Year-end financial planning guide: Moves you need to make before Dec. 31, part 2

WASHINGTON — Last week in my Year-End financial Planning Guide, I focused on moves you should consider to lower your taxes for 2015 before it’s too late. This week, the focus is on estate planning.

Many people are under the misconception that estate planning is only for the wealthy. On the contrary, preparing for life’s unknowns is one of the most loving things you can do for your family.

Here are a few ways to get started:

1. Update your estate plan

If you’ve had any major life changes in the past year — a new baby, a divorce, a marriage, or one of your future heirs passed way — you should update your estate plan with an attorney.

We recently met with clients who paid for trusts to be drafted years ago but had never funded the accounts, and the people they named in their trust to be successor trustees had both passed away.

Read: Offit Kurman Common Estate Planning Mistakes

2. Contribute to a 529 plan

The holidays are right around the corner, and if you have a grandchild, niece or child that seems to have everything, consider making a 529 plan contribution on their behalf.  This is a great way to use the power of compounding interest to help a loved one pay for college as the growth in the account is tax-free (assuming it’s used for qualified education expenses).

To find 529 college savings plans in your state and to compare plans visit

3. Use your 2015 annual gifting limit before Dec. 31

You can give any number of people up to $14,000 in 2015 without incurring any gift tax. If you are married, then you and your spouse can give up to a total of $28,000 to any number of people.  Turbo Tax has a very good explanation of The Gift Tax rules.

4. Have a plan (and share it with family) should you be unable to make medical or financial decisions

While you are gathered with family, it’s a good time to talk to them about your wishes, should something happen to you if you become unable to make financial or medical decisions for yourself. There are two very important documents that you and your spouse or partner should have in place:

  • Financial Power of Attorney:  Creating a financial power of attorney lets you designate someone to make financial decisions on your behalf, should you become incapacitated or unable to make those decisions for yourself.  You can decide the scope of powers to grant your “agent” from access to your financial accounts to managing all your financial affairs.  Without a financial POA, the court will step in and appoint someone to take care of these, it they may not be the person you would choose.  This is especially imperative if you have a non-spouse partner.
  • Medical Power of Attorney: Like the financial power of attorney, the medical POA lets you choose who will make medical decisions on your behalf if you are not able to make those for yourself. It allows your designee to have access to your medical records, consult with your doctors and admit you to a hospital or long-term care facility, among other things. He will also see that your advanced medical directive is carried out.  In this important document, you provide specific end-of-life instructions for what type of care you want or don’t want.

For more information, read: The Durable Power of Attorney: Health Care and Finances

5. Update your beneficiary designations

If you have a life insurance policy, or any type of retirement account, you likely have signed a beneficiary designation. This is an extremely important piece of paper because who gets this money is not determined by your will, but who you named on this form.

If there were any changes in your life, like getting married or divorced, or having a child and then more children, it’s time to revisit who’s listed as your beneficiaries.  To find out who you currently have designated, contact your insurance company (for life insurance), employer (for 401ks) or brokerage firm (for IRAs).

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