Strategies for Everyone
What are some basic estate planning strategies that should always be addressed?
No two individuals will have the very same estate plan. But there are strategies that we might refer to as basic estate planning strategies, because they are employed in most estate plans:
- Avoid intestacy (dying without a will or living trust).
- Avoid the probate process to the greatest extent possible, through use of a revocable living trust instead of a will and other techniques.
- Take advantage of basic tax code provisions that significantly defer and reduce federal estate taxes.
- Apply the annual gift tax exclusion.
- Name proper beneficiaries for bank accounts and pension and other retirement accounts.
- Include directions for handling your financial affairs in the event of your incapacity.
- Where there is a family business or a family farm, include provisions to enable the business or farm to be continued, sold, transferred, or discontinued as smoothly and efficiently as possible.
It is important to remember that an effective estate plan can be achieved only after a careful and detailed review of all your specific circumstances and objectives.
Why should I consider life insurance as part of my estate plan?
Life insurance plays three basic roles in your estate plan:
- It provides the funds to replace your income for your loved ones upon your death.
- It can provide the funds to pay for estate taxes, if necessary.
- It can replace any wealth that you might leave to a public or private charity (This is commonly referred to as redirecting your “social capital”—or redirecting the amount of your estate that is subject to estate tax.)
How do I make my plan flexible for changes in my circumstances?
Change is the nature of our world. Over time, laws will change, our family situations will change, our finances will change. Flexibility in planning means two things. First, it means establishing a plan that does not have to be revised every time there is a change in the laws or in a family situation. Second, it means establishing a plan that can be revised to reflect a change in the laws or in a family situation.
A good professional estate planning attorney will be able to help you identify your goals in such a way that future changes in your family’s situation can be addressed now in the plan. A good planner will know how to build flexibility into the plan.
What documents should I expect to have in my estate plan?
At a minimum, a proper estate planning portfolio using living trust—centered documentation will often contain:
- A section for personal and family information
- A list indicating the location of original documents
- A list of the names, addresses, and telephone numbers of professional advisors and representatives
- A list of all insurance and annuity contracts which you own, so that your intended beneficiaries will not overlook these assets
- A thorough and easy-to-understand revocable living trust agreement for you; or, if you are married, one trust for you and one for your spouse or a joint trust for both of you, if appropriate
- An affidavit of trust which contains pertinent facts about your trust that can be used to prove the trust’s existence while preserving the privacy of its detailed provisions
- Pour-over will(s)
- A memorandum of distribution to dispose of your personal effects (what form this takes will depend upon the state in which you reside)
- Special powers of attorney which designate agents to fund your revocable living trust with any assets that you may acquire after you are disabled and are unable to fund the trust yourself
- A durable special power of attorney for health care which grants your designated agent the power to make medical decisions on your behalf
- A living will which directs your physician as to when to discontinue life-support systems and invasive medical procedures
- Memorial instructions which contain your burial or cremation wishes and information on the type of memorial service that you would like to have
- An anatomical gift form which allows you to make a gift of all or part of your body for medical or dental education and research, therapy, or transplant procedures
- A property agreement which severs and terminates your joint tenancy interests to allow such interests to be properly transferred into your revocable living trust (and your spouse’s interests into his or her trust, if applicable)
- A section in which you can insert documentation of the assets which have been transferred into your revocable living trust
- A detailed letter from your attorney setting forth complete instructions for transferring assets into your trust (The Living Trust Workbook, by Esperti and Peterson, Viking-Penguin, 1994, is a complete guide on the subject.)
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