Most of us own some financial assets that we have not used or relied on for a long time. Just like we do “spring cleaning” on our yard or house, sometimes we need to clean up our financial statement. If you have assets that are not earning interest or would cause delays for your personal representative if you were to pass away or need long term care, you can do yourself and your family a big favor by selling these assets and reinvesting the proceeds into a more liquid investment or account.
For example, many people own one or more United States Savings Bonds. They may have owned these bonds for many years. Often, the income from the bonds is accruing and the client has never cashed the bonds or used the income. In some cases, the bonds are so old that they are no longer accruing income. Transferring or liquidating U.S. Savings bonds can cause delays when settling a decedent’s estate. In many cases, it is far easier for the owner of the bonds to cash them than it would be for an executor or agent under a power of attorney to dispose of the bonds.
Another asset that may need to be moved is a lake lot originally purchased to use for a vacation home. Sometimes people have been paying property taxes for years on such a lot. If they took a minute to think about it, they would admit that their circumstances have changed and they will probably never even visit the lot again. Why not sell the lot and turn it into cash that can be used or invested? Disposing of the lot would remove that responsibility from loved ones who may be faced with the hassle of selling the lot at a time when they are trying to focus on the daily care of you or your spouse.
Life insurance is another example of an asset that many seniors still own but don’t need. If life insurance is to be owned, it ought to have a purpose such as providing funds to pay off debt or fund a college education for children. By the time people retire, their need for life insurance may have disappeared. In estates large enough to be subject to Federal Estate Tax ($3.5 million for decedents dying in 2009), life insurance is included in the decedent’s taxable estate. I recently handled a large estate in which a few small life insurance policies were the difference between paying estate tax and avoiding it. For smaller estates, if one needs to qualify for Medicaid to pay nursing home bills, life insurance is an asset that can prevent qualification. So if you have life insurance but you don’t have a prearranged funeral plan, why not cash in the policy and use the proceeds to purchase a prearranged funeral arrangement? If you have a term policy, consider assigning the policy proceeds to the funeral home. If you are fortunate enough to have a large estate, consider whether you even need life insurance. If not, consider transferring the ownership of the life insurance policy to your children.
Some people have possession of the actual share certificates of common stock in publicly traded corporations. Certificated shares of publicly traded companies require extra time and procedures to probate, sell or give to a family member and therefore represent expense and delay. In most cases, it will be far more convenient to hold shares of stock in a brokerage account than to have possession of the certificates. Selling or transferring brokerage assets at your local broker’s office is far more convenient than communicating with registrars and transfer agents at large financial institutions in New York City.
These are just a few examples of assets that the owner could have done something about that would have saved a family member a lot of time and expense. So make a list of all of your assets. Take a critical, thoughtful look at each asset. Evaluate the performance of the asset, your need for it and consider the difficulty or delay that might be experienced by your family members in dealing with that asset if you pass away or experience a decline in health. The more you can do to simplify your financial statement, the better off your family will be if something happens to you.This article was written by Craig W. Watson, Attorney