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FERS Sick Leave Conversion
The National Defense Authorization Act (HR 2647) was signed by the President
that now allows FERS employees similar sickleave benefits as CSRS employees.
However, the credit is phased in with a 50 percent credit for those who retire
now and full conversion after January 1, 2014. Go to our
Sickleave section for complete details and a
conversion calculator. More to come.
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Probate is the formal and legal process that States require to
transfer your property to your heirs after you die. There are a number
of probate avoidance techniques available to everyone and most are very
easy to set up and cost nothing but your time to initiate. The purpose
of avoiding probate is to free up your estate from lengthy court
proceedings and legal fees. Typically, probate fees cost 5% or more of
the value of the estate property.
Read on for complete information.
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Probate Avoidance Menu
The book,
Plan Your Estate
 states that, "Probate is the name given the legal
process by which a court oversees the distribution of property left by a will."
The average probate proceedings take a year before the estate is actually
distributed.
Probate delays asset
distribution to your heirs, wastes your beneficiaries inheritance and it is a
windfall for attorneys who can charge high fees to transfer property to your
beneficiaries under probate proceedings. There are simple ways for you to avoid
probate and this section
describes basic probate avoidance and estate planning techniques that all can
use.
Probate is also public
and your will is registered at your local courthouse for all to examine and
read. However, If you transfer property outside of probate through a trust or with Joint Tenancy,
living trusts or beneficiary and payable-on-death account designations, the
transactions are kept private. Property passed outside of probate lets your
spouse and loved ones get their inheritances quickly after your death, often
within weeks, instead of a year or longer that is required by probate laws.
There are times when probate is to your advantage such as having a lot of
debt, complex financial transactions or litigation pending. Read
Plan Your Estate, Chapter 8 for complete information on this subject.
Don’t confuse Probate with Estate Taxes. Avoiding probate won’t avoid estate
taxes if your estate is at or above the minimum federal estate tax threshold, currently
$3,500,000. Review the "Estate Tax” section in
Plan Your Estate for comprehensive tax guidance. For example, couples could own property individually, jointly
or property could be owned through a trust. You need to identify how your
property is currently registered and then you can evaluate which probate
avoidance methods to use for each asset. Look at the deed to your home to see
how your home is registered. Joint Tenancy can be listed a number of ways and
it varies from state to state. For example, in Pennsylvania a title registered
in the names of both parties such as "John Smith and Jane Smith Husband and
Wife" is considered joint tenancy. Review "Joint
tenancy" for more details and if you have any questions about how your title
is registered contact the lawyer or title company that closed your sale or
simply contact a local title company and ask them if your registration – the way
it is stated on the deed – is equivalent to joint tenancy.
Compile a List all of the
following accounts and assets that you own and review the sample
Asset Allocation Chart listed below. Use
our free downloadable Asset Allocation
Chart to assign asset registrations that meet with you and your spouse's
desires.
- Bank accounts
- Bonds
- Certificates of Deposit
- Homes
- Principal residence
- Vacation home
- Insurance policies
- Money Market accounts
- Mutual Funds
- Vehicles
- Recreational vehicles
- Cars
- Retirement accounts
- Stocks, bonds, savings bonds, etc.
Asset Allocation
Chart
This chart lists who receives assets when either partner dies. Review the
chart that follows carefully and then read the
comprehensive discussion provided for this chart to clarify any questions
you may have. Also, review the book
Plan Your Estate
for detailed information on property ownership. The rules
change somewhat depending on whether or not your state is governed by “Common
Law” or “Community Property” laws. Download our free
downloadable Asset Allocation Chart (a
Word document) that you can use to assign ownership and beneficiaries, etc.
Terms
BEN = Beneficiary
JT = Joint Tenancy
POD = Pay-on-Death or TOD Transfer-on-Death
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ASSET |
Trust/
JT/POD |
Estate
Spouse |
To
Heirs |
Comments |
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JOINT TENNANT ASSETS |
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Home Value |
JT |
$120,000 |
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Home Contents |
JT |
$45,000 |
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Resale Value |
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Bank Checking Account |
JT |
$1,000 |
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Money Market Savings |
JT |
$5,000 |
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Stocks |
JT |
$25,550 |
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See attached list |
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Cars-Chevy & F150 Ford |
JT |
$22,000 |
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Current Value |
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Sub
Total |
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$218,550
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Spouse’s Assets |
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Stocks (All holdings) |
TRUST |
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$15,000 |
See “Living Trust” |
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IRA |
BEN |
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$45,000 |
50/50 Son/Daughter |
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CDs |
POD |
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$10,500 |
" |
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Checking Account First national |
POD |
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$1,200 |
“ |
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Credit Union Savings |
POD |
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$2,300 |
“ |
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Insurance Policy |
BEN |
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$25,000 (Husband) |
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Sub
Total |
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$73,500 |
To Children 50/50 |
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Retiree’s Assets |
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Stocks (See attached chart) |
TRUST |
$25,000 |
$25,000 |
See “Living Trust” |
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Brokerage Account |
POD |
$25,000 |
0 |
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Savings Bonds |
POD |
$30,000 |
0 |
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Credit Union Savings |
POD |
$10,000 |
0 |
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Thrift Savings 401K |
BEN |
$100,000 |
0 |
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FEGLI Life Ins (Gov’t) |
BEN |
$150,000 |
0 |
Reduces after 65 |
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Life Insurance Policy #2 |
BEN |
0 |
$25,000 |
Half to each child |
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Life Insurance Policy #3 |
BEN |
$25,000 |
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Sub
Total |
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$365,000 |
$50,000 |
$25,000 / child |
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Spouse’s Estate Assets |
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$583,550 |
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Analysis: If the
retiree dies first his spouse’s estate would equal $657,050
the sum of $583,550 plus her $73,500 in assets in today’s dollars.
Each child would receive ½ of $50,000 or $25,000 each.
If his spouse dies first all her stocks and cash accounts would go to
the children leaving them $73,500 or $36,750 each. If
the spouse dies first the remaining assets would equal $458,550,
all joint tenancy assets, retiree's assets less his insurance, plus
his wife's insurance policy value. At age 67 the retiree's FEGLI
Insurance decreases to $34,000. His spouse’s estate at age 67 would
decrease by $116,000 leaving her with $511,050 in
today’s dollars if he would die at age 67 or later. |
Anyone can give property away during their lifetime to whomever they choose.
Gifts are a good way to reduce your estate, they are easy to do, and if your
estate is large enough you can save on estate taxes. The downside to gift giving
is that after you give property away it is gone forever. Currently, large gifts
of over $13,000 per year per person require you to file a gift tax return with
the federal government and if you give gifts to minors the gifts are subject to
special rules to keep them tax-free.
Gifts are exempt from gift tax for gifts of $13,000 to any one person per year.
A married couple can give $26,000 to any person per year tax free, $13,000 each
from the husband and wife. The one exemption is that you can gift tax-free any
amount to your spouse. If you pay your children's or grandchildren's tuition or
medical expenses those gifts are tax free as well. Any amount that you donate to
tax-exempt charities is also tax free.
There are many considerations and potential tax savings possible with gift
giving. You need to thoroughly understand the options.
Plan Your Estate describes all of
your options, their advantages and disadvantages. For example, you need to aware
of the tax consequences of gifts to minors, special gift tax rules, and state
law differences. This book describes Gifts and Gift Taxes in Chapter Fifteen.
Go to Detailed Asset Allocation Chart Discussion
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Back to Financial Planning Menu
Back to Home Page
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