By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, oneill@aesop.rutgers.edu
With the exception of policemen and firemen, nobody puts themselves in harm’s way for their job more often than service members. Thus, it is not surprising that Personal Financial Management (PFM) program staff often counsel military families about estate planning.
An “estate” is everything that people own in their own name or with others. Estate planning is the process of anticipating future life events (e.g., incapacity and death), minimizing gift and estate taxes, and distributing assets to loved ones in the manner that a donor intends rather than according to the dictates of state law.
Estate planning should, ideally, be started in young adulthood upon the purchase of assets and/or the formation of a family. Comprehensive estate plans typically include four or five complimentary documents: a will, durable power of attorney (names an agent to make financial decisions), living will, health-care proxy (names an agent to make medical decisions), and, sometimes, one or more trusts.
Below are five estate planning tips to share with service members:
- Write a Will- Ask people to serve in key positions, such as executor and guardian, before you name them in a will. People who die intestate (without a will) default to the “one size fits all” will provided by their state of residence. This property distribution formula may or may not be appropriate for their family’s situation, but there is no choice in the matter. The cost of a will should not be an issue. If someone is prepared with a list of their personal representatives, bequests, and beneficiaries, a will can cost less than $300.
- Review Estate Planning Documents Regularly- Review and revise documents when tax laws change or due to changes in relationships or economic circumstances. Beneficiary designations on retirement savings plans and life insurance policies also need to be reviewed periodically to make sure that they are current and not in conflict with provisions in a will or other legal document.
- Avoid Conflicts in Titling of Assets– Don’t make the mistake of wanting assets to go to one person (e.g., a child from a first marriage) named in a will, yet owning them with rights of survivorship with someone else (e.g., a second spouse). In cases where provisions in a deceased person’s will conflict with titling of assets, the title almost always determines the asset’s subsequent owner.
- Make Plans for Untitled Personal Property- Consider how you will distribute items where ownership is not identified with a written document. Examples include tools, furniture, books, dishes, collections, and jewelry. Talking about untitled property can be “sensitive” because of the emotions involved, sentimental meanings attached to various possessions, and differing perceptions of what’s fair in the distribution process. There are several ways that untitled personal property can be distributed including lists given to a person’s executor or family members, gifts made during a donor’s lifetime, drawing names out of a hat, verbal promises, and labeling items. For additional information, visit the University of Minnesota’s Who Gets Grandma’s Yellow Pie Plate? Web site at yelowpieplate.umn.edu.
- Drafting a Durable Power of Attorney- Name an “agent” to handle financial matters in the event of your incapacity. Without one, it may be necessary for your family to seek court appointment as a guardian or conservator if you become incapacitated. This appointment process can be avoided with a durable power of attorney. If properly drafted, a durable power of attorney eliminates the need for court proceedings to declare people incapacitated and to appoint a surrogate to act on their behalf.
The North Carolina Extension publication Where There is a Will, There is a Way has additional information about wills and estate planning.
