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CNN Live Saturday
"Dollar Signs": Take The Worry Out Of Wills and Estates
Aired March 13, 2004 - 16:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WHITFIELD: "Dollar Signs" is straight ahead, but first, here's what's happening at this hour. As thousands of people in Madrid, Spain protest the investigation into Thursday's deadly train bomings, word comes of 5 people being detained in the case. Spanish investigators say 3 Morrocans and 2 Indians are being held in connection with the explosions that killed 200 commuters and injured more than 1,500 others. Officials caution the investigation is still ongoin.
Three Iraqis were killed in a boming in Tikrit today, the same day the U.S. announced plans to tighten security along Iraq's borders. Paul Bremer, the U.S. civilian administrator in the region announced a new program designed to keep terrorists from pouring to Iraq. The plan would increase the number of security personnel along the border as well as identify travelers seeking entry.
Supporting U.S. troops serving in harms way. Blue Star Mothers of America held this rally today in Washington to honor troops in Iraq, Afghanistan and other hot spots around the world. Former Senator and presidential candidate, Bob Dole, spoke at the event.
A wreath laying ceremony is honoring President John F. Kennedy today. The Ancient Order of Hibernians has performed the tribute at Arlington National Cemetery for 25 years now. Kennedy is the only U.S. president belonging to the Irish American group.
Welcome to DOLLAR SIGNS. Today we're going to talk about a topic many people are reluctant to deal with, wills and estates. Our guests are going to take some of the mystery and worry out of such a complicated matter for many of us.
Stephen Maple is a law professor with the University of Indianapolis, and he's author of "The Complete Idiot's Guide to Wills & Estates". Mike Kavanagh is a certified financial planner and the radio talk show host of "Money Matters in Atlanta.
Good to see both of you gentlemen.
MIKE KAVANAGH, RADIO TALK SHOW HOST: Thank you.
STEPHEN MAPLE, AUTHOR, "COMPLETE IDIOT'S GUIDE TO WILLS & ESTATES": Thank you. Looking forward to it.
WHITFIELD: Does everyone need to get on board with getting a will or a trust or something in hand, Michael?
KAVANAGH: Absolutely. I think just about everybody. I think perhaps maybe a teenager doesn't. You can come up with exceptions. But just about everybody who considers themselves a working adult should have some kind of estate planning documents. And they're very, very important from the perspective of a certified financial planner. We think it's a basic foundation to financial planning.
WHITFIELD: Steven, there are a lot of people who are working who say I don't own any property, I don't have any kids. I really don't have anything to leave behind. That's what a lot of folks might say. What do you say to that?
MAPLE: I think that everybody needs to have a will, with the exception of like you said, teenagers. A lot of times people come to me for wills that may not have much in the way of worldly assets but they have young children. It's important to name a guardian in the will.
Plus you never know. I think sometimes we underestimate how much we actually own and how much might be transferred at death. So I'm encouraging anybody to have a will.
WHITFIELD: All right. We're getting a lot of e-mails already on this. Because it's a topic that so many people want to avoid talking about, but realize it's something they really need some help on. This, coming C. Sysko from Pennsylvania.
"Is it true that you can sign your home over to your children six month before your death in order to prevent a nursing home from taking your home?"
Michael, have you ever heard of anything like that?
KAVANAGH: Well, it's a legal question. I might defer to our author who may have more resources than I do.
WHITFIELD: OK, Stephen.
MAPLE: I suspect that what they're referring to deals with Medicaid. First of all, you don't want to be in that position. And Medicaid varies a little bit. But generally you have to dispose of your assets within three years before you're eligible for Medicare. So I'm not sure that six months before you go into a nursing home would do you much good.
WHITFIELD: OK. This coming from Laurie in Miami, Florida. She asks: "Would it be wise for a married couple in their 50s, with no children, to have a will and estate plan?"
KAVANAGH: Well, from the financial planning perspective I'm going to say, absolutely yes. Remember, it's not just a will. When you go to a lawyer, you're going to do an estate plan. And estate plan includes a lot of documents. For example it includes such as durable powers of attorney for medical care. Durable powers of attorney for my finances. And let's not forget living wills.
Here at CNN you've done a lot of stories about a tragedy down in Florida. And if someone doesn't have a living will they can find that there's a lot of -- well, a lot of grief that is caused by a very untimely event. And so I have all of those documents for myself and I would urge just about everybody to not only look at a will but look at all the other estate planning documents that are talked about in this book.
WHITFIELD: In fact, Stephen, there are many analysts and many lawyers who will say it really is one of the most loving things that you can do, even though it's something that a lot of folks don't feel comfortable about doing, but you know what? It's hard enough when a loved one loses somebody, you know, to have to go through a bunch of paperwork. At least all of this stuff is done ahead of time.
MAPLE: Well, I had a friend of mine who made a Christmas gift of a will that I drafted.
WHITFIELD: Wow.
MAPLE: And you know, I always thought that was kind of an upbeat way of approaching it.
The problem a lot of times in not having a will is the state may well dictate who gets your property. And that may not be what you're interested in, so, --
WHITFIELD: If anyone.
MAPLE: That's true. Usually there's some relative around that will collect the assets. But it may not be a relative you necessarily would want as your heir.
WHITFIELD: You put very delicately.
All right, well let's talk about how you actually get started. Because, Mike, there are an awful lot of like kits out there now where you can do it yourself whether you're online guidelines you can find. Is it really best to always make sure you get an attorney?
KAVANAGH: Well, I like the idea of getting an attorney, especially if there's any complications. But I also like the idea if -- you're not going to get an attorney, at least go out there and use some of these computer software programs. Buy the book that we're talking about today. Go to an office supply store and get some of the documents that are out there, and just fill them in and make sure they're filled in properly.
But what I do, even when I have someone who makes out their own documents, I would like them to take the completed documents to a lawyer for review.
WHITFIELD: And Stephen, about how much might it cost people to do this? I'm hearing everything from the hundreds and sometimes it could cost you into the thousands, depending on what you have.
MAPLE: I think that's probably true. It varies a lot. Usually if you have a simple will, and go to a general practitioner, that's probably the least expensive. And that may run $150 to $250. The more complex your estate is, you may have to go to someone that has a great deal of expertise. And that may run into several hundreds to thousands of dollars.
WHITFIELD: Katerina in Hawaii is on the telephone with us, with a question.
Katerina?
CALLER: Yes, good morning. Thank you very much for taking my call. I'd like to know if a husband makes a will, does state law override the will if it has illegal parts in it? Or, you know, if the wife has dowry rights and she's not included in the will? And does a power of attorney expire at the death of the spouse? Thank you.
MAPLE: OK. Two questions. The first one, many states, probably all of them, really, have the right of a spouse to elect against a will. It may vary from one-third to one-half. So that if one spouse cuts out another one, there's still a right to elect against the will as long as it's timely done.
Secondly, with durable powers of attorney, yes, they do expire at the death of the person granting the power of attorney.
WHITFIELD: Michael, anything you want to chime in on before we take a quick break?
KAVANAGH: No. That sounds great to me. You hear about will challenges all the time. It is not uncommon. That's for sure.
WHITFIELD: All right, hold tight real quick. More of your calls and e-mails coming up next on DOLLAR $IGNS. You can still send your questions to us, at dollarsigns@cnn.com.
(COMMERCIAL BREAK)
WHITFIELD: Well, welcome back to DOLLAR $IGNS.
Do you know that 75 percent of people who go to a financial planner do not have a will? My guests are helping make sure that you are not one of them. Stephen Maple is a University of Indianapolis law professor. And Mike Kavanagh is a certified financial planner in Atlanta.
All right, good to see both of you guys again.
There are lots of decisions that have to be made when getting your trusts together, wills, estate planning overall. Namely you've got to come up with an executor, you've got to come up with a power of attorney for health, executor. Lots of tough decisions to make.
So Stephen, as all of us try to figure out who we should name what are some of the characteristics that we need to be aware of as we try to name some of these people with huge responsibilities?
MAPLE: I usually suggest if it's a fairly simple estate, and you've got a couple, that each other is the primary. And then the secondary may be, again with a simple estate, one or more of the children. Usually if you select one or more of the children, you want to make sure they get along pretty well together.
If they don't, you may want to have some conscientious friend. The more complicated you may well want to have a bank serve as an executor, as well as a trust.
WHITFIELD: Wow, OK. Marsha from Arizona is on the phone with us, Mike. Perhaps this might be a question for you.
KAVANAGH: OK.
WHITFIELD: Marsha?
CALLER: Yes.
KAVANAGH: Hi, Marsha.
CALLER: I just had my will done, completely, power of attorney, durable power of attorney, executor, all of that. And now I'm going to court to change my name back to my maiden name. Do I have to have the will completely redone? Or will a codicil work?
KAVANAGH: Oh, gosh. You know, that's where I go to my attorney.
WHITFIELD: Sorry about that, Mike.
KAVANAGH: I want to be sure that I dot the Is and cross the Ts exactly the right way. And I guess that's a state-to-state type of answer. And that is where I pick up the phone, as a financial planner, and say, Stephen, what do I do?
WHITFIELD: That's right, Stephen?
MAPLE: Well, it sounds like you're an "also known as". A codicil probably would take care of you all right. In most states, if you're identifiable, even if you get married, divorced, and the name changes, that's sufficient. But I think I would suggest a codicil just to clean things up a little bit.
WHITFIELD: OK. Here's an e-mail from Gene of Santa Ana, California, asking: "I understand the current estate taxes are decreasing to zero in 2010 then returning to today's level in 2011. What is the proper estate planning strategy to deal with this?"
KAVANAGH: This is one of the biggest challenges of financial planners. We don't know what's going to happen. And so how do you plan for the future? You do the best you can. You have to assume that perhaps in 2011 it all does come back.
And so, what financial planner always does is sits there, and says, what's the worst that possibly could happen? And you try to make the best plans. You cannot make assumptions.
Of course, one of the nice things that would be great for my profession, when they do make the tax laws, if they would make them permanent. At least we'd know one way or the other.
WHITFIELD: From Oklahoma, Kathy is on the line.
Kathy?
CALLER: Hi.
WHITFIELD: What's your question?
CALLER: Yes, we were wondering, me and my husband got married, I have two children of my own. My husband has an adopted child for only two years, and we're wondering -- they never see each other, how are we to protect my two children? Because he's, you know, raised them, paid for everything, and you know, he's really wanting things left to them.
MAPLE: You really need a will. Since he hasn't adopted your children, essentially they're stepchildren. And they have no inheritance rights outside of a will in almost every state. So, certainly he needs to, if that's what he wants to do, prepare a will, and name them in the will, as a beneficiary.
As far as the adopted child, certainly you can -- shall we say, cut out a child in a will. Usually what I recommend is that you acknowledge the child's existence, and then simply indicate that that child is otherwise provided for.
WHITFIELD: All right, very good. Guys, you know, sometimes it's really difficult trying to figure out what are some of the questions you need to ask when it comes down to asking an attorney for some advice. In fact, Jeff from San Diego writes: "What kind of research and planning can I do on my own prior to meeting with a lawyer?"
KAVANAGH: I'm going to say buy Stephen's book.
(LAUGHTER)
KAVANAGH: Plug, plug.
MAPLE: You know, I appreciate that plug. My royalties will stream in, I'm sure.
KAVANAGH: Yes, yes indeed.
That's it. There's so much good information around. Steve's book, you go onto the Internet to the sites for the certified financial planning community, and see what we are saying, and what we're writing about these things. And just get some good general information.
One of the big questions, of course, is whether or not you need a simple will or do you need a trust? It would be good to find out what kind of person needs a trust versus a will. What kind of states have bad probate systems? What states have good probate systems? These are some of the questions I would have and have my clients ask before they sit down with the attorney. But you know something, the nice thing about attorneys is they're going to have their list of about 50 questions that you're going to have to answer. They'll provide you with the sheet and you take it home. And Stephen's book does that, too. It pointedly asks you questions about your particular situation, what you should be doing, and you'll go in, I think, very well armed.
WHITFIELD: Very good. You get extra plugs for your book, Stephen, "The Idiot's Guide to Wills and Estates".
MAPLE: Thank you very much.
WHITFIELD: All right, Stephen Maple and Mike Kavanagh, thanks very much to both of you for joining us.
KAVANAGH: Thank you.
MAPLE: Thank you.
WHITFIELD: Appreciate it for all that great advice as we now try to plan and nail down our wills and estates.
Now, today, it's two for one. Not only are we giving you advice on your wills and estates but now we're also giving you a little advice on the filing deadline for the IRS. What to do with those wonderful refunds you are planning for, when we come right back.
(COMMERCIAL BREAK)
WHITFIELD: Welcome back to DOLLAR $IGNS. It's tax season and millions of you are filing or have already filed your returns. Well e- filing has jumped by more than 10 percent this year and the IRS says look for larger refunds. The average refund so far is about $2,182 that's up 4.4 percent from last year's pace. But analysts suggest that you don't get your sights set too high.
Tax attorney Donna Levalley is in New York to talk about the impact of the new tax cuts on your return.
So, Donna, what is the explanation? Why is it that so many of us can expect to get a bill lit more on our refunds this year?
DONNA LAVALLEY, TAX ATTORNEY: Well, last year we had across-the- board rate cuts. So anybody who was paying income taxes is going to be paying less income taxes. Also, they were cut in May. They went into effect in terms of your withholdings in July. So, basically for the first six months of the year you were over-withheld because they were based on the old rates, before the laws were changed.
WHITFIELD: Isn't that interesting? Because there's the argument that some people might not be getting as much back because their itemization, such as their refinance -- because they refinanced, their interest rates are much lower so they have a little less to claim.
LEVALLEY: I think there's a number of reasons why people may not get as large of returns as some people had predicted. Like you mentioned, people refinanced their mortgages have much lower interest rates. And, therefore, are driving down their deduction for mortgage interest. In addition, they also issued checks for the child tax credit.
So people who either weren't entitled to it, or receive the maximum benefit with those checks are not going to be getting the credit on the return.
Additionally, in terms of the averages and what we're seeing it's the number of returns that have been issued are up about 3 million. Maybe some people who never got returns are getting small ones and driving down the average.
WHITFIELD: Interesting. Now there's a double-edged sword, isn't there? In that there are a number of people who are going to be getting larger refunds, but at the same time the IRS is promising to audit a bit more. Trying to kind of double-check why are so many people getting such sizable refunds?
LEVALLEY: Well, actually, Congress is actually chimed in, in asking them to audit more people, more businesses, and other type of entities. They think compliance has been low. And it's actually about 10 years ago, if anyone remembers, I do, actually, they had hearings in Congress about how poorly the IRS had been treating people during the audit process.
So as we've begun this random audit process they promise to be nicer and less invasive. Hopefully people that have experienced that have noticed that change.
WHITFIELD: A kinder, gentler, huh, IRS?
LEVALLEY: A kinder, gentler IRS.
(LAUGHTER)
LEVALLEY: Somebody said instead of the audits from hell, it's the audits from purgatory, that is what one columnist said.
WHITFIELD: What is this about stepped up enforcement about the rules governing earned income tax credit?
LEVALLEY: Well, they also began looking at how much fraud there was in the earned income tax credit program. Because while it serves to help a lot of people, the working poor, there are a lot of people, unfortunately, who sort of used this as a vehicle to get money they don't deserve.
And so they've had some people have been selected for a precertification program, and they're looking over those returns more carefully. They happen to be one of the most highly audited groups along with people who have cash businesses, or have incomes over $125,000.
And so, just like when they started requiring Social Security numbers for all dependents, and half of those dependents disappeared the year after they started requiring that, there may have been some drop off of the false claims. So that could also drive down how much people are seeing in returns.
WHITFIELD: All right. And I don't mean to rain on people's parade because a lot of folks are celebrating the fact that they're going to get more back in their refunds, however the withholding tables changed last July. And that certainly makes it a bit more difficult for a certain segment of the population in which to get a good sizable refund.
LEVALLEY: Well, they took out less. So people who sort of used it as a sort of a savings plan, and like a large refund, and use it to go on vacation or maybe do some home remodeling, things like that, not as much was being taken out of their check.
And I think in terms of possibly -- in terms of the lower refunds or lower refund numbers than were predicted, a number of people may have caught on to the fact that they why over-withheld in the first part of the year. And they went to their W-4s, adjusted their allowances, maybe added one more and had a bigger paycheck.
I always suggest to people, don't wait around for a large refund, increase those allowances, get the money in the paycheck during the year. If you're worried about squandering it, increase your 401(k) contributions. Set up automatic payments and pay off those credit cards faster. In the end, not paying that interest is going to save you money.
WHITFIELD: All right, good advice. Donna Levalley, thanks very much. Always good to see you.
LEVALLEY: Thanks for having me.
WHITFIELD: That's all we have time for right now.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
Aired March 13, 2004 - 16:30 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WHITFIELD: "Dollar Signs" is straight ahead, but first, here's what's happening at this hour. As thousands of people in Madrid, Spain protest the investigation into Thursday's deadly train bomings, word comes of 5 people being detained in the case. Spanish investigators say 3 Morrocans and 2 Indians are being held in connection with the explosions that killed 200 commuters and injured more than 1,500 others. Officials caution the investigation is still ongoin.
Three Iraqis were killed in a boming in Tikrit today, the same day the U.S. announced plans to tighten security along Iraq's borders. Paul Bremer, the U.S. civilian administrator in the region announced a new program designed to keep terrorists from pouring to Iraq. The plan would increase the number of security personnel along the border as well as identify travelers seeking entry.
Supporting U.S. troops serving in harms way. Blue Star Mothers of America held this rally today in Washington to honor troops in Iraq, Afghanistan and other hot spots around the world. Former Senator and presidential candidate, Bob Dole, spoke at the event.
A wreath laying ceremony is honoring President John F. Kennedy today. The Ancient Order of Hibernians has performed the tribute at Arlington National Cemetery for 25 years now. Kennedy is the only U.S. president belonging to the Irish American group.
Welcome to DOLLAR SIGNS. Today we're going to talk about a topic many people are reluctant to deal with, wills and estates. Our guests are going to take some of the mystery and worry out of such a complicated matter for many of us.
Stephen Maple is a law professor with the University of Indianapolis, and he's author of "The Complete Idiot's Guide to Wills & Estates". Mike Kavanagh is a certified financial planner and the radio talk show host of "Money Matters in Atlanta.
Good to see both of you gentlemen.
MIKE KAVANAGH, RADIO TALK SHOW HOST: Thank you.
STEPHEN MAPLE, AUTHOR, "COMPLETE IDIOT'S GUIDE TO WILLS & ESTATES": Thank you. Looking forward to it.
WHITFIELD: Does everyone need to get on board with getting a will or a trust or something in hand, Michael?
KAVANAGH: Absolutely. I think just about everybody. I think perhaps maybe a teenager doesn't. You can come up with exceptions. But just about everybody who considers themselves a working adult should have some kind of estate planning documents. And they're very, very important from the perspective of a certified financial planner. We think it's a basic foundation to financial planning.
WHITFIELD: Steven, there are a lot of people who are working who say I don't own any property, I don't have any kids. I really don't have anything to leave behind. That's what a lot of folks might say. What do you say to that?
MAPLE: I think that everybody needs to have a will, with the exception of like you said, teenagers. A lot of times people come to me for wills that may not have much in the way of worldly assets but they have young children. It's important to name a guardian in the will.
Plus you never know. I think sometimes we underestimate how much we actually own and how much might be transferred at death. So I'm encouraging anybody to have a will.
WHITFIELD: All right. We're getting a lot of e-mails already on this. Because it's a topic that so many people want to avoid talking about, but realize it's something they really need some help on. This, coming C. Sysko from Pennsylvania.
"Is it true that you can sign your home over to your children six month before your death in order to prevent a nursing home from taking your home?"
Michael, have you ever heard of anything like that?
KAVANAGH: Well, it's a legal question. I might defer to our author who may have more resources than I do.
WHITFIELD: OK, Stephen.
MAPLE: I suspect that what they're referring to deals with Medicaid. First of all, you don't want to be in that position. And Medicaid varies a little bit. But generally you have to dispose of your assets within three years before you're eligible for Medicare. So I'm not sure that six months before you go into a nursing home would do you much good.
WHITFIELD: OK. This coming from Laurie in Miami, Florida. She asks: "Would it be wise for a married couple in their 50s, with no children, to have a will and estate plan?"
KAVANAGH: Well, from the financial planning perspective I'm going to say, absolutely yes. Remember, it's not just a will. When you go to a lawyer, you're going to do an estate plan. And estate plan includes a lot of documents. For example it includes such as durable powers of attorney for medical care. Durable powers of attorney for my finances. And let's not forget living wills.
Here at CNN you've done a lot of stories about a tragedy down in Florida. And if someone doesn't have a living will they can find that there's a lot of -- well, a lot of grief that is caused by a very untimely event. And so I have all of those documents for myself and I would urge just about everybody to not only look at a will but look at all the other estate planning documents that are talked about in this book.
WHITFIELD: In fact, Stephen, there are many analysts and many lawyers who will say it really is one of the most loving things that you can do, even though it's something that a lot of folks don't feel comfortable about doing, but you know what? It's hard enough when a loved one loses somebody, you know, to have to go through a bunch of paperwork. At least all of this stuff is done ahead of time.
MAPLE: Well, I had a friend of mine who made a Christmas gift of a will that I drafted.
WHITFIELD: Wow.
MAPLE: And you know, I always thought that was kind of an upbeat way of approaching it.
The problem a lot of times in not having a will is the state may well dictate who gets your property. And that may not be what you're interested in, so, --
WHITFIELD: If anyone.
MAPLE: That's true. Usually there's some relative around that will collect the assets. But it may not be a relative you necessarily would want as your heir.
WHITFIELD: You put very delicately.
All right, well let's talk about how you actually get started. Because, Mike, there are an awful lot of like kits out there now where you can do it yourself whether you're online guidelines you can find. Is it really best to always make sure you get an attorney?
KAVANAGH: Well, I like the idea of getting an attorney, especially if there's any complications. But I also like the idea if -- you're not going to get an attorney, at least go out there and use some of these computer software programs. Buy the book that we're talking about today. Go to an office supply store and get some of the documents that are out there, and just fill them in and make sure they're filled in properly.
But what I do, even when I have someone who makes out their own documents, I would like them to take the completed documents to a lawyer for review.
WHITFIELD: And Stephen, about how much might it cost people to do this? I'm hearing everything from the hundreds and sometimes it could cost you into the thousands, depending on what you have.
MAPLE: I think that's probably true. It varies a lot. Usually if you have a simple will, and go to a general practitioner, that's probably the least expensive. And that may run $150 to $250. The more complex your estate is, you may have to go to someone that has a great deal of expertise. And that may run into several hundreds to thousands of dollars.
WHITFIELD: Katerina in Hawaii is on the telephone with us, with a question.
Katerina?
CALLER: Yes, good morning. Thank you very much for taking my call. I'd like to know if a husband makes a will, does state law override the will if it has illegal parts in it? Or, you know, if the wife has dowry rights and she's not included in the will? And does a power of attorney expire at the death of the spouse? Thank you.
MAPLE: OK. Two questions. The first one, many states, probably all of them, really, have the right of a spouse to elect against a will. It may vary from one-third to one-half. So that if one spouse cuts out another one, there's still a right to elect against the will as long as it's timely done.
Secondly, with durable powers of attorney, yes, they do expire at the death of the person granting the power of attorney.
WHITFIELD: Michael, anything you want to chime in on before we take a quick break?
KAVANAGH: No. That sounds great to me. You hear about will challenges all the time. It is not uncommon. That's for sure.
WHITFIELD: All right, hold tight real quick. More of your calls and e-mails coming up next on DOLLAR $IGNS. You can still send your questions to us, at dollarsigns@cnn.com.
(COMMERCIAL BREAK)
WHITFIELD: Well, welcome back to DOLLAR $IGNS.
Do you know that 75 percent of people who go to a financial planner do not have a will? My guests are helping make sure that you are not one of them. Stephen Maple is a University of Indianapolis law professor. And Mike Kavanagh is a certified financial planner in Atlanta.
All right, good to see both of you guys again.
There are lots of decisions that have to be made when getting your trusts together, wills, estate planning overall. Namely you've got to come up with an executor, you've got to come up with a power of attorney for health, executor. Lots of tough decisions to make.
So Stephen, as all of us try to figure out who we should name what are some of the characteristics that we need to be aware of as we try to name some of these people with huge responsibilities?
MAPLE: I usually suggest if it's a fairly simple estate, and you've got a couple, that each other is the primary. And then the secondary may be, again with a simple estate, one or more of the children. Usually if you select one or more of the children, you want to make sure they get along pretty well together.
If they don't, you may want to have some conscientious friend. The more complicated you may well want to have a bank serve as an executor, as well as a trust.
WHITFIELD: Wow, OK. Marsha from Arizona is on the phone with us, Mike. Perhaps this might be a question for you.
KAVANAGH: OK.
WHITFIELD: Marsha?
CALLER: Yes.
KAVANAGH: Hi, Marsha.
CALLER: I just had my will done, completely, power of attorney, durable power of attorney, executor, all of that. And now I'm going to court to change my name back to my maiden name. Do I have to have the will completely redone? Or will a codicil work?
KAVANAGH: Oh, gosh. You know, that's where I go to my attorney.
WHITFIELD: Sorry about that, Mike.
KAVANAGH: I want to be sure that I dot the Is and cross the Ts exactly the right way. And I guess that's a state-to-state type of answer. And that is where I pick up the phone, as a financial planner, and say, Stephen, what do I do?
WHITFIELD: That's right, Stephen?
MAPLE: Well, it sounds like you're an "also known as". A codicil probably would take care of you all right. In most states, if you're identifiable, even if you get married, divorced, and the name changes, that's sufficient. But I think I would suggest a codicil just to clean things up a little bit.
WHITFIELD: OK. Here's an e-mail from Gene of Santa Ana, California, asking: "I understand the current estate taxes are decreasing to zero in 2010 then returning to today's level in 2011. What is the proper estate planning strategy to deal with this?"
KAVANAGH: This is one of the biggest challenges of financial planners. We don't know what's going to happen. And so how do you plan for the future? You do the best you can. You have to assume that perhaps in 2011 it all does come back.
And so, what financial planner always does is sits there, and says, what's the worst that possibly could happen? And you try to make the best plans. You cannot make assumptions.
Of course, one of the nice things that would be great for my profession, when they do make the tax laws, if they would make them permanent. At least we'd know one way or the other.
WHITFIELD: From Oklahoma, Kathy is on the line.
Kathy?
CALLER: Hi.
WHITFIELD: What's your question?
CALLER: Yes, we were wondering, me and my husband got married, I have two children of my own. My husband has an adopted child for only two years, and we're wondering -- they never see each other, how are we to protect my two children? Because he's, you know, raised them, paid for everything, and you know, he's really wanting things left to them.
MAPLE: You really need a will. Since he hasn't adopted your children, essentially they're stepchildren. And they have no inheritance rights outside of a will in almost every state. So, certainly he needs to, if that's what he wants to do, prepare a will, and name them in the will, as a beneficiary.
As far as the adopted child, certainly you can -- shall we say, cut out a child in a will. Usually what I recommend is that you acknowledge the child's existence, and then simply indicate that that child is otherwise provided for.
WHITFIELD: All right, very good. Guys, you know, sometimes it's really difficult trying to figure out what are some of the questions you need to ask when it comes down to asking an attorney for some advice. In fact, Jeff from San Diego writes: "What kind of research and planning can I do on my own prior to meeting with a lawyer?"
KAVANAGH: I'm going to say buy Stephen's book.
(LAUGHTER)
KAVANAGH: Plug, plug.
MAPLE: You know, I appreciate that plug. My royalties will stream in, I'm sure.
KAVANAGH: Yes, yes indeed.
That's it. There's so much good information around. Steve's book, you go onto the Internet to the sites for the certified financial planning community, and see what we are saying, and what we're writing about these things. And just get some good general information.
One of the big questions, of course, is whether or not you need a simple will or do you need a trust? It would be good to find out what kind of person needs a trust versus a will. What kind of states have bad probate systems? What states have good probate systems? These are some of the questions I would have and have my clients ask before they sit down with the attorney. But you know something, the nice thing about attorneys is they're going to have their list of about 50 questions that you're going to have to answer. They'll provide you with the sheet and you take it home. And Stephen's book does that, too. It pointedly asks you questions about your particular situation, what you should be doing, and you'll go in, I think, very well armed.
WHITFIELD: Very good. You get extra plugs for your book, Stephen, "The Idiot's Guide to Wills and Estates".
MAPLE: Thank you very much.
WHITFIELD: All right, Stephen Maple and Mike Kavanagh, thanks very much to both of you for joining us.
KAVANAGH: Thank you.
MAPLE: Thank you.
WHITFIELD: Appreciate it for all that great advice as we now try to plan and nail down our wills and estates.
Now, today, it's two for one. Not only are we giving you advice on your wills and estates but now we're also giving you a little advice on the filing deadline for the IRS. What to do with those wonderful refunds you are planning for, when we come right back.
(COMMERCIAL BREAK)
WHITFIELD: Welcome back to DOLLAR $IGNS. It's tax season and millions of you are filing or have already filed your returns. Well e- filing has jumped by more than 10 percent this year and the IRS says look for larger refunds. The average refund so far is about $2,182 that's up 4.4 percent from last year's pace. But analysts suggest that you don't get your sights set too high.
Tax attorney Donna Levalley is in New York to talk about the impact of the new tax cuts on your return.
So, Donna, what is the explanation? Why is it that so many of us can expect to get a bill lit more on our refunds this year?
DONNA LAVALLEY, TAX ATTORNEY: Well, last year we had across-the- board rate cuts. So anybody who was paying income taxes is going to be paying less income taxes. Also, they were cut in May. They went into effect in terms of your withholdings in July. So, basically for the first six months of the year you were over-withheld because they were based on the old rates, before the laws were changed.
WHITFIELD: Isn't that interesting? Because there's the argument that some people might not be getting as much back because their itemization, such as their refinance -- because they refinanced, their interest rates are much lower so they have a little less to claim.
LEVALLEY: I think there's a number of reasons why people may not get as large of returns as some people had predicted. Like you mentioned, people refinanced their mortgages have much lower interest rates. And, therefore, are driving down their deduction for mortgage interest. In addition, they also issued checks for the child tax credit.
So people who either weren't entitled to it, or receive the maximum benefit with those checks are not going to be getting the credit on the return.
Additionally, in terms of the averages and what we're seeing it's the number of returns that have been issued are up about 3 million. Maybe some people who never got returns are getting small ones and driving down the average.
WHITFIELD: Interesting. Now there's a double-edged sword, isn't there? In that there are a number of people who are going to be getting larger refunds, but at the same time the IRS is promising to audit a bit more. Trying to kind of double-check why are so many people getting such sizable refunds?
LEVALLEY: Well, actually, Congress is actually chimed in, in asking them to audit more people, more businesses, and other type of entities. They think compliance has been low. And it's actually about 10 years ago, if anyone remembers, I do, actually, they had hearings in Congress about how poorly the IRS had been treating people during the audit process.
So as we've begun this random audit process they promise to be nicer and less invasive. Hopefully people that have experienced that have noticed that change.
WHITFIELD: A kinder, gentler, huh, IRS?
LEVALLEY: A kinder, gentler IRS.
(LAUGHTER)
LEVALLEY: Somebody said instead of the audits from hell, it's the audits from purgatory, that is what one columnist said.
WHITFIELD: What is this about stepped up enforcement about the rules governing earned income tax credit?
LEVALLEY: Well, they also began looking at how much fraud there was in the earned income tax credit program. Because while it serves to help a lot of people, the working poor, there are a lot of people, unfortunately, who sort of used this as a vehicle to get money they don't deserve.
And so they've had some people have been selected for a precertification program, and they're looking over those returns more carefully. They happen to be one of the most highly audited groups along with people who have cash businesses, or have incomes over $125,000.
And so, just like when they started requiring Social Security numbers for all dependents, and half of those dependents disappeared the year after they started requiring that, there may have been some drop off of the false claims. So that could also drive down how much people are seeing in returns.
WHITFIELD: All right. And I don't mean to rain on people's parade because a lot of folks are celebrating the fact that they're going to get more back in their refunds, however the withholding tables changed last July. And that certainly makes it a bit more difficult for a certain segment of the population in which to get a good sizable refund.
LEVALLEY: Well, they took out less. So people who sort of used it as a sort of a savings plan, and like a large refund, and use it to go on vacation or maybe do some home remodeling, things like that, not as much was being taken out of their check.
And I think in terms of possibly -- in terms of the lower refunds or lower refund numbers than were predicted, a number of people may have caught on to the fact that they why over-withheld in the first part of the year. And they went to their W-4s, adjusted their allowances, maybe added one more and had a bigger paycheck.
I always suggest to people, don't wait around for a large refund, increase those allowances, get the money in the paycheck during the year. If you're worried about squandering it, increase your 401(k) contributions. Set up automatic payments and pay off those credit cards faster. In the end, not paying that interest is going to save you money.
WHITFIELD: All right, good advice. Donna Levalley, thanks very much. Always good to see you.
LEVALLEY: Thanks for having me.
WHITFIELD: That's all we have time for right now.
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