Banking & Finance - February 2023

February 2023 Special Section

An estate plan provides protection against predators

When we pass away, everything we’ve worked our entire lives for is at risk of being stolen by the government and other entities. How does this happen? Well, there are a number of reasons, but it all boils down to not making a proper estate plan. A proper estate plan protects your money while you are alive and after you pass away. A good estate plan makes sure that your legacy is passed down to your beneficiaries and not stolen by the government and other predators.

So, let’s look at some of the most important things you need to have in an estate plan. The first is the Financial Power of Attorney. This is a document that allows you to designate who gets to access your bank accounts on your behalf if you are incapacitated in life. This is also the number one document used to abuse the elderly, as there have been multiple occasions of the elderly being manipulated into signing away their money. However, if you don’t have a Financial Power of Attorney, your loved ones will have to fight for the right to help you pay your taxes and bills. Thus, when your attorney is drafting your Financial Power of Attorney, make sure you specify that whoever you designate as your financial agent can only use your assets for your benefit and draft it specifically to protect you and your assets.

The second item in an estate plan is the Last Will and Testament. We’ve heard about this in movies, but what does it really entail? Contrary to popular belief, a Will does not prevent your loved ones from having to go to court and it does not fully protect your assets. A Will, by law,

must be processed by the probate court and the probate process is a completely public process in which anyone - creditors, debtors, Medicaid - can step out to claim your assets, even if you have named beneficiaries.

One way to protect your assets from the probate process is to make sure you have beneficiaries on your bank accounts and life insurance policies. However, if your beneficiaries are minor children, your surviving spouse cannot access the money, even for the child’s benefit.

On top of that, if you have a house, then there is no real way to protect it without the risks of probate court even as a married couple in Georgia. Some people recommend putting your house in your children’s name, but that results in him or her having to pay a sizeable capital gains tax - and he or she could potentially lose the house in a divorce, to their creditors or lawsuits.

So how do we avoid the probate court entirely? The answer is by creating a trust.

If you put everything in a trust, then the Trustee will ensure that everything you own is distributed the way you want to your beneficiaries. The entire process is private and there is no need to worry about the probate court or capital gains tax. Advanced trusts will even protect your assets from your children’s divorces, creditors, and lawsuits. However, a trust only works if you set it up correctly, fund the trust, and maintain the trust during your lifetime but it is worth the time and cost to avoid probate and to protect your assets.

It may be difficult to think about what happens to our assets after death, but an estate plan is an essential part of any financial management. By making sure that your assets are protected in life and in death, you can have peace of mind about your legacy.

GEERDES

Brought to you by - Geerdes & Associates

Understanding Health Savings Accounts (HSAs)

Brought to you by - American Commerce Bank

Q. I chose a high-deductible health plan this year to reduce my premiums. Is there anything more I can do to manage health care expenses?

A. Your high-deductible health insurance plan may qualify you for a Health Savings Account or HSA. An HSA is a tax-advantaged savings account that can be used to pay qualified expenses with pre-tax dollars.

Q. Who is eligible to open an HSA?

A. HSAs are available to individuals and families who are enrolled in highdeductible healthcare plans (HDHPs). These are plans that, while they may offer lower premiums, come with higher out-of-pocket expenses, such as deductibles and co-pays. With an HSA, you can accumulate pre-tax savings to cover both planned and unplanned healthcare-related expenses.

Q. How does an HSA work?

A. Opening an HSA is about as simple as opening any other bank account. There are a few up-front questions to ensure that you qualify. Once funded, you’ll discover three significant tax benefits:

• Your contributions are tax deductible. Contributions to an HSA operate in the same manner as a 401(k). You contribute pre-tax dollars, thereby reducing taxable income.

• Earnings grow tax-free. Balances accumulate similar to an IRA.

Any investment earnings on your HSA contributions are not taxed.

• Withdrawals are tax-free. As long as your withdrawals are used to cover qualified medical expenses, you will pay no taxes on the money you withdraw. You can find a list of qualified medical expenses on the IRS website (www.irs.gov).

Q. Open enrollment season is over. May I still open an HSA?

A. Yes. Unlike a Flexible Spending Account (FSA), Health Savings Accounts can be opened at any time during the year. You may also change your contribution rates at any time or even invest a single lump sum.

Q, But if my healthcare expenses are lower than I’m expecting, will I lose the money I’ve saved in my HSA?

A. HSA contributions aren’t limited to any calendar year. If you don’t use the funds this year, they’ll roll over into following next year. Balances can accumulate over time, similar to an IRA. When you turn 65, money in your HSA can be withdrawn for reasons other than healthcare, though such distributions will likely be taxable.

Q. An HSA sounds like a great idea! Is there a limit on how much I can deposit?

A. Yes, there is a limit on the amount you can contribute. For 2023, those limits are $3,850 for an individual and $7,750 for a family. Plus, individuals over 55 may make a one-time catch up contribution of $1,000.