The components of an estate plan vary from individual to individual. For some, the documents may be as basic as a will, power of attorney and health care proxy. For others, charitable remainder trusts, private foundation trusts or other structures may enter the equation.
“An estate plan is important because it provides protection for the wealth you have accumulated and it protects future generations,” says Dennis Gilkerson, senior vice president and Western Market group manager for Comerica Bank.
Smart Business spoke with Gilkerson about the importance of periodically reviewing estate plans, what types of vehicles minimize the impact of estate taxes, and how to find an estate planning expert that is right for you.
When preparing an estate plan, what types of considerations should be taken into account?
Some of the questions that should be asked are: What is the family situation and how is the family structured? What kind of legacy do you want to leave? Do you want to pass your wealth on to subsequent generations, or do you want to leave a portion to charity?
Usually, everybody wants to minimize tax exposure and preserve wealth, but it goes beyond that. You need to be aware of the objectives you want met.
We try to help our clients create the image of what they want. Do they want a foundation? Do they want to support a specific cause or do they want to just leave the decisions for the use of wealth and the direction of contributions to subsequent generations? Also, health care issues should be taken into consideration.
How often would you recommend that an estate plan be reviewed?
At the minimum, it should be reviewed every three to five years. Of course, 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.
Why is creating a living trust so crucial in the estate-planning process?
It provides the direction for your instructions to be carried out. It protects you before you die by naming guardians for children and providing a plan for your health care. You design it while you’re living to protect you toward the end of your life or in the event of a catastrophic accident.
What steps can be taken to minimize the potential impact of estate taxes?
There are a variety of ways to create vehicles to pass on wealth. Many structures are available, and in some cases, they can even be tailored allow a family to manage its tax exposure. For example, if someone is interested in supporting a charity, then a charitable remainder trust is a possibility. With such a trust, a person is able to keep the value of his or her principal intact. Then upon his or her passing, the money goes on to the charity that he or she has selected.
Establishing a foundation is another option. A foundation can make contributions to a variety of causes or institutions that the donor has in mind. Again, it loops back to what the family situation is, and it is also influenced by the size of the estate.
How important is it to get expert help with one’s estate-planning needs?
It’s very important, because a professional can offer expert advice and help you create a flexible document. Ultimately, such a document will stand up against a challenge in the courts. If you go online with a fill-in-the-blanks kind of strategy, it’s going to be a relatively generic plan. Depending on the size of your estate, you might need something more detailed with more provisions.
How should an estate-planning expert be selected?
It’s important to know their background. You wouldn’t want to just flip through the telephoone book and find trust and estate attorneys. It’s valuable to ask your friends and associates with trust plans for referrals. Also, most wealthy families have accountants and lawyers. It’s wise to ask who the family has used in the past for trust and estate matters. You can also get good, solid referrals from your private banker, accountant or lawyer.
DENNIS GILKERSON is senior vice president and western market group manager for Comerica Bank . Reach him at (310) 281-2416 or firstname.lastname@example.org.