estate planning http://www.wisebread.com/taxonomy/term/8328/all en-US What Happens to Your Online Stuff After You Die? http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-happens-to-your-online-stuff-after-you-die" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/laptop-178793917.jpg" alt="laptop" title="laptop" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Many people write wills for their physical property, but few even think about creating a plan for their <em>digital</em> estates. Without such a plan, your loved ones might be unable to access your digital files or the accounts could be deleted before they see them.</p> <p>A digital estate plan can help ensure that every online account will be accessed or transferred to the right person. And for those with networks of online-only friends and work colleagues, a digital estate plan can help inform those virtual friends of one's actual demise.</p> <p>Let's start with a look at the nature of the problem, and then we'll look at some solutions.</p> <h2>Terms of Service Agreements</h2> <p>Remember those &quot;I agree&quot; boxes you checked next to Terms of Service Agreements without so much as glancing at the fine print? They typically restrict &quot;non-authorized users&quot; (in other words, your survivors) from accessing your accounts.</p> <p>Plus, they often say accounts are nontransferable. While people violate service agreements all the time without repercussions, the agreements are legal contracts and <a href="http://computer.howstuffworks.com/internet/basics/web-site-terms-of-service.htm">violating them is a crime</a>, although a misdemeanor. Social media companies often say they allow heirs to <em>delete</em> the deceased's account and not much else. Photos, comments and stories, everything else (good and bad) is lost.</p> <p>A digital estate plan will help your executor access and manage your online possessions. While they do not guarantee access (because of those service agreements), they often persuade a service provider to approve login access, especially since the contracts can change.</p> <h2>Creating Your Digital Estate Plan</h2> <p>Experts recommend following these steps.</p> <h3>1. Create an Inventory</h3> <p>Make a list of your online accounts with their usernames and passwords. Include social media sites, online bank accounts and credit cards, and utilities paid online. Remember to update them when changing accounts and passwords or at least once a year.</p> <h3>2. Save It</h3> <p>Store them in a secure location like a safe deposit box, CD, flash drive, or encrypted computer file. Password managers such as <a href="https://lastpass.com/">LastPass</a> or <a href="https://agilebits.com/onepassword">1Password</a> make it easy to encrypt and securely store such data. Another popular password manager &mdash; PasswordBox &mdash; includes a feature called &quot;<a href="https://help.passwordbox.com/customer/portal/topics/319767-legacy-locker/articles">Legacy Locker</a>&quot; that stores logins and passwords and shares them with designated people upon your death.</p> <p>Don't include your logins and passwords in your actual will, which becomes part of probate court's public records.</p> <h3>3. Name a Digital Executor</h3> <p>Your digital executor can be different from your regular executor. The digital executor should be digitally adept and, like your traditional executor, be impartial and trustworthy. Be specific and name accounts the executor will be able to control, delete, and maintain.</p> <h3>4. Say What You Wish to Happen</h3> <p>Define what you wish to happen to your accounts. Do you want your Facebook account deleted or memorialized? Let your executor know if you're using <a href="https://support.google.com/accounts/answer/3036546?hl=en">Google's Inactive Account Manager</a>. Your executor is obligated to follow your instructions.</p> <h2>What Google, Facebook and Others Will Do</h2> <p>Google recently introduced its Inactive Account Manager. You can use the tool to name a &quot;trusted contact&quot; to be contacted if a Google account, such as Gmail, YouTube, or Blogger, becomes inactive for any reason. If your account is inactive for a period of time, which you choose, Google sends you a text or email. If you don't respond, Google can &mdash; based on your instructions &mdash; delete the accounts or allow trusted contacts &quot;to receive data&quot; from the accounts.</p> <h3>Facebook</h3> <p>Facebook won't release login information but will delete or &quot;<a href="https://www.facebook.com/help/www/150486848354038">memorialize</a>&quot; an account on the request of heirs. Memorialized accounts are essentially frozen in time. No one can login or add or change photos or anything else. Depending on the privacy settings of the deceased person's account, friends can share memories on the memorialized Timeline.</p> <h3>LinkedIn</h3> <p><a href="http://help.linkedin.com/app/answers/detail/a_id/2842/~/deceased-linkedin-member---removing-profile">LinkedIn</a> says it will shut down profiles of deceased members on request. It asks heirs to complete and electronically sign a form via DocuSign. If heirs have login information, they may want to download the deceased's contacts, although it's legally unclear if the contact lists belong to the LinkedIn members or their company.</p> <h3>Twitter</h3> <p>Twitter will shut down accounts of deceased users on request. According to <a href="https://support.twitter.com/articles/87894-how-to-contact-twitter-about-a-deceased-user">Twitter's policy</a>, heirs have to mail or fax a signed statement, a copy of the death certificate, and a copy of a government-issued ID like a driver's license.</p> <h3>Digital Media</h3> <p>When consumers purchase digital music and e-books, they technically only buy licenses to view or hear them. For instance, the iTunes terms of service agreement says accounts are nontransferable and will end if users don't meet the terms. But if agreements allow multiple computers per account, heirs could use that loophole to claim the purchased media.</p> <h2>Missing Login Information?</h2> <p>If a relative passes away without leaving login information, heirs <em>might</em> be able to obtain access with the proper documentation and patience.</p> <p>Google says it might provide <a href="https://support.google.com/mail/answer/14300?hl=en#1">Gmail access</a> if heirs send a copy of the heir's government-issued ID and the death certificate. But it makes no promises and warns the wait can be long.</p> <p><a href="https://support.google.com/youtube/answer/3306113?hl=en">YouTube</a> says it might grant access &quot;only after a careful review&quot; if heirs provide a copy of the death certificate and power of attorney document.</p> <p>Because the concept of digital wills is relatively new, it's unclear how the issue will evolve. Internet firms could change policies after more requests from grieving families. Few states have laws on digital estates but more may address the topic in coming years. Despite the uncertainty &mdash; or maybe because of it &mdash; creating a digital estate plan can help your family access your virtual self before it, too, expires.</p> <p><em>Have you considered what will happen to your digital self &mdash; and your digital property &mdash; after you pass? What steps have you taken? Please share in comments (which are forever, unless something happens to the server, or an heir asks that they be removed).</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/michael-kling">Michael Kling</a> of <a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/estate-planning-why-me">Estate Planning: Why Me?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Is it Time to Talk with your Parents?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance digital will estate planning online property wills Tue, 20 May 2014 08:12:16 +0000 Michael Kling 1139916 at http://www.wisebread.com Life and Death: The Related Taxes, and How It Affects Your Family http://www.wisebread.com/small-business/life-and-death-the-related-taxes-and-how-it-affects-your-family <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/life-and-death-the-related-taxes-and-how-it-affects-your-family-tom-harnish" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/life-and-death-the-relate...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/life-and-death-the-related-taxes-and-how-it-affects-your-family" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000006796696XSmall.jpg" alt="Mother and baby" title="Mother and baby" class="imagecache imagecache-250w" width="250" height="165" /></a> </div> </div> </div> <p>Death and taxes, Ben Franklin wrote, are the only things that are certain in this world. Margaret Mitchell indirectly added babies to the list when she wrote in&nbsp;<em>Gone With The Wind</em> that&nbsp;there's never a convenient time for death, taxes, or childbirth. But even if taxes are inconvenient and death is certain (or the other way around), there is much we can do to make them easier on our family.</p> <h3>Kids and Taxes</h3> <p>If your business isn&rsquo;t incorporated, hiring your kids can produce substantial tax savings. You can deduct what you pay them, and you won't pay Social Security or Medicare tax, and you usually won't have to pay state unemployment or disability taxes on the money, either. Together, your family will send less to Uncle Sam.</p> <p>Your children&rsquo;s income is taxed at the same rate as yours until they are 19 (or 24 if they're full-time students). You can help reduce the tax bite by encouraging them to put the money in tax-free municipal bonds or growth stocks they won't sell until they&rsquo;re 19 (or 24), when their tax rate probably will be much lower than yours.</p> <p>If your estate pays enough taxes to take a disproportionate hunk out of your kids' income (as discussed above), you might want to gift some of your money to them. You can give a gift to whomever you like, and as many people as you like, and you won&rsquo;t pay gift tax if the amount is less than $13,000 per recipient per year. This isn&rsquo;t to avoid inheritance tax, by the way &mdash; in 2010 there wasn&rsquo;t any thanks to President Bush&rsquo;s tax legacy &mdash; but in 2011 there will be a 35% tax on estates over $5 million as part of&nbsp;<a href="http://www.wisebread.com/how-will-the-obama-tax-cut-deal-affect-you">Obama&rsquo;s &ldquo;tax cuts.&rdquo;</a>&nbsp;Most people won&rsquo;t have to worry about that; but if you do, gifts today can avoid taxes tomorrow.</p> <p>Be careful if you loan your adult children (or anyone else) money. If they want to borrow more than $10,000, you have to charge them interest. If you don&rsquo;t, you have to report a certain amount anyway, just as if you&rsquo;d received it from them. Paying taxes on money you didn&rsquo;t receive doesn&rsquo;t seem fair, but that&rsquo;s the way the tax code works.</p> <p>Another way to help your kids is to help them earn the retirement savings credit. The retirement savings credit can be up to 50% of the first $2,000 they pay into an IRA or company retirement plan, but paradoxically it's only available to low-income taxpayers &mdash; the very people who are least able to afford to make the contribution. But you can help, if you have an adult child who's not a full-time student, by giving him or her the money to fund such a retirement contribution.&nbsp;</p> <h3>Death and Taxes</h3> <p>Now onto sadder topics: If you're terminally ill and want to keep your home in the family, think about selling it to your kids now. It won't help your taxes, but it could save them some after you're gone.</p> <p>If you have investments that have been losing money on paper, consider selling them, too, before you die. Their value will be &quot;stepped down,&quot; as it's called, on the date of your death, and your heirs won't be able to claim the loss, so you might as well do it now.</p> <p>If, happily, you aren't terminally ill but thinking about living a very long time, keep in mind that a portion of long term care insurance costs are deductible.</p> <h3>Business and Taxes</h3> <p>If you are a self-employed business owner, you have a number of options when it comes to income and expenses. If, for example, 110% of your income is over $150,000 you don't need to make estimated tax payments this year. And you can also push some income into 2012 if you wait to send out bills until December 31st. You can can also chose pay some business expenses before the end of the year to be sure you get the deduction this year.</p> <p>And now that we're thinking about shifting money, consider shifting some of your own compensation from salary to dividend. Your salary is taxed on the basis of your tax bracket, which is probably 25-35%, but dividends are taxed at a maximum of 15%.</p> <p>The tax bite on some expenses, like compensation, varies too. If you buy a new company car your first year write off is about $12,000. But Congress has provided a tax incentive for gas guzzling SUVs and pickups, believe it or not. They told the IRS to let you write off $25,000 of the big vehicles expenses the first year, and depreciate the balance over the next six.</p> <p>Keep track of medical bills carefully. If you have to make modifications to your home for medical necessities, such as wheelchair ramps or hand controls for your cars, for example, you can include those costs in your medical deductions.</p> <p>Travel expenses related to medical care can be deducted too &mdash; and not just car mileage. You can deduct $50 a night per person for lodging if you have to go somewhere for treatment.</p> <p>Finally, keep in mind that what you do and don't deduct from you taxes, and what income you do or don't report is a serious issue. The tax tips offered here are simply thought-starters. Be sure get advice from a tax accountant or tax attorney to know you're doing it right. Besides, if your taxes are prepared by a professional you are <a href="http://www.openforum.com/idea-hub/topics/money/article/8-invitations-to-an-irs-audit-kate-lister"><span>less likely to be audited</span></a>.&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tom-harnish">Tom Harnish</a> of <a href="http://www.wisebread.com/small-business/life-and-death-the-related-taxes-and-how-it-affects-your-family">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/save-money-with-a-dependent-care-tax-credit-and-fsa">Save Money with a Dependent Care Tax Credit and FSA</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/business-succession-planning-part-2-how-life-insurance-will-insure-the-life-of-your-business">Business Succession Planning Part 2: How Life Insurance will insure the Life of Your Business</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/dont-miss-these-7-great-tax-deductions-for-parents-and-caretakers">Don&#039;t Miss These 7 Great Tax Deductions for Parents and Caretakers</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-ways-to-file-your-taxes-for-free-in-2015">8 Ways to File Your Taxes for Free in 2015</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center Taxes business taxes estate planning family finances small business Thu, 20 Jan 2011 01:22:57 +0000 Tom Harnish 455894 at http://www.wisebread.com Financial IQ Test: How Healthy is Your Life Insurance Plan? http://www.wisebread.com/financial-iq-test-how-healthy-is-your-life-insurance-plan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/financial-iq-test-how-healthy-is-your-life-insurance-plan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/IMGP0234_1.JPG" alt="life insurance" title="life insurance" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>What kind of life insurance policy do you have (if you have one at all)? Do you understand the terms? Are you getting the most bang for your insurance buck? How did you select the amount of insurance you have? How did you choose your insurance company and structure the policy? And how often do you review your life insurance needs?</p> <p>Following is a Financial IQ Test to help you determine how healthy your life insurance plan is. <strong>Simply look at each statement, and answer it with a YES, NO, or NOT SURE.</strong> Keep track of your answers, and we'll see how you score at the end. Then, check out the resource articles below to increase your knowledge base.</p> <h2>Financial IQ Test: How Healthy is Your Life Insurance Plan?</h2> <h3>Policy and insurance company selection</h3> <p>I check on the financial stability and overall reputation of the insurance company.</p> <p>I buy only from companies with an &quot;A&quot; rating or higher.</p> <p>I look at the monthly, quarterly, and annual premiums and select the least expensive option.</p> <p>I shop across a few different insurance companies, or use a broker to help me.</p> <p>I have asked about discounts for my spouse and I both having policies with the same insurer.</p> <p>I decline coverage offered by <a href="http://www.wisebread.com/stop-calling-me-how-to-avoid-telemarketers">telemarketers</a> from my credit card company.</p> <h3>Policy Structure</h3> <p>I have enough life insurance to cover lost income, funeral expenses, pay off debts, and address any future needs (like a child's education).</p> <p>I've selected both a beneficiary as well as a contingent beneficiary on the policy application.</p> <p>I've indexed future needs (like a child's education or retirement savings for my non-working spouse) to inflation.</p> <p>I've reviewed all the riders on the policy and only have the ones that I need.</p> <p>I have reduced my insurance analysis needs by existing coverage provided through my employer or association membership.</p> <h3>Policy Maintenance</h3> <p>When I review my life insurance plan, I also review my premiums and compare them to current market rates.</p> <p>When something major happens in my life, I reevaluate my life insurance needs right away.</p> <p>I review my life insurance needs (if nothing has changed) every three years.</p> <p>I discuss my insurance needs and options with my <a href="http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner">financial planner</a>.</p> <p>The insurance company always has my most current address on file.</p> <h3>General Knowledge and Maximizing Value</h3> <p>Smoking almost doubles my life insurance rates, but if I quit for a year and submit a form, my rates will drop.</p> <p>I know the difference between temporary (Term) and permanent insurance, and have selected the most appropriate kind for my needs.</p> <p>I know I'll have insurance needs in the future, so I got life insurance at a young age to guarantee my insurability.</p> <p>I understand the benefits of a convertible (Term) policy.</p> <p>I know what a cash value is on a permanent insurance policy, and what I can do with it.</p> <p>I know how to access the cash value of my permanent policy tax-free.</p> <h2>Scoring</h2> <p>Did you keep track of how many times you answered YES, NO, and NOT SURE? Great! Give yourself the following points for each answer:</p> <p>YES = 4 points</p> <p>NO = 0 points</p> <p>NOT SURE = 2 points</p> <h2>Analysis</h2> <h3>Score 0-30: Do you have life insurance at all?</h3> <p>This is not a criticism; some people don't need life insurance at certain points in their lives. But have you taken the time to do an analysis and educate yourself as to your options? Do you know if your employer has provided life insurance and do you know what to do with it or if it's enough? Best not to bury your head in the sand with the excuse that you'll be dead and don't care about your <a href="http://www.wisebread.com/estate-planning-why-me">estate plan</a>. Check out some of the resources below, and talk to your financial planner about your needs.</p> <h3>Score 31-60: Not maximizing value</h3> <p>A little bit of knowledge is a dangerous thing. Although you have probably taken some time to educate yourself about life insurance, I would argue that you don't know what you don't know. You might be over-paying for your insurance, are insured for the wrong amount, or have an inappropriate type of policy for your needs. Make sure you review your needs regularly and are maximizing value wherever you can.</p> <h3>Score 61-88: You have a plan</h3> <p>If you scored in this range, then congratulations &mdash; you most likely have a life insurance plan of sorts in place. The industry is constantly changing, so make sure you reevaluate your needs, what you're paying, and the policies you have. Make sure your financial planner is on board with the plan, and check out the Wise Bread resources below to get some fodder for your next conversation with them.</p> <h2>Life Insurance Resources on Wise Bread</h2> <p><a href="http://www.wisebread.com/credit-card-insurance-no-thanks">Credit Card Insurance? No Thanks</a></p> <p><a href="http://www.wisebread.com/choosing-life-insurance-term-or-permanent">Choosing Life Insurance: Term or Permanent</a></p> <p><a href="http://www.wisebread.com/universal-life-insurance-and-whole-life-insurance-a-comparison">Universal Life Insurance and Whole Life Insurance: A Comparison</a></p> <p><a href="http://www.wisebread.com/how-and-why-to-buy-life-insurance">How and Why to Buy Life Insurance</a></p> <p><a href="http://www.wisebread.com/is-getting-life-insurance-for-your-children-prudent-or-prudish">Is Getting Life Insurance for Your Children Prudent or Prudish?</a></p> <p><a href="http://www.wisebread.com/do-i-need-life-insurance-for-little-ones">Do I Need Life Insurance for the Little Ones?</a></p> <p><a href="http://www.wisebread.com/insured-annuities-for-wise-bloggers">Insured Annuities for Wise Bloggers</a></p> <p><a href="http://www.wisebread.com/why-you-don-t-need-mortgage-life-insurance">Why You Don't Need Mortgage Life Insurance</a></p> <p><a href="http://www.wisebread.com/ad-d-insurance-no-good-no-bad-just-ugly">AD&amp;D Insurance: No Good, No Bad, Just Ugly</a></p> <p><a href="http://www.wisebread.com/did-your-parents-give-you-a-whole-life-insurance-policy-heres-what-to-do-with-it">Did Your Parents Give you a Whole Life Insurance Policy? Here's What to Do With It</a></p> <h2>Other FINANCIAL IQ Tests on Wise Bread</h2> <p><a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-debt-management">How Healthy is your Debt Management?</a></p> <p><a href="http://www.wisebread.com/financial-iq-test-how-healthy-are-your-bank-accounts">How Healthy are your Bank Accounts?</a></p> <p><a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-budget">How Healthy is your Budget?</a></p> <p><a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-health-care-plan">How Healthy is your Health Care Plan?</a></p> <p><a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-disability-insurance">How Healthy is your Disability Insurance?</a></p> <p><a href="http://www.wisebread.com/financial-iq-test-do-you-have-the-best-auto-insurance-coverage-for-your-needs">Do you Have the Best Auto Insurance Coverage for Your Needs?</a></p> <p><a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-financial-plan">How Healthy is Your Financial Plan?</a></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-life-insurance-plan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-does-it-take-to-become-a-cfp">What Does It Take to Become a CFP?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/meet-wise-breads-financial-planning-expert-jeff-rose-cfp">Meet Wise Bread&#039;s Financial Planning Expert, Jeff Rose, CFP!</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/not-insuring-these-6-things-could-bankrupt-you">Not Insuring These 6 Things Could Bankrupt You</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-do-i-need-to-know-before-i-hire-a-cfp">What Do I Need to Know Before I Hire a CFP?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-i-get-life-insurance-through-my-employer">Should I Get Life Insurance Through My Employer?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Insurance estate planning financial IQ Test life insurance Mon, 09 Aug 2010 13:00:06 +0000 Nora Dunn 199842 at http://www.wisebread.com Do You Need an Estate Plan? http://www.wisebread.com/do-you-need-an-estate-plan <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/do-you-need-an-estate-plan" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/420816_99422477 (1).jpg" alt="All My Riches" title="All My Riches" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Say the words &quot;estate planning&quot; and what typically comes to mind are extravagant estates worth millions of dollars. Estate planning is for celebrities and the very wealthy, right? I &nbsp;mean, the average working guy or gal can make do with a standard do-it-yourself Will.</p> <p>Well, not necessarily.</p> <p>One of the benefits of being a freelance writer is that I get to work with a variety of different clients on a variety of different topics. And in the process, I learn quite a bit about subjects I had never explored before, estate planning being the latest.</p> <p>What I found is that estate planning is much more than just divvying up your coin collection and jewelry. Quite the contrary, there are a number of issues that a good estate plan can address.</p> <p>A living trust for example, can provide you with a way to offer incentives to your heirs for personal accomplishments. Want to ensure your son or daughter goes to college? Make that a condition of receiving their distributions. Want to teach your children the importance of carving out their own place in the world instead of just relying on their inheritance? A trust allows you to do that as well.</p> <p>You can also use a trust to provide for disabled dependents without affecting their eligibility for government assistance programs, and depending on how you structure your trust, you can ensure that your assets stay in the family, even in the face of taxes or a divorce.</p> <p>Heck, there's even a specialized trust to protect your pets after you're gone.</p> <p>A financial Power of Attorney allows you to designate someone to speak on your behalf if you become disabled or incapacitated and are unable to handle your own affairs. A Healthcare Directive provides the same protection in regard to your healthcare and medical decisions.&nbsp;</p> <p>But estate planning doesn't stop there and this is what really won me over.</p> <p>A good estate plan also encompasses all the non-financial aspects of your life, like the old photo album in the top of your closet, grandma's quilt that lies at the foot of your bed, the tapes you made of Great Aunt Ethel's family stories and all the memories and knowledge that up until now, you've been carrying around in your head.</p> <p>In short, creating an estate plan is about leaving a legacy...not just a few bucks and the deed to the house.</p> <p>That's all well and good you say, but I don't have enough of an estate to worry about.&nbsp;</p> <p>Are you sure?</p> <p>The problem with not having an estate plan is that you're still going to pass on someday. And when you do, the courts will step in and make all these decisions for you. That means that if property needs to be sold to pay creditors or taxes, you won't have a say over which property is used to cover those expenses. And someone must oversee the distribution of all your belongings, a process known as &quot;probate.&quot; If you haven't designated that person yourself, then the court will make the designation for you and there's no guarantee you'll agree with their choice or the way your belongings are divided among your heirs.</p> <p>Of course, by then, it would be too late to do anything about it.</p> <p>Now, I know that no one likes to think about a time when they're no longer around but the truth is, it will happen whether we're ready or not. And I've realized that when that day comes for me, my kids will need to know where the important documents are. They'll need to know that I have life insurance and savings accounts as well as journals I've created for them over the years and keepsakes that are stored in my great-grandmother's hope chest. Personally, I kind of like the idea of taking care of things before I go...after all, that's what Moms do, isn't it?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/kate-luther">Kate Luther</a> of <a href="http://www.wisebread.com/do-you-need-an-estate-plan">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-financial-perks-of-marriage">10 Financial Perks of Marriage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/can-you-afford-to-have-a-baby">Can You Afford to Have a Baby?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-should-you-say-no-to-those-who-want-to-borrow-money-from-you">When Should You Say No to Those Who Want to Borrow Money from You?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/getting-by-on-a-lot-less-money-3-ways-its-easier-than-you-think">Getting by on a lot less money: 3 ways it&#039;s easier than you think</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-a-divorce-improve-your-finances">Could a Divorce Improve Your Finances?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Family estate planning life planning taxes Tue, 15 Jun 2010 13:51:40 +0000 Kate Luther 126252 at http://www.wisebread.com Post Divorce Finances: 7 Steps to Rebuilding Your Financial House http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/post-divorce-finances-7-steps-to-rebuilding-your-financial-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/post divorce finances.jpg" alt="new horizons" title="new horizons" class="imagecache imagecache-250w" width="250" height="333" /></a> </div> </div> </div> <p class="MsoPlainText">My, how life changes when you close one chapter of your life and open a new one. Severing a conjoined life and combined finances as a result of divorce is painful through and through. The jump to a single income lifestyle paves the way to feeling the cash crunch, and if children are involved it is even more pronounced. Even if the breakup is liberating, there is still some mopping up to do after the storm. </p> <p class="MsoPlainText">Here are seven things you can do to set your new life up on the right foot:</p> <p class="MsoPlainText">&nbsp;</p> <h3 class="MsoPlainText"><strong>Joint Banking Be Gone</strong></h3> <p class="MsoPlainText">Close all <a href="/separate-bank-accounts-till-death-or-banking-do-we-part" target="_blank">joint bank accounts</a>, joint non-registered investment accounts, and <a href="/sexually-transmitted-debt-eewww" target="_blank">credit cards</a>. Not only is this a tangible form of evidence to demonstrate a date of separation (in locales where you need to be separated for a time prior to applying for divorce), but it also protects each party from destructive actions the other may take in anger or apathy. </p> <p>   <br /> <br /> <h3 class="MsoPlainText"><strong>Remove all Beneficiary Designations</strong></h3> <p class="MsoPlainText">Here is a list of items you may need to look at in terms of removing joint or beneficiary designations:</p> <ul> <li>life insurance policies</li> <li>retirement funds</li> <li>auto insurance</li> <li><a href="/credit-card-insurance-no-thanks" target="_blank">credit card insurance</a></li> <li>pension funds through work</li> <li>health care plans through work</li> </ul> <p class="MsoPlainText">If you are required to designate a new beneficiary and are not sure who to choose just yet, simply choose your estate for now, or until you hear otherwise from your lawyer/accountant/financial planner. Although an estate designation may not be the most tax-efficient option, it will keep things simpler until all the divorce paperwork is properly nailed down and you get on your feet again. </p> <p class="MsoPlainText">&nbsp;</p> <h3 class="MsoPlainText"><strong>Create a New Budget</strong></h3> <p class="MsoPlainText">Flying solo means creating a whole new budget – a crucial step of the process. You may or may not have been actively involved in the finances while married, so creating a new budget could be an exercise in learning how much things cost, or simply reallocating income streams accordingly. </p> <p class="MsoPlainText">&nbsp;</p> <h3 class="MsoPlainText"><strong>Update Your Will</strong></h3> <p class="MsoPlainText">Updating a <a href="/wills-the-basics" target="_blank">will</a> doesn’t have to be a laborious process. If it is simply a matter of changing beneficiaries, a codicil (a one page addendum that attaches to the will) can suffice. </p> <p class="MsoPlainText">&nbsp;</p> <h3 class="MsoPlainText"><strong>Review Your Estate Plan</strong></h3> <p class="MsoPlainText">Although you will have covered most of the bases with reassigning beneficiaries and updating your will, your <a href="/estate-planning-why-me" target="_blank">estate plan</a> may incorporate some larger issues or opportunities given the new financial structure of your life. </p> <p class="MsoPlainText">For example, your previous estate plan may have been mindful of your ex-partner’s <a href="/is-it-time-to-talk-with-your-parents" target="_blank">parents</a> who are – or will become – financially or physically dependant. Or maybe children from a first marriage have been incorporated into the estate plan and now the structure of trusts or income streams needs to change. </p> <p class="MsoPlainText">&nbsp;</p> <h3 class="MsoPlainText"><strong>Don’t Blow the Financial Settlement!</strong></h3> <p class="MsoPlainText">Just in case you had eyes for a new stereo system or a bigger house, you may want to seek counsel before spending any financial settlement that arises as a result of your divorce. From tax efficiency, to your overall financial plan, there could be ways to greatly help or detrimentally cripple your finances by virtue of what you do with the settlement. </p> <p class="MsoPlainText">If you are the one doling out the settlement, then refer to the following point to help you sort through the noise:</p> <p class="MsoPlainText">&nbsp;</p> <h3 class="MsoPlainText"><strong>See a Financial Planner</strong></h3> <p class="MsoPlainText">Your <a href="/how-to-choose-a-financial-planner-yes-you" target="_blank">financial planner </a> will be instrumental in helping you with many of the above chores. Many financial planners can help with the transition and separation of accounts, but if you are uncomfortable meeting with the same planner you used as a couple, then ask around for a referral to a new planner who you can trust and establish a new relationship with. </p> <p class="MsoPlainText">You face lifestyle changes (in some cases drastic ones), income differentials, emotional transitions, tax plan modifications, and investment time frame readjustments. Your <a href="/asset-allocation-for-all-markets" target="_blank">asset allocation</a> plan may change, either because your investment personality is different from your ex-partner’s, or because you plan to utilize your investments differently (ie: your time horizon is longer, or you need to draw down on some investments now). </p> <p class="MsoPlainText">&nbsp;</p> <p> <span style="font-size: 10pt; font-family: 'Courier New'">As crushing and stressful the trauma of severing your life from a loved one can be, you must try to maintain a level head throughout the process. By covering off the bases above, and keeping your eyes on the road ahead, you can survive the ordeal and move forward without falling into so many of the traps that lurk along the way. Life will go on, and in some cases, may even improve. </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/estate-planning-why-me">Estate Planning: Why Me?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Is it Time to Talk with your Parents?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">What Happens to Your Online Stuff After You Die?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance beneficiary designations divorce and money estate planning joint accounts post divorce finances wills Tue, 28 Oct 2008 04:06:55 +0000 Nora Dunn 2548 at http://www.wisebread.com Business Succession Planning Part 2: How Life Insurance will insure the Life of Your Business http://www.wisebread.com/business-succession-planning-part-2-how-life-insurance-will-insure-the-life-of-your-business <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/business-succession-planning-part-2-how-life-insurance-will-insure-the-life-of-your-business" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/business succession planning part 2.JPG" alt="key man" title="key man" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p class="MsoPlainText"><span>As a follow up to my first article on <a target="_blank" href="/business-succession-planning-part-1-what-a-shareholders-agreement-means-to-you">Business Succession Planning</a>, there are a number of ways that Life Insurance can be fit into the life of a successful business owner. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>There are <strong>two basic ways</strong> in which a business owner will want to look at Life Insurance for the life of their business:</span></p> <p class="MsoPlainText"><span> </span></p> <h2><span>Buy-Sell Agreement Funding</span></h2> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>As referenced in my <a target="_blank" href="/business-succession-planning-part-1-what-a-shareholders-agreement-means-to-you">previous article</a>, if an owner dies in a situation where there are multiple partners (or even as few as two) who own the company, the shareholder's agreement likely has provisions for the deceased owner's shares to be bought by the other owners. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Here's the rub: depending on how the shares are valued and depending on how large the company is, the other owners probably don't have the cash kicking around to buy out the deceased's shares at the drop of a hat. Nor does the company have that kind of dough in the bank.</span></p> <p class="MsoPlainText"><span>In fact, many a company has gone bankrupt or into unshakable financial duress due to improperly funded buy-sell agreements and the consequent inability to carry the terms through. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><span>Structuring Life Insurance for Buy-Sell Agreement Funding</span></strong></h3> <p class="MsoPlainText"><span>The way around this mess is to purchase Life Insurance on the lives of each of the owners. The beneficiaries are the surviving company owners. That way if Bob dies, a life insurance policy on his life will give the other owners the cash to purchase Bob's share of the company. The company remains solvent, and Bob's estate (family) receives the money from Bob's share of the business. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>The good news is that depending on how the policy is structured and the type of business, the <strong>life insurance premiums are often tax-deductible</strong>, and the <strong>insurance proceeds are also tax-free</strong>. It's a great way to process a relatively small tax-deductible expense with the promise of receiving a relatively large tax-free lump sum of money just when it is needed. </span></p> <p class="MsoPlainText"><span> </span></p> <p><span> </span></p> <h2><span>Key Man Insurance (Key Person Insurance)</span></h2> <p class="MsoPlainText"><span> <br /> Business owners are quick to insure the company against the loss or damage of its <em>property</em> on the basis that office equipment and inventory are valuable assets. Such assets, however, may not be as valuable as key employees.</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Consider a top salesperson who is unsurpassed at bringing in new accounts, or a manager who handles the day to day operation of the business. Key employees like these are a firm&rsquo;s most valuable resource. </span></p> <p class="MsoPlainText"><span>If a key-person died suddenly, profits could be impacted and there might be considerable costs incurred in recruiting, hiring and training a suitable replacement.</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>So why insure the life of a key employee? Although it won't replace the work that the key employee did, the extra cash will provide a cushion to: </span></p> <ul> <li><span>Keep the business running </span></li> <li><span>Offset expected reductions in sales revenue </span></li> <li><span>Find and train a new person to assume the deceased&rsquo;s role </span></li> </ul> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Believe it or not, <strong>when applying for substantial business loans, some banks will actually look for key man insurance</strong> depending on the structure of the firm to ensure that an unexpected death won't be the end of the company (and an end of the loan payments).</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Examples of key employees would be anybody whose special skills contribute significantly to the bottom line, like:</span></p> <ul> <li><span>Active business owners</span></li> <li><span>Employees who have strong relationships with major customers</span></li> <li><span>Employees with specialized knowledge that is hard to replace</span></li> </ul> <p class="MsoPlainText"><span> </span></p> <h3><strong><span>Structuring a Key Man Policy</span></strong></h3> <p class="MsoPlainText"><span>The company purchases a life insurance policy on the employee. Both the owner and the beneficiary of the policy is the company. So if the employee dies, the money goes to the company (tax-free). </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Obviously the amount of insurance needed is dependent on the level of value the employee has on the company's operations. Things to consider include:</span></p> <ul> <li><span>How much would it cost to replace the employee? (including recruitment fees, etc)</span></li> <li><span>How much net profit does the employee's work result in?</span></li> <li><span>How much would it cost the company if the employee died today?</span></li> <li><span>How much can the business afford (or how much is the business willing to afford) for this insurance?</span></li> </ul> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>The need and desire for Life Insurance (either Key Man or Buy-Sell funding) will vary from company to company and person to person. It is an intricate situation that incorporates the <strong>nature of the business, the needs of the owner(s), as well as their respective family situations</strong>. <em>No one piece of the pie can be examined in isolation from the others</em>. </span></p> <p class="MsoPlainText"><span>And with so many things, life will continue to change, so periodic re-evaluation of needs (along with a &quot;gut check&quot;) is always prudent. </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/business-succession-planning-part-2-how-life-insurance-will-insure-the-life-of-your-business">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-5-best-credit-cards-for-small-businesses">The 5 Best Credit Cards for Small Businesses</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-got-over-the-hump-and-sold-my-blog-for-3-million">How I Got Over the Hump and Sold My Blog for $3 Million</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/10-things-all-successful-freelancers-do">10 Things All Successful Freelancers Do</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/coworking-spaces-the-office-alternative">Coworking Spaces: The Office Alternative</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship business succession planning buy-sell agreement estate planning key man insurance life insurance shareholders agreement small business Sat, 09 Feb 2008 02:13:37 +0000 Nora Dunn 1768 at http://www.wisebread.com Wills: The Basics http://www.wisebread.com/wills-the-basics <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/wills-the-basics" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/wills.JPG" alt="mourning" title="mourning" class="imagecache imagecache-250w" width="250" height="180" /></a> </div> </div> </div> <p class="MsoPlainText"><span>As indicated in a <a href="/estate-planning-why-me" target="_blank">previous article</a>, planning for the future (even if the future means you&#39;re dead) is a necessary evil. Here are some of the basics of a will and what you need to know. </span></p> <p class="MsoPlainText"><span> </span></p> <h2><span>BASIC TERMINOLOGY</span></h2> <h3><u><strong><span>Will</span></strong></u></h3> <p class="MsoPlainText"><span>This is a legal document which outlines how your assets and belongings are to be distributed when you die. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Executor</span></u></strong></h3> <p class="MsoPlainText"><span>Your executor (also known as &quot;administrator&quot;) is the person you designate in your will to carry out your wishes. </span></p> <p class="MsoPlainText"><span>Since they have to follow your will to the letter, it is best to meet with your chosen executor, gain their approval for such a responsibility (it&#39;s a big one), and then describe your wishes to them as outlined in the will. They should also ideally know where to find the will and other key documents if and when they need to. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Beneficiary</span></u></strong></h3> <p class="MsoPlainText"><span>Beneficiaries are the people who receive your assets when you die. You designate them as you see fit in your will, and you can have as many beneficiaries as you wish. Beneficiaries can also include companies, charities, and other organizations. (If you designate an organization or charity as your beneficiary, it is best to consult with them first to determine how specifically to do so). </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Intestate</span></u></strong></h3> <p class="MsoPlainText"><span>If you die without a will, you are considered to be intestate. This is when the government steps in, and over a tiresome period will attempt to contact anybody who might be a family member with a right to receive any of your assets. They first need to find the most appropriate executor, since nobody will be allowed to touch anything you owned until one is appointed. All accounts without designated beneficiaries (and even some that are) will be frozen and assets locked up.</span></p> <p class="MsoPlainText"><span>If there are competing interests for who should be the executor, then intestate succession can become ugly, costly, and chaotic. </span></p> <p class="MsoPlainText"><span>And if somebody dies intestate, even joint accounts can be frozen (not always, but in some cases), so spouses who think their estate situations are simple and not in need of wills can sometimes be in for a nasty surprise. </span></p> <p class="MsoPlainText"><span> </span></p> <h2><span>BASIC BENEFITS</span></h2> <h3><strong><u><span>Guardian for Children</span></u></strong></h3> <p class="MsoPlainText"><span>In your will, you designate a guardian for your minor children. You can also specify certain elements of how they are to be raised, and arrange how they will be financially cared for. </span></p> <p class="MsoPlainText"><span>If no guardian is selected, your kids don&#39;t get to pick, and sometimes the most logical guardian (for example a close friend who has been involved with the family since the beginning and would love to care for the kids) won&#39;t be respected - it goes by the book (worse case scenario: think &quot;wicked Aunt who hates kids and never went to a family picnic if you paid her&quot;). </span></p> <p> <span> </span></p> <h3><strong><u><span>Income Tax Savings</span></u></strong></h3> <p class="MsoPlainText"><span>Depending on where you live, there is usually a tax-friendly provision for the rollover of assets between spouses on death if it is properly specified in the will. Otherwise, there is a &quot;deemed disposition&quot; of assets often resulting in a tax bite before the spouse gains access to these funds. (General financial prudence dictates that you put off paying taxes until the last possible minute, in order to achieve greater overall gains using compound growth). </span></p> <p> <span> </span></p> <h3><strong><u><span>Trusts for Children</span></u></strong></h3> <p class="MsoPlainText"><span>If you die and your kids are the age of majority, they will have full access to the assets you bequest to them. Not to challenge your parenting skills in raising a responsible child, but really - what 18 year old (or 21 year old for that matter) is going to responsibly accept a financial windfall? Heck - many seasoned <em>adults</em> can&#39;t handle financial windfalls; young adults won&#39;t fare any better. Your hard-earned estate that you hoped would provide financial security for your kids could end up being spent in record time with very little to show for it. </span></p> <p class="MsoPlainText"><span>So in your will, consider setting up a trust. There are a few types of trusts (which go beyond the scope of this article), but basically you can set the terms as you wish. You can specify when and how your kids receive the money, and even how it is to be used or invested. Beware of setting too many restrictions: resentment can become a factor if the kids feel they have been unrightfully challenged, but most will eventually respect a decision to hold off divesting the funds until a later age. </span></p> <p class="MsoPlainText"><span> </span></p> <h3><strong><u><span>Family Law Protection</span></u></strong></h3> <p class="MsoPlainText"><span>Once again we trust our kids to make all the right choices in life, including their choice of spouse. However life happens, and sometimes marriages break down. If your hard-earned estate is left to your child and their partner (be they a husband or wife, or just a common-law partner), half of it could well disappear along with that marriage when it breaks down. </span></p> <p class="MsoPlainText"><span>In your will, you can insert clauses and terms to prevent this from happening. </span></p> <p> <span> </span></p> <h3><strong><u><span>Common Disaster Clause</span></u></strong></h3> <p class="MsoPlainText"><span>The best way to demonstrate the effectiveness of a Common Disaster Clause is by example: </span></p> <p class="MsoPlainText"><span>John &amp; Jane are married, with no children. They are both in a serious car accident, hospitalized in critical care. John passes away first, but Jane hangs on. However two weeks later, Jane too dies. </span></p> <p class="MsoPlainText"><span>Without a common disaster clause, John&#39;s assets would go to Jane, the surviving spouse. When Jane dies, her entire estate (which includes everything John brought to the marriage) would go to her side of the family (or whoever her contingent beneficiaries are if she had a will). John&#39;s entire family would be denied any inheritance (including heirlooms or other prized family items - it&#39;s not all about money). </span></p> <p class="MsoPlainText"><span>A common disaster clause diverts this problem by stating that if both spouses die within a certain amount of time (eg: a 30-day period) as a result of a common disaster, then their estates are split in half and distributed to their respective families accordingly. </span></p> <p> <span> </span></p> <h3><strong><u><span>Liability Clause</span></u></strong></h3> <p class="MsoPlainText"><span>This is inserted to protect the executor from being sued, for example in the case of an investment loss. This is particularly important if they are managing trust accounts. </span></p> <p> <span> </span></p> <h3><strong><u><span>Expert Clause</span></u></strong></h3> <p class="MsoPlainText"><span>This allows your executor to retain the services of an accountant or lawyer with regards to processing the estate or receiving estate-specific advice, and the estate can pay for it. Otherwise, the fees could come directly out of the executor&#39;s pocket. And although they may be a great brother or good friend, nobody appreciates a legal bill - much less an unexpected one!</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span> </span></p> <p> <span>As I said earlier, it’s not all about money and cash grabs when you plan your will and estate. You are looking out for the best interests of yourself, your loved ones, and their loved ones too. Nobody likes to plan for the future in this respect, but once it&#39;s done it can be put to bed, and everybody can rest easily knowing that the future is taken care of. </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/wills-the-basics">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-7"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/estate-planning-why-me">Estate Planning: Why Me?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Is it Time to Talk with your Parents?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">What Happens to Your Online Stuff After You Die?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance beneficiary estate planning executor family law intestate trusts wills Tue, 22 Jan 2008 08:45:49 +0000 Nora Dunn 1659 at http://www.wisebread.com Debunking Common Estate Planning Myths http://www.wisebread.com/debunking-common-estate-planning-myths <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/debunking-common-estate-planning-myths" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/Will.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Given the tens of millions of Americans nearing the Golden Years, the fields of retirement and estate planning are expanding by leaps and bounds. Along with the growth of work for financial advisors and estate planning attorneys, has come the advent of self-planning. From managing your entire investment portfolio from your home computer, to preparing your own Wills, Trusts and advanced-directives using an online document-preparation service, the &quot;do-it-yourself&quot; sector of financial and estate planning is enjoying huge growth. </p> <p> As more and more Americans rely on websites like LegalZoom to help them prepare pre- and post-mortem documents, it is important to understand the several &quot;myths&quot; of estate planning, and how these online sites fail to convey the risks involved with self-prepared documents.</p> <p><strong>Myth #1: You Need a Will</strong><br />This is an absolute lie, perpetrated by online companies and sometimes unethical attorneys looking to generate business. Don&#39;t get me wrong, most people could benefit from a Will, but not everyone needs a Will. If you have minor children, you will want to prepare a basic Will as soon as possible to ensure guardianship of your children passes to a trusted family member or friend in the event of your premature demise. However, if you have no minor children, there are other ways to assure the meaningful disposition of your assets when you pass other then a Will.</p> <p>For example, let&#39;s say Robert Jones is a widower with two adult children. Robert owns his personal residence that he&#39;s lived in for several years, has a life insurance policy, a small bank account and a rather large IRA account that pays him income on a quarterly basis. Robert also has a pension and receives income from Social Security. My advice here is that, in the absence of extreme family matters, i.e. his children are divorced, he is expecting to inherit a large sum of money from a relative, etc., there is no pressing need for Robert to have a Will. The personal residence can be re-titled (in most states) to give Robert a Life-Estate and pass the home to his two children when he passes away (outside of probate). Also, Robert&#39;s life insurance, bank and IRA accounts can all pass to his children by either naming them as Beneficiaries (in terms of the insurance and IRA) and also making the bank account payable to his children on death. Now, if we were to mix in several equity accounts, multiple pieces of real estate and different gifting ideas, Robert&#39;s planning becomes more complicated. But, for now, you can see that the idea that everyone needs a Will is simply misleading. </p> <p><strong>Myth</strong> <strong>#2: A Trust Automatically Avoids Probate</strong><br />Trust planning is becoming more and more popular in the U.S., mainly because it is a creative way to meaningfully pass along large assets to your descendants while hopefully avoiding a probate proceeding. Without getting into too detailed a discussion about the different kinds of trusts available (they vary by state) it&#39;s important to note that having trust will not automatically avoid a probate proceeding when you pass. The first step after you execute your trust is to re-title your assets that you wish the trust, vis-a-vis the trustee to manage. If you pass away without re-titling all of your trust assets, then those assets which remain outside the trust will be subject to disposition according to your Will, and a probate proceeding will be likely. </p> <p><strong>Myth #3: Everyone Needs A Trust</strong><br />This is nothing more than a ploy for business. Playing on the example from Myth #1, Robert Jones does not need trust-planning at all. While it is true Robert could have some type of trust to ensure the proceeds from his IRA account are managed/distributed according to his wishes, the truth is most of Robert&#39;s assets will pass to his descendants by operation of his beneficiary designations. Trust planning is advantageous in several situations, including second marriages, families who wish to provide for adult/minor children, including a child with a disability, high net worth individuals and those who hold certain types of assets, i.e. large investment funds, several pieces of real estate, etc. However, for most Americans trust planning will do little beyond cost you a chunk of money annually (trustees are entitled to annual commissions for managing your property in most states) and create more of a paperwork shuffle in managing and distributing your assets. </p> <p><strong>Myth #4: Giving Away My Money Is The Only Way I&#39;ll Qualify for Medicaid</strong><br />Many online sites and attorneys advise elderly clients to actively give away their money in order to lower the available resources and qualify for Medicaid (to defer the cost of nursing care or placement in an assisted-living facility). The truth is, most baby-boomers are very independent when it comes to managing their finances, so while this type of strategy may have worked in the 1980s and 90s with the Depression-era babies, it will serve little utility as the baby boomers reach retirement age. There are several different ways to qualify for Medicaid without giving up total control to your money, and if anyone tells you otherwise they are flat-out lying. However, based on new federal regulations placed into effect almost two years ago, Medicaid will now require you to provide financial history account statements for five years prior to your Medicaid application. The lesson for those who feel they may need nursing-care and placement within the next decade, purchase long-term care insurance, and start keeping accurate details and records of your finances. </p> <p><strong>Myth #5: I Should Name My Estate As Beneficiary of My IRA/Life Insurance</strong><br />Don&#39;t do this. I cannot think of any benefit here, especially because estates generally pay higher taxes than individuals, this type of planning will have serious tax consequences for your estate. The reality is a lot of people name their estate (i.e. Estate of Robert Jones) as the primary beneficiary of their IRA/life insurance/annuities, etc. This is bad for tax-planning purposes, and also because now those assets are forced to pass through your estate (rather then directly to your intendend beneficiaries) and will be subject to probate. This is a bad idea all around. </p> <p>I hope you enjoyed my first post, and will look forward to many more posts which intersect the areas of personal finance, taxes and estate planning. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/anthony-marrone">Anthony Marrone</a> of <a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-8"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/estate-planning-why-me">Estate Planning: Why Me?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Is it Time to Talk with your Parents?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">What Happens to Your Online Stuff After You Die?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance estate planning myths trusts wills Sat, 19 Jan 2008 18:51:58 +0000 Anthony Marrone 1650 at http://www.wisebread.com Estate Planning: Why Me? http://www.wisebread.com/estate-planning-why-me <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/estate-planning-why-me" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/estate planning, why me.JPG" alt="shoes" title="shoes" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>A friend of mine mourned the loss of her husband, who died of a heart attack at age 56. Although most people understand their mortality by the time they reach their fifties, this man didn&#39;t believe in insurance or planning for the future, and hence died with no coverage, very few assets, and no will. </p> <p>For years prior to his death, my friend fought a losing battle with her husband, encouraging - even begging - him to consider a will, <a href="/is-it-time-to-talk-with-your-parents" target="_blank">powers of attorney</a>, and insurance. His never-changing reply was <em>&quot;What do I care? I&#39;ll be dead anyway. Everything will go to you and that&#39;s that&quot;</em>. </p> <p>But amidst her grieving, as she rifled through the last of his belongings, filed his last tax return, and consolidated his finances into hers, she was left with nothing but bills. Lawyer&#39;s fees, accountant&#39;s fees, taxes, probate, funeral bills, a mountain of debts he wasn&#39;t forthcoming about, and a whopping tax bill reflecting years of mismanagement of his assets and taxes - all adding up to a substantial sum of money. And with each new bill, actual resentment towards her late husband brewed. <br />After three years of toiling to resolve his estate (which appeared uncomplicated at the onset) and paying off the <em>ensuing bills which ended up being over $100,000, my friend wanted a divorce from her late husband.</em> </p> <p>I cannot stress enough how important it is for everybody to consider their estate plan and to prepare a will. Even young single people can benefit from having a will - or at least their parents and siblings can, especially if there is any sort of division of loyalty among family members. Governmental legislation has a formula they apply for the division of assets (and debts) in the event of there being no will, but it certainly is not ideal. And even the simplest of estates can become muddled in confusion and resentment if not dealt with properly. <br />For example: You have a spouse and two small children. Legislation will designate the first &quot;x&quot; dollars of your estate value to your spouse, and then will divide the remainder equally between your spouse and children. The children&#39;s inheritances will be paid into a court system and held until they are 18 years old, with many restrictions as to how that money can be used prior to then. </p> <h3>What is your Estate? </h3> <p>Your estate is everything you own when you die; from the shoes on your feet, to your retirement accounts, to insurance policies. </p> <h3>What makes up an Estate Plan? </h3> <p>Things that should be reviewed as part of an estate plan include wills, powers of attorney (although they come into effect while you are still alive but incapacitated), and insurance policies.<br /><strong>For business owners, a succession plan is crucial</strong>. Otherwise, your employees, customers, and suppliers will be left &quot;holding the ball&quot; if you disappear unexpectedly. Your children or spouse may lose out on inheriting something they could be interested in, as there are muddy waters around corporate succession if there isn&#39;t anything documented in the charter papers about it. Also, if you have a business partner and they die without properly planning their own estate, their share of the business could be left to an uninterested and incompetent spouse by default. Or worse - their share of the business goes to minor child to be held in trust. In both cases your own share of the business is in jeopardy. </p> <h3>Okay, I want to start planning. What next? </h3> <p>Firstly, you should take a snapshot of your current estate situation; consolidating information into one easy document or notebook. Things to document include: </p> <ul> <li>Bank account information (bank addresses, account numbers, etc)</li> <li>Security Deposit Box location</li> <li>Financial assets (institution, account numbers, approx value)</li> <li>Financial debts (institution, account numbers, approx value)</li> <li>All other assets (car, house, jewellery, incidentals)</li> <li>Insurance policies (location of policy, type, company, policy number, amount)</li> <li>Memberships (gyms, auto association, miscellaneous - your executor needs to know this information in order to cancel services or gain access to automatic insurance benefits)</li> <li>Pension information (company, amount, survival benefits, who to contact)</li> <li>Location of powers of attorney</li> <li>Numbers of people (friends and family) to be notified</li> <li>Contact info for lawyers, accountants, financial planners, and other key team members</li> </ul> <p>Ultimately this information will be kept with your will when you have one, but for the meantime it is a launching pad for you to start planning your estate. </p> <h3>Planning Your Estate</h3> <p>Once you have an idea of what you own, you can formulate a plan for how you would like it to be doled out to those you love. Sometimes it&#39;s easy: &quot;everything goes to my spouse&quot;. But even the simplest of situations can become complicated: what if your spouse goes with or before you? <strong>Determine not only the beneficiaries, but also the contingent beneficiaries for everything</strong>. <br /><strong>Consider who your executor will be</strong>. (And of course, then decide who the contingent executor will be). <br />It is common practice not to choose parents as executors, as more often than not they don&#39;t succeed their children. Instead, choose somebody close to your age or younger. (For people in their 20s and 30s without a spouse or siblings, you could initially nominate a parent, but may eventually want to designate your lawyer to the task. </p> <h3>See a Professional</h3> <p>Many people are enticed by the simplicity of a hand-written will, or using one of the numerous inexpensive legal will kits that are widely available. I cannot discourage this more! These boilerplate home-made wills are fraught with terminology that is vague, leaving loopholes for potential ugliness to crop up when your loved ones need it the least. There are improperly drafted wills that have literally torn families apart, or left them in waiting for literally decades for resolution due to a clause that had to go to the courts for interpretation. <br />The best way to avoid this can of worms is to accept the short-term pain of using a lawyer for the long-term peace of mind of having an iron clad will in place. Most lawyers will also keep a copy of the will in their offices, so if yours gets lost or burns in a fire, there is always an accessible copy. </p> <h3>I Don&#39;t Want to Plan my Will Now! It&#39;s Gonna Change…</h3> <p>Yup. If life rolls the way it should, it will toss you lots of curve balls that mean changes to your will. Moving in with new spouses, booting old spouses out, serious family quarrels (and not just spats - I mean serious!), and close friendships are all legitimate reasons to review your estate plan. <br />The good news is that you don&#39;t have to completely redraft your will to change small clauses or beneficiaries; more often than not an addendum at the end will suffice, thus minimizing legal fees and complications. </p> <h3>I Don&#39;t Have any Family. Why Bother? </h3> <p>If you die and don&#39;t have any family members at all who the government can contact to wrap up your estate, then the government gets to keep everything. <br />Now I&#39;m not anti-establishment or anything, but why not instead make sure that your favourite charity, community sports league, or even quirky café down the street benefits instead? </p> <p>Although morbid in nature, estate planning doesn&#39;t have to be a morbid chore. In fact, envisioning how the future for your family, friends, and favourite charities could be simplified or improved with a properly planned estate can actually be a comfort - especially once it is in place and you can forget about it. </p> <p>We&#39;re here to live life now; but let&#39;s not forget where we came from and where we&#39;re going. </p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/estate-planning-why-me">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-9"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Is it Time to Talk with your Parents?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">What Happens to Your Online Stuff After You Die?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bequests estate planning wills Wed, 16 Jan 2008 01:31:21 +0000 Nora Dunn 1636 at http://www.wisebread.com Is it Time to Talk with your Parents? http://www.wisebread.com/is-it-time-to-talk-with-your-parents <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-it-time-to-talk-with-your-parents" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/crucial conversations.jpg" alt="parents" title="parents" class="imagecache imagecache-250w" width="250" height="244" /></a> </div> </div> </div> <p class="MsoPlainText"><span>It’s no secret that <a href="/money-matters-why-all-the-secrecy" target="_blank">talking about money and financial matters</a> in general can be a topic not many like to broach. And with friends and acquaintances, it’s understandable that you may wish to keep a few cards close to your chest. </span></p> <p class="MsoPlainText"><span>With your parents (and other family members) though, <strong>not</strong> talking about money can be detrimental in more ways than one. Because life happens when you’re busy making plans, and some of the most important decisions might need to be made when you feel under pressure and unprepared. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>It can be difficult to contemplate, but the fact is that even though your parents may be in good health right now, the potential for a health crisis to occur only increases with age. Planning ahead won&#39;t prevent the situation, but it can help you be prepared to make better decisions at a time when emotions could cloud your judgement.</span></p> <p class="MsoPlainText"><span>By developing a strong financial plan now, as well as setting in place legal mechanisms for the responsible administration of their finances, your parents can ensure they&#39;ll get the needed and costly medical, home or institutional care without eroding overall family finances, especially if they should become unable to make their own decisions.</span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>I had a great uncle (think “eccentric rich uncle”) who was getting on in age and suffering mentally and physically with dementia. He also didn’t have a will or power of attorney. When he became ill and institutionalized, the state took over his finances and property, and although they made the best decisions they could on his behalf, it was all according to the book and they had no leeway for suggestions from his family and friends who knew of his wishes. The entire situation could have been easily averted if he had his finances in order, proper legal documentation, and had discussed it all with his family. As it happened, he died in a place he hated, and the few bequest wishes he had were never respected. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Although the issue of finances may be awkward, it is in everyone&#39;s interests to ensure that your parents are properly taken care of. If you’re not part of a family who openly communicates about finances, try raising the topic casually, and perhaps by raising small issues first. This will help both you and your parents feel more at ease with some of the trickier conversations that may eventually have to happen. </span></p> <p class="MsoPlainText"><span>You may even discover your parents have been waiting for you to take the first step. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Once you are comfortable getting down to brass tacks, it would be best to assemble a complete picture of your parents&#39; financial situation:</span></p> <p class="MsoPlainText"><span> </span></p> <h2><span>Income</span></h2> <p class="MsoPlainText"><span>Where do your parents derive their income, and do any conditions apply? For example, company pension plans may have strict limits on the amount and duration of income to a surviving spouse.</span></p> <h2><span>Assets</span></h2> <p class="MsoPlainText"><span>Get a picture of their assets (and liabilities for that matter). Locations of necessary paperwork, accounts, and safety deposit boxes is also key. </span></p> <p class="MsoPlainText"><span>Many assets also allow for beneficiary designations within the account setup; ensure that these beneficiary designations are consistent with their wishes.</span></p> <h2><span>Expenses</span></h2> <p class="MsoPlainText"><span>Identify all your parents&#39; current expenses and determine whether their income (along with any government aid) will be sufficient to cover projected home or personal care costs.</span></p> <h2><span>Insurance</span></h2> <p class="MsoPlainText"><span>Do your parents have extended health care plans? Should they consider <a href="/critical-illness-insurance-for-wise-bloggers" target="_blank">critical illness</a> or <a href="/long-term-care-insurance-for-wise-bloggers" target="_blank">long term care</a> insurance? Have they properly provided for each other with life insurance (if needed)? </span></p> <p> <span> </span></p> <h3><span>Consider estate plans:</span></h3> <p class="MsoPlainText"><span> </span></p> <h2><span>Will</span></h2> <p class="MsoPlainText"><span>Without a will, there is an increased potential for litigation and unexpected family quarrels, and the very real possibility that their wishes won&#39;t be properly respected. Ask your parents if they have up-to-date wills. Leaving things until “later” or ultimately “the system” will cause untold amounts of grief in the end. I have seen improperly drafted or vague wills take literally decades to resolve; meanwhile all assets are held by custodians and nothing is distributed. You’re not trying to swoop in for the loot by discussing wills with your parents; you are attempting to make sure their wishes are carried out. If you don’t know what they meant in drafting “xyz clause”, then nobody will. </span></p> <h2><span>Executor</span></h2> <p class="MsoPlainText"><span>Have they designated a Personal Representative (also referred to as an executor or liquidator) in their wills? This is the person (or trust company) who is responsible for winding up their affairs and distributing assets and bequests. And if the executor is you (all the more reason to be having this conversation –many executors don’t even know they were so designated until it’s too late and they are in the thick of it), make sure you know all the logistics like where exactly their will, insurance policies, legal documents, and financial papers are located. It is also worth asking who their contingent executor is; it is always prudent in making wills to designate a contingent executor, and if that person is you, it is still a grave responsibility not to be taken lightly. </span></p> <h2><span>Enduring power of attorney</span></h2> <p class="MsoPlainText"><span>This gives a designated person the power to make financial decisions on each parent&#39;s behalf, if that parent becomes incapacitated. Most couples designate each other as their power of attorney, with a child or other family member as their contingent power of attorney. If you are the primary or contingent power of attorney, there is a lot that goes unsaid in the legal wording of this document. Make sure you know exactly what your parents’ wishes are with regards to their preferences for personal care when they are incapacitated, as well as maintaining their financial affairs. As power of attorney, you will have carte blanche with their affairs and you need to know how to deal the ins and outs in a manner consistent with their needs and desires. </span></p> <h2><span>Living will</span></h2> <p class="MsoPlainText"><span>(Sometimes called a health directive) - provides explicit directions about the personal and medical care to be provided for each parent should they become incapacitated. It is also referred to as a <strong>Power of Attorney for Personal Care</strong>, and should be addressed with the same degree of gravity as the Enduring Power of Attorney. </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span>Talking about all this stuff doesn’t have to be the soul sucking depressing experience that it may seem to be at the onset or on paper. Sure – you have to discuss a number of “what if” scenarios that we all would rather not imagine, but the peace of mind you and your parents may feel by virtue of knowledge and understanding is not to be underestimated. <strong>Preparing for the unknown gets us one big step closer to understanding it.</strong> </span></p> <p class="MsoPlainText"><span> </span></p> <p class="MsoPlainText"><span> </span></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/is-it-time-to-talk-with-your-parents">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-10"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/post-divorce-finances-7-steps-to-rebuilding-your-financial-house">Post Divorce Finances: 7 Steps to Rebuilding Your Financial House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/estate-planning-why-me">Estate Planning: Why Me?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/wills-the-basics">Wills: The Basics</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/debunking-common-estate-planning-myths">Debunking Common Estate Planning Myths</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-to-your-online-stuff-after-you-die">What Happens to Your Online Stuff After You Die?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance communication estate planning powers of attorney wills Sat, 15 Dec 2007 23:17:11 +0000 Nora Dunn 1502 at http://www.wisebread.com