The Coronavirus Hits Home-Now is the Perfect Time to Review Your Estate Planning

The Coronavirus health emergency is a huge reminder that life is fragile, precious and unpredictable. The daily increasing numbers of COVID-19 cases and deaths remind us that we are all mortal and we all need to be prepared. We continue to hope that you, your family and your loved ones are doing well through this pandemic that has turned the world upside down and changed our daily routines.  What better time than now to create or review your estate plan?

Here are some questions for you (and your spouse if you are married) to review:

  • Does your will or trust reflect your current wishes?
  • Are your digital assets covered in your estate plan?
  • Are your powers of attorney for property and health care up to date?
  • Who gets your money, when and how?
  • Who are the fiduciaries (executrix, trustee, other) who would handle your estate?
  • If you have minor children, who are your guardians?
  • Who are the beneficiaries of your retirement assets and life insurance contracts?
  • Is the titling of your assets up to date?
  • Will your estate avoid or minimize probate?
  • Are taxes minimized or eliminated?

Let’s spend some time on taxes.  Two keys points.  First, the current lifetime gift and estate tax exemption for federal purposes is $11,580,000 per person.  However, with the National debt already high and ballooning due to the economic stimulus, the government might look to estate taxes for much-needed revenue. Changes in your plan might be made now before the exemption changes.

The second point is state estate taxes, particularly for our clients and friends who reside or own property in Illinois.  In 2011, when the federal lifetime estate exemption rose to $5 million per person, Illinois “de-coupled” its state estate tax exemption from the federal exemption.  Since, 2013, a lower exemption of $4 million per person applies to Illinois residents.  Those with Illinois assets who haven’t updated their estate planning documents since 2011 could be subject to a potentially avoidable and unnecessary payment of Illinois estate tax.

Here’s an example from our estate planning attorney friends at Bischoff Partners, LLC in Chicago.  “If an Illinois couple passes with combined estates of $5 million with no trusts planning, the surviving spouse’s estate could owe an Illinois estate tax payment of $285,714.  If the couple had used trusts to plan for each of their $4 million exemptions, which essentially doubles their applicable Illinois tax exemption to $8 million, the couple’s tax of $285,714 could have been avoided entirely.”  Planning and continual review is so important.  The “bad result” above of owing Illinois $285,714 would be the result from no planning or planning that was done pre-2011 and not updated.

The Illinois estate tax rate is advertised as a graduated rate between 8% to 16% of assets over $4 million.  So, you would guess that the tax on a $ 5 million IL estate might be $120,000.  However, the fine print doesn’t work that way.  It’s 28% on the first $1 million taxable in Illinois.

Depending on the size of the estate, Illinois clients may want their attorney to review the advisability of an “Illinois QTIP Election” which can defer payment of the possible Illinois estate tax to the death of the surviving spouse.  In addition, it is our understanding the Illinois QTIP election allows couples to double the $4 million Illinois exemption to $8 million and still plan for using each individual’s Federal Estate Tax Applicable Exclusion as much as possible.

Lots to review and lots to think about.  Again, we say: “What better time than now?”

At DWM, clients know that we are not attorneys and don’t give legal advice. However, we have collaborated with estate attorneys on hundreds of estates in Illinois, South Carolina and elsewhere.  Part of our “Boot Camp” process for new clients is working with them and their attorneys to create or update their estate plan. This includes our review of the documents, preparation of an “Estate Flow”, a review of their titling and beneficiary designations and providing recommendations.  As a follow-up to this blog, we’ll be sending out existing “Estate Flows” to all clients to help kickstart their review process.  If you are not a client, please contact us and we’ll be happy to discuss how we can help you get started.

Conclusion:  Life is fragile, precious and unpredictable.  Yet, working with your attorneys and your wealth managers you can plan, implement, monitor, and revise your estate plan to prepare you and your family for the future. No time like the present to get it done!

https://dwmgmt.com/

Summertime Treasure Hunt: Find Your Unclaimed Assets

unclaimed_money-300x300There is currently a staggering $41.7 billion in lost and forgotten assets, and approximately 1 in 10 Americans have unclaimed property. Most people who find their name on a list will have several hundred dollars’ worth or less from things like unclaimed dividends, overpayments, an unreturned security deposit, traveler’s checks, or a final paycheck from a part time job in college. But some people have very large sums waiting to be inherited from deceased relatives or old 401Ks. The largest payout to date was to a woman in Kansas City, MO who received $6.1MM in 2011. Her ancestors had invested in an obscure company, the stock was lost as it was passed through the generations, and the value continued to grow until she found she was the rightful heir. Other states have had similar examples; New York returned $4MM and Wisconsin has paid out $1.5MM, each to a single person. Recently, DWM helped one of our clients identify almost $12k in assets he wasn’t aware he was owed! Clearly it’s worth checking, and getting your money is usually easier than you’d expect.

When a company or financial institution has lost contact with someone for over a year, they are required by law to turn over the forgotten assets or funds to the state of the owner’s last known address, who is charged with trying to find the person or their heirs. Most states sell stocks, bonds, and safety deposit box contents since it would be impossible to warehouse all these items. The proceeds are then kept for the owner.

The best place to start is with your state treasurer’s office, but be sure to check every state you’ve lived in. You can perform a multi-state search (39 states participate) on www.MissingMoney.com.

Each state’s treasurer’s office has a website, which you can easily find through a search engine. For easy reference, Illinois is: https://icash.illinois.gov/index.asp and South Carolina is: http://www.treasurer.sc.gov/unclaimed-property. When searching for state treasurer’s websites, beware of .com websites, aka “finders”, that charge for searches you can easily complete yourself, for free.

There are a wide variety of situations that result in unclaimed funds. Sometimes checks are returned to the IRS as undeliverable. A family member may have unclaimed VA benefits. You have an old savings bond you forgot about. Also, state and county governments usually list unclaimed child support, but be careful not to fall for a pay-to-search website. The possibilities seem endless. Here are two websites with links for places you might not have thought to check: http://www.unclaimed.org/other/ and http://gma.yahoo.com/unclaimed-money-12-sources-forgotten-funds-200019047–abc-news.html.

It’s also possible you were named as the beneficiary on an insurance policy you weren’t aware existed. You would assume insurance companies would be required to track down beneficiaries, but that’s not the case; it is the beneficiaries’ responsibility to claim the benefits. This is the one situation where you might need to pay a search service since you need to know which company issued the policy to make a claim. MIB Solutions (formerly the Medical Information Bureau) is a private company that maintains a record for almost everyone who has applied for an insurance policy in the last 7 years. After that time, the records are wiped. http://www.mib.com/lost_life_insurance.html

Having unclaimed property is so common that ‘Good Morning America’ has a segment to reunite people with their assets called “Show Me the Money”. They have many useful articles and a list of myths and facts at http://gma.yahoo.com/unclaimed-money.

You may want to perform a search for other family members, your school, or even your church. The best way to prevent unclaimed assets is to keep your and your beneficiaries’ addresses updated, cash all checks promptly, and record safety deposit box and insurance policy information for loved ones. Wishing you luck on this summertime treasure hunt!