Putting your affairs in order: what documents to collect to save your family

Generally, we think of “putting our affairs in order” as something we do after we get the terminal illness diagnosis from the doctor.  There are many reasons not to wait for that time to get your affairs situated, but I’ll leave that for another time.  Today I want to talk about what it actually means to get your affairs in order. First, though, let’s see why it’s important:

Have you ever been the one “in charge” after someone has died?  No?  Imagine this: your nearest and dearest loved one has passed away.  You’ve talked to the hospital and picked a mortuary, so that’s a process that’s been started.  It’s really hard to talk about your loved ones “body” or “remains” while you’re still trying to process the loss in the first few minutes or hours.  But then you feel like you have to DO something, so you head to the house to see if you can find the “important papers.”  Two things can happen at this point:

Scenario one is that you arrive, and already know where the estate plan is, and head right for it.  With it are all of the life insurance policies, retirement and bank accounts, instructions, pre-need funeral planning receipts and contact information, and smaller things like an address book to get in touch with all his/her friends, a locked box (which you have the key) with all of the computer passwords, safe combinations and the like.  There seems to be a lot to do, so you contact the estate planning attorney, who, after asking you a couple questions, says, “there’s nothing to worry about and nothing to do.  Take care of you, your family, and the final arrangements.  Then call me back in a couple weeks if you have questions, but the instructions should all be there…just don’t worry about it now.”  So this is what you do, as you start calling friends and family members and bracing for the days ahead.

Scenario two is that you arrive, and don’t know where anything is.  Does s/he even have life insurance?  Where are the bank accounts?  Was there a will?  Where is it?  You start tearing apart the desk, closets, cupboards,…and find nothing.  Now you’re grieving, in shock, have a million things to do, and now you can’t find anything.  This adds to your stress, so you call in other family members, who are now tearing apart the boxes in the garage.  Everything is chaos, and still no information.  It’s overwhelming to the family.

Which would you prefer your loved ones experience?

The former?  GREAT choice.  Now, here’s what to put in the file:

  1. Your estate plan, with trust and will.
  2. Your powers of attorney.
  3. Your life/long-term care insurance information.
  4. Your retirement information.
  5. Bank account information.
  6. Pre-need funeral planning documents.
  7. Investment account documents.
  8. Deeds of property, such as homes, vehicles and boats.
  9. Health, disability, auto and property insurance documents.
  10. Income source documents (social security, employment, investments, child/spousal support).
  11. Credit card statements and evidence of other debt.
  12. Important papers, such as marriage/birth/death certificates, passports, tax returns, military or genealogical records.
  13. Names/contact information of trusted professionals, such as accountants, lawyers, financial advisors, gardeners, house cleaners or caregivers, home repair professionals (electrician, plumber, roofer, chimney sweep, etc.).

And one final thought: make sure you have at least one trusted friend or family member who knows where it is and what’s in it.

Long-Term Care Insurance: California divorce and estate planning

There are a lot of misconceptions and misinformation about long-term care insurance, and I don’t profess to know all of the ins and outs of it. But I DO know that it’s critical to have for just about everyone. By the time you’ve hit your forties, you need to look into it and get a policy before it becomes too late.

Now, what does this have to do with divorce? When you’re married, you have a built-in buddy. Someone who may be able to take care of you once you start having trouble taking care of yourself. You have to figure that either you or your spouse is going to lose it before the other, and the one left standing will be the caregiver.

Well, I don’t think that’s necessarily fair, and I am a strong believer in long-term care insurance for everyone, but this post is about divorce, so I’ll skip that.

It’s even more critical to have long-term care insurance when you are divorced because you don’t have an automatic back up to care for you if you fall ill. Long-term care covers in-home help and fills in the gap of health insurance or Medicare. In-home help can cost $25-30 per hour, and this really adds up if you need around the clock care. If you care about staying in your home and staying independent as long as you can, you should check into long-term care. And if you don’t care about these things now, believe me, you will. But perhaps by the time you realize how much you care about these things, it might be too late to get the insurance you need.

Don’t wait. Look into it now. It’s not very expensive and could mean a world of difference to you.

Estate planning “musts” to take care of NOW

I often get asked what the most basic “must dos” or “must haves” are in estate planning.  Here is the answer:

  1. Talk to an estate planning attorney.  Most, like me, offer free consultations, so you don’t have to spend anything but time, and then at least you’ll know and understand your need and risks, and be able to make informed decisions
  2. Talk to a financial advisor.  See above – you only lose your time, and if you find a reputable one (your estate planning attorney should know several fantastic ones, as I do), then you can make sure that as  you grow older, you are working toward your financial goals.

Those two items will give you all the information you need.  But more specifically:

  1. If you have children, decide on and formally nominate a guardian to care for them if you are unable to.  If you don’t decide?  A judge – a stranger – will make the decision for you.
  2. Create a will or trust.  If you don’t decide who will get your stuff, someone else will.  You’ll also pay a lot of money for the privilege.  Again, talking to an estate planning attorney to find out your risks and options costs nothing.  Why remain uninformed?
  3. Make sure you have enough life insurance.  What you think of as “enough” and what is really and truly “enough” should your spouse die may be entirely different amounts.  If one spouse doesn’t work, and the working spouse dies, wouldn’t you want to have enough life insurance to allow the survivor to take time to grieve, take care of the children, and then think about work, instead of having to worry about finding work right away?
  4. Make sure your retirement and life insurance beneficiaries are always up to date.  If you’ve been married for 20 years and your life insurance names your girlfriend of 25 years ago when you pass away?  Then your girlfriend gets the money and your wife doesn’t.  Is that what you want?
  5. Make sure you have long-term care insurance if you need it.  A financial advisor can help you to decide on this, and the earlier you get it, the cheaper it is.
  6. Make sure both spouses know and understand the family finances, even if one spouse does the day-to-day management.  Do not get caught in a situation where one spouse dies and the survivor does not even know what accounts exist.
  7. On that note, put your paperwork in order, or at least in one place.  Even if it’s disorganized in a drawer, make sure all the important paperwork, account statements, estate plan, life insurance, etc. is all in one place and easy to find.  Should you pass away, your family will be going through a rough enough time as it is – don’t make it worse by leaving a scattered financial life.

None of these items are difficult or even time-consuming, but they mean everything in the world to your family should something happen to you.  What are you waiting for?

Painful estate planning questions you must answer to avoid disastrous estate planning mistakes

Many of my estate planning clients have put off their estate planning for months, and even years sometimes. Part of this is because death or disability is something we don’t want to think about, and part of it is because some of the questions are difficult to answer.  What my clients do not always understand is that (1) it’s my job to help them to make the decisions, and (2) if they don’t decide, then someone else – a stranger – will decide for them. Here are some questions you need to consider when thinking about estate planning:

  1. The guardian for your children. This is probably the most important decision you will make.  In case the unthinkable happens – you and your spouse are out together on date night and get into an accident and are both hospitalized or worse. What do you think will happen to your children, who are at home with the 19-year old neighbor babysitting? The police will likely take your children into protective custody – foster care – until a proper guardian is named.  If you have a formally-named guardian in your estate planning documents (and not some hastily-written page), then you can avoid this awful experience for your children.
  2. Who will get your stuff. If you don’t decide who gets your stuff, the state will. And perhaps more importantly than the couch and the jewelry is the estate itself.  Do you have minor children? Do you want them to inherit hundreds of thousands of dollars when they reach 18? Do you perhaps want to hold back some of the estate to pay for college, or at least to let them mature a little before coming into (and losing) a great deal of money right at 18? The only want to do this is through trusts.
  3. What do you want the doctors to do if you are in an irreversible coma? If you don’t decide how you want the doctors to treat you and what extraordinary measures will be taken to save your life, then the doctors will endeavor to keep you alive as long as they can.  Do you want to survive by machine alone? If not, then you need to tell someone!  Tell your parents and your children, and create a power of attorney that legally records your wishes.  If you don’t do this, you could cause your family to scramble to determine what YOU would have wanted.
  4. Who will help you to manage your assets and estate if you can’t? Most of us are more likely to experience a slow decline than go out with a bang.  Because of the advances in medical and health care, we are living longer and with better-quality lives. But as we slow down, there is a chance that we will start to lose our ability to pay our bills and manage our finances.  To avoid the painful, time-consuming and expensive process of conservatorship, each of us needs to designate someone to make decisions on our behalf if we become unable to.  This is relevant to individuals of all ages, as surviving traumatic brain injuries is getting more and more common.
  5. Where are your documents? Part of creating your estate plan in making sure everything is in one place: your will, trust(s), powers of attorney, bank/investment/life insurance/retirement statements, pre-need funeral planning documents, and passwords/keys/online account information.  There is nothing worse than making your grieving family rummage through your stuff to find what they need.

Estate planning is the last thing that you can do for your family to make your passing easier. Isn’t your family worth it?

Your 2012 estate plan guide: when, how and why to update your existing plan

One of the most common estate planning questions I get is when and why you would need to update your estate plan. For 2012, here is your custom guide to ensuring that your estate plan is current:

  1. Has the value of your estate increased substantially since your last update?  Do you have more than $5 million if you’re single, or $10 million if you’re married?  Is this a change from before?  If so, then you may want to consider a review of your estate plan.
  2. Did you complete your powers of attorney before 2003?  In California the forms changed at that time, so now would be a good time to take another look.
  3. Are your beneficiaries on your retirement and life insurance accounts updated?
  4. Does your estate plan reflect your current family and desires for distribution to them?  Or has there been a birth, death, marriage or divorce since your last estate check up?  If so, you may need a review.
  5. Are you protected for a time (the time) when you are unable to think or care for yourself? Do you have your powers of attorney? Long-term care?  Advances in medical care mean we will live longer, but at the same time we will more likely experience a diminishing of capacity before we pass on.  Without these basic planning tools, we leave our family with these burdens.  Are you approaching 50?  If you don’t have long-term care yet, now is the time to get it.  You can’t wait until you need it or you won’t qualify.
  6. Have you chosen a guardian for your minor children?  If you don’t, then your children could become the subject of a custody battle if something happens to you, or they could be place in foster care while the decision is being made.  Don’t take this risk!

If it has been a while since you created your estate plan, or you don’t have one at all, now is the time to put the tools in place to protect your family and your assets.  Schedule a FREE appointment online, or call us at 925.307.6543.

Why and when you need an estate planning/elder law attorney

Top reasons why you may need an estate planning or elder law attorney:

  1. To keep more of your assets and money for your family than for the government/attorneys
  2. To have peace of mind that your family and all you have worked for is protected
  3. To avoid the state’s plan for the passing of your estate (probate) because it is complex, difficult, expensive, and time-consuming, and you want to make sure you don’t put your family through it
  4. To acknowledge that your needs will change as you age, and it takes critical planning to ensure that you and your family are cared for as you grow older
  5. Because the government (through Medicare/Medical/Medicaid) will not be sufficient for your long-term care, and you know that an attorney can help you to evaluate your options to make sure you are protected

Top reasons when you may need an estate planning or elder law attorney:

  1. Your estate becomes worth $150,000 or more (not including debt)
  2. Your loved one has been diagnosed with dementia or Alzheimer’s
  3. You are worried that you do not have a plan in place for your estate and family after you’re gone – everyone needs a plan, regardless of age, estate size, or family composition
  4. You are concerned about your or your loved one’s ability to cope with rising costs, continue to pay bills, or provide for ongoing medical care

Do you have any of these concerns?

Estate planning post-divorce: Why it’s critical to your future

Here is a video I did recently on estate planning after your divorce is completed.  All too often, once your divorce is final, the last thing you want to do is more work.  So, changing your beneficiaries, updating your retirements, 401Ks, powers of attorney, etc. gets lost in the shuffle.  But, ask yourself:  Do you want your ex to get the assets you worked your life to accumulate?  Do you want to leave your children with an uncertain financial future?  If you’ve gotten divorced, make sure you’ve taken these essential steps to properly protect your assets, family and future.

Protecting What May Be Your Most Valuable Asset

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville. Her bio and contact information are below.

If you are young and healthy, you might think your chances of becoming disabled are fairly slim. And you wouldn’t be alone in your belief: 64% of workers believe they have only a 2% (or less) risk of suffering a disability that could sideline them for three months or longer.1

But statistics tell a different story: 43% of 40-year-olds will suffer at least one long-term disability (90 days or longer) before age 65.2 Despite this risk, 38% of working Americans say they would be able to pay their living expenses for only three months or less if their incomes were interrupted; 65% would not be able to cover expenses for one year. These findings become all the more alarming when you consider that the average long-term disability lasts for two and a half years.3

If you wouldn’t think of going without insurance coverage for your home, health, or car, it doesn’t make much sense not to protect what may be your most valuable asset: your ability to earn an income.

A Policy That Can Protect

An individual disability income insurance policy can help replace a percentage of your salary, up to the policy limits, if you should suffer an illness or injury that makes it impossible for you to continue working. The benefits can continue until you recover or for a predetermined number of years, whichever comes first. If you pay the premiums yourself, the benefits usually are not taxable. Some policies will pay if you can’t perform your current occupation, whereas others will pay only if you cannot perform any type of job.

Many workers have some type of short-term group disability coverage through their employers. Group plans rarely cover as much as the 70% to 80% of income that individual policies typically offer, and the benefits from group plans are taxable to the extent that the employer pays the premiums.

Your Future Could Be at Stake

In the absence of an adequate, long-lasting source of disability income, you could be forced to use your retirement assets to pay living expenses and medical costs. If you have to withdraw assets from a tax-deferred retirement account, the withdrawals may be subject to a 10% federal income tax penalty if you are younger than 59½ (depending on the severity of the disability), as well as ordinary income taxes. Even worse, tapping your retirement assets could interfere with progress toward your retirement goals, creating the possibility that you might not be able to attain the retirement lifestyle you envisioned.

The appropriate disability income strategy may help reduce the financial consequences if you lose your income because of an illness or injury.

1, 3) Council for Disability Awareness, 2010
2) 2010 Field Guide, National Underwriter

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to their age, goals, and life circumstances.
4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506
phone: (925) 736-3024 / fax: (925) 736-3026
http://www.GirlsJustGottaHaveFunds.com

 

Beyond estate planning: Long-term care insurance

When I work with my clients to complete their estate plans, including their living trust, their powers of attorney, their wills, and other documents, I talk to them about other areas of their life where they should “get their affairs in order.”  One of these areas are long-term care insurance.  While this is not a service that I provide personally, I consider it part of my job to at least alert my clients to the other areas of their life that may need attention in preparation for retirement and beyond.  Many individuals just don’t have the correct information to be able to make informed decisions, so I try to bridge these gaps so my clients can make the best decisions for them.

Long-term care insurance is insurance that helps to pay for your care as you get older.  Very few of us are going to go from healthy and active one day to dead the next.  Most of us will decline more slowly as age starts to take its toll on our bodies.  Perhaps driving or climbing stairs will become difficult, and then perhaps we’ll need to use a cane or walker.  Medicare will not help you unless and until you are housebound and confined to your bed (generally).  During that phase of your life where you are slowing down, if you don’t have long-term care insurance, you have two options:  you can pay for it ($20,000/month or more) or depend on your family and friends to help take care of you.  Not many older individuals have an extra $20,000/month to spare, so paying for it is nearly impossible.  Depending on family can be an option for some, but I think many who have the ability to think about it ahead of time do not want to place this burden on their family.  Even those who cringe at the thought of having a stranger come into their home can understand the need for their caregiver family member to have a break from the care giving.  Long-term care insurance helps to pay for in-home care (or assisted living), can help to relieve family care givers, and help to save your finances when you can’t work anymore.  If you get it at a young age, it’s quite reasonable to pay for, and both you and your family will be grateful you had it.

Getting to know your beneficiaries

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville.  Her bio and contact information are below.

Thanks to a popular 2007 motion picture, many Americans now have a “bucket list” — an inventory of accomplishments they hope to achieve in their lifetimes.

Although many bucket list endeavors require courage or tenacity, such as traveling to faraway places or writing a book, there’s at least one task you can resolve to accomplish that is fairly simple but could have lasting benefits for your family, friends, and possibly a favorite charity.

Designate Your Beneficiaries

When you set up an IRA or participate in an employer-sponsored retirement plan, you are typically asked to fill out a beneficiary designation form. Although many people postpone the naming of a beneficiary, this can be a big mistake. IRAs and most retirement accounts are not subject to probate, and the assets will convey directly to your designated beneficiaries, regardless of different instructions in your will. Whoever is designated as your account beneficiary will inherit the proceeds directly, and it would be unlikely for a probate court to order a different result.

Failing to designate a beneficiary means your estate could inherit the money. Because your estate is not eligible for the same tax benefits that individual investors enjoy, your estate would be required to withdraw the assets over a shorter time period. By contrast, a correctly named beneficiary can preserve the tax-deferred status of the inherited funds and spread the tax liability over several years or even over his or her lifetime.

Life Insurance Policies, Too

Life insurance benefits also convey directly to beneficiaries, independent of the probate process. Although it would be unusual to purchase life insurance without designating a beneficiary, it’s not unusual for policy owners to fail to review their beneficiary designations on a regular basis.

The reasons you bought your life insurance policy and the people you want it to protect may change over time. But only you can change the designated beneficiaries on your life insurance policy. Major life events such as marriage, birth, divorce, or death may affect your choice of beneficiaries, and it’s important to update your designations to keep pace with any changes in your life.

Estate conservation issues may be uncomfortable to face, but there’s probably no other aspect that is as simple or inexpensive as designating beneficiaries. Keeping your beneficiary designations up to date can help ensure that your valuable assets go to the people you want to inherit them.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to  their age, goals, and life circumstances.

Sarah joined her family’s wealth-building business to help the children of her family’s clients begin to start building their own wealth, with someone who understood their values and who would not be judgmental or lecture them like a parent.

Sarah has a Bachelor of Science in Business from the Kelley School of Business at Indiana University. She joined her family’s firm in 2006 after several years in a successful retail merchandising career with Target Corporation and Abercrombie & Fitch.

As an active member of the Junior League of the Oakland-East Bay and the Pleasanton North Rotary Club, Sarah participates in philanthropic work regularly. Sarah is on the Board of Directors for the Financial Women’s Association of San Francisco and helps to organize events especially for members who live in the East Bay. She is also the Vice President for the Founder’s of Success chapter of Business Network International (BNI) and a member of e-Women Network.

In addition to financial consulting, Sarah is an entertaining and captivating public speaker; and she is currently writing a book about financial planning for women with young families. In her spare time, Sarah enjoys playing tennis, cooking, and traveling.

4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506

phone:                         (925) 736-3024             / fax: (925) 736-3026

www.GirlsJustGottaHaveFunds.com

 

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson is a registered representative of and offers securities, investment advisory, and financial planning services through MML Investors Services, Inc. Member SIPC. (2121 N. California Blvd. #395, Walnut Creek, CA 94596 (925) 979-2300). CA Insurance License #OF43069.