From tragedy, to tragedy — this one closer to Centralia IL than the Philippines (by which I don’t intend to deprecate the horror of the typhoon’s aftermath — please do donate, as I suggested last week) — we now have had some terrible tornadoes through our Midwest (see: http://apnews.myway.com/article/20131117/DAA4LGI00.html). Even NFL Football was affected, as the Bears vs. Ravens game was suspended for about 90 minutes on Sunday.
Alan Newcomb’s Rule of Thumb: You know it’s serious when they suspend an NFL game! (Sad, but true.)
So I thought that I would speak to something related to handling tragedy … and, in my case (as a compulsive planner), I end up landing in the area of preparation — and not just Centralia IL tax preparation.
Because, as is true with tax strategy — it’s always better to be prepared BEFORE you hit the deadline. In the tax world, this relates to tax planning (which reminds me: have you come in to see us yet, before the end of the year, so you can do that? Call (618) 532-7223 to set up an appointment, if not).
But in larger cases, the best kind of preparation takes more than just taxes into account. So, here we go…
Alan Newcomb’s 9 Reasons to Create an Estate Plan RIGHT NOW
“Every time we have an election, we get in worse men and the country keeps right on going. Times have proven only one thing and that is you can’t ruin this country even with politics.” – Will Rogers
Many well meaning Centralia IL people think that estate plans are for someone else, not them. (Our tax clients hopefully know different.) They may rationalize that they are too young or don’t have enough money to reap the tax benefits of a plan. But as the following list makes clear, estate planning is for everyone, regardless of age or net worth.
Here are my NINE reasons why you should consider this right now…
- Loss of capacity. What if you become incompetent and unable to manage your own affairs? Without a plan, the courts will select the person to manage your affairs. With a plan, you pick that person (through a power of attorney).
- Minor children. Who will raise your children if you die? Without a plan, a court will make that decision. With a plan, you are able to nominate the guardian of your choice.
- Dying without a Will. Who will inherit your assets? Without a plan, your assets pass to your heirs according to your state’s laws of intestacy (dying without a will). Your family members (and perhaps not the ones you would choose) will receive your assets without the benefit of your direction, or of trust protection. With a plan, you decide who gets your assets, and when and how they receive them.
- Blended families. What if your family is the result of multiple marriages? Without a plan, children from different marriages may not be treated as you would wish. With a plan, you determine what goes to your current spouse, and to the children from a prior marriage or marriages.
- Children with special needs. Without a plan, a child with special needs risks being disqualified from receiving Medicaid or SSI benefits, and may have to use his or her inheritance to pay for care. With a plan, you can set up a Supplemental Needs Trust that will allow the child to remain eligible for government benefits while using the trust assets to pay for non-covered expenses.
- Keeping assets in the family. Would you prefer that your assets stay in your own family? Without a plan, your child’s spouse may wind up with your money if your child passes away prematurely. If your child divorces his or her current spouse, half of your assets could go to the spouse. With a plan, you can set up a trust that ensures that your assets will stay in your family and, for example, pass to your grandchildren.
- Financial security. Will your spouse and children be able to survive financially? Without a plan and the income replacement provided by life insurance, your family may be unable to maintain its current living standard. With a plan, life insurance can mean that your family will enjoy financial security.
- Retirement accounts. Do you have an IRA or similar retirement account? Without a plan, your designated beneficiary for the retirement account funds may not reflect your current wishes, and may result in burdensome tax consequences for your heirs (although the rules regarding the designation of a beneficiary have been eased considerably). With a plan, you can choose the optimal beneficiary.
- Avoiding probate. Without a plan, your estate may be subject to delays and excess fees (depending on the state), and your assets will be a matter of public record. With a plan, you can structure things so that probate can be avoided entirely.
To your family’s happily-planned financial future …