Estate Planning Information

Estate Planning is important no matter how much money you have since it can ensure that your assets are distributed according to your wishes and to whom and when you decide they should be distributed.  It also provides guidance on who should make decisions on your behalf should you become physically or mentally incapacitated.

Good estate planning can reduce your tax liability so that as much of your money gets passed on as possible, and it can give you peace of mind knowing that your financial affairs are taken care of before you die or become incapacitated.

You should first make a list of all of your assets and the value of each asset.  You should include all of your financial investments, stocks, bonds, furniture, vehicles, jewelry, retirement accounts, all insurance policies, all real estate, any business interests, and any “receivables” (i.e. any monies due to you including any IRS refunds, loans due to you, or any pending inheritance).

You should determine who you want to handle your financial affairs when you die or become incapacitated.  If you choose a trustee to oversee your trust, (whether it is a beneficiary, family member, or corporate trustee) be sure that the terms of the trust clearly outline your wishes.

A simple estate may only include a will, a power of attorney, and a living will (medical power of attorney).  More complex estates may involve revocable or irrevocable trusts.  Trusts are legal documents that outline how and when your assets will be distributed upon your death.  Trusts can also reduce estate and gift taxes and allow your assets to be distributed without probate.

You should then decide who will be inheriting your assets and when.  It may not always be a good idea to leave everything to your spouse.  If you have a sizeable estate, you need to be sure that you take advantage of the estate tax exemptions.

You should also decide if your beneficiaries are to receive their income from just the investments, or if any of the principal will be distributed after you die. When making these decisions, you need to consider the age (or maturity) of the heirs, their current and future financial needs, and whether or not your heirs will be financially responsible if inheriting a large sum of money all at one time.  You may want to consider leaving assets in a trust until your children reach a certain age, and even then only paying out a portion of the assets over a specified time period or for specific circumstances (for school or for buying a house for example).  This can prevent heirs from receiving and spending all of their inheritance before they are financially responsible adults.

Your estate should provide for your minor children and you should choose legal and financial guardians for your minor children.  You should consider a special needs trust for any children with special needs.

If you were married before and have children to your first spouse, you may want to consider what you leave your second spouse after allowing for your children (and first spouse, if appropriate).

You may also consider gifting some of your assets to your heirs before you die so that you can enjoy seeing your heirs benefit from your generosity.  You may also be able to give them investment advice so that they can see their assets grow.
Charitable gifts should also be considered so that your investments can grow tax free.

It’s always a good idea to discuss your estate planning with your heirs before you die or become incapacitated.  Good communication is important so that all of the beneficiaries know and understand how and when the assets will be distributed and to eliminate any surprises or disagreements down the road.

Estate planning is an evolving process.  You should be sure to review your estate plan at least once every 3-5 years as your family, financial, and health situations, as well as laws, change.