Estate planning is meant to be an ongoing process, not a one-time transaction. In the same way that you never stop budgeting, saving, and investing as you go through life, it is also sensible to see estate planning as a lifelong project. Let’s look at some of the considerations you should make now that the 2018 midterm elections are in the history books.
Planning in a Fluctuating Political Climate
Estate plans must change when you experience any major life changes, such as marrying someone new or welcoming a child to the family. But you also need to respond effectively to large-scale changes that are external to your personal life, such as legislation that impacts the way your assets are taxed. Regardless of your political leanings, it’s safe to say the United States is continuing to experience a period of dramatic political and legal change. Elections like the 2018 midterms —and the resulting political change —often create fear and anxiety about how the impact of new laws and tax policy will affect your life. But you can offset that uncertainty by focusing on making the smartest estate planning decisions possible in light of the results. We’re watching the situation as it moves forward and will keep you informed of legal and tax changes that affect you and your loved ones.
The Midterm Split: Democrats Won the House, Republicans Kept the Senate
Before the midterm elections, it was unclear how legislation like the 2017 Tax Cuts and Jobs Act would be affected. Now that we know the House and Senate are split between Democratic and Republican control, it remains to be seen how well the parties will work together on a common agenda. So what does a divided federal government mean for you? The budget reconciliation strategy the Republicans used to pass theTax Act will no longer be as viable an option, which could slow additional legislation the Republican-controlled Senate proposes. According to Kiplinger, “What is likely off the table with a Democratic House and Republican Senate is tax reform 2.0, which would make certain provisions of the 2017 tax law permanent, locking in individual and small business tax cuts. Social Security and Medicare reforms, which might have helped offset the effect of the tax cuts, are also likely off the table.” When the new Congress first convenes in January, we will continue to monitor proposed legislation so you are informed about potential risks and opportunities for your estate plan.
Some Things Are Constant, No Matter Who’s in Charge
Amid so much political uncertainty, it’s important to remember there are many foundational constants in estate planning that are important no matter who’s in charge politically or what the tax laws look like. As part of your financial wellness team, we’re staying informed and will be here to guide you in matters of estate planning. In order for you to grow and retain your wealth, careful estate planning is always a necessity —regardless of which party controls Congress. Many things may change, but a lot will remain the same: no one can legislate away irresponsible spending, divorce, lawsuits, bankruptcy, sibling rivalry, and the many non-tax reasons to utilize estate planning. An up-to-date comprehensive estate plan remains the best option for passing along your wealth and your values to the next generation.
Will your estate plan do what want it to do? Is it customized to help you thrive in the current U.S. legislative landscape? Let’s take a look. Give us a call today.
The divorce process can be long and expensive. However, the work does not end once the divorce decree is signed. Visiting another lawyer’s office may be the last thing you want to do, but we can help simplify the process for you.
In order to ensure that your assets and estate planning wishes are carried out in light of this major life change, there are three things you must do as soon as possible.
- Change Beneficiary Designations on Life Insurance;
- Change Beneficiary Designation on Retirement Plans;
- Create or Revise your Estate Plan.
If you and your former spouse had a joint trust, you will need to have your own individual trust created to hold the assets that are now in your name only. In this new plan, you will need to think about who to name as the trustee and beneficiary. If you have minor children, you may also need to consider who is going to be the individual to manage those assets on behalf of your children. In many cases, you probably don’t want your ex-spouse in these roles. If you do not have any estate planning documents in place, now is the perfect time to get everything in order.
How a Trust Can Protect Your Children’s Inheritance after a Divorce
A trust protects your children’s inheritance in a few distinct ways:
- Since you select the Trustee, you can choose someone other than your ex-spouse to manage the assets. In fact, you can even state that the ex-spouse can never be a Trustee, if you wish.
- Since you select the Beneficiaries, you can determine how the trust assets can be used for them. You may have long-term goals for your beneficiaries, such as college, purchasing of a first home, or starting a business. When you share your intent, your Trustee can invest the assets appropriately and ensure your legacy is used the way you want, rather than the assets being potentially wasted or used in a thoughtless way.
- A fully funded trust avoids probate, so your children do not have to deal with the cost, publicity, and delay that is all-too-common in probate cases. Although “plain” beneficiary designations, like the one that Beth used, also avoid probate, they may still open the door for a guardianship or conservatorship court case, especially when your children are minors. A fully funded trust avoids these guardianship and conservatorship cases. This means more money for your intended beneficiaries and less for the lawyers and courts.
Your estate plan is more than just a trust however. It can include documents such as a Financial Power of Attorney and Healthcare Directive and Power of Attorney. Whether you have them already or need to have ones executed, this is a crucial time to review them. Chances are you no longer want your ex-spouse to have the authority to sign documents on your behalf or make medical decisions for you. To avoid confusion by third parties as to who should be acting on your behalf, make sure to call us so we can update these essential documents.
Divorce can be a long process. We can help you cross the finish line. As you take those next steps into your new life, call us, so we can make sure that you cross the finish line with documents that are able to carry you and your wishes forward.
Early-November is generally the time when employers send out summaries of employee benefits offered by the company and give employees the option to enroll in these benefits. These can include retirement plan options, health care, dental, vision, disability, and life insurance coverage. Your employer may pay 100 percent of the premiums, split the costs with you, or you may be required to pay all of the premiums yourself. Below are several considerations you should keep in mind once open enrollment begins.
When considering any retirement plan offered through your employer such as a 401(k), 403(b), or 457 plan, you will need to consider: what percentage of income you choose to contribute and whether the contribution must be made pre-tax, after-tax, or to a Roth plan (if available). How much you can contribute, and whether pre-or post-tax, depends on your specific financial circumstances. Remember to also consider any “matching” contributions your employer may make since these contributions can help improve your overall retirement savings.Healthcare benefits may include the ability to enroll in a Health Savings Account (HSA), in addition to enrolling in the usual healthcare, vision, and/or dental coverage. HSAs allow plan participants to set funds aside, tax-free, for health care costs. Employer-provided life and disability insurance coverage will provide your beneficiary with a stated amount of money if you die while employed by your employer or become disabled. The coverage generally expires when you no longer work for that employer.Perhaps the most important thing to do during your employer’s open enrollment period is to review the employer-provided benefit package to determine what should remain and what should be changed. If you do not understand the options being provided to you, contact human resources right away for more information.
While you are reviewing your benefit package, you should consider your beneficiary elections or those who will inherit these assets upon your death or incapacity. A primary beneficiary is the first to inherit. Should he or she pass before you, or with you, assets would then go to any secondary beneficiary you have designated. These are often referred to as contingent beneficiaries. Even if you have previously enrolled, you must review your beneficiary designations on your employer-provided benefits to ensure they are still how you want them. Benefits that may require a beneficiary designation are life insurance policies, retirement accounts, health savings accounts (HSA), as well as disability insurance.
If there are any new providers for your employer-sponsored benefits, this means that the insurance company has changed. Keep in mind that your previously chosen beneficiaries, and possibly coverage, may not have carried over. It is always better to review these documents, even if you are not planning any changes.
Estate Planning Concerns
If you are contemplating any changes to your beneficiaries, give us a call so we can ensure your beneficiary designations work as expected with your current estate plan or so we can properly prepare a plan that carries out your ultimate goals for you and your family. Once you have updated your beneficiaries, make sure to obtain written confirmation of this from your employer’s human resources department and share this information with us. If you have any questions, contact us. We’re here to help.