■ Make tax-free gifts. Under current federal law, you can give up to $13,000 to as many people as you wish each year. This is a great way to reduce the size of your estate (and potentially save estate taxes) over time. For example, if you give $13,000 per year to your two children and three grandchildren, you would remove $65,000 from your estate in just one year and $325,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited. So are gifts for tuition and medical expenses, if you give directly to the institution.
■ Secure/update health care documents. At the minimum, everyone over the age of 18 needs 1) a durable power of attorney for health care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 2) HIPPA authorizations, which give written consent for doctors to discuss your medical situation with others, including family members.
In addition, a revocable living trust* is preferable over a will at incapacity because it can prevent the court from controlling your assets.
■ Review/update guardian for minor kids. It is quite likely that the person you name as guardian for your children when they are small will not be the best choice as they get older. Also, this person could change his/her mind, move away or even become ill or die. Revisit your choice from time to time, and name more than one in case your first choice cannot serve. Remember, if you haven’t named a guardian who is able and willing to serve and something happens to you, the court will decide who will raise your kids.
■ Review/update beneficiary designations. This is especially important if your beneficiary has died or if you are divorced. If your beneficiary is incapacitated or is a minor, setting up a trust for this person and naming the trust as beneficiary will prevent the court from taking control of the proceeds.
■ Review/update your insurance. Check the amount of your life insurance coverage and see if it meets your family’s current needs. Consider getting long-term care insurance** to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse should need it due to illness or injury.
■ Talk to your children about your estate plan. You don’t have to show them bank and financial statements, but you can talk in general terms about what you are planning and why. The more they understand it, the more likely they are to readily accept it — and that will help to avoid discord after you are gone. You can also talk to them about your values and the opportunities that money can provide. Even better, show your values by doing — the holidays are an excellent time for families to do charitable work together.
■ Get basic documents for your unmarried kids who are over 18. Unmarried adults (18 and over) need to have a durable power of attorney for health care and HIPPA authorization, so you can act on their behalf in a medical emergency. And, while you’re at it, go ahead and have your attorney prepare a simple will and durable power of attorney. Hopefully, these will not be needed, but if an event does occur, you will be glad you have them.
*A revocable living trust may be amended, altered or revoked by its settlor at any time, provided the settlor is not mentally incapacitated. Revocable trusts are becoming increasingly common in the US as a substitute for a will to minimize administrative costs associated with probate and to provide centralized administration of a person’s final affairs after death.
**Long-term care (LTC) is a variety of services which help meet both the medical and non-medical needs of people with a chronic illness or disability who cannot care for themselves for long periods of time.
JJ Consults 