WISE MONEY

Honolulu Star-Advertiser - - MONEY - AIKAWA KANA Kana Aikawa is a fi­nan­cial ad­viser at Wealth Manag­ing Part­ners Inc. She has a Bach­e­lor of Busi­ness Ad­min­is­tra­tion in fi­nance and man­age­ment from the Shi­dler Col­lege of Busi­ness at the Univer­sity of Hawaii at Manoa. Reach her at 954-7072.

Proper es­tate plan­ning can make all the dif­fer­ence in times of fam­ily emer­gen­cies >>

In ev­ery as­pect of fi­nan­cial plan­ning, proper prepa­ra­tion is the key to suc­cess. Whether it’s sav­ing to­ward your child’s col­lege ed­u­ca­tion, re­tire­ment or po­ten­tial long-term care ex­penses, the key is to plan for it. The same goes with es­tate plan­ning. Es­tate plan­ning is some­thing that of­ten gets put off be­cause peo­ple as­sume it’s com­plex and ex­pen­sive. No one ever plans on be­ing sick or dy­ing pre­ma­turely, yet it’s this kind of plan­ning that can make all the dif­fer­ence in a time of emer­gency for your fam­ily.

Not hav­ing an es­tate plan can cre­ate fam­ily feuds, and, fur­ther­more, your fam­ily might fail to claim as­sets that they were un­aware of. Un­for­tu­nately, this sit­u­a­tion hap­pens more of­ten than not. You have heard of the fa­mous fam­ily feuds over es­tates such as with Michael Jack­son, Robin Wil­liams and, most re­cently, Prince. Deal­ing with fam­ily death is enough of an emo­tional stress, but imag­ine hav­ing to also fight with your fam­ily mem­bers over who gets what.

Ac­cord­ing to the Na­tional As­so­ci­a­tion of Un­claimed Prop­erty Ad­min­is­tra­tors (un­claimed.org), state trea­sur­ers cur­rently hold $60 bil­lion in un­claimed prop­erty. These in­clude aban­doned bank ac­counts, life in­sur­ance claims that were never made, for­got­ten stocks and pen­sion ben­e­fits (you can search for un­claimed as­sets at Miss­ing-Money.com).

It’s im­por­tant that your fam­ily is aware of all your as­sets and in­sur­ance poli­cies so that the des­ig­nated ben­e­fi­cia­ries can make the proper claims. Not hav­ing a proper es­tate plan can lead to sig­nif­i­cant emo­tional stress and fi­nan­cial con­se­quence.

A good start­ing point for any es­tate plan is to gather all doc­u­ments for ev­ery as­set you own and de­cide how you want each of those as­sets to be dis­trib­uted upon your death. Here’s a ba­sic list of im­por­tant doc­u­ments that you should have in your “vault”:

Will and/or trusts. Aside from nam­ing who gets what, if you have chil­dren who are mi­nors, you will also need to de­cide who will be their guardian if both you and your spouse were to die. Every­one should have a will, but whether you need to have a trust will vary case by case. The main rea­son peo­ple cre­ate a trust is to avoid pro­bate, which can some­times take years and cost thou­sands of dol­lars.

Durable Health Care Power of At­tor­ney Form (Ad­vance Health Care Di­rec­tive). This is a le­gal doc­u­ment in which you give an­other per­son per­mis­sion to make health care de­ci­sions on your be­half if you ever be­come in­ca­pac­i­tated. AARP of­fers a state-by-state list­ing of ad­vance-di­rec­tive forms on its web­site.

List of all bank and in­vest­ment ac­counts, life in­sur­ance poli­cies and their ben­e­fi­cia­ries. Some as­sets will by­pass pro­bate by con­tract be­cause you are able to name ben­e­fi­cia­ries. Ex­am­ples: IRA, Roth IRA, 401(k), life in­sur­ance, an­nu­ities, TOD (trans­fer-on-death) bro­ker­age ac­counts and POD (payable-on-death) bank ac­counts. Ben­e­fi­cia­ries listed un­der these con­tracts will su­per­sede your will or trust, so it is very im­por­tant that you up­date your ben­e­fi­ciary list when­ever there are ma­jor events in your life such as mar­riage, di­vorce, ad­di­tion of a child, or if you sim­ply wish to make changes. Hav­ing an or­ga­nized list will make it easy for your ben­e­fi­cia­ries to lo­cate your as­sets upon your death and en­sure that they end up in the proper hands — and not deemed un­claimed prop­erty.

Long-term care in­sur­ance. If you have long-term care in­sur­ance, it’s im­por­tant one of your fam­ily mem­bers or some­one with a health care power of at­tor­ney be aware that you have the pol­icy, which can help cover some or all of your long-term care ex­pense.

Mar­riage li­cense. If your spouse dies, you will need your mar­riage li­cense to claim any type of spousal ben­e­fits.

Con­tact in­for­ma­tion of at­tor­neys, CPAs and fi­nan­cial ad­vis­ers that your fam­ily can reach out to for help. This is a ba­sic list of doc­u­ments that every­one should keep read­ily ac­ces­si­ble to their fam­ily and trust ex­ecu­tor so that they’re not left scram­bling through the house look­ing for them. These can be kept in a phys­i­cal locked vault or se­cure web­sites that al­low you to keep an on­line vault. I do not rec­om­mend us­ing a bank safe de­posit box, be­cause your ex­ecu­tor might not have ac­cess to the box af­ter your death. And since these doc­u­ments have no street value, the worry with es­tate plan­ning doc­u­ments is not so much that they’ll be stolen, but more so that your fam­ily won’t be able to find or ac­cess them. There­fore, I would rec­om­mend keep­ing them in your home in a per­sonal safe or fire­proof file cabi­net.

It’s not only im­por­tant to pro­tect im­por­tant doc­u­ments, but to get rid of un­nec­es­sary pa­pers as well. Some­times peo­ple hold on to so many pa­pers, it takes hours to find the im­por­tant ones. Last year I as­sisted an el­derly client in or­ga­niz­ing her doc­u­ments; it took us an en­tire day to sort them out as she had kept state­ments from 30 years ago, in­clud­ing ac­counts that she had al­ready closed. When get­ting rid of old, un­wanted doc­u­ments, make sure to de­stroy them prop­erly to pro­tect your­self from iden­tify theft.

Es­tate plan­ning sounds in­tim­i­dat­ing and com­pli­cated, but it really isn’t as bad as it sounds. If you do not have a plan and I have con­vinced you to cre­ate one, that’s half the bat­tle. Re­mem­ber, an es­tate plan is sim­ply a strat­egy for what hap­pens to your as­sets when you die or if you are un­able to make de­ci­sions for your­self. Putting your af­fairs in or­der will give you peace of mind know­ing that the ones you love will be taken care of af­ter you’re gone and that the nest egg you worked so hard to build will be passed down ac­cord­ing to your wishes.

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