Not only is it a new year, but we also begin a new decade, a new century and a new millennium. What better opportunity to take stock of legal and financial matters and set meaningful goals going forward? Here is a list of seven recommendations to help you review your personal and business affairs as we move boldly into the twenty-first century; if you can accomplish even a few of these you will probably be way ahead of the competition:
1. Review and update your will: Make sure the executor and trustee you named are still the best choices. Review your beneficiary designations and your testamentary plan. Make certain your will has kept up with recent changes in the tax laws and in your finances. Failing to update your will can amount to a false economy since the cost of updating the will could be far exceeded by the cost to your loved ones of an outdated will.
2. Prepare a “living will” and durable power of attorney: The benefits here are obvious. If you become incapacitated and unable to express your wishes these documents will do it for you. A living will allows you to advise your relatives and medical providers in advance about your preferences for the use or non-use of heroic life-sustaining measures. A durable power of attorney allows you to appoint in advance an agent to handle your affairs in the event you lose the ability to do so. Lengthy and unnecessary court proceedings are avoided. Again, the cost of these documents is far outweighed by the savings if they ever become necessary.
3. Check the titles on your real estate and motor vehicles: If you are married and intend for your spouse to receive these assets outside your will upon your death, they must be titled in a particular way (as “tenants by the entirety”) and this may require recording new deeds and changing motor vehicle titles. As a bonus, legal claims against one spouse will not attach to property held by both spouses as tenants by the entirety.
4. Review your insurance deductibles: In our experience, low deductibles are costly and often are not worth the additional premium. Have your insurance agent compute the premium difference with higher deductibles and you will likely find that you can save significant dollars better directed to other needs.
5. Look into an umbrella policy: Umbrella liability policies are relatively inexpensive and are usually available in connection with either your homeowners policy or motor vehicle coverage. They generally kick in after the limits of your underlying coverages have been exhausted. In today’s litigious society it makes a great deal of sense to carry umbrella coverage. In fact, the money you save by increasing your deductibles (see above) may fund much of the cost of umbrella coverage. Remember, insurance is for catastrophic losses, not minor bumps and scrapes.
6. Update your corporate minute books through December 31, 1999: Now is your chance to bring your corporate records current through the end of the last century. For tax purposes it is important to maintain complete and timely records reflecting the activities of your corporation. These include major purchases, dividend and compensation payments and the election of officers and directors each year. As we observed in our last issue, failure to maintain corporate records can result in a loss of corporate limited liability.
7. Adopt a gift program to reduce estate taxes: With each passing year you lose the opportunity to give away a portion of your estate tax-free. Spouses are allowed to give away $20,000 per donee per year, thereby reducing potential estate taxes. Over ten or more years such a gift program can save significant estate taxes.
Let us know if we can help you with any of your new year’s resolutions.
– Kevin Palmer