Between Christmas and New Year’s life seems to go on pause. We are exhausted from the holidays. We know the new year is about to start but we are not quite ready to jump back into the rat race. This is a perfect time to sit down and think of what you did in the year ending and where you are going in the year ahead.
It is a good time to check the batteries in your smoke detectors, throw out the mystery substance in the back of your freezer and finish off those half used boxes of ammo.
It is also a good time to review your legal affairs. Here are Some things you should think about.
1. Have there been any changes in your state’s firearms laws that you should know about?
If you have not been active in your state association, You may not know about changes in the law. This is a perfect excuse to write a friendly letter to your state legislaror. Thank him for working so hard on local issues. Tell him how important gun ownership is to you. Tell him you worry about some law passing that you do not know about and then, because you did not know about it, violating the law accidentally. Ask him if he could let you know if there have been any changes in the gun laws over the last year or if there are any proposals for the new year that you should know about.
2. Review the way you store your guns. Is it safe given the circumstances of your family? Does it comply wi th state or local laws?
3. Review your licenses. Which ones will expire in the coming year? Mark on your new calendar the date when the license will expire and place a tickler note several weeks before the expiration date so that you have plenty of time to file for a renewal.
4. Review your life insurance. Life insurance goes direcdy to the beneficiary named on the policy. It does not go through your will unless you have the policy made payable to yourself. Life insurance is, however, part of your estate when it comes to paying death taxes.
Are the people named as beneficiaries on your life insurance policy still the people you want to have the money? If you named your parents, and they are now elderly, you may want to change the beneficiary. A big insurance payment to them late in life may cause them estate planning problems. Has the person you named died? Is your ex-husband still listed as beneficiary on your policy? If you are not under a court order to keep him listed, you may want to name someone else. Some people name a friend or relation on their life insurance policy with the understanding that the friend will look after their children. This is a bad idea. Once the money is paid, there is no way of forcing the named beneficiary to spend the money for any particular purpose. Even if the person named means well, the money can be taken by that person’s creditors or can be divided in a divorce. Naming minor children on an insurance policy is also a bad idea. The insurance company will force the family to seek a formal guardianship in court before they will payout the money.
That is both time consuming and expensive. The best way to handle insurance for the support of minor children is to create a trust. The insurance is payable to the trust and the trustee is directed to support the children. A court has the power to force the trustee to spend the money correctly. The money is not subject to the trustee’s creditors.
Many people are over-insured with term life insurance. Term insurance has no cash surrender value. The moment you stop paying the premiums, the insurance stops. For young families, term insurance is a great way to make sure that if one of the breadwinners dies, there is enough money to payoff the mortgage and other bills. It will also help support the children and get them through college.
For people without children, or those with adult children, the picre changes. Those people do not need a lot of insurance. Term insurance over the amount needed payoff debts, is a waste of money. Except for the cost of your funeral, your debts die with you if you have no property standing in your name. Other than to preserve business or real estate, why would you go without in your older years to pay on a life insurance policy that you will never benefit from? Many people will pay insurance premiums for most of their adult life only to find that, at the end of the road, they have let the policy lapse because they are entering a nursing home or can a longer afford the policy on their fixed incomes.
Senior citizens should accept that that they have already given enough to their adult children. It is time they spent their money on themselves.
Younger people should be aware lat most life insurance policies have exclusions which will prevent one policy from being paid out if death occurs as a result of flying in non-scheduled aircraft (private lanes) and acts of war. If you are a soldier deploying to a war zone do not go out and buy more life insurance without checking to make sure it will cover you if you are killed by hostile action.
5. Review your liability policies. For most people, their liability policies are their home and auto insurance policies. These policies are important because they will ay for a lawyer to defend you if you are sued. Because the insurance company only has to defend you up to the limit of the policy, you want to make sure the policy limit covers the amount of your assets. Thus if you have an auto policy with $20,000 of liability overage and a home worth $500,000, you are under insured. The insurance company can offer the maximum of its coverage ($20,000) to the person you ran over with your car, and leave you to pay for the rest of the person’s $400,000 in medical bills.
Your liability coverage should protect the value of your assets. You also want to check the exclusions. If you have a dog or are engaged in some business on your property, you may need a “rider” for your insurance to cover that activity. You should discuss these things with your agent. 6. Review your loss coverage. This is important with home insurance. Most policies exclude flood and water damage. Read your policy, especially the definitions section, carefully. You may be shocked to see how your company defines “flood.” Ask your agent. You may want to buy flood insurance or get a rider to extend your loss coverage.
You want to check on the current value of your home. Rule of thumb is that you insure for 80% of the fair market value of the property. It is assumed that 20% of the value is in the land. If you over-insure, they will not pay you more money than the house is worth. If you have architectural details that make the replacement value of your home more expensive than standard house construction, or if you have made improvements to your property, you want to talk to your agent. You may need added coverage.
Most home insurance policies automatically insure the contents of the house at a percentage of the home value. Read the fine print. This usually does not cover jewelry, works of art, firearms, collectables, cameras, and electronic equipment (including computers), except in a very small, flat amount. If you want these things insured, you need a rider on your policy. Insurance companies generally require a detailed inventory and appraisal for all jewelry, firearms, collectables and fine arts. These items are often very expensive to insure. Many people will invest in a fireproof safe rather than pay for insurance. Keep in mind, however, that fireproof safes are not always waterproof.
In many states, homeowners can declare a “homestead” in their homne. For example, in Massachusetts, if you file a declaration of “homestead” with the registry of deeds, the first $500,000 of value of your home is exempt from being taken by creditors for debt unless the debt was secured by attachments before you filed. This is an important protection for homeowners. If this type of law is available in your state, you should take advantage of it. 7. Powers of Attorney.
Most lawyers recommend that every adult have a durable power of attorney which will allow someone to act on their behalf if they become incapacitated. These are very dangerous documents because they give the person named total access to your money. They are very important documents because if you become sick, they provide your family with an easy and inexpensive way of taking care of your affairs. This is not the same as hiring a lawyer. Lawyers generally are not named in durable powers of attorney. Most people will name a family member as the person to serve as the power of attorney for them.
I suggest that if you have a durable power of attorney, that you do not give it to the person who will be taking care of you. You should either hold onto it yourself or you give it to a third person to hold. That way the person you have named will not be tempted to misuse the power. Obviously the person who will be exercising the power or attorney must be told where to find the document giving them power of attorney if something happens to you. Obviously the person named should be consulted before the document is drafted and they should be willing to do the job. This is not a gift. This is a hard, dirty, time-consuming, nerve-wracking job you are asking someone to do. You are, in essence, naming someone to be your caretaker if you get sick.
Closely related to the power of attorney are the health care proxy and the living will. These documents may be contained within the power of attorney or may be separate documents. They state what your medical care preferences are and how you want the end game for your life to be played out. They are all important documents.
If you already have one of these documents, you should ask yourself, “Do I still trust this person to make good decisions for me?” Is the person named too old or too sick themselves to be able to handle the job? Does this person have too much on their plate already? Have they moved away? Have they died or become incompetent?
8. Minor Children. If you have minor children, you need to provide for their care if you get sick, are in an accident or die. For younger couples, an unplanned death may involve transportation of some kind. In that event, you and your spouse might die together. If that happens, who will take care of your children? Think about it while you are healthy. The person you choose should be willing to do the job. The person you choose should be young enough to take care of your children when the youngest child is 18 years old. If your parents are a young 60 years old, and your child is one now, they may not be able to keep up with the child when he or she is fifteen and they are 70.
Make sure your children and other responsible people in your family know where the children are supposed to go if something happens to you. Each year you should review your choice of guardian. Is that choice still a good choice?
9. Wills and trusts. People ask me, “Should I have a will or a trust?” The fact is, you may need both. Wills and trusts, when used properly, are not substitutes for each other. They are different tools used in estate planning. One very good reason to have a will is to name a guardian for your minor children. The courts will generally honor your wishes. You can also create a testamentary trust within your will to manage any money you leave for your minor children. Once your children are grown, you should change your will to reflect the change in your circumstances.
Wills need to be reviewed from time to time. You need to ask yourself: Has someone been married or divorced since I wrote the will? Has a new child been born? Has someone died? These events may cause all or parts of your will to be invalid. Ask yourself: Do I still want to give money to that person or cause? Do I still want to name that person as my personal representative to manage my estate? Sometimes you grow apart from people. These are just a few of the things you want to consider. When you are young, a simple will may be all you need. If you have been successful in life, you may have to plan for estate taxes either to the federal government or your local government. In most cases, things such as life insurance policies, joint bank accounts, and property held with a right of survivorship are all brought back into your taxable estate.
You may want to consult With your attorney about the level of assets in your state that will trigger death taxes. The end of the year is a good time to add up all of your assets and all of your debts to see where you stand financially. The good news is that we are living to an older age. The bad news is that many of us will end our lives in nursing homes. If we do no Medicaid planning, all we have worked for may go to pay the nursing home. Elder law is a specialty. Things that elder law planners have you do are not the same as the things that tax planners will have you do. In tax planning they will tell you that you may make gifts of up to $11,000 per year to as many individuals as you want without tax consequences. That is true. Unfortunately the Medicaid rules are not the same. In many places (the rules vary slightly from state to sate) any sum of money you give away within five years of a nursing home placement will trigger a penalty. Do not try to do this type of planning yourself. Speak with a professional knowledgeable about elder law.
10. Charities While you are reviewing your estate plan, think about supporting those charities and organizations that have been important to you during your life. Gifts to charities are deducted from your gross estate. Think about setting aside a percentage of your net estate for gifts. Organizations such as the Second Amendment Foundation and the National Rifle Association have endowment programs that welcome such gifts. Don’t forget small charities such as your local library, conservation program, junior program and Scouts. Even small donations mean a lot to them.
The point is, plan ahead for yourself and your family.
This article was reprinted from Women&Guns Nov-Dec, 2007, Copyright © 2007, Karen MacNutt