Estate Plan Review Averts Potential Heartache

Shortly after her divorce in 2002, Tracy¹ made a will to name a guardian for her 11-year-old son and set up a trust to provide for his future financial needs. “I wanted to make sure my son would be taken care of, my debts would be paid off and my money would go where it was supposed to go,” Tracy explains.

Time to Update
In 2008, Tracy began a new job. In the process, she rolled over a 401(k) into an IRA and filled out life insurance and retirement beneficiary forms at her new place of employment. With her son now nearing adulthood, Tracy felt it was time to look over her existing plans.

Tracy met with estate planning attorney Johni Hays, and, together, they discussed her old will, her current assets and her future goals. While the 45-minute conversation was simple and relaxed, what they discovered will save Tracy’s son from future problems and offers Tracy true peace of mind.

4 Estate Planning Must-Haves for Single Parents
1. Will (to name a guardian) with a trust (to handle the money)
2. Durable power of attorney
3. Health care power of attorney
4. Living will

Issues That Caused Concern

1. Tracy had her younger brother listed as trustee and guardian of her teenage son. She did not, however, have a backup listed if her brother did not survive her.
2. For executors of her will, Tracy listed her brother, who lives out of state, and her father. Because at least one executor must be in state, according to the state law where Tracy lived, Tracy needed a backup for her brother in case her father should predecease her.
3. Tracy had a financial power of attorney in place, but she lacked a power of attorney for health care and a living will to take care of future health care wishes.
4. Of greatest concern, Tracy had filled out her beneficiary forms incorrectly on her life insurance and retirement plan assets—the bulk of her estate. Instead of putting the trustee of her son’s trust as beneficiary, which would distribute payments to him at ages 25, 30 and 35, Tracy had listed her son as beneficiary. As a result, he could receive the full amount when he turned 18, a much younger age than Tracy wished for him to receive a large inheritance.

The Solutions
Hays was able to amend the will with a codicil and draft the other needed documents. To correct Tracy’s beneficiary designations, she requested change of beneficiary forms for her IRAs and her life insurance.

“Tracy’s case is the perfect example of how you need to coordinate your whole estate plan, and that includes more than just a will,” Hays says. Tracy is thrilled she took the time to update her plans.

	To make sure your plans are in order, request our FREE guide to estate planning.

¹Although this article is based on a real-life example, the name has been changed to protect privacy.

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These additional factors play a key role in adequately protecting you and your heirs.

1. Review ownership and beneficiary designations. You can unwittingly limit your power to distribute certain types of property through your will. In the case of a married couple that owns all property in joint tenancy, the will of the first spouse to die may lose its effectiveness.

2. State your health care wishes through a living will. This simple document outlines your preferences about lifesaving medical treatments in certain circumstances such as if you are terminally ill. Combine this with a durable power of attorney for health care to appoint someone to make your medical decisions if you cannot make them yourself.

3. Keep your financial affairs private. Unlike a will, a revocable living trust is not available under public records, and all assets in the trust are handled with the same privacy. Your personal family business is not exposed.

4. Include a trust in your estate plan. If you have substantial financial assets, consider creating a credit shelter trust in your plans. The potential benefits include estate tax-saving opportunities that can help ensure that your heirs will not have to liquidate those assets to pay estate taxes.1

5. Finally, allow yourself peace of mind. Seeking professional advice and looking at all your options can lead to a tax-wise estate plan that meets the needs of your heirs and your favorite charitable organizations, such as Hospice & Palliative CareCenter, giving you the comfort of knowing that your assets will benefit those you leave behind.

Have questions? We can help. Contact Ellen Coble at 336-331-1312 or ellen.coble@hospicecarecenter.org.

1Currently federal estate taxes are repealed for all deaths that occur in the calendar year 2010. In 2011, estate taxes are scheduled to be reinstated for estates worth more than $1 million at rates up to 55 percent. Congress, however, is likely to address reinstating estate taxes before 2011. What the final legislation will look like and when it might become effective is unknown at this point.

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