1: You Need a Good Estate Plan
A good estate plan will help you anticipate the future and manage the present. It is in your best interest and in the interest of your heirs to make sure that your intentions are clear.
Estate planning is usually not a do-it-yourself project. You’ll be faced with critical decisions that only a professional estate planner can help you make.
Simply defined, estate planning is the process of thoughtfully providing for the efficient transfer of your assets to your heirs and charitable interests in accordance with your wishes. It is a testament that affirms not only how your estate will be distributed, but also what kind of a legacy you will leave behind and the impact it will have for future generations.
Estate planning isn’t just for the rich or older people. Everyone should do it. It can begin with the simplicity of writing a will, but it can also involve trusts, changing beneficiaries of life insurance policies and retirement accounts, selecting guardians for minor children, providing lifetime income for yourself and others, minimizing taxes and other estate settlement costs or passing on business interests and providing for your charitable interests.
Here you can learn how to get started. A little informed preparation can go a long way in building your confidence in this process.
Estate Planning Questions
Why is a will so important?
We spend a lifetime building, preserving and managing our estates. Thus, it is only right that we make thoughtful choices about how our estate will be distributed at death. Another critical issue for people with minor children is who will become the legal guardian of the children in the event of an untimely death of both parents. A will is essential to accomplishing these objectives. (Jointly owned assets and named beneficiaries of a life insurance policy or retirement plan will not be affected by the lack of a valid will, unless those named are no longer living.)
Do I need a revocable living trust?
A revocable living trust is a trust you create during your life, titling all or selected assets to it which will be managed by a trustee. It is revocable because you can terminate the trust at any time during your life. You can serve as the trustee during your life if you wish. At death, the trust will distribute or continue to manage the assets within the trust in accordance with your wishes. There are some distinct advantages to a living trust. They include:
- All trust assets will be distributed or managed as you wish at your death and will not be reviewed by the Probate Court, thus saving probate court costs. If you own property in another state other than your state domicile, your estate will avoid being subject to more than one probate court.
- In your living trust you can appoint a successor trustee to manage trust assets in the event that you can no longer do so. At death, the trustee can continue to manage trust assets for any living beneficiaries for their lives or for a term of years.
- A living trust will preserve your family’s privacy in contrast to the Probate Court, which has public access.
A living trust is not a device that will save you estate or inheritance taxes, but it can assist you in reducing your estate settlement costs. You can still name and benefit your charitable interests in your living trust. You would use the same kind of bequest language that you would use in a will.
What is a durable power of attorney?
This is a legal document in which you appoint an individual as your “attorney-in-fact” giving that person the legal power to take charge of your financial affairs in the event of incompetence or disability.
What is a power of attorney for health care decisions?
This is a legal document in which you appoint an individual as your “attorney-in-fact” giving that person the legal the power to make decisions about your medical treatment in the event of incompentency. Such a power is often used in conjunction with a living will.
What is a living will?
This is a legal document in which you indicate whether or not you would want your life to be “artificially prolonged” in an injury, disease or terminal condition that prevents you from communicating your wishes to medical professionals. Living wills are often used in conjunction with a power of attorney for health care.
What is a testamentary trust?
As opposed to a living trust which is created during someone’s life, a testamentary trust is created in a will and goes into effect only upon the death of a decedent. The purpose of such a trust is to provide assets and income for someone after your death.
Will I have to pay estate or inheritance taxes?
Under current law federal estate taxes do not kick in until your estate has reached a value of $2 million or more. If your estate exceeds this value the federal estate tax rate begins at 45%. In 2009 the exemption from federal estate taxes goes up to $3.5 million and in 2010 the federal estate tax is repealed. In 2011 the estate tax exemption goes back to the 2002 levels unless Congress makes additional changes between now and then. It is very likely that Congress will pass some new law that will take us beyond 2011.
Depending on which state you live in, your estate may be subject to state estate taxes and/or inheritance taxes. It is also important to consider how you attempt to pass IRA or other similar retirement fund assets to children, since these distributions will also be subject to income taxes. For many estates, careful planning is essential to minimize the impact of taxes on the estate. A qualified professional should be able to assist you with this. Finally, any assets you wish to pass on to us for our charitable purposes will avoid all taxation. In some cases, it’s a choice: give some of the value of your estate to the government or to charity. It is your choice if you will do the proper planning.
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