A View From The Balcony

If your family was like mine, financial discussions were few and normally short.  Here is a scenario:

Child: I need money for so and so.  Mom: Go ask your Dad.  Dad: We can’t afford it. 

End of discussion.

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That lack of financial education has contributed to a national financial literacy crisis.  Furthermore, advice garnered from non-financial professionals like neighbors, friends and family members has led to several misperceptions.  Here are some for you to consider:

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1: “What’s his is hers and what’s hers is his.”  Not so true in South Carolina.  SC is not a community property state so what’s his is his and what’s hers is hers unless it is owned jointly or assigned to someone else.  In other words, you cannot access your spouse’s accounts just because you are married. One solution is a Durable Power of Attorney which gives the Attorney in Fact the right to act on financial accounts on behalf of the grantor in the case of diminished capacity.  You should consult an attorney specializing in will and trusts or estate planning to advise you.

 

2: “I must use the life insurance proceeds to pay the funeral home.”  The correct term would be “may.”  If you are the beneficiary of the life insurance policy, it pays directly to you, bypassing probate.  You may do with it what you choose.  Of course, the funeral home may file a probate claim against the estate if they are not paid.  The chances are they had you sign a document guaranteeing payment before they performed the services, making you personally liable for payment.

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3: “I should go ahead and gift my children my stock and real property to save them aggravation when I am gone.”  While gifting does mitigate the possibility of sibling conflict, it may also create a significant tax liability* if they sell the property after your death.  Your cost basis carries over with the gift so your children may be subject to capital gains taxes on the amount of the sale that exceeds what you paid for the property.  If you allow the property to pass to the children as an inheritance, they will normally receive a “step up in basis” meaning their cost basis for the purpose of a sale will be the value of the property on the date of your passing.  They may have to pay little or no taxes.  You should consult your tax advisor before gifting.

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4: “I’m the Executor so I get everything.”  I have actually heard this said.  The duties of the Executor or Personal Representative of an estate are defined by law.  Basically, the Executor is charged with carrying out the wishes of the deceased pursuant to the Last Will and Testament, coordination with and reporting to the Probate Court, dealing with creditors who file claims against the estate, facilitating tax preparation on behalf of the descendant and, lastly, dispersing remaining assets based on the Will.

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5: “I don’t have an estate.”  Everyone has an estate.  Your estate is everything you own on the day you die.  It may be 3 mansions and a billion-dollar portfolio or just a pocketknife and a can of beans.  I have witnessed some of the worst family fights concerning some of the most financially insignificant estates.  It is not as much about the assets as it is about sentimental value, sibling rivalry and the emotions of losing a loved one.  Save everyone a lot of heartache and have your documents prepared and communicate your wishes to your family.

 

 

William Cary Rowell, Financial Advisor with Eagle Strategies LLC, A Registered Investment Advisor. Registered Representative with NYLIFE Securities LLC (Member FINRA/SIPC) A Licensed Insurance Agency.

628 Chestnut Centre

Suite 9

Myrtle Beach SC 29572

Bus office 843-449-7805

 

 

*Neither Eagle Strategies LLC, nor its advisors provide tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.