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Home Blog Where Life Plans and Estate Plans Collide

Where Life Plans and Estate Plans Collide

Where Life Plans and Estate Plans Collide

This month our team has been focusing on expanding knowledge surrounding estate planning. Contrary to what happens all too often, estate planning is not a “set it and forget it” activity. The reality is life plans and estate plans collide causing the need to review and update. Major life events such as marriage, birth, death, divorce, starting a new job or career, buying a home, starting college, illness or disability all impact our estate plans.  

We get it. Talking about death is uncomfortable. Worse yet, it costs real money and time to update an estate plan. The cost of not reviewing your plan when life plans change can be enormous, not only hitting your wallet but also impacting your family, sometimes, in less than ideal ways.

So, what life plans are we talking about? Here are a few to consider:

Marriage: You met the person of your dreams, had the fairytale wedding, signed the marriage certificate, bought the perfect house (thanks to our friends in the Home Loan Center) and are living in marital bliss. All is well, right?  

  • If this is a first marriage, more than likely your estate planning goals align. You will need to review what assets you both brought into the marriage, consider changing beneficiary designations and even account ownership. Although updating your wills is a good idea, most of your assets likely are held in a non-probate fashion. To make life easier, now is a good time to also update your Financial and Healthcare Powers of Attorney.  
  • In Iowa, if this is a second marriage or you are coming into the marriage with significant assets, we hope you met with your attorney before the wedding. It is common that in a second marriage you will have different estate planning goals. There are many tools that can be used to provide for your new spouse while also ensuring children from a prior marriage will receive an inheritance from you.  

 
Birth:  Congratulations!  You just had your first child. Nothing to do, right?

  • Actually, now is the time to consider naming a Guardian in your will. Sure, they would not be left on the street if something happened to you, but you likely have strong opinions on who you would want to care for them if you cannot. Don’t stress. Odds are it will never be used AND you are not required to tell your sister-in-law that she isn’t named because you think she would create irreparable damage to your child. Also, if you name someone and years later the unimaginable happens, if that person is not suitable, the Court will protect the best interests of your child. Remember, no decision, is a decision. It means you leave your family to figure it out without your input. Families always agree, so you should be fine.
  • Besides who will care for your child, you will also need to consider how they will be cared for financially in your estate plan. This could include establishing a Testamentary Trust for their benefit.

Divorce:  Did the tax law changes in 2019 cause you to rush into Court to divorce your spouse before the end of 2018? I’m guessing not but there are some that say the loss of the alimony (court-order payments to your former spouse) deduction in 2019 and beyond caused many to speed up the process. If you did divorce recently, you know where this is headed.

  • Update your plan. Just because you have that very costly piece of paper symbolizing your nuptials are no more, there remains a mountain of paper saying otherwise. Although operation of law helps you in most cases (Iowa law has a provision stating that if you divorce after making a will, provisions in favor of your former spouse are revoked), it is best practice to update. As a now single individual, your Financial and Health Care Powers of Attorney become even more important.
  • Your divorce decree resolves rights to property between you and your former spouse. It is your responsibility to make sure investment and retirement account beneficiary designations are consistent with the terms of the decree. Although most states automatically allow for a divorced spouse to be removed as the beneficiary when you fail to update, getting the financial institution in control of the account to recognize the revocation can be costly and time consuming. If by chance you do want to name your ex-spouse as the beneficiary, you need to execute a new beneficiary designation dated after the divorce to avoid confusion.

Starting a New Job:  Yet another time for celebration and paperwork.

  • Assuming your new job offers benefits such as 401k and insurance, once again you are making decisions that have an impact on your estate plan. Confirm you are executing beneficiary designations consistent with your overall plan.  
  • If you are relocating to another state, it may also be a good time to update your Wills and Powers of Attorney.

Buying a home:  Before you purchase the home you should consider carefully the impact of how you will take title.

  • A common form of ownership with a spouse, is joint with rights of survivorship. This means if you die, the property automatically passes to your spouse (or co-owner) without the need for probate. This means even if your will says, “I leave everything to my children” if you purchase a home and title it jointly with another individual the property passes to that individual and your children would not receive the property.
  • Likewise, you could own as Tenants in Common. This means you each own an undivided one-half and at your death, your will controls your half only.
  • Another option is a life estate with remainder interest.  Here, if you own a life estate, you control the property during your life and the remainder interest holder takes possession at your death.  If the remainder interest holder dies before you, their interest is an asset that must be probated pursuant to the terms of their will.
  • In Iowa, if you own a property in your name alone, you have a probate asset. Some states, like Minnesota, allow a Transfer on Death Deed. This allows you to bypass probate by naming who takes title at your death through a Deed. In Iowa, this is not an option.

Starting College: You may think an 18-year-old has no estate planning needs. Think again.

  • When you turn 18, your parents no longer can legally access information to help you. This is a great time to execute both Financial and HealthCare Powers of Attorney. A Healthcare Power of Attorney should also include language allowing a parent to access medical records, or HIPAA authorization.

Illness/Disability: We all acknowledge planning for death is, well, inevitable. We often fail to recognize the fact that study after study show that the majority of us will be impacted by either a temporary or permanent disability in our lifetime.

  • Powers of Attorney are a fairly simple and inexpensive tool that can make life easier for both you and your family in the event of a disability. If you do not have these in place, Court action may be necessary to appoint a Guardian and Conservator on your behalf. This takes time, expense and likely you will not be in a position to dictate who you would want to help you.  
  • Additionally, an estate plan that utilizes a Revocable Trust can help ensure that you will be cared for as you desire, while also ensuring continuity of asset management.

No matter what life plan may be changing in your world, don’t forget to consider how it collides with your estate plan. We have a team of professionals with experience and expertise here to help you make sure your life plan is consistent with your estate plan. 

Call us at 641-422-1600 or email wealth@myfcb.bank to schedule an appointment today. 

Products provided by First Citizens Wealth Management are not insured by the FDIC, are not deposits of the bank and are not guaranteed by this institution; and, are subject to investment risks, including possible loss of the principal invested. Please note that neither First Citizens Bank nor the First Citizens Wealth Management department provide tax or legal advice. You should always consult an attorney along with a tax professional to determine how to prepare the best estate plan for your situation.

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