ORGANIZE YOURSELF

The need to provide security and a better lifestyle are often the underlying factors in what drives us to take time, energy and money to develop an estate plan in the first place. If we didn't want to take care of loved ones after we're gone, no one would bother completing an estate plan.

How to Review Your Estate Plan.

Organize and Arrange.

This is the first step, and often most difficult. Organize all of your financial information, deeds and records. This will develop an accurate picture of your estate. Do not overlook non-tangible assets, like insurance policies, investments, personal property (like furniture or art), and any collections you might have.

Analyze Your Current Situation.

Once you organize yourself you will have a clearer picture of your estate and be able to determine what is at risk. This should be done with the help of an experienced estate attorney. Ask yourself these questions:

Will my estate go through probate?

Is my estate subject to estate taxes?

Are assets at risk if I become incapacitated?

Who will take care of me if I become incapacitated?

Who will manage my assets if I become incapacitated?

Do I have children? Who would care for them if something happened to me?

Are any of my family members disabled?

These are all important questions you should ask and answer yourself.

Talk With Your Family.

Your estate plan will effect you AND your family. You may want to discuss family member's wishes, and identify how they want assets handled. But also make clear your own wishes. An open dialog will reduce the chances a family member could contest your plan later. And if you suspect there could be trouble down the road, consider implementing an advanced strategy that is more difficult to contest.

Look Into The Future.

You will want to play a lot of "What If?" games. This simply means you look at best and worst case scenarios (and everything in between). Again, "what if I become incapacitated and need nursing home care?" "How would that be paid for?" "Who would I want to manage my affairs for me?" "What if my spouse becomes incapacitated and outlives me?" These are all questions that should be asked of yourself.  

Choose and Executor, Trustee and Attorney-in-Fact.

You're incapacitated or disabled. Who do you want to care for you, your assets and your affairs.

You're no longer around. Who do you trust to manage your affairs and care for your family?

Is it a relative, friend, or even business associate? Whomever you select will need to have the time to carry out your plan, and the skills to do so. Select wisely, and discuss your wishes with that person so that they know how you want things to be taken care of.

Selecting Beneficiaries.

You will also want to decide who will be your beneficiaries and what they will get.

If you are married, chances are (but not always) your spouse will be your primary beneficiary. In some cases, this may not be wise. For example, your spouse may be incapacitated or disabled and receiving public benefits in a nursing home. A direct bequest to him or her will effectively stop these benefits. Instead, you will want to provide for a different type of distribution.

Similarly, if you have incapacitated or disabled children or grandchildren, you will need to establish special provisions for them in order to preserve their public benefits.

Your beneficiaries may be perfectly healthy, but you may still wish to delay their receipt of the estate. A wayward son may be ill-equipped to receive a lump-sum inheritance. You may instead wish to establish a rust that distributes portions of the trust assets over time.

These are just a few examples.

Review and Prepare Up-To-Date Estate Planning Documents.

Each person has their own individual needs and desires. You may be married. You may not be. You might have adult children. Or you might have a disabled grandchild. Regardless, there are certain documents that we consider "foundational" to your overall estate plan. These include:

Last Will and Testament

Durable Power of Attorney

Living Will

Designation of Health Care Surrogate

Living Trust

You may or may not require additional documents, depending upon your particular circumstances. In addition, you should investigate the relevance and need for such tools as Long-Term Care Insurance, Life Insurance, and sophisticated estate tax planning instruments.

Give Today, Not Tomorrow

One of the easiest ways to provide for loved ones is by making annual gifts. Gifting today not only reduces your estate (and your possible estate tax liability), but also allows you to share in the joy a gift can bring.

Each and every U.S. citizen can give away up to $11,000 per person each year. A husband and wife together can give $22,000 to any child, grandchild... or anyone else they feel like. For instance, if a couple has two children and 8 grandchildren, they can gift a total $220,000 (10 beneficiaries x $22,000) per year, completely free of gift and inheritance taxes.

With the passage of the Taxpayer Relief Act of 1997, Congress began raising the original $10,000 limit to account for inflation. However, as politicians often do, they put some restrictions on the increases. Congress stipulated that the $10,000 limit would rise with inflation, rounded down to the nearest thousand.

Suppose inflation is 3%; the limit would rise to $10,300, but be rounded down to $10,000. The next year, it would rise to $10,630, only to be rounded down again to $10,000. In 2002, the gifting limit changed for the very first time to $11,000, and it may take a few more years for it to increase, if low inflation continues.

Can You Give Too Much?

What happens if you gift too much (i.e., over the $11,000 "annual gift exclusion")? The beneficiary will have to pay taxes on the amount over $11,000. These taxes can rise as high as 55%, and closely mirror estate tax rates.

An alternative is to have the amount over $11,000 apply towards your Unified Credit. Everyone is given this credit by the IRS, and it is usually used for calculating estate taxes. Currently, the Unified Credit shelters $1 million of your estate from taxes.

If you give a daughter $50,000 (and you could only gift up to $11,000), then the remaining $39,000 could be subtracted from your Unified Credit. Your Unified Credit will be reduced to $961,000 but your daughter will not be taxed on the gift.

Another concern when gifting is that you give away too much of your estate, not to trigger a tax, but to maintain your lifestyle. Many people automatically gift, and end up giving too much of their assets to loved ones. Gifting should always be part of an overall estate plan that takes into account your current needs.

Remember, before you write that annual gift check, make sure you double-check with your estate adviser.

Consider Setting Up a Living Trust

Consider setting up a Living Trust in addition to just a Will.  Living Trusts allow you to avoid probate, maintain privacy, and facilitate the transferring of assets. Living Trusts also help married couple's maximize both of their Unified Credits.

Estate Taxes

Many people do not consider estate taxes when setting up an estate plan. Estate tax rates, like gift taxes, can climb as high as 50%. Effectively funding a trust with tax-advantaged vehicles, like municipal bonds and cash-rich life insurance, can help reduce taxes even more.

Talk With Your Family About Their Goals and Objectives

The best thing you can do to provide for your family is talk with them about what you want to accomplish. Do you want all of your grandchildren to go through college? How do you do you want your property divided? How should your money be used?