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October is Estate & Gift Planning Awareness Month
This brief on "Estate & Gift Planning Awareness Month", was crafted by The Financial Awareness Foundation.
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This is a great time to make sure that your financial house is in order with current financial, estate and gift plans.
The crafting of a good estate and gift plans starts with organizing, followed by the proper drafting and signing of appropriate legal documents such as wills, trusts, buy-sell agreements for business owners, durable powers of attorney for financial management, and an advance health-care directive or health-care power of attorney. Having these documents in place saves you and your family a lot of money and time at a very difficult and emotional period. It also allows you to pass on your values, knowledge and assets to future generations and your charitable causes to help make this a better world.
THE PROCESS - SIX STEPS TO SUCCESSFUL ESTATE & GIFT PLANNING
1. DEFINE YOUR GOALS
- What do you want to happen to your assets in the event of your death, sickness or disability?
- If your beneficiaries predecease you, who are your alternate selections?
- How will your assets be distributed, and when will these distributions take place?
- Decisions on distribution of your estate assets should take into account the size of the estate, the ages and abilities of your children, and your personal desires.
- For example, a distribution to children over time might consist of 10 percent of the estate at age 18, 25 percent at age 21, 50 percent at age 24 or upon completion of college, and the balance at age 30.
- ·Choose your appointees for important roles:
- ·Who will be your executor(s) and, if applicable, trustee(s) and/or guardians?
- It is advisable to list at least a first and second alternate for each appointment in case your first choice is unwilling or unable to serve.
- If you have children who are minors, the appointment of a guardian is probably the most important decision you'll make. With the court's approval, this person, or persons, will raise your children. Consider appointing a family member and spouse, or another close couple who'll care for your children the way you would want.
- You may want to consider listing multiple executors, trustees and guardians to serve together in handling the details of your estate.
- This can provide a check-and-balance system for the appointees and help them avoid oversights or misappropriations. Consider appointing family members, friends, professionals, advisers and/or trust companies for this position.
- There is some risk here: If these people disagree and have problems, they can each be represented in court by counsel paid for by your estate, so be very careful in making your selections.
- Living trusts have become a popular tool because there is less administration and costs required in comparison with only a only will. Be aware that having a living trust does not eliminate the need for a will and administration at either the first or second spouse's death.
- To get the benefits of the trust, certain details must be attended to, and this is the job of your appointees. For example, leaving a trust for the surviving spouse requires that the trust be funded properly and in a timely manner at the first death, or major tax benefits can be lost.
- Is estate privacy an issue for you?
- Do you want your estate to be public record upon your death?
- Do you have any special gifts you want to make to your favorite cause or nonprofit?
- ·Do you want an elderly parent or friend to be financially cared for?
- ·All of these circumstances should be noted within your plan.
2. GATHER & ORGANIZE YOUR DATA
There are three basic tasks to be accomplished:
- Review and update your financial position.
- Review how you hold title to your assets. Is it consistent with your estate & gift plan?
- Did you know that how you hold title to assets has a higher legal priority than your will? For example, if you and your best friend held title to an investment club account as joint tenants and you died, the property would revert to your friend even though you had willed your interest to your spouse.
- Review your beneficiary selections. Are they aligned with your estate plans?
3. ANALYZE YOUR SITUATION
- Start by determining your current net worth, assuming your death occurred today.
- This can be done by totaling your current assets and liabilities, and adding the value of any life insurance.
- Try sketching a picture or flow chart of your existing estate & gift plan.
- Review your appointees:
- Executor
- Guardian of the Person/of the Property
- Trustee
- Power of Attorney for Financial Management
- Advance Health-Care Directive or Health-Care Power of Attorney
4. DEVELOP YOUR STRATEGIES
With the assistance of your estate planning advisor(s), identify the legal documents that need drafting, or make any necessary adjustments to existing documents. Determine any other actions that must be taken for your wishes to be carried out.
5. IMPLEMENT YOUR PLAN
- Do what needs to be done -- i.e., update or create new
- Wills
- Trusts
- Powers of Attorney & Advance Healthcare Directive
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Adjust title to your properties
- Change alternate beneficiaries of retirement plans and life insurance policies.
- Consider making current or planned gifts to family and your favorite causes and nonprofits
- Provide your executors and trustee with a location sheet as to where you keep things
6. TRACK & MONITOR YOUR PROGRESS Check your estate & gift plan annually or any time there are major changes in your family situation or net worth. Use your financial planning calendar to schedule your next review.
October - during Estate & Gift Planning Awareness Month - is a great time to do this!
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