Estate planning allows you to determine the distribution of your estate according to your personal specifications and wishes.
When properly executed, your planning ensures the transfer of the your assets to designated heirs, preserves assets during your lifetime, alleviates the administrative confusion which often accompanies death and reduces your estate taxes and legal expenses after your death.
- Estate Planning Fundamentals- The primary options to consider are property ownership, trusts, gifts, spousal transfers and charitable gifts. Considerations in the initial data gathering process include general information, the need for competent legal counsel and tax considerations involving federal estate taxes, state taxes and taxation of annuities, life estates and remainder interests. Managing the probate process and estate liquidity are also addressed.
- Basic Estate Planning Documents- A will is a formal legal document instructing survivors in the settlement of the deceased’s estate. Guardianship for children refers to the responsibility of a child’s care and upbringing if the parents die while the child is a minor. Plans are made for incapacity with powers of attorney and living trusts. Letters of instruction are informal letters which give survivors information concerning more personal matters such as explanation of assets, location of important documents and miscellaneous information.
- Property Ownership- The rights of ownership are not absolute, vary widely by state, are limited by health codes or zoning ordinance and imply certain costs and responsibilities. Forms of ownership include sole ownership, joint ownership, tenancy in common and community property. Selecting the appropriate asset ownership designation is often the most essential component of sound estate and financial planning given the features, advantages and drawbacks of each type.
- Trusts- Trust are a special form of ownership which transfers ownership to a third party, the trust, while allowing the real owners to retain control by appointing themselves or institutions as trustees. They can help you avoid the costs associated with owning trusts outright. Considerations are revocable versus irrevocable trusts, testamentary versus living trusts and choosing trustees.
- Charitable Contributions– You may want to undertake a program of charitable giving which can provide income tax and estate tax savings. Gifts arranged for in a will allow you to make an immediate commitment to help a chosen cause but hold off your actual contribution until after death. A charitable remainder trust provides an incentive for contributing to a worthwhile cause while making valuable tax savings. Private foundations give you the opportunity to structure and regularize your giving, ensuring your generosity will be perpetuated after you die.
- Other Formal Considerations– Although a clear and well-defined body of exists for married couples, cohabiting couple law is slow to hit the main stream. Financially independent clients who plan to marry should consider premarital and post marital agreements. The IRS is particularly unfriendly to US citizens marrying foreign ones and clients in this situation should make provisions ahead. Life insurance can fund an estate and provide liquidity to cover the expenses of an already existing estate.
- Funeral Planning- Planning your funeral in advance is perhaps one of the most considerate non-financial acts a you can carry out on behalf of your survivors. Choosing a funeral home,and specifying requested services helps steer clear of overcharging. A letter of instructions, not placed in your safe deposit box can locate your will, describe previously arranged funeral services, clarify organ donor requests, request a specific type of ceremony and specify preferred death notices.
