There is some cushion to this harsh new rule: There is an exemption amount of $1.3 million of gain from this carry-over basis rule, and another $3 million exemption applying to assets inherited from a spouse. Any excess, however, will be subject to to the new carry-over basis rule. The duty to allocate this exemption among assets going to different persons will be that of your executor or successor trustee. Choose that person wisely. )
As Time Goes By… Part 2
November 26, 2009
In our recent blog post we listed 6 essential components of your Estate Plan that should be reviewed on a regular basis and why it’s so important to keep them updated. Today we’ll go into more detail about the first of these components; what they are, and how to review them.
Fiduciaries- Make a list of all the people you’ve named in any fiduciary role in your estate plan, including Trustees, Executors, Health Care Agents, Financial Agents, Guardians, and Advisors. Has your relationship with any of these people changed? What about the person’s own family or financial situation? Do you still feel confident in each person’s ability to carry out your wishes?
Assets- Look at the schedule of assets you have with your Estate Planning materials. If you don’t already have a schedule of assets, make one right now. Don’t forget to include property, bank accounts, stocks, Retirement accounts and Life Insurance policies. Of all the assets on this list, have all of them been put in the name of your trust or has your trust named as the beneficiary? Have all of your new assets been added to your trust? If you refinanced your home, was it put back in the name of the trust? If you answered “no” to any of these questions, it’s time to call your attorney.
Distribution and Beneficiaries- For most people, the whole purpose of a will or trust is to make sure that property is distributed according to their wishes upon death. So take your time reviewing that section of your estate plan. Is your list of beneficiaries still accurate? Do you have any new children or grandchildren? If so, your estate plan should reflect these changes.
In our next blog we’ll have more information about the second part of the list of things to review in your estate plan: Health Care, Guardianship and documents pertaining to minor children, and last but not least, legal updates.
As Time Goes By… Part 1
November 24, 2009
For many people the holiday season brings more than just celebration. Seeing family and friends you may not have seen since this time last year means seeing children who have shot up like weeds, siblings and cousins with noticeably more gray in their hair, and even sometimes seeing an empty place at the dinner table that wasn’t empty last year. In short, for many people the holiday season means facing the passage of time and the changes that passage can bring.
The passage of time is inevitable, as is the change it brings; and when your life changes it’s important that your estate plan change with it. Reviewing your estate plan every 1-3 years is essential to keeping it up to date and working the way you intended it to work. Luckily, reviewing your estate plan can be quick and easy if you know what you’re looking for. Here is a list of 6 key components you’ll want to review regularly:
- Fiduciaries
- Assets
- Distribution and Beneficiaries
- Health Care
- Guardianship and documents pertaining to minor children
- Legal Updates
If we’re lucky, our lives are constantly changing—our families evolve, our finances improve or decline, we meet and form strong relationships with knowledgeable friends and professionals. It only makes sense that your estate plan should change too. What seemed best for your family 4 years ago might not be the ideal situation now. By reviewing and updating these 6 components on a regular basis, and touching base with your attorney, you will insure that your estate plan will continue to protect yourself and your family the way you intended it to when you first created it.
Make the Most of IRA Distributions—Carefully
March 19, 2009
When we talk to clients about “the estate” they will pass on to their heirs, that estate includes a number of components: home, life insurance, bank accounts, investment accounts, secondary properties, and IRAs or other retirement assets. Many people consider their IRA the least of the assets in their estate, because they intend to spend down the IRA before they die, leaving nothing (or almost nothing) to pass on to their heirs. But should you die before that IRA is spent down it can end up being a significant inheritance over time to your beneficiaires, provided you—and your beneficiaries—play your cards right.
According to this article by Dan Caplinger, one of the biggest mistakes you can make is to name your “estate”, rather than named family members, as beneficiary for your IRA: “[B]ased on how the tax laws treat IRA money that goes through your estate, your heirs may miss out on a tax break that could save them thousands of dollars over their lifetimes.” Caplinger’s article continues to explain what he thinks is the best way to designate a beneficiary for your IRA, and how your loved ones can spread out distributions over time to make the most out of their inherited investment.
Of course, at our firm we know that every situation is unique, and there may be times when perhaps it will be more beneficial to your purpose to distribute your IRA to your heirs through your trust or even your estate. We therefore always recommend that you ask us or your financial advisor, or both, before making changes that will affect the distribution of any part of your estate, and especially your IRA’s, 401K’s or other retirement assets.
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