Give Your Family The Gift Of Estate Planning

November 22, 2014

Most people spend their lifetime working to provide a good life for their families. They strive to provide their spouses and children with the best of everything. However, if they don’t have an effective estate plan in place they haven’t done a complete job. An estate plan is a person’s blueprint for how they want their assets handled after they are gone-and a good estate plan will minimize taxes, deal with all the different kinds of property a person has (personal property, real estate, investments, pensions, business interests, life insurance, IRA’s, etc.) and distribute them according to the person’s wishes. Another important function of an estate plan is to appoint fiduciaries: executors, trustees, and guardians, to be responsible not only for our assets, but for our other precious possessions: our minor children.

The cornerstone of the estate plan is a properly drafted will. Yet a recent Gallup poll found that less than 50% of Americans had one. What happens if a person passes away
intestate, without having a will? This means that the assets would be distributed according to the laws of the state where the person resided, which would most probably be New Jersey. The probate process would be more complicated since an administrator would have to be appointed to oversee everything, and the posting of bonds could possibly be required no matter what the size of the estate. The heirs recognized by the state would have to agree about various issues and a failure to reach a consensus could cause delay and potentially drain the estate by incurring fees and costs. In addition, the estate would be vulnerable to the various applicable taxes: Federal estate tax and State estate and inheritance taxes. On a practical level, the heirs would be left to wonder about what their loved one would have wanted, and family discord could result.

A will is the legal mechanism that allows a person to plan every aspect of the distribution of his or her assets that have taken a lifetime to accumulate. It is an important document, but equally important is the estate planning process. Every person’s financial, personal and family situation is unique, and everyone’s will and estate plan should reflect this. The estate planning process is designed to generate a current list of assets, analyze the tax impact under different scenarios, assist the client in formulating goals, and take into account special circumstances. Perhaps a family has a disabled or chronically ill child. Maybe one child has been assisted a great deal financially by the parents, or maybe it wouldn’t be wise to have a lump sum of money be distributed to a potential beneficiary because they have creditor or other issues. Perhaps there is a situation where the grandparents are raising or supporting grandchildren. Second marriages need special planning as do families with a single, divorced or widowed family member. Which charities does the client wish to benefit? The ages of the clients and their potential beneficiaries are a significant factor as well. The plan for a young family just starting out will be different then the one for a mature couple whose children are grown and whose assets are known and in place.

The client is then presented with different options that are designed to meet the articulated goals. Sometimes the solution will be trusts established during their lifetime and sometimes lifetime gifts or transfers of assets will be suggested. Special planning may be necessary called if the client owns property in several different states.

The key word in all of this is
plan. At the end of the process the client will be presented with several different options. These will be carefully evaluated and the one that meets most of the goals and needs will be implemented. Then the estate plan will need to be reviewed whenever the tax laws change or whenever there is a life changing event in the life of the client: marriage, divorce, relocation, retirement, change in financial circumstance, etc. At the minimum, estate plans should be reviewed every five years.

Most clients are pleasantly surprised to discover the worth of their estate. First list the value of your home and other real estate, cars, jewelry, life insurance, stocks, IRA or 401K and any business interests, then factor in appreciation. Second, contact an attorney who specializes in wills and trusts and give your family the gift of estate planning.

Categorised in: Estate Planning