Wednesday, April 23rd, 2014

A Fort Collins Tax Preparer Asks: How Is Your Parents’ Estate Plan? Do You Even Know?

Last week, I wrote about planning ahead for children with special needs. And I’m grateful, because I can tell that a few people passed along that information to some friends, both here in the Fort Collins area, and beyond (After all, we can easily serve as a tax preparer for people outside the area).

I hope you can tell that we care about what we do around here at Team Meyer — and that we care for you. Enough to take the time to be in close contact with you throughout the year, and open myself up to plenty of email questions, and otherwise.

(Unfortunately, most tax professionals don’t usually offer this kind of access … which, I suppose is good for me and my clients — but not so good for the many other families out there!)

One of the best ways that you can offer your thanks to me and my staff is to share us with your trusted friends. We’re not looking to be the “biggest” tax firm in the Fort Collins area — we’d rather be the BEST — but we’ve found that our best clients come from referrals. “Birds of a feather”, and all that. So do us a favor … have your friends come our way! We’d love to look over their current tax return, as a favor to you — because we almost ALWAYS find a better, more tax-saving way to file (and they can always be amended, up to three years out).

And speaking of tax-saving, here’s another thought:

Judy Meyer’s Seasonal Tax Advice for July 2012
Convert Your Traditional IRA into a Roth IRA
If your traditional IRA still hasn’t recovered from the 2008-2009 stock market meltdown, then it’s likely worth much less than it once was. Therefore, the tax “hit” from converting it to a Roth IRA right now could also be less. While no tax hit is ever welcome, it may be a small price to pay for tax savings — because future income gains that accumulate in a Roth IRA will be free of federal income taxes of course. And traditional IRA distributions could be hit with tax rates even higher than today’s. Given future government deficits … it could be the smart move.

And we’re here to help! 970-490-2172

Now, onto my primary Note: I mentioned that I’m on a bit of a roll, as it relates to planning. Well … how are your parents doing in that department?

A Fort Collins Tax Preparer Asks: How Is Your Parents’ Estate Plan? Do You Even Know?

A thoughtful estate plan can make your heirs’ lives easier. But it is your parents’ estate planning that will make your life easier.

Not every family has fostered the ability to speak openly in love–I’ve written about that necessity in the past. But if you have begun that process, here is an outline of what grown children need to know about their parents’ business. In fact, adults of any age should update their estate plan every year.

And, as a parent, if you are willing to share some of this information with your children–especially if one of them is also the executor of the estate–they’ll appreciate having the facts and be more prepared emotionally when the time comes. They will know your wishes ultimately anyway, and good communication will lessen any surprises ahead of time. They will benefit from knowing the answers to the following questions:

Do you have enough saved for a comfortable retirement?
Many financial planners use a safe withdrawal rate by age to make sure their clients will still have enough money toward the end of their retirement. But this isn’t always the case, and it’s worth looking into.

If your spending is under this withdrawal rate, you have more than enough and probably can leave a legacy to your heirs. But if you are over this rate, you may run out of money and have to compromise your standard of living abruptly. It may be uncomfortable, even embarrassing, for parents to share their finances with their children, but grown children often want to know how their parents are doing.

Where are the important documents?
The five documents your children should be able to retrieve quickly are a will, a living will, a power of attorney, a directory of basic information and the latest end-of-year financial statements.

The directory of information should list the assets of your estate along with account or policy numbers and contact phone numbers. It also helps to indicate your intentions for the distribution of each asset, which will help confirm you have the correct titling and beneficiary designations on every portion of your estate.

You may have structured your will to divide your estate equally among your children. But if you have tried to make it easy for one child to access your bank accounts by adding his or her name, you have overridden your estate plan and left that child joint tenancy with complete rights of survivorship. This can be a problem.

Titling and beneficiary designations are legal estate planning actions. It’s best to review them with your legal advisor. Various types of assets are best designated differently in the estate plan. This is not the occasion for do-it-yourself thrift. It is a rare family that has compiled and reviewed a complete list of estate assets: bank accounts, investment accounts, retirement account, real estate holding, life insurance, health savings accounts and so on.

Are there any special bequeaths?
Any promises you want kept should be documented. Your good intentions won’t matter if you aren’t around to implement them. If you have promised money to a charity and want that obligation kept, document it. If you have promised to loan a child money, document it. If you have promised to help fund your grandchildren’s college education, document that. Without documentation, none of these promises can be kept if you aren’t around to make the decisions.

Are there plans to remarry?
If parents have remarried, intergenerational estate planning is even more critical. Prenuptial agreements and careful estate planning are required in the case of second marriages to avoid disinheriting children or grandchildren from the first marriage. The default is rarely a good option.

Do you have any prepaid funeral arrangements?
Do you want to be buried or cremated? Do you have any preferences for a memorial service? Although it may seem macabre to plan your own funeral, a memorial service takes time and thought. It will be that much more special and comforting to your family when it is filled with your favorite music and readings.

Encourage your children’s interest in your estate planning. Most of the time, their intentions are honorable. They may simply want to understand your values and therefore your wishes.

I’m personally dedicated to the success of your family — and to ALL of their finances. Can other tax professionals say that?

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