Asset Planning, Inc Blog

The latest from the team.

Record Retention: Keep it or Toss it

After your taxes are complete it is always a good idea to go through your records and organize what you should keep and what you can get rid of.

How long to keep records is a combination of judgment and state and federal statutes of limitations. Since federal tax returns can generally be audited for up to three years after filing and up to six years if the IRS suspects underreported income, it’s wise to keep tax records at least seven years after a return is filed. Requirements for records kept electronically are the same as for paper records. Many records can easily be kept on-line now and downloaded and to your computer, external drive or cloud account.

Records Retention Guideline # 1: Some items should never be thrown out

This is because these items would be hard to replace and you may be asked to provide them later in life. I suggest storing these “permanent records” in an expanding file or wallet – preferably in a fire safe box:

  • Income tax returns: if the return is uncomplicated then you only need to keep it for 7 years.
  • Important correspondence.
  • Legal documents.
  • Vital records (birth/death/marriage/divorce/adoption etc.).
  • Retirement and pension records.
  • Year-end investment statements.
    • If the investments are transferred to another account make sure the cost basis has transferred over correctly.
    • IRA non-deductible contributions (Form 8606).
  • Will and Trust documents.
  • Records of paid mortgages and other loans.

Records Retention Guideline # 2: Everything Else

You should retain these records according to the following guidelines:

  • Home purchase documents – Ownership period + 7 years.
    • Property records/builder contracts/home improvement receipts (keep until property is sold – needed for taxes)
  • Car purchase and sale records (keep until car is sold + 3 years).
  • Insurance policies (keep for life of policy).
    • If policy is changed to another company make sure that you keep the files together.
  • Sales receipts (keep for life of warranty or life of the item on large purchases).
  • Warranties and instructions (keep for life of product).
  • Medical bills – keep for 3 years or longer if there are any reimbursement questions.
  • No need to keep monthly statements for credit cards, bank statements, utilities, etc. if you receive a year end recap or are able to go online and view up to 3 years of statements.
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What Happens to Your Social Media & Online Accounts When You Die?

Until very recently there was really no estate planning direction on how your social media and online accounts should be handled after you pass away. If you're like me, I have multiple social media accounts and have opted to go paperless on every account that I can. Though this is the most convenient option for us now it may pose a problem when you pass away and there are no instructions or information left for your loved ones. I recently listened to a webinar hosted by TLD Law that gave out some great information and tips on how these digital assets should be handled.

First, we'll talk about what digital assets really are. Digital assets are considered any electronic record that is stored in an online account, not the online account itself. For example: You have a Gmail account, the Gmail account and address are not considered a digital asset. The digital assets would be any emails, pictures or other files in the email account.

Here are some other examples of digital assets:

Airplane Miles, Social Media, Software Licenses, Websites, Cryptocurrencies and any other digital file stored with in an online account or your computer; think Shutterfly, iCloud etc.

One quick way to ensure that your digital assets are taken care of after you die is buy completing a Power of Attorney specifically for those digital assets. The Power of Attorney should have a digital assets provision in it.

If you have a trust in place you should check it to see if there is a provision for digital assets. If the trust document was drafted before 2017 it likely does not, and you will need to amend the trust accordingly.

In the trust and power of attorney documents you should give clear instructions on how you would like your digital assets taken care of when you pass away.

By law, anyone you give this responsibility to will have a fiduciary duty of care, loyalty and confidentiality to uphold. What that means is that they are not allowed to share any personal information that has not already been made public.

A lot of online sites have either legacy contact information or inactive user account manager options that you can set up in your account profiles. Whoever you designate will be contacted after a certain length of time, usually chosen by you, where your account has not been active.

It's important to note that by giving some power of attorney over your digital assets, the companies that hold that information are not legally required to give them access to the online accounts. It is very important to compile an ongoing list of all of your online accounts as well as passwords and keep it in a safe place that your trusted person knows about. Downloading this information onto a hard drive and keeping it in a safety deposit box or fireproof safe are a couple of options. If you simply just give someone this information without the proper legal documents their attempt to log into your account may be misconstrued as computer fraud and may be prosecuted. Especially in the case of elderly parents or grandparents, because there is a heightened awareness of elderly abuse.

There is a ton more information and tips online. I highly encourage you to do some research and get these provisions in place.

 

 

 

 

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New Developments in Dementia and Alzheimer's Testing

Amy Florian from Corgenius released some information regarding new tests to alert you to the early signs of dementia and Alzheimer's disease. The first study was about sense of smell and the second one was about personality changes.

Here are some highlights taken directly from her research on the studies that we thought were important.

Regarding smell, scientists studied several factors in reasonably healthy people and then followed them for five years to see who developed dementia. They found that when combined with baseline cognitive function at the start, the most important factor was sense of smell. They specifically studied five scents – orange, leather, peppermint, rose, and fish. The greater number of scents that created difficulty and the more poorly a person could discern these smells, the more likely they were to exhibit dementia five years later. Researchers noted that this can’t be relied on as a singular test, but rather as a realization that sensory function is closely related to brain function, and may be among the first areas to exhibit deficiencies.

Another study focused on the long-recognized fact that personality changes are an early sign of Alzheimer’s disease, especially becoming uncharacteristically angry, aggressive, paranoid, or inappropriate. Now researchers have developed a 34-question quiz that can help determine the breadth and depth of behavioral changes, and they are proposing an intermediate diagnosis of mild behavioral impairment. You can take the quiz here. Note that these changes should persist for 6 months and be fundamental changes in behavior in order to indicate problems.

We are always looking for ways to keep you informed on the latest news with issues we come accross and cognitive decline is an important one.

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The Importance of Choosing the Right Trustee

 

More and more people are realizing the importance of setting up a trust for their estate. Having a trust in place insures that your wishes for your estate are carried out on your terms if you become unable to care for yourself or pass away. It also prevents your assets from going into probate after your death and saves a huge headache for your heirs. While having a trust in place is very important it is also very important who you name as the trustee.

There are a few different options when selecting a trustee. The most common scenario is that a married couple sets up a living trust where they are both listed as trustees and they list a child or family member to become the successor trustee. In the case that one spouse passes before the other the living spouse will become the sole trustee until they are incapable of caring for themselves or they pass away. At that point the successor trustee in charge of handling the estate duties.

The responsibilities of managing an estate are many and can be daunting to someone who lacks experience in these types of situations. When choosing your trustee you should choose someone who is (a) willing to dedicate the time and energy to run the estate (b) responsible and possesses good judgement and (c) someone who can be objective when following the instructions set up in the trust. It may seem like the natural choice to choose your child or a family member to act in this role but it may not be the best choice depending on the complexity of your estate and their abilities.

In the case where a person is unsure of who to name as a trustee an estate attorney will usually suggest that a bank be set up as the trustee to carry out the responsibilities of the trust. This is called a corporate trustee. This seems like a good idea because a bank has experience with handling trusts and wealth management. But this is not always the best choice either. When the duties of a trustee are needed the bank will take over the trust, move your assets from whatever accounts you have them set up in now to investments of their choosing and will take over the estate. They will follow the instructions in the estate as wished but it may leave your family without the feeling of a personal connection since they may not have worked with that bank before or know the person handling the assets.

Did you know that you have another option that will help ease the burden on your loved ones by running the estate themselves? There is something called an administrative trustee. In a lot of cases we see a child take over the duties of the estate and get overwhelmed with the process. They may be doing it free of charge but in the long run trying to take care of everything on their own ends up costing more financially and emotionally. An administrative trustee is a company that is set up to handle all of the time consuming paperwork and filing responsibilities of the estate. They do not make any decisions as far as wealth management is concerned. That is still the responsibility of the trustee and their financial advisor. Yes, there is a fee to have an administrative trustee but it can outweigh the stress and headaches that come along with trying to do everything yourself.

The best thing to do is have an open discussion with your family, estate attorney and financial advisor. Make your goals and wishes for the estate clear and set up the trustee that you think will be the best fit for your personal situation. By doing this you will have the peace of mind knowing that your wishes will be followed and that your family will be taken care of in the way that you want.

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Special Needs Trust Workshop

 
 
Below is a link to a 3 part workshop on Special Needs Trusts held at St. Joseph's Hospital in Orange, Ca. The event is being organized by a parent that went through the process of setting up a special needs trust and now runs a conservator support group in Orange County.  
 
In short, special needs trusts are used for beneficiaries who are disabled, either physically or mentally.
 
I will be attending the Nov. 8th event for my own knowledge
 
 
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Planning Your Digital Estate

Deciding how to manage one's digital legacy has turned into one of the trickiest estate-planning tasks. Facebook status updates, blogs posts, tweets, digital music libraries and other digital remains may have significant financial or personal value to the families. Failure to plan ahead may prevent loved ones from recovering these digital items of personal value and information pertaining to bills or other financial liabilities. It could also leave your estate vulnerable to identity theft.
The first step to start navigating through this new world of digital estate planning it is important to recognize the obstacles one faces, such as all the legal terms of use and service of each online service provider. Providers differ in how one can handle accounts of deceased users. Yahoo for example, will terminate your account upon your death if a certificate is submitted. Google recently introduced a new feature allowing users to specify the termination of account data should the account be inactive for a certain period or passed along to specific individuals.
Some accounts that you access online do not pose an estate-planning challenge. Financial institutions do have clear procedures an account holder's death. Always check the terms of use and inquire what will happen to your account in case you pass away.

Retrieved from Kiplinger's Retirement Report

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