Many of us will be getting together with family over the upcoming holidays, which is an opportunity to talk. Whether the gathering will be at your home or the home of a family member, we can all agree with Perry Como who sang “There’s No Place Like Home for the Holidays” back in 1954. Since then, the song has been covered by Robert Goulet (1968), the Muppets (1987), Garth Brooks (2000), and many others. I prefer the version (interminably) crooned by Lenny Salvatore in the 1970s, Lenny was a co-worker of mine back when I was a letter carrier. I didn’t like hearing the song then (especially not all morning while we prepared our routes for delivery), but now it has become part of the Christmas season for me and I miss hearing Lenny sing it.
At family gatherings we will talk about recent family events, reminisce over past happenings, watch a little TV and, maybe, play a board game or two. Talking about money is generally not on the list for family holiday get-togethers – however – depending on which family members you are gathering with, money might be a topic that should be discussed.
Consider talking to your adult children about your estate plan. If you have no formal estate plan, take steps to put one in place. Let your children know what to expect when you (and your spouse) pass on. We have all seen headlines about celebrities (Prince, for example) who die without having an estate plan in place.
Even if you have an estate plan, it may be out of date. Is your former spouse still listed as beneficiary for your Thrift Savings Plan? What about other common beneficiary forms. As a federal employee you will have forms for your FERS (CSRS) contributions, your unpaid compensation (e.g., value of unused annual leave, etc.) and, if you have it, your Federal Employees Group Life Insurance (FEGLI). If you’re a federal retiree, the forms for retirement contributions and unpaid compensation will likely no longer apply, but you’ll still have the TSP and, perhaps, FEGLI. You might also have beneficiary forms for outside life insurance, IRAs, and other financial assets. Make sure that those forms reflect your current wishes.
Estate planning decisions that you have made may affect the taxes that your heirs pay after your death. Though it is likely that your estate will fall below the threshold for federal estate taxes, some states have lower thresholds. If you make a mistake in how you designate beneficiaries for an employee plan (e.g., TSP) or an IRA, the account may have to be liquidated earlier than would have been the case had you designated differently.
I’m not suggesting that you invite a tax or IRA professional to your holiday gathering but do be sure to consult with them on items like beneficiary designation. Decisions that made sense before the passage of the SECURE Act may not make sense today.
Talk to your children about their potential inheritance and emphasize to them that it should not be considered a windfall to be spent in a short period of time.
Remember, though it may feel uncomfortable talking about your financial and estate plans, it can make it much easier after your death. Consider using this holiday season to start the conversation.