5 Year-End Estate Planning Tasks

2016-2017The end of the year is the perfect time to look back at all the changes and make a few moves to protect your family and your assets in 2017.

Estate planning is one of the most overlooked areas of personal finance. Many people do not want to confront the thought of their personal mortality or incapacity. But the good thing is that a brief moment of discomfort can provide a great amount of protection for your family if something happens. Once an estate plan is put together, it can be easily maintained with regular reviews.

You should review your estate plan at least once a year. December is the perfect month to make such a review. You will want to see if there are any notable life or financial changes over the past year or if any are expected in the new year. Examples involve large changes of your finances and assets (such as the purchase or sale of a new home), addition or subtraction to your family (by marriage, divorce, birth, or death), or changes in health, both yours and your beneficiaries.

I encourage every adult to take some time to review their plan, if any, to make sure it reflects their wishes and provides the best protection for your assets and loved ones. Here are five simple year-end moves you can make to ensure you are starting the new year on a strong footing.

  1. Update your beneficiary designations. Most retirement and financial accounts have beneficiary designations. It is common for these designations to go unchanged for years or decades. This is a common reason for inheritance to be “accidentally” left to an ex-spouse or someone unable to claim the inheritance. In some cases, the beneficiary designation never gets completed properly, even though you might think it has been. It is well worth the time to speak with your financial representative, insurance agent, or go online to the account holder to check your beneficiary designations and make changes if necessary.
  2. Give gifts. As of 2016, the annual gift tax exclusion is $14,000. This means you can give a gift of $14,000 to as many people as you wish without the need to worry about filing any documents with the IRS. The lifetime gift-tax exemption is currently $5.45 million. This is the amount you can gift beyond the annual exclusion before the gift tax apples. For those seeking to reduce the value of their estate or to set up a financial program to benefit your children or grandchildren, this is a great way of doing it.
  3. Revisit your will or trust. Your will and trust should be about much more than who gets your stuff when you die. Instead, these documents should be viewed as your last act on this earth. It should be designed to make life easier for your loved ones on the event of death, disability, or incapacity. Keeping these documents current and up to date will relieve a huge burden during a troubling time. Review the documents for errors or changes you may want to make. If you have minor children, you should also make sure they properly nominate a guardian in case something happens to you and your spouse.
  4. Refresh your Powers of Attorney and Advanced Healthcare Directive. These documents can become stale after a few years. Even though these documents may remain valid until your death, some institutions have internal rules that require them to be “fresh.” Although these internal rules violate California laws and the institutions can be forced to accept these documents by a California court, the easier solution is periodically “refresh” these documents by signing a new copy, even if nothing has changed.
  5. Talk with Loved Ones About Long-Term Care. Future accidents and illnesses can be unpredictable. Some estimates have 1 in 3 people needing some form of long-term health care during their lifetime. The average costs of nursing homes and assisted livings is currently around $8,100 per month and can be much more. Medicare does not cover long-term care and Medi-Cal has strict income and asset limitations. Whether you stay at home for as long as possible or believe that a nursing home will be necessary in the near future, it is a good idea to proactively speak about long-term care with your loved ones and financial professionals so a rough plan is in place.

Let This Year Be The Year You Take Action!
Estate planning is an easy task to check off your “to-do” list, along with any last minute tax and financial moves before the year’s end. It’s great to set aside some time to review all of your documents, make updates, and meet with an attorney, if necessary. You deserve the peace of mind knowing that your legal ducks will be in a row before the New Year!

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