Thursday, October 29, 2009

Step 5 to Getting Yourself in Order: Synchronize your beneficiary designations with your estate plan or dispositive document.

We are up Step 5 of Getting Yourself In Order. Step 5 is to synchronize your beneficiary designations with your estate planning.

For the earlier four steps, just read our prior articles which appear below.

Why do you want to check your beneficiary designations and synchronize them with your plan? Because if you don't, then some big surprises could await your family.

Beneficiary designations exist in many places. Life insurance; disability insurance; IRA's; 401(k)accounts; pension benefits and others. Many of those forms were completed years ago and what you put down then may not match what you want now!

Another issue is that life insurance beneficiary designations will not necessarily be what you use for qualified plan accounts like IRA's and 401(k) accounts. Those type of accounts have special rules dealing with income taxation and frequently you will want to maintain the income tax deferral on those accounts. Those rules require that special consideration be given to those accounts.

Here's another example: Let's say you took out a life insurance policy when you graduated from college. Back then you thought it a good idea to list your mother as the beneficiary. Now you are married or in a committed relationship. Your Will provides for your estate to pass to your spouse or partner. However, that life insurance is going to your Mom if you don't synchronize the beneficiary designation with your plan.

So Step 5 of getting yourself in order is to check and then synchronize your beneficiary designations with your estate planning. If you don't know how to do this, let us know and we can point you in the right direction.

Protect yourself against greedy adult children-

Protect yourself against greedy adult children-

Monday, October 26, 2009

Getting Yourself in Order--Step 4: Creating Your Dispositive Document; A Will or Trust

In our series about getting yourself in order, we are at Step 4, creating a dispositive document. Read our prior columns for the previous steps in this important series.

What is a dispositive document? Well, it sounds fancy, but it's not. A dispositive document can be either a Will or Living Trust. In other words, a dispositive document is where you cover (among many important things) where you want your property to go and how to get it there in the event of death. For simplicity sake, we will use a Will to illustrate how important having a dispositive document is.

First, what if you don't have a Will? Well, we have covered this in prior articles below and encourage you to read those. If you don't have a Will and die, then your estate (whatever that may be) is handled according to the laws of intestacy (generally not what you want) and according to the beneficiary designations that you have created. Is this good? Usually NO! Read on and you will agree.

Another set of problems is created by computer forms, zoom forms and fill-in-the-blank forms. Basically, they don't work, or create unanticipated problems for your family. They are unreliable at best and a disaster at worst. Specific problems with these documents are covered in a prior article which appears below.

Here are the reasons you want a Will and why you don't want to rely on the laws of intestacy:

1. You get who you want to be your Personal Representative (PR) also known as your Executor. If you die without a valid Will, you get no choice and who is appointed may not be who you want!

2. You get to establish your plan for your property. If you don't have Will, you get the state's plan for your property and that could be the last thing you want.

3. You get your choices for guardians of minor children. Without a valid Will, the kids will live with the persons designated by the Court, not necessarily your choice.

4. You get to establish the plan you want for protecting your kids, or spouse, or other family members from unwise spending habits or predators who may target them for being suddenly with money.

With a Will you also get to address special circumstances that could be important to you such as:

1. 2nd or later marriages. Let's face it, fewer people are married to their first spouse and that requires some planning. Without a valid Will, it could lead to trouble.

2. Special needs kids. Special needs kids are fragile enough without our exposing them to financial disaster or predators. They require special consideration and planning which can only occur if you do a Will.

3. Blended families. Along with 2nd and later marriages comes blended families. We even get to watch them on TV with Eight is Enough and Jon & Kate + 8 and many other examples. Blended families require outside the box thinking to address the issues and the solutions can only occur in your dispositive document--Will.

4. Aging parents and others you are responsible for. It takes a village according to some, which means you may be responsible for family members other than your children. These circumstances require planning and special drafting in your Will because without that, those people will go lacking in your estate.

5. Operating or special assets and property. Whether you have a small business, farm, ranch or oil and gas assets, you may have property that needs special handling. How about if you are a fix and flip expert? That's a business that requires special drafting in your Will. Without that special attention, your business or assets could have problems.

6. Estate tax issues. If your estate is large enough (over $3.5 million for 2009, or just $1 million in 2011)then estate tax planning is advisable. Why? The minimum estate tax is 45% for 2009 and up to 55% in 2011. A future article will cover the impending estate tax asteroid scheduled to hit the earth January 1, 2010, so more on that later. Without a Will, your family gets no estate tax planning and you have another family member--Uncle Sam, who will take a huge piece of the pie away from your family.

You know what's amazing? I have covered only a few of the basic reasons for having a Will! There are many others too numerous to list here. But just these few should convince you about having your own dispositive document.

So that's Step 4 in getting yourself in order: get yourself a dispositive document, otherwise, it could be hazardous to your financial health.

Wednesday, October 21, 2009

Getting Yourself In Order--Step 3: Arranging for Proper Decision Makers in the Event of Disability

In this series about getting yourself in order, we are up to step number three. Step 3 is establishing decision makers for yourself in the event of disability. Establishing proper decision makers for yourself is crucial to protecting yourself and family should disability or incapacity occur. How you do this is discussed in greater detail below.

First, let's review where we are in getting yourself in order. The first two steps:

1. Protect your House. Make sure your house is protected with proper insurance coverage and pay special attention to liability coverage and to adding a personal liability umbrella to your homeowner's insurance.

2. Protect your Car. Make sure your auto insurance is adequate and pay special attention to the liability limits. You won't survive financially if you lose everything in a lawsuit involving a car accident.

And now: 3. Provide for who makes decisions for you if you are incapacitated and cannot make decisions on your own.

Just like a car accident, we don't plan to become incapacitated through illness or injury. However, stuff happens and either through age, illness, and injury, incapacity can occur. Perhaps you know someone or know of someone who cannot speak for themselves and the occurrence is a shocking surprise.

Our State has statutes which provide for who will make your decisions if you haven't provided for this yourself. However, it would be coincidental if the State selects who you would want making those decisions. Proper planning is not a game of chance, it is about creating certainty. Here's another way to look at this issue. One element of being responsible to protect ourselves from unplanned events, especially the unpleasant ones.

By creating your own plan, with proper legal documents, you can control the outcome of an uncertain future. To make sure that you have the decision makers in place that you choose, you should adopt two different types of Durable Powers of Attorney. Details on these documents have been discussed in several of our prior articles and we encourage you to review those.

The two types of Durable Powers of Attorney that you want are:

1. A Durable Financial Power of Attorney; and

2. A Durable Health Care Power of Attorney.

In each type, you want to make sure the appropriate HIPAA language is included. We discussed having HIPAA in your DPOA in a prior article.

If you adopt these two documents, you will make your life is better and more secure and go far in protecting your family. So that is Step 3 in getting yourself in order.

Wednesday, October 7, 2009

Do you Want HIPAA In Your DPOA's: Making Sense of the Alphabet Soup of Powers of Attorney

Recently we ran a poll about whether people should have HIPAA in their DPOA's. It wasn't a joke, but a little trick question. Here we will attempt to make sense of this alphabet soup and explore why you really do want HIPAA in your DPOA.

First, to take the acronyms away, the question would read, "Do you want HIPAA provisions in your Durable Powers of Attorney. To answer, let's start with some definitions.

DPOA: Durable Power of Attorney. A Power of Attorney which is "durable" is one which is valid after the maker becomes incapacitated. If the Power is not "durable" it is revoked as a matter of law by the maker's incapacity. A Durable Power of Attorney sets forth your choice of decision makers when you cannot speak for yourself.

There are two general types of Durable Powers of Attorney. One is for financial matters (paying bills, financial decisions, signing tax returns, etc.) The second is for health care matters such as what medical treatment should be provided to you when you cannot speak for yourself.

HIPAA: The Health Insurance Portability and Accountability Act. The part of this federal law we are concerned makes your health information private. What this law did was to require that all medical providers lock up your health information so it could only be provided to those persons you want to have it. Unfortunately, there are numerous unintended consequences to this laudable goal.

Did you know that your doctor is not permitted to speak to your spouse or other family member about your medical status or treatment unless you so specify in a HIPAA release? This is why you might have encountered HIPAA releases and privacy statements at your doctor's office. If you are thinking, "what a pain" or something similar you are right!

Here's a real life situation. A client had an 18 year old daughter playing lacrosse on her high school team. The girl was injured and taken to a local hospital. The people at the hospital refused to provide her mother with information about her condition because the girl had not signed a HIPAA release! Now, most right-thinking medical personnel ignore these rules and will speak with family members absent a HIPAA release. However, that did not occur for this mother.

After her daughter was released from the hospital, her mother brought her to our office for Durable Powers of Attorney with HIPAA provisions. That's because the federal regulations for HIPAA allow us to name a HIPAA Personal Representative in our Durable Powers of Attorney. By doing so, you solve the problems of who any medical facility and personnel can speak to about your care and medical bills.

So here is what you should know about these issues:

1. Any person over the age of 18 should sign a Durable Financial and Durable Health Care Power of Attorney.

2. Your Durable Powers of Attorney should have HIPAA provisions for the reasons discussed above.

In the words of the initial question: Yes, you do want HIPAA in your DPOA's.

Any questions? Let us know and we will be happy to respond.