Estate Planning

The second wall to a solid financial plan is estate planning. Everyone needs to plan for their untimely demise, so as to make sure their wishes happen posthumously.

First step is to have a will regardless of your age or financial situation. This is your instructions for your family and friends to act on your behalf. Who should make decisions in your place? Who should be the guardian of your underage children?  What happens to your assets? Where does Grandma’s silver go (many intra-family feuds result from arguing over things)? A will can answer these questions.

Next have a medical power of attorney. This acts like a will in giving instruct-tions of your wishes in the event you are incapacitated due to medical circumstances.  It answers questions as to whether to keep you on life support? Whether to resuscitate? Whether to donate your organs?

Succession planning in ones business or work place is another step. What happens to your business if you die?  Do you have a business partner, a child, or a key employee who can run or buy the business from your family? How will they pay for it?  If you have a trust officer or a lawyer acting as your executor they may sell your business quickly due to their fiduciary liability. By planning ahead your family can have a better way to receive value from your business.

Planning for income for your spouse also needs to be considered. Do you have your spouse named as your beneficiary for you IRA, pension, annuities, or other qualified retirement plans? Is your Social Security setup under the spousal arrange-ment? How are your assets titled - can your spouse control them without having to go through probate?

Questions to think about for your heirs- what should they receive? Are they mature enough to handle those assets or do they need to be placed in a trust for their behalf? Should a child involved in the family business or farm inherit it outright or buy it from the estate? What do the other heirs get in place of that asset? How should you split your assets amongst your heirs?

Estate taxes are the hidden destroyer of family assets. All of us know of family farms and businesses that had to be sold due to owing estate taxes. Being prepared on how to deal with these will ease the burden on ones heirs. Even though the current trend is for the Federal Estate Taxes to disappear many states are raising their own estate tax rates to take in the difference for more revenue for their treasuries. Also if the congress doesn’t make permanent the current law, estate taxes will revert back to 2001 levels.  There are many ways to reduce and pay this tax without des-troying the asset base you have worked a lifetime to create.

The last area for consideration is charity. Do you want to leave a legacy to your alma mater, church, or a special organization? Whether you donate for the joy of giving or just to reduce estate taxes it is a factor in your overall estate plan.

Comments

[Super Saver]

Good advice. We didn't do all this until we did an international assignment. I am glad that was the impetus to get all our estate planning documents in place. While we haven't needed to use any of the elements, it does give us piece of mind.