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CHAPTER 18 n KEEP YOUR PLAN CURRENT
gifts or her will. But portability is not automatic. To get it, the executor of the estate of the irst spouse to die must ile an estate tax return within nine months (a six-month extension is allowed). Surviving spouses should see to it that the form is iled even if they have nowhere near $5.43 million of their own, because who knows what the future holds?
Nine months is also the deadline if you plan to disclaim (turn down) any portion of what you inherited so that it can go directly to other family members or into a trust for their beneit. The 2012 tax law makes it more likely that spouses will leave everything to each other outright. Others may want to give the survivor the right to disclaim at least some money and have it go into a bypass trust (see Chapter 4). This allows the survivor to make an informed decision based on her own inancial resources and federal and state estate laws at that time. If you want to use this postmor- tem tax planning strategy, you need to keep an eye on the calendar.
Meanwhile, make sure you have a durable power of attorney, appoint- ing a family member, friend or adviser whom you trust as an agent to act on your behalf in inancial and legal matters if you become unable to because of illness or disability (Chapter 1). Also revisit your health care proxy, a separate document that authorizes an agent to make medical decisions on your behalf. Many spouses give each other these powers. When a spouse passes away, you need to be sure that you have desig- nated someone else to take care of you and your inances.
Another thing to do as soon as possible is name beneiciaries for any retirement assets you inherited from your spouse. If you die without do- ing that, your heirs will lose valuable income tax beneits associated with these accounts. Other options for spouses who inherit these accounts don’t have the same urgency (Chapter 7).
Once things have settled down, you should revise your will and living trust. Unless you remarry, you will have the last word about which assets ultimately go to family, charity or the tax man. If you have amassed more wealth than is covered by the exclusion amount (including what you carry over from your spouse), you may want to take steps to minimize estate tax. Start by convert- ing traditional IRAs to Roth accounts – one of the simplest, most tax-eficient estate planning tools available and one that costs nothing in legal fees and can sharply reduce income taxes (Chapter 7). Then consider various ways to transfer assets to family members during your lifetime (Chapter 15). If you’re thinking of moving to another state or dividing your time between various places, factor in how that would affect your estate plan (Chapter 11).
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