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Estate Planning Tips During COVID-19

When it comes to COVID-19, there is so much that feels beyond our control.  With estate planning (wills or trusts and more), there are things that you CAN control. Here is a list of things you can do (from an estate planning perspective) that may help you feel a little more in control:

#1 During this COVID-19 crisis, who are your emergency health care decision makers?  

Talk to your loved ones about your wishes regarding your medical care. First, who would you want to step up to advocate for you during a health care crisis? The two parts of Health Care Directives are the Designation of Health Care Surrogate and Living Will. With the Designation of Health Care Surrogate, you nominate someone you trust to make health care decisions for you in the event that you are unable to communicate those decisions yourself. With a Living Will, you can include directions regarding end of life decisions, as well as other decisions about your care and treatment.

#2 Look for your HIPAA Authorization.

Your Health Care Directives should also include a HIPAA Authorization.  HIPAA Authorization language follows the requirements Health Insurance Portability and Accountability Act (HIPAA) to authorize your designated patient advocate to receive information about your health condition and status.  Without one in place, a hospital, medical office, or third-party medical provider may not be able to release medical records or other medical information to your designated patient advocate.

#3 Update or create a Durable Power of Attorney.

A Durable Power of Attorney for Finances lets you designate an Agent to access your assets and make financial decisions on your behalf. A Durable Power of Attorney’s scope can be as broad or as narrow you wish.  Some of the more common powers an Agent may need in emergency situations include handling financial transactions, dealing with bank accounts, transferring funds, paying bills, filing taxes, funding a trust, updating beneficiary designations, and addressing insurance claims.

Learn more about a power of attorney here.

#4 Review your Will or Trust

A Last Will & Testament and Revocable Living Trust Agreement address how you want your estate to be handled upon your passing. It is important to review your existing estate plan if your goals, family or financial situation has changed since you last had your estate plan prepared.  If you do not have a basic Will or Revocable Living Trust Agreement in place, now is a good time to begin the estate planning process. Because if you don’t do anything and you pass away, your family will be stuck with the state’s intestacy laws, which could result in distributions that are contrary to your wishes.

Learn more about Wills here.

Learn more about Trusts here.

How do you know if you need a Will or a Trust?

#5 Check your guardian designations for your minor children.

If you have minor children, you need to designate guardians. In Florida you can do this in your Will and in a separate document. Above all, if you don’t legally nominate guardians for your kids. Your family members could end up in court fighting over who gets to raise them (and control their inheritance).

#6 Check beneficiary designations and asset titling.

Life insurance, annuities and retirement plans pass according to their beneficiary designations, regardless of what your Will or Trust provides.  It is important to coordinate the beneficiary designations with the rest of your estate plan.  Make a list of your assets.  For example, do your accounts show a joint owner?  If you have a trust, does the account statement show the trust name?  Check the beneficiary designations for life insurance and retirement plans. If you need to update these, contact your financial advisor to get your beneficiary forms. If you’re not sure how your accounts fit in with your estate plan, contact your estate planning lawyer.

Avoid these common life insurance mistakes.

#7 Update your passwords list and digital information. This is part of your estate plan.

We live in a digital world!  First, create an inventory of your online accounts and digital files,. Second, note your login IDs and passwords. Remember to note the answers to any security questions and what type of two-factor authentication is in use.  Third, identify all of your devices. For example, make a list of your smartphones, tablets, smart speakers ( like Alexa), laptops, desktop computers. Also, note their passwords, along with the passwords for any important apps. Finally, inventory the other electronic records you use, own or control.

Here’s an article about password managers.

#8 What are your family financial needs?

The COVID-19 pandemic has hurt many families financially.  Therefore, you may want to make gifts or loans to family members.  The annual gift tax exclusion amount is currently $15,000 per person.  For loans to family, the IRS requires that you charge the Applicable Federal Rate (“AFR”). That rate is based on the length of the loan.  You should carefully document gifts and loans to avoid misunderstanding and confusion in the future.  Note that family gifts and loans may affect eligibility for Medicaid benefits.

#9  Remember that you’re not alone! Check in with the experts that you know for help.

There’s a ton of news about health care, finances, state and federal government orders.  Ask your professional advisors for help. We’re trained to sift through what’s important and applies to your situation. Finally, check in with your advisor team and ask for advice. We’re here to help.

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What should you know about naming beneficiaries?

Do you have a beneficiaries in your Last Will and Testament, Life Insurance and Retirement Accounts? Here are some important things you need to know.

Beneficiaries of a Last Will and Testament have to wait.

First, you use a Will (Last Will and Testament) to give assets to your beneficiaries, your beneficiaries don’t inherit automatically. Those beneficiaries will need to wait until the probate court process is over before they can inherit. In some cases, this can take many months or even years. If the estate is complex, the legal fees can deplete that inheritance.  If avoiding probate is a top priority, consider a Revocable Living Trust as part of your estate plan.

Go here to learn more about wills and trusts.
Go here to learn more about avoiding probate.

Your Last Will and Testament does not control your retirement plan and life insurance policy benefits. 

Second, assets in a life insurance policy or retirement plan pass to your beneficiaries directly, bypassing your Will (Last Will and Testament).  Your beneficiaries will receive these assets after completing a claim form.

Minor children should not inherit directly. Consider a trust.

Don’t name a minor child as the beneficiary of a life insurance policy or other assets. That is because minor children cannot inherit assets directly. Instead, the wise move is to create a trust to hold these assets for the benefit of a minor child. Name a trustee to oversee the management and distribution of the funds in a way that complies with your wishes.

Go here to learn more about trusts.

Be careful how you name retirement plan beneficiaries.

Unfortunately, most beneficiaries of a retirement plan take the cash immediately, which may not be your intention.  Don’t name your estate as a beneficiary.  That is because that may not allow your spouse or younger beneficiary to take advantage of an IRA rollover or some provisions that could allow your IRA to grow tax-deferred over many years.

If there are multiple beneficiaries, name them.

Finally, if there are multiple beneficiaries for an insurance policy or retirement plan. Don’t make name one person, assuming he/she will distribute to other beneficiaries.  Instead, designate a separate share for each beneficiary.  Does a beneficiary have special needs? If so, create a trust for their share so any inherited assets don’t disqualify them from important government benefits.

Call our office today at (813) 902-3189 to schedule a time for us to talk about an Estate Planning Session.

Will These Life Insurance Mistakes Hurt You?

Life insurance is an important part of estate planning and taking care of the people you love after you pass away. Here are some common mistakes that you should avoid.

1. Not naming a beneficiary

Too many people forget to name a beneficiary or backup beneficiaries. Those mistakes can result in your life insurance proceeds having to go through the probate court process. That can tie up your money for months and even open up the life insurance proceeds to your creditors. And that can wipe out your funds.

2. Naming an individual as beneficiary to take care of that money for someone else

You might be tempted to list someone you know and trust as beneficiary of your life insurance, with the understanding that he or she would use that money to take care of another person that you have in mind. This could result in a number of problems. For example, you list your sister as beneficiary of your life insurance so that she can take care of your daughter.

3. Not keeping your beneficiaries up to date

Too many people forget to update their beneficiary designations.  You should review your beneficiary designations at least once a year so that you can make sure you update them upon events like divorce, deaths, and births.

4. Naming a minor as beneficiary

We see this ALOT. And it can result in expensive and time consuming complications for your family. That is because in Florida, minor children can’t directly inherit assets over $15,000. If a minor is listed as the beneficiary, the proceeds of your insurance will be distributed to a court-appointed custodian (guardian of the property), who will be in charge of managing the funds (often for a fee) until the age of majority, at which point all benefits are distributed to the beneficiary outright.

Instead of naming a minor as beneficiary, consider setting up a trust to receive the insurance proceeds, and name a trustee to hold and distribute the funds to a minor child you would want to benefit from your insurance proceeds. By doing so, you get to choose not only who would manage your child’s money, but also how and when the funds are distributed and used.

5. Naming an individual with special needs as beneficiary

If a loved one has special needs, chances are you want to help provide for a lifetime of care and protection. But if you leave the money directly to someone with special needs, it could disqualify that individual from receiving much-needed government benefits. Consider creating a “special needs trust” to receive the insurance proceeds. That way the money won’t go directly to the beneficiary upon your death, but it would be managed by the trustee you name and dispersed according to the trust’s terms, without affecting benefit eligibility.

You owe it to your loved ones to get this right.

Naming life insurance beneficiaries might seem pretty straight forward. But if you mess this up, you can create pretty big problems for the people you love.  But don’t worry, we can support you in planning for the people you love, whether it’s through life insurance or other tools such as wills or trusts.  Schedule an estate Planning Session to get started.

Call us at (813) 902-3189.

Part 1: How do you choose life insurance beneficiaries?

Part 1: How do you choosing life insurance beneficiaries?

Choosing a beneficiary for your life insurance policy isn’t as easy as you might think. That’s because  naming someone as your life insurance beneficiary really has nothing to do with you. Why? Because you should consider how that money will affect your beneficiary’s life once you’re gone. If you’re not careful, you might create problems for your loved ones.

Here are a few important questions you should ask yourself when choosing your life insurance beneficiary:

1. What are your goals? 

Ask yourself: what do you ultimately intend to accomplish with your life insurance?  For example, are you trying to replace income for your spouse and kids? Are you just trying to cover your funeral costs?

The real reason you’re investing in life insurance is something only you can answer. And that answer will put you in a better position to choose your beneficiary.

2. What are your beneficiary options?

Your primary beneficiary is your first choice. If you don’t name a beneficiary, then your life insurance goes to your estate. That means that your life insurance will end up in Probate. Your insurance company will ask you to name your top choice to get the money after your death. This is the primary beneficiary. Probate can tie up your life insurance in court for months or even years.

You should also name a backup beneficiary (a/k/a your alternate or contingent beneficiary)

For example, you can name multiple primary beneficiaries, like your children, and have the proceeds divided among them in whatever way you wish. Also, the beneficiary doesn’t necessarily have to be a person. You can name a charity, nonprofit, or business as the primary (or contingent) beneficiary.

When choosing your beneficiaries, you should ultimately base your decision on which person(s) or organization(s) you think would most benefit from the money. In general, you can designate one or more of the following examples as beneficiaries:

  • One person
  • Two or more people (you decide how money is split among them)
  • A trust you’ve created
  • Your estate
  • A charity, nonprofit, or business

3. Do you have minor children?

If you name a minor child as a primary or contingent beneficiary (and he or she ends up receiving the policy proceeds), a legal guardian must be appointed to manage the funds until the child comes of age. This can lead to numerous complications, so you should definitely consult with an experienced estate planning attorney if you’re considering this option.

Check out Part Two in this series discussing the remaining three questions to consider when naming beneficiaries for your life insurance policy.

Call us at (813) 902-3189 to book your Estate Planning Session.