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10 estate planning tasks your client should do before 2013

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The end of the year will be here before we know it. But there is still time for your clients to get some major estate planning goals accomplished. As an advisor, here are 10 things you should tell your client to do before the end of 2012.  

estate planner

1. Have your estate planning done. You should set the end of the year as a deadline to finally get this completed. Figure out why you have been procrastinating and conquer your fears. If it’s because you don’t have an attorney, ask friends and acquaintances for referrals. If it’s because you aren’t sure who you want to be the guardian for your minor children or who you want to be your executor or trustee or how to divide your estate, your attorney and advisor can help you decide. (You can always change your mind later; don’t let these decisions keep you from putting a plan in place now.) If money is an issue, start with what you can afford (a will, power of attorney, health care documents) and upgrade later when you can. Your attorney may also be willing to accept payments.  

new baby

2. Review and update your existing estate plan. Personal and financial circumstances will change throughout your lifetime, and your plan needs to change with them. Revisions should be made any time there are changes in your family (birth, death, marriage, divorce, remarriage), your finances, tax laws, or if a trustee or executor can no longer serve. Now is a perfect time to do this; if there are changes you want to share with family members, you can do that when they are home for the holidays. (See task #9.)  

tax form

3. Use your $5.12 million exemption. For the rest of this year, every American can transfer up to $5.12 million free of federal gift, estate and generation-skipping transfer tax. (A married couple can transfer up to $10.24 million.) If Congress does not change the current law, the federal estate tax exemption in 2013 will be just $1 million. You do not have to die in 2012 to use this exemption; you can use it to make gifts now, while you are living. You do not have to completely give away your assets; you can make the transfers in ways that will let you keep control and even keep the income your assets are generating. And you do not have to use the full $5.12 million exemption to benefit. Even those with less than $1 million should consider some planning to prevent future tax liability.  


4. Make tax-free gifts. Under current federal law, you can give up to $13,000 to as many people as you wish each year. This is a great way to reduce the size of your estate (and potentially save estate taxes) over time. For example, if you give $13,000 per year to your two children and three grandchildren, you would remove $65,000 from your estate in just one year and $325,000 in five years. (You can double these amounts if you are married.) Charitable gifts are unlimited. So are gifts for tuition and medical expenses, if you give directly to the institution.  

health care

5. Secure/update health care documents. At the minimum, everyone over the age of 18 needs 1) a durable power of attorney for health care, which gives another person legal authority to make health care decisions (including life and death decisions) for you if you are unable to make them for yourself; and 2) HIPAA authorizations, which give written consent for doctors to discuss your medical situation with others, including family members.

In addition, a revocable living trust is preferable over a will at incapacity because it can prevent the court from controlling your assets.   


6. Review/update guardian for minor kids. It is quite likely that the person you name as guardian for your children when they are small will not be the best choice as they get older. Also, this person could change his/her mind, move away or even become ill or die. Revisit your choice from time to time, and name more than one in case your first choice cannot serve. Remember, if you haven’t named a guardian who is able and willing to serve and something happens to you, the court will decide who will raise your kids.  


7. Review/update beneficiary designations. This is especially important if your beneficiary has died or if you are divorced. If your beneficiary is incapacitated or is a minor, setting up a trust for this person and naming the trust as beneficiary will prevent the court from taking control of the proceeds.  


8. Review/update your insurance. Check the amount of your life insurance coverage and see if it meets your family’s current needs. Consider getting long-term care insurance to help pay for the costs of long-term care (and preserve your assets for your family) in the event you and/or your spouse should need it due to illness or injury.  

Family meeting

9. Talk to your children about your estate plan. You don’t have to show them bank and financial statements, but you can talk in general terms about what you are planning and why. The more they understand it, the more likely they are to readily accept it — and that will help to avoid discord after you are gone. You can also talk to them about your values and the opportunities that money can provide. Even better, show your values by doing — the holidays are an excellent time for families to do charitable work together.  


10. Get basic documents for your unmarried kids who are over 18. It’s a mild shock when we learn we can’t see our college kids’ grades without their permission, even though we pay the tuition. It can be much worse if they become ill. Unmarried adults (18 and over) need to have a durable power of attorney for health care and HIPAA authorization, so you can act on their behalf in a medical emergency. (See task #5.) And, while you’re at it, go ahead and have your attorney prepare a simple will and durable power of attorney. Hopefully, these will not be needed, but if an event does occur, you will be glad you have them.

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