“I want to make things simple for my family.” This is one of the goals I hear most frequently when a person begins the estate planning process.
Implementing the correct legal documents is critical in achieving this goal, and the legal documents tend to receive the most attention. But the quest for “simple” shouldn’t end there. Here is a list of five “simple” things you can do now to simplify the administration of your estate plan in the future.
Consolidate Stocks, Bonds, and Financial Accounts
Consolidating assets is one of the easiest steps. Each separate account, stock and bond you own is an asset that your future trustee/executor will have to wrangle with. While no single account, stock or bond is, in and of itself, difficult to deal with, having to track many different accounts, stocks and bonds is a task that can leave your future trustee/executor’s head spinning.
Are any of these assets darkening your financial statement?
- An online brokerage account you dabbled with years ago, but now ignore.
- A checking account opened to obtain a car loan, long since paid off.
- A retirement account from the job you quit ten years ago.
- Any account you haven’t used in the past several years.
- Shares of publically-traded stock or savings bonds owned in certificate form and outside of an electronic or brokerage account.
If any of these sound familiar, consider consolidation. While consolidation should never override the overall investment structure and objectives, closing unused accounts and rolling the funds into another existing account, consolidating separate bonds or shares of stock into a single brokerage account, or liquidating and depositing the proceeds into an existing account can certainly simplify administration. Your financial adviser can help you transfer certificate stock directly into a brokerage account without triggering capital gains. He or she can also help you consolidate retirement accounts so as to continue the advantageous tax treatment these accounts enjoy.
Seek Out and Claim “Lost” Property
Most states have an agency that holds lost and unclaimed property, and Oregon is no exception. Go to www.oregon.gov/dsl/up and search to see if any unclaimed property comes up under your name. Claim any unclaimed property you find. It generally takes 4 months or more to process a property claim. Claiming the property now will save your future trustee/executor time and hassle. Follow the same procedure for each state you have lived in. Most states have an online unclaimed property search tool that you can locate with a Google search.
Develop Trusted Relationships with Professionals
Consider hiring a CPA to prepare your annual income tax returns. Your CPA will develop a good sense of your tax and financial situation. Upon your death or incapacity, your CPA will be an invaluable resource to your trustee/executor, greatly reducing both the administrative burden and the chance that important nuances of your tax situation will be overlooked. Similarly, a good relationship with a trusted financial adviser will help ensure that your investments continue to be properly managed in the event of death or incapacity.
Communicate, Communicate, Communicate
Good communication will help prevent future misunderstandings that lead to complication, delay, and litigation. A great deal of estate fights originate from misunderstandings about a decedent’s intent. Consider sharing the details of your estate plan with your family. Be sure to express your desires regarding end-of-life medical care. A family meeting in which you and your estate planning attorney explain your estate plan to your future beneficiaries will help ensure an accurate understanding of your wishes.
Give it Away
Lifetime gifting is one of the simplest estate tax savings strategies. Unlike the Federal government, Oregon does not have a gift tax. This means that, under current law, you can completely eliminate the Oregon estate tax by making lifetime gifts that lower the value of your estate to less than $1 million. Consider including provisions in your
estate planning documents that allow a trustee or power of attorney agent to make gifts to future beneficiaries in the event of your incapacity.
Example: Jim is retired and has no debt. His pension comfortably covers his day-to-day expenses, but will end at this death. His total assets equal $1.2 million, and include $260,000 of cash. In 2014, he gives $14,000 to each of his three children, and $14,000 to each of his six grandchildren (totaling $126,000). In 2015, he makes the same gifts to the same people, resulting in a total transfer of $252,000 and reducing his total estate to $948,000. Jim dies shortly thereafter. Jim’s estate will owe no estate tax and his trustee/executor will not be required to file an estate tax return. If Jim’s estate had remained at $1.2 million, his estate would have owed $20,000 in estate tax to the state of Oregon.
Be sure to consult with your CPA and estate planning attorney prior to making large gifts. Gifts to an individual that exceed the annual exclusion (currently $14,000 per recipient) must be reported on a federal gift tax return, and will reduce your federal lifetime exclusion. In addition, gifts of appreciated assets with a low income tax basis could result in a higher overall tax if the asset were later sold by the recipient. Your CPA and attorney can help navigate these twists. The items listed in this article are relatively easy for you to accomplish—and much more difficult for your future trustee/executor to accomplish. Taking steps to simplify your estate planning situation will save time, hassle, and expense for loved ones.