Estate Planning | Wealth Management

The prospect of dying is not a favorite subject to dwell on but it is inevitable and it is worth planning for the eventuality. Estate planning is making a plan in preparation for your death. You might like to think estate planning is only something to plan for as you get older or when you have an estate of significant value. Even at younger ages than retirement and responsible emergency preparedness, people die unexpectedly and leave their spouse and family prematurely unsupported.

Coming up with a plan for the disbursement of your assets after death can be very detailed depending on your own personal and family situation. It can quickly get very complicated. However, it is worth spending a little time now to get at least something simple in place and it can always be changed and evolved as time permits and circumstances change.

Well before retirement proper asset protection can mean your net worth will quickly accumulate in value. Life insurance for example may be a substantial sum.

Wills

The most basic estate planning document is your will. Without a will the government will take control of your assets and distribute them at their discretion. Creating a basic will that is a legal document, signed by you, witnessed and notarized, is an easy first step to outline your wishes of how and where your assets and property are disbursed.

The will’s directions are carried out by your appointed executor and overseen by probate court. There are some costs for the court and attorneys, and your funeral arrangements. If a surviving spouse is named as beneficiary there may be no probate process, nor estate tax consequences depending on your jurisdiction’s laws and amounts involved. Be aware however that these laws and exemption amounts can change at any time on the whim of politicians, leaving you no time to adjust. Best to prepare before you have no choices.

Trusts

A trust is created for estate planning reasons in order to control how assets are titled and disbursed with the least taxable impact. Estate taxes are assessed when assets change from one generation to the next, as opposed to when passing to a spouse. An asset can be titled in the name of a trust and the grantor can specify how the trust distributes proceeds, if at all.

Trusts can be detailed and more complex to create, with additional costs involved, but the grantor can be more secure in knowing his wishes are executed and with potential savings in taxes due. Most grantors act as their own trustee while alive and successor trustees are named to continue the trust instructions after death. Successor trustees can be spouse, family, children, attorney or a professional corporate trustee.

Setting up a trust in name is just the first step. Be sure that your trust is funded, in other words that assets are retitled as appropriate for them to be included in the trust directives..

Powers of Attorney

At some time before death there can be periods when you might be incapacitated temporarily or chronically. Planning for this contingency can make it easier for you and your heirs to keep your wishes in place. Durable power of attorney and healthcare surrogate power are used in conjunction with the will and trust.

An appointed person as durable power of attorney takes care of personal financial affairs when you cannot do these things yourself. Healthcare directives allow a healthcare surrogate to act on your behalf and make medical decisions according to your predetermined wishes when you are not able to.

Retirement Plans

Most individual retirement plans allow you to specify a beneficiary on your death. The transfer of these funds are outside of your will and trust directives and do not go through probate court. Check with your brokerage that your beneficiaries are named otherwise the funds will be added to your residuary estate and subject to estate taxes.

There are several changes to the regulations regarding retirement account rules that may affect how you want to continue traditional, Simple, and Roth IRAs. Check with your financial professional to see if these changes can be of value to your estate planning and tax situation. In particular there are some changes in the way you can fund and move to Roth IRAs that could be beneficial.

Review your assets and liabilities whenever there is a change in your financial situation, when buying or selling assets, especially real estate, and when there are changes to your family structure such as births, deaths and marriages. At a minimum review your estate planning yearly.

No related posts.