Update: Bear in mind that much of what follows applies specifically in the state of Arizona. Each state has its own laws and regulations about the way property is held by more than one person, wills, and how heirs and appointed representatives can access, manage, and dispose of a deceased person’s property. You should check with a lawyer in your state to learn the best ways to pass down real estate and financial assets and how to make your wishes apply when you’re incapacitated.
So, when my lawyer and beloved tax preparer announced that she’s retiring, it crossed my mind that it’s been quite some time since my will was redone. It sets up a trust that expires when my son turns 21…and he’s now almost 35.
This morning I met with a Scottsdale lawyer and learned a number of interesting things. My vast financial holdings, of course, are so…uhm, less than infinite that they’re not very complicated. The main things I learned are these:
1. When a house is held in joint tenancy and one person dies, the other person gets title to the property without having to pay taxes or jump through probate hoops.
For reasons unknown to me, M’hijito and I are tenants-in-common on the downtown house. That entails a little more complication after the demise of one person. I don’t remember why we elected to do that…there may have been a reason. But since that house is going to have to be dealt with sooner than later, I expect the reason is moot.
2. When you own a house free and clear and there’s a single person you’d like to have inherit it, you should designate that person as the beneficiary for the house. Then he or she gets it without paying taxes on it and without hoop-jumping.
3. Same is true with bank accounts. If the heir is designated your beneficiary in the bank or credit union’s records, all the person needs is a death certificate to get access to the funds.
4. And you should also designate a beneficiary to your 401(k), 402(b), IRA, and mutual funds. Similarly, this avoids probate and gives the person immediate access to those funds that aren’t tax-deferred.
5. You now not only need a medical power of attorney to go with your living will, you need a mental health power of attorney. This allows your designee to get mental health care for you should you suffer dementia to the point where you need hospitalization.
6. Of course, you still need a durable power of attorney to permit your designee to pay your bills and otherwise deal with financial matters when you’re incapacitated.
7. If you haven’t updated your medical and durable powers of attorney recently, you need to do so ASAP. Recently the laws were changed so that some specific paragraphs need to be set out and initialed to make these instruments do what they’re intended to do.
8. When you owe on a mortgage, it’s a good idea to have a term life insurance policy that will provide the heir with enough to cover the cost of the mortgage. In M’hijito’s case, it’s de rigueur, since most of my funds are now in tax-deferred instruments, and he would lose about half the money to taxes if he had to withdraw enough from my IRAs to make payments. Besides, I want him to be able to keep the IRA funds until he reaches retirement age, since it’s very unlikely Social Security will be available for him.
She urged me, however, to talk with a real estate lawyer before taking out an insurance policy to cover the upside-down mortgage on the downtown house. Since I won’t be able to work much longer—certainly not at the pace I’m doing now—it may be in our best interest to consider a strategic default now, not later.
{sigh} Really, I don’t want to have to default. But neither do I want my son to be left holding the bag, which is where he’s going to be after I die, unless the credit union agrees to drop the principal to something near what the house is really worth. Even if he collects enough insurance to pay off the mortgage, all that means is he has to throw $210,000 of insurance money down the toilet. Better that than that he should be shackled to unaffordable payments that are also flowing into the same black hole. But neither option is good: they both amount to financial self-immolation.
Wow. What a world! Ten years ago, if you’d said I would ever seriously think about walking away from a debt, I would have said you were nuts. Now it seems like it’s nuts not to seriously think about it. Who would ever have imagined such a thing would come to pass?
for a box of it!
for around $2.00.
this thing, for example. Oboy do I want to try one of those! It’s called a “Ruby Stone,” and women all over the Web rave about it. Came across it on another site where a bunch of manicurists and their customers were doing some sort of dance to spring over it and decided it’s THE substitute for expensive pink emery boards whose sandpaper wears right off by the third use. I have a couple of glass nail files which work well and don’t wear out readily. But these women say the Ruby Stone is even better. It only costs $1.84, meaning that the cost of shipping, if you’re paying it, would about quadruple the price. So: free shipping? Junk acquisition!
for only $8.02!), you could very well rack up another $848.16 in a year’s time.