Early Planning For Retirement And Inheritance

Question: We are nearing retirement, and are becoming concerned about our future, and the future of our children.

Going through our books and records in preparation of our 2016 tax returns, we began to wonder what we should be doing now to make sure that there will be no surprises that can affect our future or the inheritance of our children.

Do you have any comments?

Answer: I could write a book on this subject. Too many of us live active lives, do not concern ourselves with future problems and basically are living on a "day-to-day" basis.

But if we take the time to think about these matters, and if we look around our house, we begin to realize that some careful planning is needed for the future.

Here are but a few ideas for you to consider. Clearly, you should discuss all of these matters with your family and your legal, tax and financial advisers.

Do you have adequate life insurance coverage? Many of us took out insurance policies years ago, and often have not reviewed the coverage to make sure it is adequate for the needs of our survivors.

More importantly, where beneficiaries change (because of divorce or death) the policy must be corrected to reflect the appropriate beneficiary. In recent years, insurance policies have changed, and the tax laws have changed. What you have obtained ten or fifteen years ago may not fit your current needs.

Indeed, some people begin to realize that as they get older, and their children become self-sufficient, the level of insurance can in fact be reduced. You should discuss all of these matters with your insurance adviser.

Is your house insurance adequate? Many insurance policies have automatic increase provisions to periodically boost the coverage.

Make sure the replacement value of your house meets industry standards, so you will not suffer a financial loss if your house is destroyed.

Do you have a Last Will and Testament? If not, you are strongly advised to give serious consideration to preparing one now.

And even if you have a Will, if it was written years ago, your legal and tax advisers must be consulted to make sure that the new tax laws will not adversely affect your Estate. With the new adminstration -- and talk of serious tax reform -- I recognize it is difficult to make decisions. However, don't put your planning off; there is no guarantee that the tax laws will be changed in the foreseable future.

Additionally, you should consider signing Living Wills and Durable Powers of Attorney to cover situations where you may be in an accident and not able to handle your own affairs.

Indeed, the Supreme Court of the United States has made it clear that if you are medically diagnosed as totally "brain dead," and you want the doctor to "pull the plug," you must make your intentions quite clear -- preferably in writing -- so as to give guidance to the doctors. This is known as a "Living Will" or a "Declaration," and will be necessary if you have to go into a hospital.

If you do not want to be artificially maintained by life-support equipment in the event of an accident, you should prepare a Living Will declaring your intentions while you are able to do so.

Are titles to the family assets in a form acceptable to you for inheritance and tax purposes? You should explore with your advisers the pros and cons of such things as (1) creating a revocable trust, or (2) preparing a "deed on death". Many states have now adopted laws that allow you to prepare and file a deed that does not take effect until you die; but you have the abolute right to cancel the deed at any time during your lifetime.

You must also consider what will happen when your spouse dies. For every document that you enter into, always have an alternative person designated, just in case the person you do authorize to take certain actions is not able nor willing to assume that obligation.

Finally, if you die or are seriously incapacitated, will your family be able to find all of your legal documents and papers? Often, one party in the household handles the books and records. The other spouse has no idea whatsoever where things are.

Both of you should sit down one weekend and make a comprehensive list of your assets and liabilities. If you have stock certificates, certificates of deposit, life insurance policies, or other valuable documents, make a list where they are, so your family will not have to suffer more under the circumstances. You should also make a list of people who should be contacted in the event of a problem.

This list should include at the very least the names and addresses of your attorney, accountant, insurance adviser, executor of your Will and administrators of any pension plans.

Life has become quite complex. If you do not put your own "house in order," the courts and the tax authorities will make decisions on your behalf (or on behalf of the Estate) which may not be in anyone's best interest. Careful planning now can save considerable aggravation and frustration for your family in the long run.

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