When time is at a premium, it’s easy to put estate planning concerns aside, but it can be difficult when you know that you need to do something, and do it relatively soon.
Addressing these concerns involves a visit to your trust officer, lawyer, accountant, certified financial planner and/or insurance agent. Your visit will be more productive and your time better spent, however, if you have already considered some fundamental issues.
Here are three of the more salient ones.
How much am I worth?
This question needs to be asked not to determine whether you need to do any estate planning but to determine how involved it should be. For example, a husband and wife with assets exceeding $1.5 million should be thinking about planning to take full advantage of the unified credit (the ability to protect a portion of your estate from federal estate taxes), and this may involve a division of assets between you and your spouse.
Those with very large estates may need to consider lifetime transfers of wealth and the use of charitable bequests as part of the overall plan. Although the federal estate tax is being phased out and will be eliminated in 2010, several states have uncoupled themselves from it, and some have already begun or will be shortly implementing an inheritance tax, creating new planning challenges.
Maximizing the amount distributed to your loved ones is a key component of a successful estate plan.
What happens while I am alive?
Is there a mechanism in place to ensure you are cared for in case of your incompetence or incapacity? A revocable trust, along with powers of attorney for property and health care, can protect you and your assets during your lifetime. Your investment strategy should provide for financial security so that you have the capacity to live out your life in relative comfort.
Do not forget that investment decisions made early can have a profound effect on your ability to be self-reliant later in life. Other financial issues, such as the role of life and long-term care insurance, should be considered as well.
Where does my estate go when I die?
The distribution of your assets to your loved ones after your death is obviously a fundamental concern of your estate plan. At a minimum, you need a will with a clear pattern of distribution.
In certain situations, you may wish to restrict the distribution to your beneficiaries for some period after death, and the use of a revocable trust or a trust under will is a great tool to accomplish this.
Dealing with other issues, such as business succession, may require more sophisticated planning techniques.
Effective estate planning is goal-oriented and personal. If you know where you want to go, getting to your destination will be much more efficient. Michael Nylen is vice president, Asset Management and Trust Services for MB Financial Bank, N.A. Reach him at (708) 210-5931 or [email protected]. This article is intended to highlight certain issues on the subject of estate planning and should not be construed as legal advice.
