John Lane Law

What Happens to My Debt When I Die? - John M. Lane Law, PLLC

“When we think about retirement planning, our focus often keys on the question of how to maintain a monthly paycheck after we stop working.”

A retirement plan isn’t set without some thought and planning on how to transfer any unspent assets to people we’d like to benefit after we die, and to whom we can entrust important financial and health care decisions in the event we’re unable to manage those affairs.

fosters.com explores this in a recent article, “What happens to your debt in estate planning?” The article reminds us that this is where estate planning is needed. An estate plan is a set of instructions that lets us designate certain individuals to act on our behalf after we die, or while we’re living but incapacitated, and provides guidance about how our assets should be distributed to beneficiaries at death, or managed for us while we are alive but unable to do so on our own.

Wills, trusts, and beneficiary forms set out our instructions as to who will receive any assets that we leave behind. Wills name an executor who is responsible for an accounting of all of our assets and liabilities at death. The executor also works with the probate court to get our creditors paid, and distribute the remaining funds to our heirs. Trusts are similar, but don’t involve oversight by the probate court. When a trust is set up to own assets during your lifetime, a successor trustee is named at your death or incapacity to manage the trust assets and then distribute them at the specified time to the named beneficiaries.

Wills and trusts don’t have any control over accounts that have a joint owner or beneficiary designation, unless the estate or trust has specifically been named as beneficiary. IRAs, 401(k)s, life insurance, annuity contracts, and brokerage and bank accounts can all be created with beneficiary designations that serve as the instructions to their custodians, regarding who is to receive them after death.

Durable power of attorney documents for both financial matters and health care are also important components of a retiree’s estate plan. Because IRAs, 401(k)s and other retirement accounts can’t be owned by a revocable trust, trustees can’t manage them for you. An agent designated in a durable power of attorney can take any actions you authorize on these sources of retirement cash flow. A durable power for health care will specify the individual you authorize to make care decisions for you and what your wishes are regarding life-sustaining treatments.

It is not unusual for those approaching retirement to either delay creating wills, trusts and power of attorney documents or not to have reviewed them for many years. Because laws and relationships change over time, it is important to review estate planning documents regularly and consult with an estate planning attorney when updates are needed.

What happens to the debt? With good planning, there hopefully is no debt. But if there is, beneficiaries generally do not have to pay the obligation, unless the debt was owned jointly with a spouse or a co-signer. Unsecured debts, like credit cards, however, do become liabilities of the estate and payment of these debts will be overseen by the probate court. The executor will need to pay them from any assets passing via the decedent’s will. An experienced estate planning attorney should work through these items with you and your heirs to take care of your affairs while you are living.

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: fosters.com (November 22, 2017) “What happens to your debt in estate planning?”

Simple Estate Planning Tools - John M. Lane Law, PLLC

“The longevity of successful retirement cannot be overstated, thus the importance of building, preserving and protecting one’s assets during retirement.”

When we look at the steps taken in our investing lives, the basics are simple. As working investors in the initial stages, the priority is accumulation and growth. Therefore, we participate in retirement plans such as IRA’s, 401-k plans, etc.

As Marco Eagle’s article, “Money Talks: Estate planning tools” explains, the next phase is the retirement stage, when the focus shifts from accumulation to preservation and maintenance of the nest egg.

Growth is a component of any retirement plan, but protecting your purchasing power during retirement is critical. You also want to generate a predictable stream of income during retirement, in order to avoid compromising your lifestyle.

The final stage of successful retirement planning is often overlooked: that’s the estate planning phase or the strategy of a succession plan to pass assets to your family. There are many estate planning tools that can be used to execute an estate plan. You can create a personal trust. Under this arrangement, your assets are transferred into a trust during your lifetime and then transferred by the trust at death. It’s important from both a tax standpoint and an allocation standpoint, regarding who receives what and how much. This is what your estate plan does for you and your family.

Work with an experienced estate and trusts attorney to establish your estate plan, so you can achieve your final objectives when passing assets to the next generation. Some individuals like the ability to exercise control with an effective plan to pass assets to their beneficiaries, without the need of trusts or probate.

There are many types of insured annuity strategies that will pass assets immediately to the beneficiaries, without the need of probate. Avoiding probate is frequently part of a strategy to make the assets available, immediately after the death certificate is issued.

Some see the foundation of their estate planning as the incorporation of life insurance. This lets the beneficiaries inherit assets, generally tax free. Avoiding a taxable event upon death is also appealing, based on both taxes as well as overall portfolio values. Talk to a professional about your situation.

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: Marco Eagle (June 11, 2017) “Money Talks: Estate planning tools”

If it is So Important, Why Doesn't Everyone Make a Will? - John M. Lane Law, PLLC

“Understanding what happens to you when you die may help you understand the intricacies of your estate and make planning both simpler and more effective.”

No one likes to plan for his or her death, but it’ll happen to all of us, says The Reading Eagle Business Weekly in the article “Make a will, plan for distribution of assets.”

You can pass your wealth to anyone you want, but state and/or federal taxes may be due on these transfers. The rules are also complex, and if you die without a will, the state laws of intestacy may say who gets your wealth.

Most folks make the mistake of signing their wills and life insurance policies, then putting them in files and forgetting about them. These documents and your intentions will become out-of-date. It’s not uncommon for a decedent to have been divorced for five years when they die, but the ex-spouse still inherits all of his or her assets. Why? Because the ex’s name is still in the will or is listed as the beneficiary of the life insurance policy. This happens more frequently than you might think.

Probate?

Probate versus non-probate assets is one of the most misunderstood concepts in estate planning. Probate is the process that deals with proving a will's validity by filing it in court. The will names an executor who is responsible for fulfilling its terms. The estate assets are identified and valued, then given to the individuals named in the will.

There are also non-probate assets that are transferred by operation of law. They specifically include accounts with beneficiary designations like IRAs, 401(k)s, pensions, retirement accounts, life insurance, annuities and transfer-on-death accounts. These non-probate assets supersede what’s written in the will. The beneficiary designations control them.

Do you have a will? When was the last time you reviewed it?

You should hire an experienced estate planning attorney to help structure an estate plan for both your will and beneficiary designations to allow for the efficient transfer of your assets.

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: Reading (PA) Eagle Business Weekly (January 17, 2017) “Make a will, plan for distribution of assets.”

Time to Review your Financial Planning - John M. Lane Law, PLLC

“There's no time like the present to take stock of your financial life.”

Business Insider’s recent article, “A financial adviser shares a 5-step checklist to complete before the end of 2016,” notes that many folks spend more time planning vacations than they do their finances or retirement. The beginning of the new year is an excellent time to take a comprehensive review of what you have—both assets and liabilities—to prepare for the year ahead and any financial milestones or challenges you may face. These can include things like marriage, a home purchase, adopting a child or retirement.

Here are some important financial steps to at the start of 2017.

Take financial inventory. Consider aggregating your accounts and identifying what you have, such as IRAs, bank accounts, and life insurance. You should take an inventory of your debt and determine how you will pay it off in 2017.

Review your estate plan. OK, it’s not that exciting, but it’s important. Don’t wait until this time next year, because tragedy can strike at any time. If you fail to plan properly, and something unfortunate happens, your family may be left unprepared. It's critical to have control over what will happen to everything that you leave behind.

Update your beneficiary forms. This is a task that should be reviewed periodically—especially if you've been married or divorced, had children or retired in recent years. A designated beneficiary on an insurance policy or an IRA has precedence over a will or a trust. As a result, it's important to make adjustments after major life changes.

Make some smart tax moves. You should know how the taxes work on your 401(k)s and IRAs, so take a look to be certain you're saving effectively. The maximum annual contribution to a 401(k) is $18,000 or $24,000 if you're over 50. Therefore, if you've got a holiday bonus, that’s the perfect reason to add to your retirement accounts.

You should also remember that you can gift as much as $14,000 per person annually to as many people as you'd like without a gift tax liability. In addition, with any tax planning for retirement, you might think about converting your retirement money through a Roth IRA conversion ladder. Money transferred from a traditional IRA to a Roth is tax- and penalty-free after paying taxes on the conversion.

Evaluate your path to retirement. Retirement planning is important at every stage of life, so be pro-active. If you create a plan, it can hold you accountable. It is important to speak with a qualified estate planning attorney. Don’t just “set it and forget it.” Stay on top of issues and continually monitor the situation.

If retirement is in the near future, or if you're planning to retire early, start to have discussions about identifying guaranteed income, social security, your pension options, and how to utilize any or all of them into your overall income plan, along with the tax consequences.

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: Business Insider (December 9, 2016) “A financial adviser shares a 5-step checklist to complete before the end of 2016”

Roll with the Changes After a Divorce…Including Beneficiary Designations - John M. Lane Law, PLLC

“What happens if you don’t make changes?”

While you don’t plan ahead for a divorce, you should immediately take steps to ensure your interests are protected and your estate plan reflects your new marital status if your marriage ends.

What should you change? Forbes’ article, “The First Thing You Must Do When Your Divorce Is Final,” says, in a word: “Everything.”

Once your divorce is final—that is, the divorce decree has been approved by a judge—and a judgment rendered, you should begin to review and revise, if necessary, the following legal and estate planning documents:

• Trusts
• Powers of Attorney (property, healthcare, HIPAA, etc.)
• Your will
• Life insurance policies
• Retirement accounts

Let’s say your ex-spouse is the beneficiary of your life insurance policy and you die.

Guess what!

The proceeds are going to go straight to your ex-spouse and not your children. It doesn’t matter if your estate planning documents stipulate that the proceeds should go to your children. Still, if the plan all along was to keep the ex as beneficiary, you’re fine. Otherwise, the kids get zero.

What happens if you don’t even have a valid will in place? The divorce cuts the ex-spouse out as a legal heir, and that person won’t be in line to receive anything from your estate—but they still get the insurance proceeds if you don’t make the beneficiary change.

One final thought: when you make changes to estate planning documents, be certain that the changes are in accordance with the terms of your divorce decree. The divorce judgment is legally binding, and if you agreed that your ex-spouse would remain the beneficiary of a life insurance policy as a part of your divorce, you can’t change the beneficiary designation on the policy.

If you do, you’ll create a significant headache for your heirs if you pass away while the policy is in force.  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: Forbes (August 14, 2016) “The First Thing You Must Do When Your Divorce Is Final”

Don’t Be Like Abraham Lincoln. Create a Will - John M. Lane Law, PLLC

“Even after you're gone, you can still help provide for the people and causes you care about.”

What do Abe Lincoln, Bob Marley and Prince have in common?

You guessed it…they all died without a will.

But why?

Kiplinger’s article, “4 Strategies to Avoid an Estate-Planning Mishap,” says that their reasoning was the same as it is for most people: just “too busy.” They were busy with life’s daily demands on their time. Also, many people don't want to think about it or take the time to sit down and get it done.

People don’t realize how much can be accomplished in a very short time with an experienced estate planning attorney. Similarly, they also don’t understand the issues that can pop up if they don't have a plan in place.

While you may hear about income and investments at every turn these days, you may not hear about important topics like taxes, health care, asset protection and leaving a legacy for your family, friends, and charities.

Be certain that you’ve made every effort to express how you want your assets distributed when you die. Take a look at these four basic strategies and discuss them with an experienced estate planning attorney to help you avoid an estate planning mishap.

1. Get that will in place. A will directs your executor about your wishes and spells out how you want your assets distributed when you pass away.
2. Consider a living trust. This can protect your assets and can help your estate avoid probate. While you may believe you don't need a living trust, it can help make certain your assets are managed according to your wishes even in the event that you’re no longer able to manage them on your own. In addition, you can sign a health care directive and power of attorney so those you trust can make decisions about your physical and financial well-being. Finally, trusts are not public court records so your affairs remain private.
3. Title your accounts appropriately. Get that trust in place or set up a "transfer on death" designation. This lets assets pass directly to the beneficiaries named by the owner. Also, make sure you’ve properly named the beneficiaries and contingent beneficiaries on IRAs and other tax-qualified accounts.
4. Think about life insurance. A policy is used to provide a death benefit for your family and can augment the legacy you pass down. It can help cover final expenses—like funeral, burial and medical bills.

Do it now. Your picture on the five-dollar bill might be a nice lasting tribute, but your family will like a comprehensive estate plan much more.

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: Kiplinger’s (August 2016) “4 Strategies to Avoid an Estate-Planning Mishap”

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?"

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

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"

Life Insurance Needs to Roll with the Changes

"One thing is sure, if our lives change because of unexpected life events, our insurance needs should also change."

As we travel through the phases of our financial life, our needs change. The New York Daily News article, "3 ways to choose the right life insurance plan," speaks to this process.

Young adults have some pretty straightforward insurance needs like obtaining insurance for their first car, a ring for that special someone, and their first apartment. As we get older, our needs in life and in insurance change. Saving for a down payment on the first house, college tuition for the kids, and then down the road, retirement become new priorities. And many of us will be faced with unexpected events, like illness or death of a loved one, divorce or a spouse who is forced to retire prematurely.

Make adjustments. Life insurance is an important financial tool that should never be a "set it and forget it" plan. For example, a couple has life insurance policies on which they're continuing to pay premium payments and then the husband passes away. Depending on the death benefit and her level of concern for their children's financial state, it is possible that the wife does not need to keep her life insurance policy. She could put the dollars she was paying for insurance premiums in her pocket for her desired benefit. Also, many companies have employer-sponsored life insurance plans for their employees that cover about three years of salary. Depending on the level of coverage, you might consider purchasing additional insurance outside of your employer.

Know when to cancel. Don't be afraid to cancel your policy if it makes sense for your financial outlook. By the time many people retire, hanging on to insurance policies and continuing to make premium payments may not make sense. If you have a total estate value that may exceed the federal estate tax exemption amount at your death ($5.45 million), high net worth individuals may use life insurance to help offset estate taxes more than the exemption amount.

Choosing the right plan. Be realistic about the amount of coverage you'll need, especially when it comes to the amount you will pay in premiums. The amount of insurance coverage is typically capped at ten times your annual salary. Insurance providers have strict health and financial guidelines that they use in determining coverage. These may include a health exam and ordering copies of your medical records from your doctor, which help the insurance provider determine your rated insurable level.

Contact John M. Lane Law, PLLC to discover the Simplified Solution to your estate planning needs. For more information about how we can help you, visit our website at www.JohnLaneLaw.com.

Reference: New York Daily News (March 22, 2016) "3 ways to choose the right life insurance plan"