Andrews, Bongar, Starkey & Clagett: Southern Maryland Attorneys

Annual Review – How To Do It.

How to Perform an Annual Review of Your Legal & Financial Situation

Far too many people see a lawyer only when they have a crisis on their hands. Yet many legal problems can be prevented by seeking sound legal advice before a crisis develops. It is much easier and less expensive to prevent a problem than to fix it. And there are several preventative measures you can take without seeing a lawyer. You can place yourself in a relatively safe position simply by spending some time every year to review your financial and legal situation.

We are attorneys who believe in preventative medicine. Just as you should practice preventative medicine for your body's health, you should do the same for your legal and financial health. We believe everyone should regularly assess their legal and financial situation, make sure they are protected from possible legal hazards, and plan to avoid a crisis. This document provides a basic list of things to review each year, along with steps you can take to protect yourself. Review it every year, and make sure you are healthy - legally speaking, that is. Be sure to read “Our Most Important Advice” on the right side of this page.

1. Storage of Documents - Part I: You need a safe place to store your most important documents. The best and most popular places are a fire proof safe or a bank safe deposit box. Things like birth certificates, social security cards, stock certificates, bonds, insurance policies, etc. should go here. If you have a safe deposit box, make sure your heirs know where it is. The best practice is to give someone besides yourself the right of access. If not, the bank will seal the safe deposit box upon your death and open it only with a court order, regardless of who has the key. If you use a safe in your home, make sure your heirs know its location and the combination.

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2. Your Assets - Part I: If you died tomorrow, would your loved ones be able to figure out what you own, how much you own, and where it all is? Do your family a favor and keep a comprehensive list of all your assets, including insurance policies and real property. List each one, and the holder of the account or location of the property. Provide account numbers and contact information. It would also be helpful to include the estimated worth of those assets. You should review it every year and revise it (hopefully upwards!).
   
   Here are things you should include in your list: bank accounts, retirement accounts, any other investment accounts, stocks, bonds, insurance policies, real property, and valuable personal property. You should probably keep a list of debts too, even though you may prefer not to think about them. Your heirs will need to know.

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3. Storage of Documents - Part II: You need a filing system for bank statements, credit card statements, investment account statements, etc. Your loved ones shouldn’t have to wade through a pile of junk to find these and handle your affairs. And doesn’t it stress you out too? Get the paper pile in some sense of order - one that would make sense to someone else. It doesn’t have to be a filing cabinet with tabbed files, but that is the best way to do it. Those little metal filing cabinets are cheap, as are simple manilla files.

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4. Your Assets - Part II: You don’t have all your eggs in one basket, do you? Are you properly diversified? Do you have a nice mix of stocks, bonds, and other asset classes? If your assets are too heavily concentrated in any one spot, think about diversifying. If you don’t know why this is important, see a financial planner soon.

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5. Taxes: Your taxes are a great summary of your financial situation. Therefore, you should pay some attention to them even after you mail that envelope to the IRS. Did you owe taxes? Why? Are you losing a dependent’s tax deduction next year? Perhaps you need to adjust your withholding? Keep copies of your last 7 years of tax returns. The IRS can go back 7 years to audit you (longer if they suspect fraud).

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6. Your Will: Do you have one? If so, review it and make sure it is still relevant. If you need changes, see your attorney. If you do not even have one, it is past time to see the attorney. Getting a will done is simple and inexpensive. If you find yourself with significant assets to pass on, you should find out if you need a trust.

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7. Power of Attorney & Living Will: A Power of Attorney grants power to another person to manage your finances if you are disabled. A Living Will contains your wishes regarding medical care if you are disabled and in the hospital. Do you have them? Do you need these items? If you do have them, review them and make sure they are still relevant. Are your appointed agents still local? Are they still the right people to have that power? If you do not have these items, at least spend a few minutes thinking about whether or not you need them.

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8. Insurance: Are you covered? Are you covered enough? These are two very important questions you need to ask if you want to live through a crisis if one occurs. Insurance is all about preventing a crisis. Make sure you have it, and you have enough to cover you.
   
   Car Insurance: You have to have car insurance, but do you have enough? If not, and you cause an accident where someone is injured and gets a judgment higher than your insurance limit, you personally have to make up the difference! Maryland only requires you to get a minimum policy for liability only, covering you with $20,000 for any one injured person, and a total of $40,000 no matter how many are injured. This is known as a 20/40 policy. That is not enough! The injured person’s medical bills alone could eat that up! The old rule of thumb was to get at least a 100/300 policy, but a 250/500 policy is safer and more reasonable. At least call your insurer and find out how much it would cost to increase your insurance. You may find it is quite reasonable.
   
   Homeowners Insurance: Again the question is - do you have enough? With home prices continuing to rise, you may find out that the policy you got when you purchased your home no longer covers it. If your house burns down, and your insurance won’t be enough to rebuild or pay off the mortgage, what are you going to do? You need enough to cover you. Also ask yourself - will you be able to replace the contents of your house if it burns? Do you get the replacement value or just the fair market value of your home’s contents? Get replacement value. Are you covered if somebody slips and falls on your property and sues you? How much? Read the fine print and call your agent if you have questions.
   
   Life Insurance: Do you have children? Or a spouse that relies on your income? If so, you better have life insurance. Your heirs will not be able to live without it. And do you have enough? Will the money replace your income? Will your kids go to college? At least give this some thought. If you think you need more insurance, see an agent. Term life insurance is generally inexpensive, especially if you are relatively young.
   
   Disability Insurance: Everyone knows they should buy life insurance in case they die. But did you know it is far more likely that you will become disabled? And yet few people get disability insurance. If you do not have it, you should seriously consider it. Ask yourself - if I became disabled and could not work, how would my family survive?
   
   Other insurance: Do you have significant assets to protect? A business? A special situation? There is a lot of insurance available. Perhaps a consultation with an agent can open your eyes to insurance you did not even know you needed. At least give it a few moments thought in your annual review.

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9. Your Credit Report: By law, you can receive one copy of your credit report free every year. Get it. See what is on it. Is there anything unusual? Make sure nobody is trying to steal your identity. Plus, a credit report is a nice back up list of your debts and assets.

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10. Your Resume: How secure is your job? It pays to keep an updated resume in case you find yourself needing it. Review your qualifications and job history. Add anything new.

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11. Do you need to see an attorney?: Do you need legal advice about these issues or anything else in your life? Are you starting a new business, contemplating buying real estate, or making a major life change that has legal ramifications? If so, this may be the time to see an attorney to make sure you take the right actions and get it set up right. Remember, it is a lot less expensive to pay an attorney for preventative action than for fixing problems.

We hope you find this list useful and helpful. If you do need an attorney, please consider us. We want to be your family attorneys, and we would like to help you avoid problems before they start. It is a pleasure to see clients when they are not having a problem. We don’t get to do that enough. Most people don’t practice preventative legal medicine. You should.

Andrews, Bongar, Starkey & Clagett, P.A.
11705 Berry Road, Suite 202, Waldorf, Maryland 20603
301-843-1950 # 301-645-4100 # 301-863-7480 # 410-535-9449

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More legal info & tips to keep you safe.
For examples of past issues, click here.