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Being Prepared Means More than Just Batteries and Water

Hurricanes Harvey and Irma should serve as reminders of the importance of protecting financial records as well as homes and personal property.  What are a few of the steps you should take to be prepared to recover quickly from a disaster, large or small?

Insurance — Review all your insurance policies — home, life, health, auto — to make sure you have the right types and levels of coverage.

A will or trust — Review your will and/or living trust to make sure they reflect your family’s needs and your wishes.  Ask your attorney to review the documents periodically to take advantage of all tax-saving strategies and to stay current with state laws.

A living will — You can leave instructions regarding the use of life-sustaining care through a living will or health care power of attorney.  Another document to consider is a durable power of attorney, naming a friend or family member to make financial decisions in your place in the event of disability.

A document inventory — The best will in the world won’t help if it can’t be found when needed.  Compile a list of all your important documents and the location of each.  Include the names, addresses and phone numbers of your advisers.  List insurance policies, bank accounts, brokerage accounts and safe deposit boxes.

Assistance for the charities you support — When reviewing your estate planning documents, consider including a charitable gift in your estate plan or naming us the beneficiary of a financial account.

Retiring in 2018? Take These Steps First

If you’ll be retiring next year, here are a few ideas to help smooth the transition:

  • Check in with Social Security.  They need several months’ notice to get your checks rolling or arrange for direct deposit.

  • Ask your insurance agent about replacing group life and health coverage that you currently have with your employer.  Check into long-term care policies.

  • Talk to the benefits manager at work concerning your options on retirement plans.

  • Review your will and/or living trust.  If your estate will be subject to tax (generally, estates over $5.49 million in 2017), ask your attorney about ways to reduce or eliminate the tax.  Consider creative ideas for reducing estate tax through charitable gifts.

Beneficiary Designations and Joint Property

Beneficiary designations and joint property arrangements can sometimes produce unexpected results for your estate plan.  It’s important to remember that beneficiary designations will override provisions you have made in your will.

  • Marjorie, for example, has a will that divides her estate equally among her three children.  But years ago she named her firstborn as beneficiary of thousands of dollars in U.S. savings bonds.  Those bonds will pass outside her will under the beneficiary designation, thwarting her goal that the children “share and share alike” from her estate.

  • Florence recently named one of her daughters as joint owner on her checking account, with the idea that the daughter could pay bills in the event Florence became disabled.  The daughter will be entitled to the balance of the checking account upon her mother’s death, even though Florence did not intend it to be a “bonus inheritance” for her daughter.

  • Beneficiary designations also can be affected by state or federal law.  Frank, who recently remarried, has a 401(k) account that names his children as beneficiaries.  But his plans won’t be effective unless his new wife signs a spousal waiver allowing Frank’s children to benefit.

  • Keep in mind that U.S. savings bonds and retirement accounts, if left to charity, will save both income taxes and estate taxes.

A Deduction for Doing Nothing

It may sound too good to be true, but there is actually a tax deduction available for “doing nothing.”  It’s called a conservation easement and, depending on whether the gift is during life or at death, there can be either an income tax or an estate tax charitable deduction.

With a gift of a conservation easement, the owner of the land typically gives up the development rights to the property.  The gift can be for a scenic easement to preserve the view for the general public or an easement that protects a fragile or endangered habitat.  The amount of the deduction is generally the difference between the value of the land without the easement and the value following the gift.  A conservation easement must be in perpetuity and must be granted to a qualified charity that can enforce the restrictions.

Granting an easement doesn’t necessarily mean that the owner can’t continue using the property.  For example, the easement can provide that the owner will not build more than a specified number of buildings on the land or will use the land only for a particular purpose, such as for agriculture.  An easement can also apply to only a portion of an owner’s entire parcel.

Not only is a tax deduction available for giving up the development rights to the land, but there may also be a reduction in property taxes as a result.


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