Naperville Estate Planning: A Will Isn't Enough

Unless you take extra steps, much of your net worth may not end up where you want it.

Drawing up a will may not be the most pleasant task, but it seems straightforward: You leave behind a legal document that specifies how you want your property doled out when your time on this earth is up. What you may not realize, though, is that much of your net worth can be passed along outside of that will. Without some planning, you could unwittingly disinherit intended beneficiaries, including your children, from significant portions of your estate.

Start with your 401(k) plan. If you’re married, your spouse is automatically entitled to every dime in the account when you die, regardless of what your will or the beneficiary form says. And that applies even to accounts you established with former employers years before you met your better half. If you want to leave a 401(k) to someone else, your spouse must first file a written statement waiving rights to it. In rare situations your 401(k) plan may not require this spousal consent if your marriage is less than a year old. But that’s not the norm, notes Ary Rosenbaum, a retirement-plan lawyer in Garden City, N.Y. In most cases your spouse will become the sole heir to all of your 401(k) accounts the minute you say “I do.”

Don’t count on a prenuptial agreement to solve this kind of quagmire either. A person can’t give up spousal rights to inherit a 401(k) until actually married. “A prenup by itself is not a valid waiver according to the rules governing 401(k) plans,” says Rosenbaum.

Then there’s the money sitting in your IRA accounts. In most states your will has no bearing on who inherits any of your IRAs at the time of your death. The person who gets the cash will be the one you named on the beneficiary form. And it doesn’t matter how long ago you named the recipient. A spouse you divorced 30 years ago, for instance, will usually collect if his or her name is still on the form.

Here, at least, you’ve got a bit more flexibility. In most states an IRA, unlike a 401(k), doesn’t revert automatically to your current spouse when you die; you can name anyone you want as beneficiary. Beware, though: Once you’re married, you can’t transfer the assets of a 401(k) account into an IRA and then name a new beneficiary—effectively disinheriting your spouse from the 401(k)—without obtaining your spouse’s written consent first, notes Ed Slott, a C.P.A. and IRA specialist in Rockville Centre, N.Y. But if you’re about to get married, it’s perfectly legal to roll a 401(k) account into an IRA before you walk down the aisle.

Finally, remember that another financial asset not governed by your will is life insurance. Once again, those who get the money are the people you named on the beneficiary forms. The bottom line: It’s crucial that you get the full picture of who really stands to cash in on your estate. Review the beneficiary designations on your retirement and insurance accounts on a regular basis, and make sure they’re in sync with the intentions outlined in your will. After all, it’s your loved ones you ultimately want to enrich at the end of the day, not their attorneys.

Information provided is general in nature.  Consult an attorney, Naperville Estate Planning advisor or Naperville CPA regarding your specific legal or tax situation.

From the Aug. 15, 2011 issue of Fortune. © 2011 Time Inc. All rights reserved. By Janice Revell 

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Designating Retirement Plan Beneficiaries

IRAs and defined-contribution plans have become an important component of personal wealth — averaging roughly 60% of the assets of U.S. households with $100,000 or more to invest, according to recent research.¹

Designating account beneficiaries (in light of your overall estate conservation strategy) and keeping those designations up to date can be a complex process, especially if you have been married more than once. It may not be wise to assume that your survivors would honor your spoken intentions in the event of a mistake or oversight.

The beneficiaries you designate and varied retirement plan rules typically supersede instructions in your will; therefore, a beneficiary form could easily become one of your most crucial estate conservation documents.

Plans Play by Different Rules

Some individuals may not know that a will does not control who will inherit retirement plan assets, or they may simply forget to make desired changes in writing. For example, an account holder who is divorced may intend to leave retirement plan assets to his or her children. But a former spouse could receive the money if the account beneficiary form was never updated, even if a will and a divorce decree state otherwise.

If no beneficiary is named — or the designated person is deceased and there is no secondary beneficiary — retirement assets may be transferred according to the administrator’s plan documents rather than an account owners preferences.

There also may be a significant difference in the government rules that apply to employer-sponsored plans and some IRAs. Federal law requires that spouses automatically inherit assets held in workplace plans such as a 401(k), unless the spouse signs a waiver allowing the participant to designate someone else. IRAs, on the other hand, are subject to laws that vary from state to state; spousal waivers may or may not be necessary.

In one case, a man who died unexpectedly six weeks after a second marriage accidentally disinherited his children. Courts awarded his employer-plan assets to the new wife — even though his children were the designated beneficiaries — because the wife had not waived her rights to the plan assets.²

A Few Things to Remember

• Many laws favor spouses, so be careful when you intend to name someone other than your spouse as a beneficiary.
• Don’t name minor children without making arrangements for a guardian or trustee to control the assets until the beneficiary is old enough to manage them.
• Review your beneficiary designations annually, and inform your financial professional when there are changes in your life that could affect your choices, such as the birth of a child, the illness or death of a beneficiary, marriage, divorce, and especially remarriage.
• Keep in mind that beneficiary designations usually don’t carry over when you roll 401(k) assets to a new employer’s plan or to an IRA, or if you convert a traditional IRA to a Roth IRA.
• Request an acknowledged copy of each new or updated beneficiary form from the financial institution or your financial professional and store them with your other important documents.

Distributions from traditional IRAs and most employer-sponsored retirement plans are taxed as ordinary income. Withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty, with certain exceptions such as death and disability. Employer-plan distributions may be penalty-free following separation from service at age 55 or older. IRA distributions may be penalty-free if used for qualified higher-education expenses or a first-time home purchase ($10,000 lifetime maximum).

1–2) The Wall Street Journal, September 7, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from Naperville CPA. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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Doing Your Heirs a Favor

The passing of a loved one is never easy for friends and family, but it can be even more difficult if the survivors do not have the information they need to make decisions and take care of final arrangements.

Legal documents such as a will and powers of attorney are important, but a letter of instructions — which is not a legal document — could be just as advantageous for your heirs. It enables you to express your final wishes and provide guidance regarding the many personal and financial matters that your heirs may face after your passing.

A letter of instructions can convey any information that might help your loved ones. Here are some topics to consider addressing in the letter.

• People to contact, such as attorneys, financial professionals, insurance agents, and accountants.
• The location of important documents, including your will, insurance policies, birth certificate, marriage and/or divorce papers, Social Security and Medicare cards, tax returns, vehicle titles, and deeds to real property.
• Your wishes for final arrangements such as a memorial or funeral service and organ donation.
• Information on your bank and retirement accounts, including account numbers, PINs, and passwords.
• A list of creditors and the location of bills.
• A description of any important information to be found on your computer, including login IDs and passwords.

Store your letter in a safe, yet accessible place; tell your loved ones where they can find it; and give copies to the executor of your estate and other trusted individuals. Because some information in the letter may change over time, consider updating it regularly.

It may not be pleasant to think about what might happen after you’re gone, but leaving a clear letter of instructions could be a final act of gratitude for your heirs.

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent Naperville estate planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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Where There’s a Will, There’s a Way

When U.S. congressman and former entertainer Sonny Bono died in a skiing accident in 1998, he died intestate — without a valid will. More than a decade later, his heirs were still contesting his estate.¹ Other famous people who died intestate include Abraham Lincoln, Pablo Picasso, and Howard Hughes.²

This situation is not unusual; only 35% of Americans have a will (see chart). If you have a will, you’ve taken an important step to help ensure that your assets are distributed as you wish, but it’s also important to update your will regularly as circumstances change.

If you don’t have a will, you’re risking unwanted outcomes and potential problems for your heirs. Although it’s natural to feel uncomfortable about estate planning, a will might make a big difference for those you love.

Making Your Own Choices

A will enables you to specify not only which assets you want to give and to whom, but also who you want to administer your estate. It may be the most appropriate way to designate guardians for minor children or for adult children with special needs. Any parent of children who need care should have a will, regardless of financial assets.

If you die without a valid will, the state may decide how your assets will be distributed. Typically, assets would go to the spouse and children, but state laws vary widely, and there are different distribution formulas. When the deceased dies intestate and leaves no spouse or children, the situation becomes more complicated.

Having a will does not avoid probate, the legal process by which assets are distributed. However, a will might make probate more efficient and less expensive.

A will is a good start in estate planning. Here are some other documents to consider.

• Beneficiary designations for life insurance policies, IRAs, 401(k) plans, and similar accounts generally supersede a will, so it’s important to keep them up-to-date.
• A living will specifies your wishes for medical care in the event that you become incapable of making or communicating those wishes.
• A power of attorney authorizes someone of your choosing to make financial or medical decisions on your behalf.
• A trust enables you to specify how assets are distributed after your death and may help avoid probate and estate taxes. Even if you have a trust, you should have a will.

The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

It may be difficult to think about estate planning issues while trying to manage the many challenges of daily life. However, documenting your preferences now could make a big difference for your heirs and help ensure that your legacy is handled according to your wishes.

1) InvestmentNews, September 12, 2011
2) legalzoom.com, March 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent Naperville estate planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2012 Emerald Connect, Inc.

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Trusts and Estate Planning Tools

Insurance for Two Could Benefit Your Heirs

Tax (Photo credit: 401K)

Since the federal estate tax was established in 1916, the amount exempted from the tax has been raised substantially over time. The $5 million exemption for 2011 and 2012 is the highest in history, and the 35% top estate tax rate is the lowest in 70 years.1

However, these generous provisions may not last. After 2012, the federal estate tax is currently scheduled to revert to a $1 million exemption and a 55% top tax rate. Many families with a home and large retirement accounts could easily have estates worth $1 million or more. A survivorship life insurance policy is one way to help heirs pay estate taxes, probate costs, and other final expenses.                      

Preserving a Legacy

Also called second-to-die insurance, a survivorship life insurance policy insures two people and pays a benefit after the death of the second person. The premiums are usually less expensive than premiums for a single life insurance policy, because they are based on the life expectancies of both insured individuals.

The unlimited marital deduction allows assets to pass to a surviving spouse free of federal estate taxes, so estate taxes typically do not become an issue until estate assets pass to nonspouse heirs. Thus, a survivorship life insurance policy could pay a benefit at the time it may be needed most.

Moreover, by purchasing the survivorship policy in an irrevocable life insurance trust, the proceeds may not be considered part of your taxable estate. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced Naperville estate planning professional and your legal and Naperville tax accountant before implementing such strategies.

Even if you are not concerned about the estate tax, a survivorship life policy could be a relatively inexpensive way to leave a legacy, especially considering that an individual life insurance policy may be more expensive or difficult to obtain later in life. Survivorship life might also be used to insure business partners.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications.

With the uncertain future of the estate tax, now may be a good time to consider a survivorship life insurance policy. Even if the estate tax doesn’t apply to your estate, the insurance proceeds could benefit your heirs or a favorite charity.

1) Internal Revenue Service

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2012 Emerald Connect, Inc.

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Giving Strategies That Can Give Back

A recent survey in 136 countries suggests that spending money to help others may be a universal source of personal happiness.1 Americans seem to take this to heart, giving more than $290 billion to charity in 2010, even with the slow economy.2

When making a substantial donation to a specific charity, you might consider trust strategies that may allow you to give generously while potentially benefiting yourself and your heirs. A good first step is to understand the basics.

Charitable Remainder Trust (CRT)

In a CRT, you (the grantor) can donate money, securities, property, or other assets to the trust and designate an income beneficiary — even yourself — to receive payments of a specified amount for a set period or your lifetime (or the lifetime of your surviving spouse or designated beneficiary). Payments must be made at least once a year and may be fixed or variable depending on the type of CRT you use. Upon your death (or the death of your surviving spouse or designated beneficiary), the assets in the trust go to the charity.

Although the annual trust income is usually taxable, you may qualify for an income tax deduction based on the estimated present value of the remainder interest that will eventually go to the charity. Once assets are in the trust, the trustee may be able to sell them and reinvest the proceeds without incurring capital gains taxes.

Charitable Lead Trust (CLT)

Assets placed by the grantor in a CLT pay income to the designated charity until the trust ends (typically, upon the death of the grantor). The remaining assets are then returned to the grantor or the grantor’s heirs. Not only could this strategy provide an income stream to your favorite charity, but it might help reduce, or in some cases eliminate, estate and gift taxes on appreciated assets that go to your heirs.

Both types of trusts are irrevocable, so assets cannot be removed from the trusts once they are donated. Not all charities are able to accept all possible gifts, so it would be prudent to check with your chosen organization before making a donation or establishing a charitable trust. The type of organization you select could also affect the tax benefits you receive.

The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced Naperville estate planning professional and your legal and tax advisors before implementing trust strategies.

1) National Bureau of Economic Research, 2010
2) Giving USA 2011, Giving USA Foundation

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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Tips for Surviving the Estate Tax

Although the federal estate tax is back after a one-year reprieve, the effect on Americans could be somewhat modest compared to what may be coming.

The federal estate tax was reinstated retroactively to January 1, 2010, by the 2010 Tax Relief Act. The good news is that the exemption amount has risen to $5 million, which excludes the majority of American households from being subject to the 35% estate tax. And because of the law’s “portability” provision, married couples may be able to shield up to $10 million from federal estate taxes.

The not-so-good news is that these tax-law provisions are scheduled to expire on December 31, 2012. Unless lawmakers extend or amend the law, the federal estate tax will roar back in 2013 with a reduced $1 million exemption amount and a 55% top tax rate. These days, individuals who own a home and large retirement accounts could easily leave behind more than $1 million.

If you are concerned about the future of estate taxes and want to leave your heirs a legacy and/or liquid assets to help cover any estate liabilities, you might consider survivorship life insurance.

How Survivors Can Benefit
A survivorship life insurance policy (second-to-die insurance) insures two people but pays the death benefit after the death of the second insured person. The proceeds can be used to replace liabilities owed by the estate — or amounts left to charity — potentially without reducing the beneficiaries’ inheritance. Having liquid funds could also help heirs keep inherited assets such as a home or a business without having to sell them to pay estate liabilities.

Because the premium is based on the joint life expectancy of the insured individuals, survivorship life insurance generally costs less than two individual policies. It also may be easier to qualify for than two single policies. Of course, the earlier in life that life insurance is purchased, the less expensive it may be over the long term, and it may eliminate the possibility that you will not qualify for insurance if you acquire a chronic health condition later in life.

Life insurance proceeds are generally considered to be part of your taxable estate. If your goal is to keep the death benefit out of your estate, you might consider an irrevocable life insurance trust. Trusts involve a complex web of tax rules and regulations, so you should consider consulting with an experienced estate professional as well as your legal and tax advisors for guidance.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges. In addition, if a policy is surrendered prematurely, there may be surrender charges and income tax implications. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

Survivorship life insurance offers a way to help cover estate liabilities without your heirs dipping into their inheritance. Even if your estate isn’t subject to estate taxes, the proceeds could provide them with a cash cushion for their futures.

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek advice from a Naperville Estate Planning advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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Help an Inheritance Help You

Americans may be changing their attitudes following the Great Recession. When asked what they would do with a large inheritance, 48% of Americans said they would save it. Only 8% would spend it on things they’ve always wanted.1

These findings might seem surprising, but bear in mind that most of the respondents were probably not actually handling an inheritance at the time of the survey. An inheritance can often be accompanied by a mix of emotions that can be difficult to imagine or anticipate. Grief, excitement, and gratefulness are understandable feelings, but emotion is a frequent enemy of sound decision making.

If you expect to receive, or have already received, an inheritance, it’s usually a good idea not to act right away but to spend some time deciding how to use it to pursue your long-term goals. This may help reduce the role that emotions play in your decisions. Here are some options to consider.

Invest It

Investing represents an opportunity to grow an inheritance and potentially make it last for years. But it’s important to view any potential investment in light of your overall financial situation. If you inherit a large sum, consider how it could influence your overall investment strategy. Depending on your circumstances, a large sum could affect your risk tolerance.
Pay Down Debt

Credit cards can be useful to rent a car or book an airline flight, but carrying large balances on high-interest accounts can harm your financial health. If you have a large balance on a credit card or a vehicle loan, consider paying it off with the inherited money and use the increased cash flow to begin making “payments” toward your retirement or other long-term goals.

Of course, some types of debt, such as a home mortgage, may offer tax advantages. Whether it would be wise for you to pay off your mortgage depends on your individual circumstances and goals.

Give Some Away

Under current law, you can make gifts of up to $13,000 per beneficiary per year without incurring gift taxes. A gift of that size could help fund a college education for a child or grandchild, help a family member get out of debt, or give a young worker in your family a head start on retirement savings. Also, you can give an unlimited amount to your spouse without gift taxes as long as he or she is a U.S. citizen.

Save for Emergencies

It’s usually wise to have an emergency fund that can be used in the event of a sudden loss of income or unexpected expenses. Having three to six months’ worth of income in an emergency fund could help you avoid going into debt or selling investments at an inopportune time to cover unanticipated or sudden expenses.

Inheriting money represents an opportunity. But it may help to view it as a responsibility, too. Managing your inheritance with sound financial strategies could help you preserve it for your future and your family.

1) Gallup, 2010

The information in this article is not intended as Naperville estate planning or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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The Federal Estate Tax Is Back and May Be Here to Stay

Despite the fact that 65% of taxpayers believe the federal estate tax is unfair, it’s back after a one-year repeal, and it could be here to stay.1

Some form of estate tax has been a part of the political landscape since 1797. Although it’s been repealed and reinstated many times, the federal estate tax appears to be as American as baseball and apple pie.

The 2010 Tax Relief Act reinstated the federal estate tax, imposing a 35% tax rate on estates that exceed the $5 million exemption through 2012. By taking specific steps, married couples may be able to pool their exemptions to shield up to $10 million. But these parameters — the most generous in decades — are temporary. After 2012, the federal estate tax is scheduled to revert to pre-2001 tax law levels, with a 55 percent top tax rate on estates valued at more than $1 million, unless lawmakers extend or modify the current law.

In addition to the federal estate tax, many states tax inheritances. Twenty-two states and the District of Columbia have estate or inheritance taxes that could apply to estate assets that are considerably lower than $5 million.2

A Matter of Trusts

If you are concerned that your estate may be subject to estate taxes, you might consider setting up a trust. When properly structured, an irrevocable trust may help you reduce or avoid the fees and estate taxes that may be imposed upon your death, control the distribution of your assets, and avoid probate. Trust assets are also protected from creditors.

A trust is a separate legal entity under which the grantor (or trustor) places assets in the trust, and a trustee administers the trust and eventually distributes assets to the beneficiaries according to the terms of the trust. Once property is placed in an irrevocable trust (which cannot be modified or terminated once set up), the assets are removed from the grantor’s taxable estate. Essentially, the grantor relinquishes ownership of the assets to the trust.

Irrevocable trusts can be used for specific purposes, such as to keep life insurance proceeds out of the taxable estate for the trust beneficiaries, and to benefit charitable groups.

An irrevocable life insurance trust can be used to replace assets in an estate left to charity (so beneficiaries will still receive an inheritance) and/or to keep life insurance proceeds out of the taxable estate. The grantor works with an attorney to set up the trust document, and the trustee uses money funded by the grantor to purchase a life insurance policy that is owned and controlled by the trust. When the insured individual dies, the life insurance proceeds are paid to the trust and distributed to the beneficiaries according to the terms of the trust. With this type of trust, the grantor cannot serve as the trustee, and the life insurance premiums must be paid by the trust.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure that you are insurable.

With a charitable remainder trust, you transfer assets to the trust and name a charitable group as the eventual beneficiary. This strategy preserves the appreciated value of the assets placed in the trust because they

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won’t be subject to capital gains tax. The assets are typically sold by the charitable group and placed in an investment portfolio that can provide you (or your designated income beneficiaries) with a specified income that can last for your lifetime or a specific period of time; this income is generally taxable. Upon your death (or the death of your designated income beneficiaries), the charitable organization receives the “remainder” assets. By gifting the assets to a charitable trust, you can preserve the full value of your gift to charity.

A charitable lead trust offers a way to donate income from your gift while retaining ownership of the assets. The grantor places assets into an irrevocable trust on behalf of a designated charitable organization, and any income generated from those assets goes to the charitable group for the duration of the trust period. Upon termination of the trust, the remaining assets pass to the grantor or to the chosen beneficiaries. This could help reduce, or in some cases even eliminate, estate taxes on appreciated assets that eventually go to the grantor’s heirs.

You should bear in mind that not all charitable organizations are able to use every possible gift, so it would be prudent to check first. The type of organization you select can also affect any tax benefits you might receive.

A properly structured trust may help shield your assets from estate taxes, but you must relinquish ownership of them to the trust. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

1) Tax Foundation, 2009
2) American Family Business Foundation, 2011

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Getting to Know Your Beneficiaries

Thanks to a popular 2007 motion picture, many Americans now have a “bucket list” — an inventory of accomplishments they hope to achieve in their lifetimes.

Although many bucket list endeavors require courage or tenacity, such as traveling to faraway places or writing a book, there’s at least one task you can resolve to accomplish that is fairly simple but could have lasting benefits for your family, friends, and possibly a favorite charity.

Designate Your Beneficiaries

When you set up an IRA or participate in an employer-sponsored retirement plan, you are typically asked to fill out a beneficiary designation form. Although many people postpone the naming of a beneficiary, this can be a big mistake. IRAs and most retirement accounts are not subject to probate, and the assets will convey directly to your designated beneficiaries, regardless of different instructions in your will. Whoever is designated as your account beneficiary will inherit the proceeds directly, and it would be unlikely for a probate court to order a different result.

Failing to designate a beneficiary means your estate could inherit the money. Because your estate is not eligible for the same tax benefits that individual investors enjoy, your estate would be required to withdraw the assets over a shorter time period. By contrast, a correctly named beneficiary can preserve the tax-deferred status of the inherited funds and spread the tax liability over several years or even over his or her lifetime.

Life Insurance Policies, Too

Life insurance benefits also convey directly to beneficiaries, independent of the probate process. Although it would be unusual to purchase life insurance without designating a beneficiary, it’s not unusual for policy owners to fail to review their beneficiary designations on a regular basis.

The reasons you bought your life insurance policy and the people you want it to protect may change over time. But only you can change the designated beneficiaries on your life insurance policy. Major life events such as marriage, birth, divorce, or death may affect your choice of beneficiaries, and it’s important to update your designations to keep pace with any changes in your life.

Estate conservation issues may be uncomfortable to face, but there’s probably no other aspect that is as simple or inexpensive as designating beneficiaries. Keeping your beneficiary designations up to date can help ensure that your valuable assets go to the people you want to inherit them.

For more information on how we can assist you with your Naperville Estate Planning, please call us today!

The information in this article is not intended as Naperville tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

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The Importance Of Naperville Estate Planning

Doing your own Naperville estate planning can be an overwhelming task. Many individuals don’t even know where to begin. This is why most people seek the assistance of a Naperville financial planning services team. Estate planning is not easy, but a good estate planner can make the task a breeze. When doing estate planning, here are a few important questions you should address:

Could my current assets/investments cause any difficulty for the survivors?

Do you have any complex investments you need to account for? Do you have investments that could incur a large expense for your heirs? By looking at your current portfolio and analyzing the transferability of each asset, you will make your families life a lot easier after you pass. It is important to look at these things now because an estate planner can help you plan in advance for any obstacle.

Do I have a clearly written will?

One area that is important in respect to Naperville financial planning is your will. If your will is not clear, concise and focused, you could be leaving your family with a headache. If you pass without a clearly written will, the people who you would like to receive your assets may never see a cent. If you pass without a will, common law will dictate the transfer of your wealth to the next of kin or to your spouse.

By having clear answers to these two questions, it will be easier to give perform Naperville Estate planning for yourself and your family.

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Naperville Retirement Planning

If you are a resident of Naperville, Illinois who is working and is of a certain age (21), you should be committed to some type of Naperville retirement planning. The goal of retirement planning is to make sure that you will be taken care of financially when the time comes that you finally exit from the workforce. When people get to a certain age, normally between 60 - 65 years old and acquire “senior citizen” status, most opt to retire and hopefully enjoy the rest of their days in a financially stress free environment.

Retirement planning also includes taking care of your Naperville estate planning. Estate planning is basically planning for your estate, meaning your properties and your assets, and what happens to them after you have passed away. While this may sound like quite a morbid task to you right now, it is very importa

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nt when it comes to ensuring that your family as well as your wishes are adhered to in the event that you do pass away.

It is advised that people who are 21 years of age and above should draw up a will, assign a power of attorney and potentially a health care proxy. This way, no matter your age now, you are prepared and you have taken care of these responsibilities which can be altered later down the road.  Retirement planning and estate planning are important things that you must accomplish now so that you can rest assured that after years of working and striving to succeed, your retirement years will be light, free of stress and worry, and full of life and enjoyment.

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• Investing at 60 and Beyond: Pacing Yourself for a Secure Retirement (dailyfinance.com)

Estate Planning Does Not Have to be a Grim Task

     In Naperville, estate planning is crucial. .  What exactly is estate planning?  It is a plan of setting out a series of tasks beforehand to get to a particular objective.  Your estate (titling, controls and transfer of your belongings).

The planning is done by a professional in assisting you to work out your affairs should an unexpected event happen in your life from incapacitation or death.  Documents and processes are done to ensure the follow through.

The client must work with the planner to develop a last will and testament.  This will be read in probate court in case of your passing.  It is imperative to choose a beneficiary! This gives the court your desires regarding your probatable estate.  It is in your best interest to minimize your probate estate as the costs can be up to 8% of the value of the assets.  You can minimize the assets by titling them in a way that would avoid the public disclosure.  This can be done by:  naming the assets beneficiaries (the person or group then has the legal right to claim the asset after your death and can include IRA’s, pensions, insurance and annuities), jointly own an asset with another person (real estate, investment accounts, bank accounts),   Be careful of naming your children as a beneficiary.  People often think that owning an asset jointly with their child will avoid an inheritance tax.  This is not true!  Probate is avoided with joint ownership but children are included in the inheritance and taxes apply.  Don’t go at it alone…contact your local Naperville estate planning firm.