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2006 is almost over and
a brand-new year is around the corner. At this time of year, I suggest you sit
down and do some thinking and planning. Here's my End of Year Checklist for you.
1. Beneficiaries: Have you recently reviewed beneficiaries on your bank
accounts, life insurance, Pension, IRA? As your life progresses, you might want
to change your beneficiaries. I remember a highly publicized news item last year
- a married woman died and left nearly $1 million in her pension account, which
she opened when she was still single, and named her mother, uncle and sister as
beneficiaries. She later got married but never changed the beneficiary to her
husband. The couple was happily married for nearly 20 years when the wife died
suddenly of a massive heart attack. The husband said he never doubted he'd be
entitled to the lump-sum payment because they received annual statements that
indicated no beneficiary was named, which would make him, as her husband, the
beneficiary. But after she died, officials found a form which had been filled
out 27 years ago. Her mother and uncle were already gone and her sister received
the whole amount. The husband received not one single dime. Please take some time
to make sure your beneficiary forms are updated.
2. Title of your assets: Do you know how you hold the title to your property?
If your property is owned by more than 2 persons, there are several different
ways to hold the title and that makes a difference in how the inheritance will
be handled and taxed upon one of the owner's death. If you have a Trust, make
sure that your assets are titled in the name of your Trust. Failing to title your
assets correctly will result in an unnecessary and wasteful court process.
3. Medical Insurance: Is your medical insurance coverage appropriate to
your current situation? Choosing the correct insurance plan is not an easy task.
When premiums went up, people usually switch to the plan with higher deductible
in order to reduce their premium. But there are so many plans out there and you
might find the plan with same or lower premium with better coverage. It might
be cheaper to cover your child in a separate account. If you need prescription
medicine regularly, changing to the plan that will cover generic medicine without
a deductible might save you money.
4. Life Insurance: Is your life insurance appropriate to your current situation?
Most of us buy life insurance to cover dependants' living cost or mortgage payments
in case the wage earner of the family dies prematurely. Once children grow up,
you may not need life insurance anymore. But there are other ways to utilize life
insurance for estate planning purposes and as an investment vehicle.
5. Preparation for Incapacity: Review your estate plan for your health
and finance in case of your incapacity. You are more likely to face incapacity
in a given year than you are to die. What happens if you become incapacitated?
Does your plan provide for the appointment of a co-trustee if you decide you no
longer want to serve on your own? Does your plan define incapacity? Healthcare
Directives and Powers of Attorney are the documents your family will need if you
become incapacitated and someone needs to make medical, financial or legal decisions
on your behalf. These documents must be updated on a regular basis to reflect
changes in the law.
6. Your investment portfolio: Review the performance of your Mutual Funds,
IRA, 401(k), Variable Annuities. Global economic situations fluctuate. Your investment
allocation should be modified from time to time accordingly so that your nest
egg will achieve maximum possible growth while avoiding loss as much as possible.
Depending on your stage of life, consider changing your allocation to a more conservative
or aggressive one. Also, if you are receiving social security income and paying
income tax on it, you might want to consider selling your mutual fund portfolio
and buy Annuities in order to reduce your income to the level that your social
security income will not be taxed.
7. Retirement Accounts: Have you funded your retirement account to the
maximum allowed amount for this year? If not, fund it now if you still can. IRA
and Roth IRA can be funded until 4/15/07 for this year's contribution but most
others can't.
8. Estate Taxes: Review your asset list. If the current value of your assets
is more than $2M, you need to do something to avoid estate taxes. Not knowing
how to avoid estate tax is an expensive mistake but easily avoidable. A bad plan
can result in a 46% estate tax on assets over $2M. This adds up to $460,000 on
a $3M estate.
9. Your Trust Documents and your Will: Make sure they are still consistent
with your wishes. And don't store your estate planning documents in your safe
deposit box. After someone's death, accessing a safe deposit box can be extremely
difficult, especially if the papers specifying who is authorized to enter are
inside the safe deposit box. This mistake can result in an otherwise-avoidable
court hearing and cost. Store your important documents where they will be readily
accessible. 10.
Talk to your family: Make time to talk with your family members about your
estate plan. It can be very difficult for your children to start estate planning
discussions with you. I'm sure they will appreciate it very much when you openly
discuss it with them.
11. Calendar: Got your 2007 calendar yet? If not, I have a limited
supply of my calendars available for my clients.
Using this checklist now you're prepared for a terrific 2007. For your Retirement
& Estate Planning, Asset Protection and Insurance questions, you can reach
me at (310)800-6333. 
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