Estate Planning Quiz – Single Persons

A Will can be a real trap because: 1) It guarantees your estate will go through the Probate process, costing time, money, and needless aggravation for your family. 2) It does nothing to help should you become incapacitated and unable to handle your own affairs, an increasingly likely situation as life expectancies increase. 3) Because it becomes a matter of public record, exposing not only your plans but also the value of your assets and identity of your beneficiaries, your Will invites interference by disgruntled relatives, contentious in-laws, and other meddlers and their lawyers.

If you hold assets jointly with anyone else, you are asking for trouble if your joint owner runs into difficulty. If he or she gets divorced, doesn't pay some income taxes, has creditor problems-or gets into a scrape of any kind (e.g. gets sued), you may be hearing from some lawyer wanting to put a lien on YOUR house, YOUR bank account, or whatever else you have in joint names.

The Internal Revenue Regulations governing the income taxation of IRAs, 401(k)s, and other retirement account distributions are some of the most complex in the entire code-far too complex to fully explain here. Suffice to say that proper beneficiary selection in a timely manner is all-important to your beneficiaries who follow you.

Most Folks want to treat their children equally. So they divide their estate into equal shares: one for each child. What could be fairer, right? WRONG!! If your children are still young, consider this: one of them needs an organ transplant. Which of you wouldn't mortgage the house, sell the second car and max-out the credit cards to pay for the operation? Everyone in the family would pitch in to save the stricken member. Your obligation as a parent is to do the best you can with the resources you have to get your baby birds out of the nest. Only when that has been accomplished is it really time to divide up whatever's left into equal shares. For those with kids still at home, a family trust is the best approach to raising your family if you're not on the scene to discharge that responsibility. For grown children outright distributions of shares of your estate may be a terrible idea too. If their marriage is unstable, if they have employment or debt problems, or if they just can't handle money very well, an ongoing trust can protect their shares from divorce courts, bankruptcy claims, and even their own imprudence (to say nothing of domineering sons and daughters-in-law.)

It can be a bad idea to own the life insurance policies on your own life because the entire death benefit under the policy will be part of your gross estate and thus subject to the Federal Estate Tax. Someone else should own the policy. Often it makes sense to have an Insurance Trust as the owner of the policy. But, it is very important to set up the trust before you buy the policy. This simple arrangement can save thousands of dollars or more!

A Durable General Power of Attorney is a good idea, but unless it is very, very comprehensive it will not help in many common situations. (Our Power-of-Attorney documents now run 28 pages long, and they're growing!) Worse, no matter how thorough your Power-of-Attorney is, by actual survey 50% of the time the bank, brokerage firm, title company or whoever simply won't honor the Power-of-Attorney! No matter what it says, They May Refuse It. That's why lawyers have developed a far better solution for dealing with incapacity: The Revocable Living Trust.

Many people already have a Living Will, the instrument that says how much (or how little) extraordinary care you want used to prolong your life if you're in a terminal condition. That's a good first step. Some people even have a Power-of-Attorney for Health Care Decisions which appoints someone to make medical decisions when they are unable to do so on their own. The better device is a combined document called an Advance Medical Directive written in accordance with the law of your own state (which makes it less likely that a doctor or hospital will hesitate to accept its validity.) Best of all, you should consider including in your Advance Medical Directive the provision authorizing your medical surrogate to request a Do Not Resuscitate (DNR) order from your attending physician, so that paramedics will not perform painful or aggressive (sometimes brutal) procedures to keep you alive at a time when your body is ready to slip away to a peaceful demise.

In these difficult and unpredictable economic times, it is especially important to do all you can in your own estate plan to protect your family’s inheritance from lawsuits, foreclosures, bankruptcy - divorce proceedings – and unwanted interference by meddlesome in-laws or would-be gold diggers. Our Reservoir Trust is a way to set aside a pool of assets for your beneficiaries, available to them when and as needed, but sheltered from these outside threats.