Fortunately, many people have realized
the importance of estate planning,
and it has become an essential part of their financial plans. Do you count yourself
among them? To be sure, legal and financial issues can seem complex, but the purpose of estate planning couldn’t be simpler:
to empower you to decide how best to distribute your assets at your death by preserving these assets through minimized
estate taxes and other expenses associated
with inheritance.
Smart Business talked to Curt
Ramkissoon, vice president, private banking, Columbus, for FirstMerit Bank, about
the importance of sound estate planning.
What is an estate plan?
An estate plan is really a process that provides for the management and disposition
of your assets if you die or if you become
physically incapacitated. It involves your
family, including minor children, other individuals and, in many cases, charitable
organizations. The centerpiece of an estate
plan typically involves a will and, more
commonly, a revocable living trust.
What is an estate?
An ‘estate’ consists of all the properties
owned by you, which may include:
- any type of real estate;
- bank accounts — checking, CDs, savings and money markets accounts;
- stocks, bonds and other marketable
securities; - life insurance policies; and
- personal property, such as automobiles, jewelry, artwork and other valuable
collections.
What does an estate plan accomplish?
Your estate plan will help you save, or
better yet, maybe even avoid taxes, including gift and estate taxes, income taxes, and other taxes that may apply to your estate. It
is also an excellent way to help you plan
for temporary or long-term incapacity
through the use of trusts or powers of
attorney, including powers of attorney for
health care. This is not to mention helping
you plan for your retirement years by planning distributions from qualified plans
such as 401(k), 403(b) and IRA plans.
What happens to my assets if I don’t have an
estate plan?
If you do not have an estate plan, you cannot control how your assets will be managed
or distributed if you die or become incapacitated. Your estate could be distributed to
your heirs at law or other default beneficiaries if you die without a will. Also, if you die
without an estate plan, your family may be
faced with very substantial taxes that could
have been avoided with simple planning.
My estate plan is simple. Can’t I just get a
will?
In some cases, a simple will may be
enough, but often, it is not. Many common assets, such as joint assets, survivorship
marital property, life insurance proceeds
and IRA proceeds are not governed by a
will. It is important to consider the financial impact assets not governed by your
will, will have on your survivors. For many,
an estate plan is not as simple as you might
expect.
Other estate-planning documents, such
as trusts, are available to help reduce or
eliminate estate taxes. However, trusts are
also available to address special family situations, such as special needs children,
spend-thrift children, second marriages,
etc. You may just have the desire to control
the distribution of your assets well beyond
your children, i.e. grandchildren, great-grandchildren, charitable entities, etc.
How often would you recommend that an
estate plan be reviewed?
At the minimum, an estate plan should be
reviewed every three to five years.
However, if there is a life-changing event —
such as a marriage, the death of a spouse,
the birth of a child or grandchild — then it
should be reviewed earlier. Also, it should
be reviewed if the needs of a child or beneficiary have changed.
How important is it to get expert advice with
your estate-planning needs?
It is very important to choose an expert
that specializes in the estate-planning field.
An estate-planning professional can offer
expert advice and assist you in creating a
customized plan specific to a family situation.
CURT RAMKISSOON is vice president, private banking,
Columbus, with FirstMerit Bank. Reach him at (614) 570-7570 or
[email protected].
