Points to Remember When Planning Your Estate

It is on your list of things to do, but something always comes up. Estate planning is something you know that you should do but never seem to find the time. With the assistance of your tax professional, estate planning does not need to be a daunting task. Additionally, it is not something you want to put off until it is too late, as state laws may interfere with your estate planning objectives. Avoid the common pitfalls by planning your estate wisely.

Some basic estate planning objectives include:

1. A valid will & trust that is periodically reviewed and revised when necessary
2. Flexibility to allow family members and heirs to meet changing needs and emergencies
3. Cash liquidity at death to cover final expenses and taxes
4. A business succession plan
5. The integration of insurance & retirement benefits with other estate assets
6. Maximization of income, gift and estate tax savings devices

Professional Input
Having a professional advise you with your situation and help guide you through the estate planning process is crucial. There are many ways that your advisor can help, as they will devise the best strategy for you and your situation.

One of the benefits of having a tax professional assist you is that they will look at the big picture. An experienced advisor will present you with the various options available to you and collaborate with your attorney to help you find the best strategy. They will also give you a wide range of “what if” scenarios so that you know what could happen down the road. Knowing these different possibilities can also help you to determine what the best strategy is for you.

Read the Fine Print
Another important aspect is the fine print in your estate planning documents. If this is not done correctly, it can have a significant impact on your future and your standard of living. As part of the estate planning process, you will need to make sure that all your documents are up to date. After taking the time to develop a solid estate plan, the last thing you would want is to invalidate those plans by not having your title documents updated. You want to make sure that all your assets are re-titled in the name of the trust. Additionally, you want to be sure to have the correct beneficiaries on all of your retirement documents.

Have You Considered a Strategic Gifting Program?
Do you have a strategic gifting program in place that will save your heirs money after you die? The law allows for tax-free gifts annually, $14,000 in 2013 per donor per recipient, reducing the size of your estate, and for you to gift to anyone you choose. Also, you can look at other strategies which involve your life insurance policy. Just by deciding not to be the owner of your life insurance policy, this keeps the death benefit from being added to your estate after you die. By having your policy in your own name, it puts you in the position of having to pay estate taxes. Avoid this by assigning ownership to another person. Another option is to set up a trust, which allows you to own the policy and to not be counted as part of your estate.

Benefits of a Trust
A trust can be a powerful tool in developing your estate plan. It not only allows you to determine how and when your assets are distributed upon your death, but it can also help reduce your estate and gift tax burden. A trust allows your assets to be distributed to your heirs without the cost and delay of probate that a will demands. Additionally, a trust also allows for timed disposition of their assets. If children are to receive assets at age 30, instead of 18, a trust is an alternative to an outright transfer of property. For example, if Dan & Daisy die without an estate plan when their children are young, their assets will go to a court appointed guardian to hold for the children. When each child reaches 18, they will receive their share of the assets outright. However, if Dan & Daisy set up a trust, the assets can be retained and used for the children’s benefit until each child reaches a more mature age. Trusts can also offer protection of your assets from creditors and lawsuits. Privacy is also a factor, unlike a will which becomes part of the public record after the probate process, the details of a living trust can be kept confidential.

Putting Contingency Plans into Place
Your advisor can also help you prior to getting married. No one ever goes into a marriage planning to get divorced, but it is something to consider when you are creating your estate plan. Your advisor can help you to incorporate contingency plans in case this unfortunate event does happen. For example, a tailored pre-nuptial agreement for older people (one or both of whom have acquired property with significant value) displays the wisdom of always being prepared. Oftentimes, there are children from former marriages in which case issues of inheritance come into play. A pre-nuptial agreement can prevent Dad’s new wife-turned-widow from getting all his estate and leaving his kids out in the cold. Or, on the other hand, it can prevent Mom’s large portfolio of securities from being doled out solely to her recently wed husband in the event their golden pond experience comes to an unfortunate end in divorce court. Although not very romantic, clarity of expectations can actually reinforce the spirit of partnership with which the wedding vows are approached.

Protecting One of the Family
Another estate planning tip to consider is care for your pets.They are one of the family, your best friend and sometimes your biggest confidante. You want to make sure that your four-legged friends are taken care of should something happen to you. Determining who will love and care for your pet is a good first step. Additionally, you may want to consider setting up a pet trust to ensure that they are cared for.

Keeping Up With Technology
Additionally, technology has become a large part of our daily lives. We all have many usernames and passwords for many different uses. From your computer’s basic login information to your bank accounts, it is important that you have this information detailed for the appropriate person should you pass away or become incapacitated. You will also want to make sure any safety deposit box or safe information is available to the appropriate family member, trustee or executor.

Lastly, many have taken their music and book collections digital, and you may hope to pass that on to someone close to you. Unfortunately, at this time, passing on digital libraries is not possible due to the terms of service of the sellers of digital content. However, with the shift in how we keep our music collection and libraries from hard copy to digital, it is something to keep in the back of your mind as this could change down the road.

Planning your estate is a personal opportunity to direct decisions concerning your assets, finances and those you care about. It is not only a method to disperse assets, but it can also be viewed as a means to perpetuate a legacy. If you are looking to start the estate planning process or have questions regarding your current plan, please do not hesitate to contact me at dlewis@bpw.com or (805) 963-7811.