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Don’t hide, or lose, your estate!

If you’ve got a house, car, bank account, TSP, pension and/or life insurance, you have an estate.

It may be modest, but the fact is most of us are worth more after we’ve gone. And one of the best things anyone can do for loved ones left behind is to make official plans for how you want your estate to be handled.

It can avoid lots of heartache and financial grief for family and loved ones. Proper planning can also avoid extra taxes and a long-drawn-out period in the probate courts.

Do you know the difference between a will and a trust? And what different types of trusts do? Are you up on tax law changes involving estates? Are you familiar with the relatively new SECURE Act, which probably covers your estate? And what’s an estate anyhow?

Having a plan — leaving clear-cut instructions — is critical. Equally important is having a list explaining your wishes and preparations in the hands of someone — your estate attorney — you can trust.

So what’s in the ultimate list? The last one (with occasional updates) you need to make? We checked in with Tom O’Rourke. He’s a tax/estate attorney in the DC area, and a regular guest on our Your Turn. He’s a former IRS attorney, and most of his clients are current or former feds.

Today’s show is about planning, understanding and managing your estate. And what should be in that all-important list.

We asked Tom for a preview of what your list should contain. Here’s what he said, starting with the all-important:

Where do I keep it? Your plan should be kept is a secure location known to the persons who will be called upon to administer it. Some options include a safe deposit box, a fire proof safe, the court in the county you reside, or have the lawyer who helped you prepare the plan.

Who should have a copy of it? This is generally a matter of personal preference. Some persons give a copy to everybody who has an interest in the plan, such as the beneficiaries and the persons being called upon to administer it. Others prefer to keep it private. It is essential that the persons who will be called upon to administer the plan — i.e. the executor, personal representative, trustee or agent under powers of attorney — know where they can gain immediate access to it.

Review your beneficiary designations. Many of your most valuable assets are governed by beneficiary designations and not by your will or trust. Such assets include your retirement annuity, TSP and IRA accounts, life insurance, and possibly such assets as bank accounts, and mutual fund or brokerage accounts.

Review how you hold title to your assets. Certain jointly-held assets pass by operation of law to a surviving owner and may not be affected by your will or trust.

How long does my estate plan last? An estate plan remains in effect until it is revoked. It does not have a specified termination point.

When should I amend my estate plan? You should review your estate plan periodically and it should be modified if there has been a change in circumstances or a change in the law.

What are examples of when I should revise my estate plan?

  • A birth, death, marriage or divorce of persons named in the estate plan.
  • A change in circumstances such as the person who has been named as agent of your power of attorney relocates and is no longer conveniently available to help you.
  • A change in your financial situation.
  • A change in your wishes.
  • A change in the law.

Have there been any changes in the law that would make it prudent for me to revise my estate plan? There have been significant changes in the estate and gift tax laws in recent years that have made it easier for most people to avoid estate taxes by increasing the estate tax exemption. Thus, if your existing plan was structured to allow you to avoid estate tax, it would be advisable to review the plan.

Many states have adopted uniform or statutory powers of attorney that are easy to implement and generally must be accepted by third parties. If you have not adopted your state’s statutory for power of attorney, you may wish to consider this.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act became law effective as of Jan. 1. This law has a significant impact on persons who hold tax deferred account. Some of the most significant changes include the following:

  • The age at which a person must take required minimum distributions has been raised from 70 ½ to age 72. This applies to all persons who reach age 70 ½ on or after Jan. 1, 2020.
  • Assets must be withdrawn from a tax deferred account within 10 years after the death of the account owner. The key exceptions to this 10-year withdrawal limit apply to a surviving spouse, minor child, disabled individual, or a beneficiary who is less than 10 years younger than the account owner.
  • A person who has “earned income” may continue to contribute to an IRA after reaching age 70 ½.
  • An account owner who makes a qualified withdrawal to pay expenses of birth or adoption expenses is not subject to the 10% early distribution penalty.
  • A person may take a tax-free distribution from a section 529 plan to pay up to $10,000 of education indebtedness.

Once you have done the heavy lifting — setting up an estate plan — he says, “individuals need to be aware of the need to review that estate plan from time-to-time to make sure it will do what you want.”

Check out the show today. And tell a friend.

Nearly Useless Factoid

By Jonathan Tercasio

In 2013, Metallica became the first band to play on all seven continents. They performed in front of a group of 120 scientists and contest winners in a transparent dome at Carlini Station in Antarctica.

Source: Guinness World Records

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