Category: Estate Planning

Alphabet Soup – the ABCs of Estate Planning

Posted on: March 18th, 2009
Here’s another piece from my recent newsletter:
 Putting the Pieces Together


It all boils down to the fear of mortality. Many people don’t want to deal with death so they postpone estate planning. As a result, an estimated 70 percent of Americans don’t even have a will.

There are plenty of reasons to have an estate plan: To keep your assets in the family and distribute them according to your wishes.


Review and Revise

   Estate planning is a lifelong process. Review your plan at least every two years — more often depending on personal and financial changes — and look for new strategies.
   Here are some events that signal it’s time to review and revise:

    Marriage and birth.This includes not only your own marriage and the birth of your children — but marriages and births in the lives of your children, grandchildren and great-grandchildren.
    Divorce.  Again, this includes youand your beneficiaries. Imagine the nightmare if your will leaves assets to your daughter and her husband and she later gets divorced. 
    Disability.  Special planning is required to ensure that a disabled beneficiary gets an inheritance and still qualifies for government assistance benefits.
   Death. This includes the death of a beneficiary, executor, guardian or trustee.
    Estate value.  Any significant growth or reduction in your assets.
    Business changes including starting, buying or selling a business, setting up a buy-sell agreement, the death of partners or shareholders.
   Tax law revisions can make your plan out of date. The federal estate tax rules are scheduled to change repeatedly between now until 2011.

You don’t want Uncle Sam to get more than his fair share and you don’t want to leave your heirs with a costly legal and financial nightmare that can take years to resolve in the courts.


Planning your estate isn’t hard — getting started involves three steps:

1. Take stock of your assets, including investments,   retirement accounts, insurance policies, real estate and business interests.
2. Decide what you want to do with those assets, who should inherit them, and who you trust to make significant decisions if you become incapacitated.
3. Call your attorney for help assembling your estate planning team, which could include an accountant, stock broker, financial planner, life insurance agent. Having a lawyer increases the chance that your documents are worded the way you want and your estate conforms to state law. Your attorney can also show you how to save on estate taxes.
Estate planning can range from very simple and straightforward to sophisticated and complex. Once you assemble your team, here are some elements you want to discuss:
A will. Your last will and testament is the center of your estate plan. It provides for the management and distribution of your assets, arranges for tax savings, and includes provisions for the care of your spouse, children and others. And it lets you designate heirs such as friends, relatives, charities, or others who might be overlooked if you die without one. Without a will, you die intestate, which means the state gains control over the management of assets. And control, not value, is the the real issue here. Anyone 18 years or older who has any assets needs a will.
Asset conservation.  Preserving your assets is a major goal of an estate plan. Inflation, a prolonged illness or a job loss can seriously erode the value of your estate. And taxes can take a huge chunk after your death. Don’t assume that estate taxes affect only the very wealthy. Even if your holdings are moderate, you may have an estate that is subject to federal taxes that can be as high as 48 percent. Plan ahead!
An executor. If you die intestate, a probate court will choose an executor for your estate and, if necessary, a guardian for your children. The court will also distribute your property, regardless of any unwritten wishes you may have expressed during your lifetime.
A will lets you name an executor of your choice. Decide carefully. Most people don’t realize the complexity and time involved in the job. Choose someone that you feel can handle it. You may even want to consider naming a professional as an executor or co-executor with a relative or friend. Here’s a comparison of the advantages of choosing a professional or personal executor.



Specialist in estates/trusts

More familiar with the family


Low or no fees

Durable power of attorney. This document names the person who will make financial and health care decisions for you in the event of incapacitation. A power of attorney is "durable" when it states that it will survive your disability. You can name separate individuals to handle your finances and your health. For example, you may want your attorney to handle your assets and your spouse to make decisions affecting your health. You can also sign a


Living Will, which puts you, rather than a medical professional or the courts, in control of life support systems if you fall into an irreversible coma or are in the final stages of a terminal illness.


Living trust. You can achieve the same financial goals if you put your assets in a living trust and name a successor trustee to manage them if you become incapacitated.  A revocable living trust preserves confidentiality by keeping private and out of probate,your estate’s value, assets, trust provisions and the names of your beneficiaries. You can manage the trust during your lifetime, but the moment you die or become incapacitated, the trustee takes immediate control.

Guardian or conservator. This option is handy if you feel uncomfortable giving one person total control over your estate. A guardian or conservator must account to probate court on how your estate is being managed.

Once you decide what kinds of bequests you want to make, be sure to discuss your plans with your heirs. The sooner and more distinctly you outline your intentions, the less chance there will be for disagreements when you’re gone.

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