Planning for Vacation

Today’s blog takes a break from the complex gifting and tax issues we addressed in the past few posts to talk about aspects of estate planning that arise while preparing for a vacation. We will return to our discussion of gift issues next week. 

     With the unrelentingly cold weather and impending “Spring Break” weeks for many school districts, our thoughts turn to vacation, many of which involve trips to warmer climates. However, upcoming trips should prompt people to think about their current estate plans and some of the possible changes they have been putting off.

Here are a few tips to think about before setting off on vacation:

• Do you have a Grandparent/Caregiver Power Of Attorney? If you are vacationing but leaving your minor children home with a grandparent or caregiver, do you have a written document giving the caregiver authority to make medical or other decisions in your absence. This document can be crucial in the event of an accident, and can provide you comfort knowing that caregivers can handle emergencies even while you are relaxing and enjoying your trip.
• Do you have a list of assets, passwords, and important contacts? Many people manage most or all of their financial assets online and it is important to have a record of your accounts and passwords so that those you have named to act on your behalf for the benefit of your family can easily locate this information. This information should be part of the list of assets and advisor contact information you keep with your important estate planning documents. While this may require some time on your part, it can save your family significant time and money if misfortune should befall you. 
• Are your disability documents current and available to those you have named? In Michigan a Durable Power of Attorney, for financial decisions, and a Patient Advocate Designation, for medical decisions, are essential to allowing another to act on your behalf in the event you become incapacitated. Before vacationing, you should be sure the documents are up-to-date and that those designated know where to locate these documents. You may even want to discuss your wishes with your designated agents.
• Are your beneficiary designations are up-to-date? With proper designations, assets such as retirement accounts brokerage accounts and life insurance can pass directly to designated beneficiaries and avoid probate. If you have a Trust, these assets can be designated the beneficiary and allowed distributions pursuant to the provisions you have set forth in your Trust.
• Are there any changes you have been contemplating making in your Will and Trust? While we usually suggest you review and update your estate planning documents every 3 to 5 years, while planning for a big trip you also may want to review your documents to make sure that provisions for your family, and those you have designated to fulfill those provisions, are still as you want them.

     Time spent on these issues will allow you to relax and enjoy your vacation knowing that your estate planning is in good order.

New Year, New Blog

In 2014 we took a break from writing Plainly Legal, but in 2015 we are recommitted to providing you with insights that are useful to planners and clients alike. We'll start the year off with some thoughts from Alan regarding the importance of regularly reviewing estate plan documents.

     I am a firm believer that one of our New Year’s resolutions should be to review and, if necessary, update our estate planning. It came as a surprise to me that it has been three years since I have taken a close look at my own estate planning. In those three years:

• Federal estate tax law has changed dramatically,
• A number of relatives and passed away,
• Both my sons have passed their 30th birthday,
• One of my sons has brought a wonderful daughter-in-law to our family and two amazing grandchildren,
• My oldest son has joined me in our law practice and made my life much easier, and
• My wife and I are three years older.

     While we all have full lives that often get in the way of planning, the beginning of a new year is a great time for our clients, friends, and me, to make a resolution to review or consider estate planning. It is particularly important to:

1. Review estate planning documents especially if they have not been updated in the last two or three years. If you have no documents, it is time to consider getting them. Pay special attention should be paid to:
   
   a. Guardians named to care for minors in the event both parents pass away. If you have previously named guardians, are these still the people you trust?
   b. Distribution provisions for children and grandchildren --when should they receive money and how much?
   c. People named to act as trustees and personal representatives after your death to protect your children and other loved ones. Are those people you named to administer your trust and estate still the ones you want to accept that responsibility?
   d. People named to make legal and medical decisions under your Durable Power Of Attorney and Patient Advocate Designation, in the event you become incapacitated. If you have previously named people, are they still able, and willing, to make these decisions on your behalf?
2. Review how you titled your assets to confirm you can avoid the high cost, time delays and public exposure of probate under Michigan law at your death.
3. Inventory your assets, so that a complete list is available for your administrators in the event of a sudden death.
4. Consider making a list of personal property designations, so that items you value can go to the desired beneficiaries.
5. Consider making a list of important people and contact information, such as your attorney, accountant, financial planner, or investment advisor, to save your family time and aggravation.
6. If you have any particular desires, write a letter indicating your personal burial preferences, so your loved ones will know how to handle arrangements at your death.
7. Consider starting Section 529 education accounts for your children or grandchildren so the funds can grow tax-deferred, and be distributed tax-free, to the extent they are used for higher education.
8. For those of you with unmarried children over the age of 18, encourage them to execute their own patient advocate designations and durable powers of attorney so that if something were to happen to them, decisions can be made without involving the probate court.

     Like all of our other resolutions, these may be hard to keep but, if completed, can provide us peace of mind that if the unexpected occurs, our loved ones will be prepared to deal with whatever comes their way.

The Importance of Reviewing Life Insurance Policies

A potentially important part of a client’s estate planning is life insurance. Life insurance provides liquidity for any estate taxes or other expenses at death, can provide for income replacement on the death of a primary household earner, and provides protection against liabilities that might come due or be difficult to pay at the death of a client. However, clients should not buy a policy and presume that the policy will meet all their needs forever. Like other aspects of the estate planning process, clients should review their insurance policies regularly to ensure that those policies still help to achieve the client’s goals.

Often clients, especially those in their early earning years will purchase term insurance because it meets their needs and is more affordable than permanent life insurance. Clients and their advisors should remember that term insurance is just that—purchased for a specific and definite time. Clients should review their policies annually or set reminders so coverage will not lapse without securing new coverage. It is also a good idea to periodically review the policies and compare them with new offerings that may be less expensive. It also is a good idea, as long as the client is still healthy and insurable, to consider purchasing a replacement policy before the current term is up in order to extend coverage for additional years. For example, a client has a ten-year term policy and five years have elapsed, if the client purchases a new ten year term policy the client has secured additional coverage at a lower rate than they would likely receive at the end of their original ten year policy.

Clients also need to remain aware of where their insurance comes from. Sometimes a client will rely on group insurance provided by their employer to meet the needs mentioned above. If so, care should be taken to insure that replacement insurance is available before the client changes jobs or retires.

Even permanent insurance requires the client’s regular review. Depending on a clients circumstances and changes in the insurance market it may be possible to purchase policies with improved benefits or decreased premiums. Clients also need to keep in mind their reasons for purchasing insurance. If those circumstances change so that insurance is no longer necessary it is often more cost effective to allow a policy to lapse than to pay premiums for an eventual payout.

Finally, clients should review their beneficiary designations to be sure the beneficiaries named are those that should receive life insurance proceeds. It is not unusual for us to review client policies and discover their parents or siblings are named, despite having a spouse and family of their own. We also will discover clients still have their ex-spouses named, even if they have remarried. Sometimes Michigan law will protect against these flawed designations in the case of divorces, but federal law overrides state law and insurance proceeds can go to those who should not receive anything.

Insurance products are constantly evolving, and the client should have their policies reviewed by a professional expert in the industry. We are happy to help our clients in facilitating policy reviews

Alan Ferrara