Taking Time Now to Plan
Your Family Estate Needs
By Benny L. Kass
(c) The Washington Post
Saturday, September 9, 1995; Page F10
We are in our early sixties and are starting to plan for retirement. We are concerned about our
future and the future of our children.
We have just finished our 1994 tax returns. Having to wade through all of our books and records
to prepare those returns made us wonder what we should be doing now to make sure that there
will be no surprises that can affect our future or the inheritance of our children.
Do you have any comments or suggestions?
Too many of us live active lives and do not even begin to concern ourselves with future problems.
Often, it is only when tragedy happens that we realize that we have no long-range plans.
In fact, too many people do not even have a complete net worth statement listing current assets
and liabilities. But if you take the time to think about these matters, you will realize that careful
planning is needed.
For most people, their home is their single largest asset. To make sure that this and any other
assets you have are handled the way you want them to be, you need to plan. Here are a few ideas
for you to consider. You should discuss all of these matters with your family and your legal, tax
and financial advisers.
Do you have adequate life insurance coverage? Many of us took out insurance policies years ago
and have not reviewed the coverage recently to make sure it is adequate for the needs of our
survivors. More important, where beneficiaries change (because of divorce or death) the policy
must be corrected to reflect the appropriate beneficiary. In recent years, insurance policies have
changed, and tax laws have too. The insurance policy you purchased 10 or 15 years ago may not
fit your needs now. In fact, you should confirm that all your insurance policies are still in effect.
Some people begin to realize that as they get older and their children become self-sufficient, the
level of insurance can be reduced. You should discuss all of these matters with your insurance
adviser.
Is your house insurance adequate? Many insurance policies have automatic escalator provisions
that periodically boost the coverage.
Make sure the replacement value of your house meets industry standards, so you will not suffer a
financial loss if your house is destroyed.
Some people purchase mortgage life insurance, so that in the event of death, the mortgage will be
paid off in full. I do not believe such a policy is worthwhile. Usually, you are required to pay an
annual (or monthly) premium on the full amount of the original mortgage, when in fact the mortgage
amount decreases each year. Additionally, many individuals do not stay in the house after their
spouse dies. Thus, when the house is sold, the mortgage will be paid out of the sales proceeds.
There are better investment opportunities than paying the premiums for mortgage life insurance. At
the very least, you can use that money to buy additional life insurance -- and will no doubt get
more coverage.
Do you have a will? If you do not, you should have one prepared now. Keep in mind that if you
die without a will (called intestate), a probate court judge may have to make decisions on how
your property is distributed. Wouldn't you rather have your property disposed of as you desire?
And even if you have a will, if it was written years ago, your legal and tax advisers must be
consulted to make sure that changes in tax laws will not adversely affect your estate.
Many people also are signing living wills and durable powers of attorney to cover situations where
they may not be able to handle their own affairs.
The Supreme Court has made it clear that if you are diagnosed as "brain dead," and you want the
doctor to "pull the plug" on life support equipment, you must make your intentions clear --
preferably in writing -- to give guidance to the doctors. This is known as a "living will" or a
"declaration."
You also should have a durable power of attorney for health and financial matters. If you become
incapable of handling your own affairs, such powers of attorney will spell out your intentions and
provide for a smooth transition from you to your representatives. Otherwise, lengthy and costly
court proceedings may be required.
Are titles to the family assets in a form acceptable to you for inheritance and tax purposes? You
should explore with your advisers the advantages of the unlimited spousal estate tax exemption, but
also consider what will happen when your spouse dies.
Finally, if you die or are incapacitated, will your family be able to find all of your papers? Often,
one party in the household handles the books and records. The other spouse has no idea where
things are. Both of you should sit down and make a comprehensive list of your assets and
liabilities. If you have stock certificates, certificates of deposit, life insurance policies or other
valuable documents, write down where they are.
You also should make a list of people to be contacted in the event of a problem. This list should
include your attorney, accountant, insurance adviser, executor of your will and administrators of
any pension plans.
Life has become complex. If you do not put your house in order, the courts and the tax authorities
may make decisions on your behalf that may not be in anyone's best interest. These decisions also
may be contrary to your desires. Careful planning now can save considerable aggravation and
frustration for your family.
Benny L. Kass is a Washington lawyer. For a free copy of the booklet
"A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny
L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036.
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