Everyone has heard the old adage, “Do not put off until tomorrow what you can do today.” However, more often than not, we do not follow this principle. This column will provide you with some basic life planning steps that, if followed, will allow you and your family to manage your assets without interruption in the event you become ill or die.
Step I — Create a Personal Inventory
A personal inventory is a list of all assets owned by you either individually or jointly. While the creation of the inventory may take time initially, once it is created, it is an invaluable tool. The inventory does not need to be on a computer. A simple notebook where the information is handwritten will serve the same purpose as a computerized list. Every December, include as one of your New Year’s resolutions your commitment to update the inventory by no later than January 31 of the following year. Once the initial inventory is created, the updating is easy. You may not even have to make any changes if your assets have remained the same. The inventory should contain the following:
For all assets held at a financial institution (such as bank accounts, mutual funds and brokerage accounts):
1. Name and address of the institution
2. Account number
3. Broker or agent’s name
4. Phone number
If the asset is real property, aside from the address of the property, you should include:
1. The name, address and phone number of the insurance carrier
2. Policy number
3. Name of insurance agent
For life, disability and long-term care insurance policies, you should include:
1. Name, address and phone number of carrier
2. Policy number
3. Amount of policy
4. Type of policy
5. Names of beneficiaries
6. Name of agent
Step II — Do a Will or Review Your Existing Will
If you do not have a will, you should seriously consider creating one. This will ensure that your wishes regarding the disposition of your assets at your death are honored rather than letting the estate laws in New Jersey control the outcome. If relevant, you should include a trust for your minor children or grandchildren and appoint a guardian for your minor children.
You should read your existing will to see if it still states exactly how you want your assets disposed of at the time of your death. If the will is more than five years old or there have been any significant changes in your assets, then you should consider contacting an attorney to discuss whether any additional planning should be considered. If any of the individuals named as executor or trustee in your will have died or are currently incapacitated, then you should do a codicil to designate new individuals to fulfill those roles.
Step III — Do a Durable Power of Attorney
A Power of Attorney (“POA”) will allow your family to take care of your finances if you become ill or disabled. The POA should be effective even if you become disabled. It should contain a specific provision stating that the POA is “durable” — it is effective even if you become disabled. Also, the POA should contain gift-giving powers. Review your POA every year and update it if necessary. Keep a copy of the POA at your residence.
Step IV – Do a Medical Directive (i.e. Living Will)
A Living Will is a document which designates someone to make medical decisions for you in the event you are disabled. Read your Living Will every year and update if necessary. Keep a copy of the Living Will at your residence.
Step V — Review All Beneficiary Designations
You should review all beneficiary designations on your life insurance policies, retirement plans (i.e. profit sharing, 401(k) or other pension plans) and individual retirement accounts. Consult with a tax professional regarding the designations of beneficiaries and any tax ramifications. Review the list every year and update if necessary.
Step VI — Review your Insurance Policies
You should review all insurance policies, including life, health, disability and long-term care, with an insurance professional to see if these policies meet your current and future financial and personal needs.
Step VII — Check On Your Social Security Benefits
Obtain your Personal Earnings and Benefit Estimate Statement from the Social Security Administration (“SSA”). This statement outlines the benefits that you will receive when you retire. As of October, 1999, the SSA automatically sends a statement to workers ages 25 or older who are not getting Social Security Benefits. The statement should arrive about three months before your birthday, with updates yearly. If you have any problems receiving this statement or any questions about it, you can reach the SSA by phone at 800-772-1213 or through the Internet at www.ssa.gov/mystatement. When you review the statement, verify your earnings record and the date on which you can retire with full benefits. Update the information every other year.
The information presented in this article is not legal advice and does not create an attorney-client relationship with Bourne, Noll & Kenyon.