What Do You Own?
John and Helen have been thinking about updating their estate plan. They called and made an appointment with Paul Plant at Harwell & Plant. John and Helen updated Paul on their current family situation. They have three children who are now on their own and successfully pursuing careers. After listening to the short update on the three children, Paul turned to a review of John’s and Helen’s property.
Paul: “Before we update your plan, we need to make sure we have a complete list of your property. Let’s start with a few questions. Do you have a home? Are there bank or security accounts?” John: “Well, we do have our home. It’s in both of our names. There is our joint checking account and a savings account. I have one savings account with myself and our son Bill. Helen has a savings account with our daughter Susan and another one for Helen and our daughter Linda. We have some mutual funds with a large financial company. I think that’s in both our names.”
Paul: “That’s a very good start. Now most people also have a pension or retirement plan. Do you have both of those?” John: “Yes, I have a 401(k) at my work and Helen has an IRA. She had a 401(k) at one time and we rolled it over into an IRA when she changed jobs. I have a life insurance policy and I think it pays Helen $300,000 if something happens to me.”
Paul: “So you have a life insurance policy. Do you know if it is a whole life, universal life or a term insurance plan? If it is a whole life or a universal life, it probably has a certain amount of cash value now.” John: “I am not real sure but it probably is a whole life plan. We bought the policy about ten years ago and I make payments every month.”
Paul: “Is there any other real estate or other securities accounts?” Helen: “When my dad passed away, he owned 640 acres of timberland. It was divided three ways between my brother, my sister and me. My share is still in my name. We don’t get income from the timberland because we only cut enough timber to pay the property taxes.”
Paul: “Thanks, Helen. That’s helpful to know. What about personal possessions? You probably have automobiles, furniture, perhaps a collection of items or a recreational vehicle?” John: “Yes, we have two cars. I think my car is in my name and Helen’s car is in her name. Of course, we have furniture in all of the rooms of our four-bedroom home. We also have an RV that we use to take trips in the summer. I think it is in both our names.”
Paul: “And are there any other types of ownership interests or business interests? Are either of you likely to receive an inheritance in the near future?” Helen: “Yes, my mother is still living. John’s parents have passed away and we received a moderate inheritance when his mom passed away. When my mother passes away, I will probably receive some additional property. When dad passed away, half of the timberland was given to the three of us and mother has the other half. When she passes away, I would guess that the three children would each receive a third of the timberland that she owns.”
Paul: “This is a very good list of the assets. Let’s now try to estimate the values of your property. The value will not be the initial amount you paid for each property.”
Paul: “John and Helen, there is just one more part to this inventory process. While I know you both are very careful and conservative in your financial affairs, some people have debt. Do you have a home mortgage? Is there a loan on a car or on your recreational vehicle? And do you have an ongoing credit card balance?” John: “Yes, we do have a mortgage on the home. It still has a balance of $100,000. There is a loan on my car of about $3,000. Helen’s car is paid off and we pay off our credit cards each month. Thanks very much for patiently working through the inventory with me.”
Why the Inventory Process is Important It takes time and effort to make a list of your property. However, there are several important reasons why that property list is a crucial part of a successful plan. The list enables you to identify your assets, estimate the value, understand the best potential benefits for your children or other heirs, plan to reduce your taxes and set up goals for your children. Identification of your property is very important. The inventory will be an excellent guide for the executor. Valuation is important. The values are estimates, but frequently the total value is significantly larger than you may realize. Benefits For Children and Other Heirs Benefits for children and other heirs are best determined after you list all of your property values. It’s also extremely important to understand how the property is owned. Some of the property in joint ownership will be transferred under state property law to the survivor. Only the property subject to the probate process is transferred by your will Because many people have substantial assets in their 401(k), IRA, other retirement plan or life insurance, and these assets are all transferred by the beneficiary designation, it is essential to help your attorney know how the property is titled and who the beneficiary is of the various retirement and insurance plans. The correct beneficiary designation enables your children or other heirs to receive benefits.
We have prepared a Will Workbook to assist you in making these determinations. We will be pleased to send you a copy at no charge. You may call us at 931-762-7528, mail your request to Harwell & Plant, PO. Box 399, Lawrenceburg, TN 38464, or email us at firstname.lastname@example.org. Published September 4, 2015, by The Foundation of the Tennessee and Memphis Conferences of the United Methodist Church.