Late Decisions

Summary:

“OK mom, I’ll get to it!” Procrastination is common
for more than just the teenager requested to clean up his room. What really
vital planning decisions are you putting off?

Decisions People Leave Until
It’s Too Late

√ Signing a living will. Clarify what your
end of life wishes are and telling your loved ones how you feel. How many
people sign them in the ER on a quick form? Everyone remembers the Terri
Schiavo tragedy. Don’t have your end of life wishes violated because you didn’t
communicate them.  Example: You
have ALS and want every measure taken to prolong your life, including a
respirator, so long as you are of sound mind. Knowing many standard forms might
restrict this you opt for a special living will that you tailor to address your
special health situation.

√ Rebalance your portfolio regularly. “I’ll
wait until the market recovers.” Yeah, that’s exactly why the average
individual investor earned about 4% in mutual funds over the past 20 years when
the return of those funds over the same time period was closer to 12%.
Rebalance regularly.

√ Tell your loved ones that you love them.
Write an “ethical will” or heartfelt letter expressing how you feel and your
concerns and wishes for family, friends and loved ones. Too often people
literally wait until they are on their death bed and then they don’t have the
strength or mental presence to do so. Example: Your daughter has early onset
Alzheimer’s disease. You opt to leave more in your will to a trust for her and
if she dies to her husband, then to your other children. You write a letter
explaining why you are leaving her more and assuring your other children it is
not because you care or love them less. The fuzzy stuff is important too!

√ Protect your assets. It’s too late when
you’re sued. Buy insurance and take other appropriate steps to protect your
assets before you have any real or likely problem.  Example: If you’re in business and subject to liability
exposure, perhaps your savings should be in your spouse’s name.

√ Update your will. Adjust for new laws,
changes in asset values and personal matters. Example: Your son has multiple
sclerosis and had to leave his job, and is struggling to make ends meet. Your
daughter is still getting by. Do you leave him more?  Example: Your child has substantial health issues – if he/she
receives government aid you might need to leave any bequests in a special needs
trust so you don’t disqualify him/her for essential government programs.

√ Sign a power of attorney. If you become
disabled and have not taken precautions, a family member may have to petition a
court to be appointed guardian to handle legal, tax and financial matters for
you. That is costly, time consuming and all public record. Plan ahead.

√ Buy life, disability or long term care
insurance. “I’ll get to it, but I’m young [healthy]…” Ask anyone diagnosed
with cancer if they received a phone call in advance of the diagnosis so they
could buy insurance. Health problems are equal opportunity employers and you
never know when they will come knocking. If coverage makes sense get it. There
are ways to tweak coverage to keep the costs down, but to still have it in
place. Example: Buy term insurance with a conversion feature. You can convert
at a later date. Buy disability policy with a longer waiting period. Buy long
term care while it is affordable, before you face health issues.

√ Maintain a calendar. “I’ve never been
audited, I’ll get to it.” Not corroborating business, travel and entertainment
and other expenses won’t bode well on an audit. A calendar documenting key data
is easy to maintain and can be essential to address a range of tax audit
issues. Are you resident in a high or low tax state? Calendar travel dates to
prove the time periods in each. Need to allocate earnings between states?
Calendar where you worked. Claiming travel, entertainment or meal expenses?
Document when, where, who and what on a calendar. Often, adding simple
notations to the appointments you keep on your regular calendar take little
additional time but may go a long way to assuring ready access to information
to support a tax position. Importantly, making those entries regularly and
contemporaneously gives them more credibiltiy.

√ Issue Crummey Powers. Yes, they should
be issued by the trustee of your trusts as soon as possible after you make a
gift to the trust. These notices inform trust beneficiaries of a limited right
to withdraw funds from a trust thus making your gifts to the trust qualify for
the annual gift tax exclusion, presently $13,000/year.