Milestone Financial Planning, LLC

Q: Second marriages: How do I protect my spouse without disinheriting my kids?

A: A great way to protect your spouse without disinheriting your kids is to title your home and your non-qualified investments in a revocable trust with what is known as a “qualified terminable interest property” (QTIP) provision. This trust allows the income and principal of the trust to be used for your surviving spouse’s needs, as defined in the trust (commonly, for “health, education, maintenance and support”), which covers most normal expenses.

At their death, the trust calls for the remaining assets to pass to your children or other beneficiaries.

Your spouse will receive a step-up in basis in the assets to fair market value at your death, and there will be a second step-up at your spouse’s death, minimizing any income taxes from the sale of the assets.

If you own property in a state that is not New Hampshire (including Massachusetts or Maine), you will want to consider state estate tax considerations.

Trusts do come with costs, so are best established when assets exceed $500,000.

There are other considerations for other types of assets (including retirement accounts); you can read our full article on this topic.

–— Jennifer L. Climo, CPA, CFP®, MSFP

Q: How do you ensure that your estate executor, financial power-of-attorney and other appointees in your estate plan know how to find the documents they need to properly execute their roles?

A: It used to be that when a loved one died, the executor of the estate was able to piece together a person’s financial affairs by looking for documents in a desk drawer, safe or filing cabinets. They could use the information they found to settle the affairs of the person that passed. Now, most things are stored electronically on personal computers, hard drives, cloud drives, etc. Electronic records are a great storage solution for someone while they are living but what happens when you’re gone if no one knows how to gain access to the records or even where they are stored? At any age, you owe it to the people you appoint to give them clear directions on where your important financial documents are stored and how they can gain access. Otherwise, you’re setting them up for failure. There are a handful of online digital legacy planning tools available to help with this process. I personally use a combination of Trustworthy and a spreadsheet. I also have a set of instructions that clearly give a step-by-step action plan for how to access my important documents and where the list of my financial accounts is. I’ve also set up digital legacy permissions for my phone, personal computer, cloud storage, password manager and personal email. Finally, I include guidance on a number of soft things like where all of my photos are stored, what I want for burial/funeral arrangements and what do with my personal effects. Doing all of this can be time-consuming but the alternative is that you leave a mess for your appointed fiduciaries to deal with.

–— Jonathan C. Harrington, CFP®, MSFP, MST

Q: What are some effective ways to integrate charitable giving into your estate plan?

A: Integrating charitable giving into your estate planning allows you to make a final gift to causes you care about and serves as lasting demonstration of your values. Doing so need not be complicated and does not require large sums or disinheriting other heirs. A few strategies you might consider include:

• Naming a charity as a beneficiary of a pre-tax IRA account. This is simple to set up, and can reduce the taxes due on your estate.

• Making a bequest in your revocable trust document. If you have a trust speak to your attorney to create a simple amendment designating a portion of the trust’s funds to be donated to charity. If you don’t have a trust creating a provision like this can be easily added to the trust at inception.

• Making a bequest in your will. If your estate plans do not include a trust you can name a charity directly in your will. Keep in mind that your will becomes public record during the probate process, you may want to use another method if you want to keep your plans private.

A qualified advisor or attorney can help you explore these and other strategies further.

–— Daniel Koppel, CFP®, MSFS