Think about your investments. Do you have assets such as Certificates of Deposit (CD’s,) United States savings bonds, stocks, or retirement accounts? Have you considered the potential pitfalls that may occur when these assets are transferred to your heirs? Consider the following:
• Savings bonds may not be an attractive investment from a tax liability standpoint. When you pass away your heirs may be responsible for any tax liabilities on the accrued bond interest. This liability is often substantial.
• Banks have different policies regarding early termination of CD’s. Do you know what your banks’ policies are for collection of CD’s?
• What about your IRA’s, 401(k) accounts, annuities and life insurance policies? Who are your beneficiaries? Have you named minor children as beneficiaries? A minor child cannot inherit funds outright. A court guardianship may be required if the inheritance exceeds a certain amount.
• Life insurance proceeds pass to your heirs income tax free. The proceeds may not be immune, however, from estate tax liability. Has your insurance company issued shares of company stock to its policyholders? This may be valuable information for your heirs to know.
• Is your brokerage account in the name of your living trust? Do you currently have stocks issued in certificate form? How is title held on those certificates? Transfer of stock certificates to your heirs may be difficult and time consuming. Have there been stock splits, spin-offs or company mergers? Without accurate records, your heirs may not be aware of all your stock assets.
• Have you considered whether your estate is subject to estate taxes when you die? Have you implemented effective tax planning strategies into your estate plan?
Your legacy should not be marred by unnecessary and avoidable traps. It is critical that you periodically review your estate plan. Do not make costly mistakes for those left behind.
For an appointment, please call the Law Office of Jane M. McNamara at 661-287-3260.