Pennsylvania Trust

New Year, New Resolutions

Photo of Leslie G. Bohner.I read an article this week which stated that New Year’s resolutions to get in shape generally fade by the end of the third week in January and the overcrowded gyms start to return to normal capacity. But that does not mean you can’t set and keep a resolution to get in “financial shape” in 2015. It doesn’t cost anything, like a gym membership, and no physical activity is involved. Here are some suggestions to get you on the right path:

Review Your Estate Plan

Don’t let the current high estate tax exemption amounts ($5,340,000 per individual or $10,680,000 for a married couple) lull you into thinking you can ignore your estate plan. If you haven’t reviewed your plan since the enactment of significant tax changes in the American Taxpayer Relief Act of 2012, now is a good time to do so.

There are also many non-tax reasons for reviewing your plan. Does your plan meet your intent for self, family and community? Have there been significant changes in your life? Do you have creditor protection concerns – either for yourself or family members – that would warrant placing assets in trust? Do you have current powers of attorney so that someone can act for you if you are unable to do so?  Pennsylvania law pertaining to powers of attorney changed dramatically in 2015 . Although existing powers of attorney are valid, you should consider whether an update is necessary. Additionally, if you have college-age children, make sure they have powers of attorney in place so you can act for them if needed.

Maximize Retirement Plan Contributions

I recently spoke to a client who was not participating in his employer’s 401(k) plan. I explained to him that not only was he losing a significant tax benefit, he was also leaving his employer’s contribution match on the table. Don’t let this happen to you. Make sure you are maximizing contributions to your retirement plan. For employees who participate in 401(k) and 403(b) plans, the annual contribution limit for 2015 has increased to $18,000, and the catch-up contribution amount for employees age 50 and over has increased to $6,000. Additionally, if you contribute to an IRA, the annual contribution limit is $5,500 ($6,500 if age 50 or older).

Consider Funding a 529 Plan

Funding a Section 529 Plan is an excellent way to save for college for a child or grandchild. The money in the plan grows free of federal and state income tax, and all withdrawals used for qualified higher education expenses are exempt from income tax. As part of the tax agenda set forth in his State of the Union Address, President Obama proposed eliminating the tax-free treatment of withdrawals from Section 529 Plans, with “grandfathering” of existing plans. Although it is difficult to predict whether this proposal will ultimately receive Congressional approval, we recommend funding a plan now so you don’t miss the opportunity. An individual can contribute up to $70,000 in a single year ($140,000 for a married couple), utilizing five years’ worth of annual exclusion gifts.

Are You Adequately Insured?

The New Year is always a good time to review your insurance coverage. Ask your agent for an evaluation of your current homeowner’s and auto insurance policies. For example, if you own a property in Florida, do you have adequate flood, windstorm, and hurricane coverage?  Have you purchased new items of jewelry or artwork that should be scheduled? Are your automobile insurance limits sufficient? Do you have adequate life insurance? Do you have a copy of each policy, and is the beneficiary designation up to date? Should you have a life insurance trust? Finally, consider whether it makes sense to purchase long-term care insurance.

A Word About Passwords   

The simple task of online holiday shopping made me realize that I had misplaced or forgotten many of my passwords. Ask yourself this question:  If I were in an accident or died today, how would my family and fiduciaries access my digital assets? The simple answer is that if they cannot find the passwords, they cannot easily gain access. Start by making a list of your current passwords to enable access to your online accounts and digital property. Store the list in a safe place. Consider electronic methods of storage. A number of web-based services, such as AfterSteps, AssetLock, Deathswitch, and EstateLogic, allow you to store electronic lists of passwords and provide mechanisms for authorized family members or fiduciaries to access such information. The Uniform Law Commission recently approved the Uniform Access to Digital Assets Act that addresses many issues associated with post-death access to digital assets. Until that or a similar law is adopted in your state, however, the safest bet is to ensure that someone you trust can locate your passwords.

Please contact a member of your Pennsylvania Trust team to help put your plan for the New Year in place.

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