The most trending tax and financial industry issues.

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Lane Keeter, CPA

Partner: Tax Consulting, Estate Planning, and Heber Springs Managing Partner

Taking a Trip? Time for a Financial Planning Assessment!

As I write this, it's Spring Break time, with the resultant trips to the beach, ski slopes or favorite amusement parks for many families. Even more are in the planning stages for summer vacation trips.

If that's you, my guess is that while you're busy lining up travel options, making sure you don't break the budget and arranging to be gone from work and other responsibilities, you probably aren't giving much thought to financial planning concerns.

But perhaps you should, if you expect to be away for any length of time, and especially if your loved ones aren't traveling with you. Let me suggest that it makes sense to do an inventory, and see if your critical planning documents are in order before heading out for some R & R.

The following are some basic financial and estate planning actions you should consider before you go (or anytime really):

Life insurance. There are a couple of considerations with regard to life insurance.

First, are the beneficiaries still as desired or do they need changing? Be sure and look at all your policies. Have major life events occurred, such as deaths, births, adoptions or divorces that change the landscape? If so, don't leave town without making the necessary beneficiary changes.

Second, do you have enough life insurance or has your financial situation changed since you last bought or updated a policy? You may need to contact your agent to purchase more or change amounts.

Retirement accounts. These also have beneficiaries. Be sure you have the correct primary and contingent beneficiaries designated for IRA, 401(k) and other retirement accounts. This will protect your loved ones according to your desires.

It's important to understand that failure to have beneficiaries designated can result in those assets ending up in hands that you do not intend and can cause unintended and costly tax consequences.

Also, if you have stepchildren or long-time relationships other than marriage, listing beneficiaries by name, together with your last will and testament, can help prevent accidental disinheritance and squabbles over the inheritance.

Will. If you don't have a will, get one! If you do have a will, as above, you need to check your beneficiaries to make sure they still are as you wish. If you have acquired or lost property since you last updated, get necessary changes made.

Also, be sure your executor is still the one you want and is still willing and able to serve in that capacity.

Power of attorney. A power of attorney authorizes someone to make critical decisions and manage your assets for you if needed. What is known as a springing power of attorney becomes valid only under specific circumstances, such as if you become incapacitated.

Another type, known as a health care power of attorney, appoints someone to make critical decisions regarding your medical care in the event you are unable to express your wishes yourself. Examples of this are decisions about what treatments to authorize, or whether to remove life support.

What happens if you don't have a health care power of attorney in place? Typically, medical officials must defer to the wishes of your legal next of kin, and that may not be what you want.

Advanced health care directive. In addition to having a springing power of attorney to enable someone you trust to make critical decisions on your behalf, one of the most loving things you can do is provide your loved ones with any end-of-life or crisis care wishes you have.

Among the questions you should consider are do you want to:

  • Be kept on life support when chances of recovery are very low;
  • Have a "do-not-resuscitate" order placed in your file;
  • Discourage your doctors from "heroic measures" to prolong your life;
  • Donate organs?

An advanced health care directive sometimes called a living will provide the guidance needed by your loved ones or other people whom you appoint.

Homestead Documents. You might consider signing a ìDeclaration of Homesteadî. A Declaration of Homestead is a legal document which can help to protect your house and property in times of economic hardship.

In some cases, this may allow you to pass your home on to your heirs, even if there is a legal judgment against you. This can happen, for example, due to high medical bills as a result of end-of-life care.

Not all states have such laws (Arkansas does) and they vary from state to state for those that do, so consulting with an attorney is advised.

Probably, if you are like most, you are not thinking about the possibility that you may not return from a trip, or could end up in the hospital for a lengthy stay. But every vacation season, sadly, we hear stories where something like this occurs, so before you go, take some time to make decisions and put your wishes in writing. It's a great gift for those you may leave behind!

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