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Archive for Wills

Discussing Your Estate with Family

Posted by Frank McKinley on
 June 21, 2021

Having this conversation before your death, when choices can be explained, will help avoid the potential relationship damage that can
happen if no one is aware or understands
your decisions.

Choose the Right Person for the Right Job
While you are likely to consider the feelings of your family members, try to take the emotion out of your decisions and select the people who will be best at certain tasks. Once people understand the various roles and what they entail, they tend to understand why a particular person was selected. The roles can range from
being the executor of the estate, to the guardian of your children, to making medical decisions on your behalf.

Prepare the Appropriate Documents
Once you have determined who will handle the key roles, you will want to get the proper paperwork drafted and notarized. These documents may include: your will, trust, 
durable power of attorney, healthcare power of attorney, and guardianship designations.

Prepare for the Conversation
You’ll want to take the time to think through this conversation and anticipate the questions people will have.

You will want them to understand what your goals are for the estate plan, what the various roles are and what they entail, and why certain people were chosen for certain roles. It is important to think through your family dynamic
in approaching this conversation. Should it be a more formal conversation that includes an attorney or financial advisor to help explain the roles and your choices? Should it be more casual discussion around the dinner table with only family?

Either way, you will want to make sure you set ground rules to avoid confrontation. You will want people to express their thoughts but if it becomes argumentative, let them know the
meeting will be canceled until it can be
discussed rationally.

Keep the Conversation Going
Let your family know that this will be an ongoing discussion as circumstances change, such as new marriages, new children, divorce, etc. By having regular conversations, you can avoid the “Mom would have wanted this” argument. Setting this expectation can help prevent future family tension.

Distributing Personal
Possessions

Dealing with major assets may be so time consuming that you don’t even think about your personal possessions, leaving distribution
decisions up to your heirs. But disputes over personal possessions are more apt to cause conflict. Some items to consider include:

Take time to think about who should receive treasured personal possessions. You might want to detail your wishes in a separate letter to your heirs to prevent disagreements.

Ask your heirs what possessions are important to them. Otherwise, you may inadvertently give a treasured possession to one child without realizing its importance to another child.

Don’t distribute assets based on arbitrary criteria. You don’t necessarily have to give your jewelry to your daughter or  your tools to your son.

Devise a method for heirs to distribute personal possessions. After you have determined how to distribute your most valued possessions, detail a method for heirs to distribute the rest of your possessions. It can be as simple as having heirs take turns selecting items or flipping a coin.

Financial Thoughts

Previously active investors who are unaware that they have experienced a decline incurred roughly a 15% loss in financial wealth. Inactive investors experienced about 6% in financial losses. More than half of the average loss was attributable to a decrease in the value of stocks, mutual funds, and investment trusts (Source: AAII Journal, November 2020).

The Employee Benefit Research Institute analyzed 401(k) plan balances for consistent participants for the years 2010 through 2018. The average 401(k) plan account balance increased at a compound average annual growth rate of 13.9% from 2010 to 2018, for an average increase from
$63,756 to $180,251. The median account balanced increased 17.3% over the same time period, to $90,015 at the end of 2018. Two thirds of 401(k) participants’ assets were invested in equities, with younger participants having a higher allocation to equities than older participants. Fourteen
percent of participants were in their 20s and 13% were in their 60s (Source: AAII Journal, November 2020).

Categories : estate planning, Financial Services, Wills

Do You Really Need a Will?

Posted by Frank McKinley on
 May 24, 2021

Many people believe they don’t need a will. But how valid are the more common reasons for not preparing a will?

Your estate is too small. Some believe that if their estate won’t be subject to estate taxes (in 2021, your taxable estate must be over $11.7 million before estate taxes would be owed), there is no need for a will. However, a will’s purpose is not to save estate taxes, but to:

Provide for the distribution of your assets.
Without a will or other estate-planning documents, your estate will be distributed in accordance with state law, which may or may not coincide with  your desires.

Name guardians for minor children.
Without a will, the courts decide who will raise minor children when both parents die.

Select an executor for your estate.
The executor assembles and values your assets; files income, estate, and inheritance tax returns; distributes assets; and accounts for all transactions. You will typically be

in a better position, based on family relationships and individual qualifications, to decide who should be named executor of your estate.

All your property is jointly owned.  When one owner dies, jointly owned property passes directly to the joint owner, regardless of provisions in a will. Also, the unlimited marital deduction allows you to leave any amount of your estate to your spouse without paying estate taxes. Thus, many married couples use joint property ownership as their sole estate planning technique. However, individuals with very large estates may save
estate taxes by distributing some assets to other heirs.

A living trust will distribute your assets. Only assets actually conveyed to the living trust are controlled by the trust document. Typically a pour-over will is also needed, which places any asset not held by the trust at your death in the trust.

You expect your estate to grow significantly in the future. Some feel it is premature to plan their estate while it is being built. However, a will can be changed. In fact, you should periodically review your entire estate plan to see if changes in your personal situation, preferences, or tax laws require changes to your plan.

The Financial Aspects of a Death

The emotional trauma of dealing with a loved one’s death can be devastating. If you also have to handle the financial aspects, it can seem  overwhelming. Following is a checklist to consider:

Your most immediate concern will be to notify family and friends of the death and to make
funeral arrangements.

If a surviving spouse and/or minor children are involved, evaluate their means of support and determine whether care for the dependents needs to be obtained.

Locate any safe deposit boxes and follow  necessary procedures to have them opened.

If the deceased was employed, contact his/her employer to start the process of collecting any
outstanding pay, life insurance proceeds, or other benefits.

Locate important documents, including wills, trusts, deeds, investment records, insurance policies, business and partnership arrangements, and other evidence of assets and liabilities.

Meet with an attorney to discuss the deceased’s estate matters.

Financial Thoughts

Individuals in retirement face five risks: outliving their money (longevity risk), investment losses (market risk), unexpected health expenses (health risk), unforeseen needs of family members (family risk), and retirement benefit cuts (policy risk). A recent study found that the greatest risk is longevity risk followed by health risk. However, retirees believed that their greatest risk was market risk. Many discounted longevity risk and health risk because they believed they would not live long enough to outlive their savings or to accumulate a large amount of health costs (Source: Centerfor Retirement Research at Boston College, July 2020).

A recent study found that investors tend to flee volatility and chase stability, but end up with bad timing with respect to stock volatility. This leads to high exposure to stocks when volatility is high and low exposure to stocks when volatility is low, resulting in returns with higher volatility (15% to 20% over 10- year periods and 70% to 75% for 30-year periods) than buy-and-hold-returns (Source: AAII Journal, October 2020).

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