The lead article of our newsletter usually involves a personal story of interest by one of our attorneys or staff. However, this month we feel compelled to address a more serious issue, one that we see adversely affecting our clients and their loved ones on almost a daily basis – – costly IRA mistakes.
Although we, of course, do our best to properly integrate your IRA with your overall estate plan, we continually find IRA mistakes being made that are outside the scope of what we do and control as your estate planners.
Here are just a few of the kinds of mistakes we are spotting (check if any of these apply to you):
- You pay more taxes on your IRA distributions than necessary because you’re not aware of the deductions and legal “tax shelters” available
- You haven’t been shown how to reduce or even eliminate your taxable required minimum distributions (after reaching age 70 1/2)
- You don’t realize that your IRAs are not protected from third party lawsuits and creditors – – during your lifetime or when inherited by your loved ones (according to a recent U.S. Supreme Court decision!)
- You don’t realize what your beneficiaries will really do with your IRAs after you pass away (which may impair their own retirement)
- You don’t know exactly which beneficiaries your IRA custodian shows on its records (and if the beneficiaries are incorrect, your IRA may conflict with the proper working of your estate plan!) We don’t have the space here to cover in detail all the IRA mistakes we frequently see, so we’re holding a special “Insider Briefing” that I will personally be giving on Saturday September 27th at 9:30 AM. [for more details and to reserve your seats, click here]
This is not a presentation on the IRA Inheritance Trust®, which you may have previously attended. That Trust will be mentioned for only about 1 minute. This insider briefing will cover a number of other IRA issues you may not have heard about before.
You should attend if you have IRAs in excess of $50,000 (including your spouse’s and any amounts you may roll over someday from a 401 (k) or other employee plan). Feel free to bring any relatives or friends who may also benefit from this valuable information.
Seating will be limited, so [click here] to reserve your seats.
I’ll look forward to seeing you there and helping make sure you take proper care of your IRAs!
What Happens When a Loved One Dies?
Whether a loved one’s passing is unexpected or not, dealing with the death can be extremely stressful. Aside from the funeral, mortuary services and hosting a gathering of relatives, an important part of this event is knowing what should be done as far as that person’s finances.
Multiple Copies of the Death Certificate
If you happen to be the executor or executrix of the decedent, it is critical that you obtain certified copies of the death certificate as soon as possible. You will need several copies – 20 copies are not too many. Banks, the state and federal governments, creditors, insurance companies and many others will not even give you the time of day to discuss your loved one’s financial affairs until you are able to produce a death certificate. Do not underestimate the importance and the necessity of getting these copies right away.
Other Important Documents
Experts say that one of the most arduous tasks in tying up the financial affairs of someone who has passed away is collecting the various pieces of documentation that should be retained routinely. If the decedent has not done a good job of keeping records, it can be like searching for needles in haystacks – a real frustration. It is best to create a list of all your assets, accounts and property while still alive, and keep it safe. Let your spouse or other trusted person know where the list is kept. When you pass, the executor of the estate will have an easier time organizing the assets and settling matters more efficiently. Some of these important documents include:
- the ultra-important copies of the death certificate;
- will and trust documents;
- life, health and other insurance policies;
- recent credit card statements;
- investment accounts and pensions;
- checking and other financial account statements;
- recent mortgage statements;
- the past two years’ tax returns;
- all relevant marriage and birth certificates; and
- an up-to-date credit report.
Obtain Letters Testamentary or Letters of Administration
You will need proof that you have authority to deal with the decedent’s financial affairs prior to contacting the institutions with which the decedent was doing business: you need letters testamentary or letters of administration. An estate planning attorney can handle obtaining these documents and assist with probate. When probate is opened, the will is validated, and the court gives the authority (via the letters testamentary) to settle the estate and act on behalf of the decedent, as specified in the will. Again, get multiple certified copies.
If there is no will, the court can issue letters of administration to a surviving spouse or next of kin after a death certificate has been produced. This individual likely will be the administrator of the estate.
Notify these organizations of your loved one’s death:
- the Social Security Administration;
- his or her employer;
- insurance companies;
- credit bureaus and credit card companies;
- the post office; and
Cancel subscriptions, memberships and credit cards right away. You should transfer any utilities, such as the water or cable, to the surviving spouse.
Speak to an Experienced Estate Planning Attorney
One thing that will reduce stress is to seek the advice of a qualified estate planning attorney. He or she can simplify the process of settling an estate and avoid any issues. Retain an attorney who practices in estate planning and trusts – doing so may relieve some of the stress of going through this process. An estate planning attorney will offer guidance and support to help save you time and energy and give you greater piece of mind.
What Is Probate and Should I Try to Avoid It?
Should you avoid sweets? Should you avoid grinding your teeth? Should you wear a mouth-guard while playing sports? The answer to all of these questions is most likely a definite yes. These three things have been proven to result in disease or injury. While probate might be like having the dentist put in a new filling, it is for the best and the short-term unpleasantness is outweighed by the long-term benefits of the process. The same might be said about probate.
What Exactly is Probate?
Probate is the legal process through which a court ensures that the decedent’s just debts, taxes and expenses get paid before the estate assets are distributed according to the decedent’s will. Although probate has its detractors, a will is designed to ensure that your estate passes to your family with a minimum amount of time, expense and red tape. Without a will, the decedent is said to have died “intestate,” and his or her assets are distributed according to state law, usually with close relatives (spouse and children) receiving set fractional shares or percentages. Intestate succession is a one-size-fits-all solution that rarely fits what the decedent would have wanted. Alternatively, a will can make special provisions for such concerns as family members with special needs, substance addictions, creditor problems, unstable marriages or blended families.
Reviewing the title of assets in your estate and completing all of your beneficiary designations for life insurance, IRAs and other investment plans, so that they are consistent with your estate plan, can make the probate move more smoothly or perhaps even make it unnecessary.
So if I Brush and Floss Can I Avoid Probate?
Your dental health is dependent on being smart and taking the necessary steps to avoid fillings (and root canals and …?). Eat a healthy diet and brush and floss regularly. Likewise, the goal of estate planning is to take the necessary steps to make sure you have conveyed your wishes after you pass and you have provided for your family - as well as other individuals and organizations that are important to you. This means drafting a will, financial planning and possibly a trust. In some cases you may be able to avoid probate, but what you should not do is avoid planning ahead.
Plan Ahead – Plan Now
Avoiding probate may not be possible or even appropriate for your unique circumstances, but working with your attorney is the best way to make sure everything is in order and your wishes are clear and will be followed when you pass away.
Probate avoidance is a process that really begins with proper legal planning now. Planning ahead will involve engaging an experienced estate planning attorney about your future and your objectives. He or she will have the experience to create a strategy most appropriate for your circumstances. Estate planning is not a do-it-yourself project and, just like oral surgery, should be left to the professionals.