John Lane Law

Beneficiaries…What Are Those? - John M. Lane Law, PLLC

"When was the last time you updated, or even thought about, the beneficiary designations listed on your retirement accounts, life insurance, or annuity contracts?"

If you don't remember when you last checked your beneficiaries, it's definitely time to review!

Beneficiary designations allow certain assets owned by an individual to transfer efficiently at her or his passing. These include retirement accounts like IRAs, Roth IRAs, 401(k)s, 403(b)s, 457(b)s, and pensions, as well as life insurance death benefits and the residual value of annuities.

These types of assets with designated beneficiaries will transfer automatically, despite anything written to the contrary in a person's will or trust. These assets with designated beneficiaries are also excluded from the decedent's probate estate unless the "estate" is the designated beneficiary.

Owners can designate both primary and contingent beneficiaries. The primary beneficiary inherits the asset, but if he or she dies before the owner, then the contingent beneficiary will be the new owner. If you don't name a contingent beneficiary, the asset will go into your general estate for distribution, which is what you're trying to avoid in the first place by naming beneficiaries.

There are no restrictions on how many beneficiaries can be designated to inherit an asset. You can split your 401(k) 50-50 if you have two children, or 60-40 or 90-10. You can also name a charity as your beneficiary, which can be a nice way to transfer assets to a special organization at your passing. Charities don't pay income tax, so they would get 100% of the value of the asset. If an individual inherits this asset, he or she will be liable for income tax right away or as funds are distributed.

A trust can also be designated as beneficiary to provide control over the asset to someone other than the inheritors. Many times it's used when minor children or individuals with disabilities are to be the ultimate beneficiaries. You should work with an estate planning attorney if you go this route, as the tax and distribution rules are complex.

Review your current beneficiary designations now to be sure they reflect your desires. You also should look at them whenever life circumstances change, like a marriage, birth, divorce, or death. You can change a beneficiary designation at any time.

Since assets with beneficiary designations transfer automatically, make sure that beneficiary designations complement your estate documents. A qualified estate attorney can assist you with how beneficiary designations should be stated to mesh with your overall estate plan.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Inside Indiana Business (February 29, 2016) "Who Are Your Beneficiaries?"

Do We Hire a Private Eye to Uncover Grandma's Estate? - John M. Lane Law, PLLC

"Relatives face a financial paper chase after a beloved relative dies."

If after grandma passed away, you realize that she didn't leave a will, it can be a real mystery to unravel all that there was to her estate. MarketWatch says in "My wealthy grandmother left no will — how do we find her stocks and bonds?" to take your cue from Jim Rockford or Rick Castle.

The executor may have to do a lot of gumshoeing.

You can contact grandma's estate planning lawyer, if she had one, as well as anyone who had access to her home—like housekeepers, friends, and other relatives. You can also see if she had a safe deposit box at her bank and watch the mail for updates on any accounts.

According to recent research, women in particular are often faced with this problem when their spouse dies. Women are also less likely to know the terms of their spouse's life insurance policy (57% versus 69% of men) and less likely to locate family financial documents in an emergency (32% versus 21% of men).

Make sure that your financial documents are in a place where they can be located easily when you die. Unfortunately, there's no law that says we have to make out a master list of where our assets are located. The deceased had to have independently made a list. Also, it's not unusual for assets to go undiscovered: grandma may have had a bank account in northern Minnesota or a timeshare in Hawaii. If there's no documentation, you'd never know.

The surviving spouse will often need important documents like tax returns, birth certificates, and insurance policies. So do your better half a big favor now and get organized.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: MarketWatch (April 30, 2016) "My wealthy grandmother left no will — how do we find her stocks and bonds?"

The Power of Powers of Attorney

"Planning for retirement and older years is a complicated business."

Retirement means making decisions on housing, income, investments, health care and estate planning—many of which can be emotional and may require major life changes. The timing of all of these decisions and their interaction also requires careful planning.

The Harvard Press says in its recent article, "Older & Wiser: Powers of Attorney," that because of the complexity of these issues, many people seek professional assistance regarding retirement living and estate planning. While many of us are tempted to avoid uncomfortable decisions, careful planning can save you thousands of dollars and can help you avoid unnecessary guardianship or institutionalization.

Powers of attorney are documents executed by an individual, the "principal," to give another individual, the "attorney-in-fact," power to decide issues on the principal's behalf. The principal has the ability to define the scope of decision-making authority in the power of attorney document.

Based on how they're drafted, powers of attorney can become effective in different ways. A durable power of attorney must be executed while the principal is still competent. It will be immediately effective and stay in effect, even if the person becomes incapacitated. A springing power of attorney is different. It becomes effective when the person is no longer competent.

A durable power can be used without the consent of the individual but must be used to the person's benefit. The springing power lets the person creating the document keep control over his or her affairs as long as it is practical. Both of these types of documents may be revoked by the principal in writing.

Drafting and executing power of attorney documents is an individualized process that varies depending on the circumstances. So it's never a good idea to use a boilerplate form from the Internet that doesn't reflect the individual's needs and circumstances.

A properly drawn and executed power of attorney provides individuals peace of mind and assurance that their affairs in the future will be addressed appropriately. Contact a qualified estate planning attorney.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Harvard Press (April 28, 2016) "Older & Wiser: Powers of attorney"

A Look at Survivorship Life Insurance in Estate Planning

"By far, this gives us the most bang for our bucks as we are insuring two lives instead of one."

The Insurance News article, "Survivorship Life Insurance Useful for Estate Planning," talks about a type of policy that really lends itself to estate planning purposes. Survivorship life insurance doesn't pay its proceeds until the last survivor dies—that is, the last spouse.

This is a real advantage for lower pricing. Another benefit to consider is the benefit of the female spouse. Since women far outlive men, this fact is also reflected in lower premiums. This means you can typically buy twice as much face amount in a survivorship policy as you could in an individual policy for the same money, which is important in estate planning scenarios. Typically, we need to have very large dollar amounts when it comes to death benefits, which in turn, means higher premiums. Affordability and cash flow are always major concerns, so this strategy can help to keep these costs down.

You should have a "permanent" plan for survivorship policies. Consider either traditional universal life or equity indexed universal life. Universal life will allow the most benefit per dollar invested. When designed properly, it can provide for sufficiently strong guarantees without any waste by having any excess money in cash value. Be certain to talk with seasoned insurance professionals when considering this type of planning for you and your family.

Also, these policies pay out the much-needed funds exactly when typically required. Once the last spouse passes away, the estate is settled and distributed. This is when money is needed for many reasons.

When the value of providing highly-leveraged, tax-free benefits are considered, many individuals opt for this financial and estate planning tool as an affordable way to leave a large legacy for both their families and their favorite charities.

Survivorship plans can provide families with an affordable and workable solution for many needs as part of a comprehensive estate plan.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: insurancenews.net (May 3, 2016) Survivorship Life Insurance Useful for Estate Planning

Even Supreme Court Justices Need Estate Planning

"Which former Chief Justice's simple one-page last will and testament was initially posthumously mocked by commenters for not explicitly dealing with estate taxes?"

Chief Justice Warren Burger died in 1995 and after the terms of the will were uncovered, its terms incurred ridicule for his failure to save his heirs taxes.

But the Chief had the last laugh. His lawyer responded that Burger's will, when given effect along with the terms of his previously deceased wife's will, created maximum tax savings.

Above the Law's April 26 post, "Think Supreme Court Justices Can't Estate Plan? Wrong," explained that when Chief Burger died, many who read his glowing obituaries almost didn't recognize the man they described. That's because, despite his many virtues, there were plenty of people whose overwhelming impression of Burger was of a man who was "pompous" and "arrogant." And for those people, it came as no surprise when many thought Burger had a fool for a client: himself.

The one-page "Last Will and Testament" that Burger personally typed was thought to be inadequate, especially for the nation's top jurist. It was believed that his poor estate planning would cost Burger's son and daughter more than $450,000 in taxes.

But the Chicago Tribune, after getting more facts, found the Chief to be a model for sensible estate planning. Burger and his wife, who died a year before he passed, did indeed consult with estate planning lawyers and took steps to minimize their tax liability. This was evident from Elvera Burger's will.

While a handwritten will that hasn't been witnessed may or may not be accepted in your state, the truth of the matter is that you don't want your heirs to have to find out at probate. Without a valid will, state laws will dictate where your property goes. The biggest risk with a self-drafted will is that the state may declare it invalid because of some technical issue.

Be safe and consult with an experienced estate planning attorney.  Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Above the Law (April 26, 2016) "Think Supreme Court Justices Can't Estate Plan? Wrong."

Military Families Need Estate Planning

"Their added risks and frequent moves call for careful attention to matters including estate planning and real-estate ownership."

Many military families—particularly young families—need financial and estate planning advice. With the risks of going into a wartime situation or the potential for a training accident, service members have a greater than average chance of disability or premature death.

The Wall Street Journal article, "How to Serve Military Families," says that in some instances military spouses are young and financially immature. Military families don't settle in one place for very long, so a nonmilitary spouse may have trouble finding a steady job that would provide a second income and a retirement plan. In that situation, if something happens to the service member, and benefits are paid out, they need to be able to access them immediately. It's more likely that young military families will need help getting these estate documents in order and updating their beneficiary designations.

Financial and estate plans can't be static. They need to reflect a family's current life situation. For example, beneficiary designations on retirement plans need to be reviewed and updated, and many soldiers and sailors name a boot camp buddy as the beneficiary of their Servicemembers Group Life Insurance (SGLI) policy after they enlist. This needs to be changed when they've married and have had children.

Retirement and insurance plans pay named beneficiaries, separate from the will. A service member's will may provide that his or her child can't access the assets left in trust until he or she reaches age 25. However, if the child is a named beneficiary of an SGLI policy, the proceeds will be paid directly to the child if he or she is 18 or has attained the state's age of majority; or they will be paid—regardless of age—to a legal guardian who may not be the person the service member would have chosen to manage these funds for his or her child. Another way to go is to have a trust for the child be the insurance beneficiary.

Real estate is another area of concern for military families who move frequently and may own property in multiple states. If the service member is killed, the property may end up in probate without the proper instructions. One might even think about starting a limited liability company for the property and speaking with an experienced estate planning attorney about setting up a living trust to hold real estate assets during his or her lifetime that also names a beneficiary in the event of his or her death.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Wall Street Journal (April 19, 2016) "How to Serve Military Families"

The Value of The Purple One's Estate Could Make His Heirs—and the IRS—Delirious

"The death of the music icon sets off a complicated process to value his estate."

The death of the musician Prince has started the clock on when the IRS will take a big chunk out of the star's estate. But no one really knows how big that bite will be or the actual size of the pie.

For those involved with Prince's estate, calculating just how big Uncle Sam's bite will be may be a real challenge. Some say it's next to impossible and might also fuel a lengthy feud between the government and the estate, as more than half the estate's value could be forfeited in taxes.

But what is that value?

The Investment News says in "Prince's death sets off estate planning quagmire" that the big immediate issue is placing a value on intangible assets, like the future royalties the artist may earn from a body of work.

Prince's fortune was about $300 million, and the divide between how the IRS and his estate view the present value of future royalties could be extremely significant. The death of a popular artist can mean increased valuation. Experts say that death has an impact on the artist's body of work.

The IRS will say his death will blow the royalties off the charts. However, the estate's attorneys will oppose such a move.

That's why the estate of the late Michael Jackson is currently locked in a court battle with the IRS. The government valued Jackson's name and image upon death at more than $434 million. However, his estate's estimate was a tad bit lower: $2,015.

The IRS has learned its lesson from the case of Elvis Presley's estate. It didn't anticipate the phenomenon of the king's increasingly popular catalog after he died in 1977.

Elvis generated $55 million in 2015 alone, which was second only to Michael Jackson's $115 million, according to Forbes' list of top-earning dead celebrities. Now the IRS is taking this potential revenue stream much more seriously.

And, as a New York Times article indicates, a "trove of Prince's recordings remains unreleased," so the potential value from those works is unknown.

Prince's estate has 15 months to file a federal estate tax return (nine months plus a six-month extension), and the estimated federal estate tax is due at the nine-month date. Note that Prince wasn't married at death, so there's no chance of a spouse taking advantage of the unlimited marital deduction, which would pass the estate to the spouse tax-free.

The federal government assesses a 40% estate tax on estate values over $5.45 million. Minnesota, Prince's state of residence, is one of 20 or so states that also have a state estate tax. The Gopher State's top rate is 16%—that will add up to a 56% tax for Prince's estate total when including the federal rate.

If the IRS says the tax amount paid by the estate was undervalued after getting the tax return, it will propose a valuation increase, which is open to negotiation.

If they can't agree, they go to court.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Investment News (April 25, 2016) "Prince's death sets off estate planning quagmire"

Are Your Financial Affairs in Order or Do You Need an Organization Intervention? - John M. Lane Law, PLLC

"What's your style for organizing your financial documents?"

Are you a procrastinator? Do you let your financial statements stack up on your desk until that (always elusive) day when you'll finally have the time to get things in order?

Are you organized but an uber-saver to the point that your file cabinet is bulging with statements for long-closed accounts?

Maybe you're a minimalist and you trash all of your financial documents, assuming you'll be able to retrieve what you need when you need it.

Morningstar's article "How to Organize Your Financial Documents" acknowledges that it's getting easier to go with option three and rely exclusively on digital resources to manage and track your financial accounts and pay bills. Financial services will remind us that paperless is the green way to go. Assuming you take some commonsense actions to protect against financial fraud, it can also be very safe. However, before you go the minimalist route, put some basic infrastructure in place with these steps.

Secure Your System. Moving your document storage from paper to digital is a vital element of getting your financial house in order. A big first step before you switch over is to be certain of the security of your home computer network with up-to-date antivirus and antispyware software, firewalls and a spam filter. A good system for periodic backing up of the data is also essential. Also, you'll need to password-protect your computer as well as sensitive documents. Finally, be careful about trying to access financial information when you're away from home. Never log into any financial accounts when using a public or unsecured network.

Create a Master Directory. Next, create a password-protected digital directory of your accounts with user names and passwords, websites, and information about where these files are on your computer. This document can be handwritten, but it's crucial to keep that document in a safe location—like a locked, fire-safe box or a safe-deposit box. Also, it's important to tell a trusted loved one of your master directory and how to gain access to it.

Investigate Your Providers' Information Systems. Do a quick audit of the quality of the digital statements provided by your banks, brokerage and mutual fund companies, and other companies with which you conduct business. Be savvy with your passwords for your information on external providers' sites.

Create a Logical Digital Filing System. When creating a secure environment for your sensitive financial information, create an intuitive organization system for digital files. Consider using broad topic folders like "Insurance," with subfolders for "Auto Insurance" and "Life Insurance."

Have a Plan for Your Receipts. Go ahead and recycle receipts for inexpensive, everyday purchases and scan receipts for items you might need to return or otherwise document the proof of purchase.

Stop It at the Source. If you're getting unwanted catalogs or other junk mail, contact the company and ask to be removed from the mailing list.

Weed Through Existing Files. Sort through existing files and clear out the files you no longer need. Those very hard-to-replace items like certificates of marriage, birth and death; adoption papers; Social Security cards; deeds; and car titles should be stored in a safe-deposit box or an in-home fireproof box. Plus, keep a copy of estate planning documents in your home and inform a trusted loved one about these documents and their location.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. Everyone has an estate, no matter how large or small, complex or simple.  For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: Morningstar (April 18, 2016) "How to Organize Your Financial Documents"