And since it would come from you, that would mean you wouldn’t be around to provide the wisdom you’ve hopefully built up over decades of working, saving, paying bills and investing so your kids or grandchildren could get that big chunk of change. What do you think they would do with the money?
Would they set most of it aside for an education and a good start with a stable financial future? Or, as is often the case with a big financial windfall, would the cash be gone in less than two years?
And it could happen, especially if you are a government worker or retiree with good life insurance and a TSP account, and a home or maybe other investments. One way to avoid that potential problem is to have an estate plan — relatively simple and inexpensive.
So we arranged to have Tom O’Rourke on our Your Turn radio show today. He’s a Vietnam veteran and former IRS attorney who now specializes in tax and estate planning. He’s based in the Washington, D.C., area and many if not most of his clients are or were feds. And while most are smart and successful, most don’t realize they are worth more than they think — and that most don’t know what they don’t know.
So he will be on today’s show at 10 a.m. EDT. Listen on www.federalnewsnetwork.com or 1500 AM in the D.C. area. If you have questions for him send them to me before showtime at email@example.com.
So if you don’t know what you don’t know, what questions should you be asking? Tom supplied this checklist which is well worth a read. Having a will is not enough in most cases. Here are the eight most common mistakes people make:
- Not having an estate plan: Approximately two-thirds of all individuals do not have an estate plan of any kind. This could mean that state law will govern how their assets are distributed following death and who will oversee the administration of their estate. It also could require a court-appointed guardian to care for you and make medical or financial decisions for you in the event you ever become incapacitated. At a minimum, an individual needs a will or trust to govern the disposition of their assets and financial and medical powers of attorney to appoint a person of their choosing to act on their behalf in the event of disability.
- Failing to update your plan over time: All plans need to be reviewed periodically to make sure they reflect your current circumstances and to insure that they continue to meet your needs.
- Failing to consider the impact of how your assets are titled on your estate plan: Many times assets are held jointly with another individual. If they are, these assets may not be governed by the terms of your will or trust.
- Failing to take beneficiary designations into account: For many federal employees, their TSP account, their annuity and any life insurance they have may constitute their estate. None of these assets are governed by the terms of a will or a trust.
- Failing to take changing laws into consideration: There have been many changes in estate tax laws over the past 10 years. If you haven’t reviewed you estate plan to reflect these changes you may have an unduly complex plan that proves difficult to administer. In addition, state laws governing powers of attorney have undergone significant changes in recent years.
- Not having significant liquidity in your estate: Many times the bulk of a person’s estate is invested in real estate and/or tax deferred accounts with relatively few liquid assets. Having to liquidate either real estate or tax deferred accounts to satisfy obligations can pose significant tax or economic problems. (Note: Perhaps this is a reason why there are so many ads on TV offering to buy real estate quickly and as is, but often at a price less than fair market value).
- Failing to take minor beneficiaries into account: While you undoubtedly love your children, do you want them to get a six-figure inheritance at age 18? Perhaps even worse, do you want your child’s inheritance to be paid to your ex-spouse to managed for the child?
- Failing to take the income tax consequences your beneficiaries will face when they receive an inheritance: This may especially be a concern if a substantial portion of your estate is composed of tax deferred assets such as the Thrift Savings Plan or an IRA.
Tom said, “Hopefully by being aware of these pitfalls, your listeners will be able to avoid them,” Definitely worth thinking about, especially now.
Nearly Useless Factoid
By Amelia Brust
The Greek island of Santorini has a museum dedicated to the tomato paste industry that was the backbone of the area’s economy before tourism took over. The Tomato Industrial Museum in Vlychada is on the site of the former D.Nomikos factory which processed the unique domati Santorini, which have a sweet flavor and thin skin thanks to the island’s placement on an active volcano.
Source: Atlas Obscura