Things To Consider
Estate planning is the process through which a person purposely accumulates assets for future use and conserves these assets for their loved ones.
It is a statement in writing as to how you want your assets managed, preserved and disposed of upon your death. It addresses your desires, dreams and goals…taking into consideration legal and tax concerns.
Estate planning should be considered important to everyone who has any type of estate at all, be it $100,000 or $100,000,000.
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Estate Planning – Important Considerations
- Your Gross Estate
For estate planning purposes it is important to identify the entities of your gross estate. Your gross estate is the value of all property owned by the decedent at the time of his or her death. This encompasses all assets whether tangible or intangible, such as personal assets, business assets, as well as your rights to future income assets. Through a will or trust you can clearly identify what your desires and intentions are.
A will is a very flexible document. Through it you can nominate a guardian, if needed, for your children, establish a trust for family members after assets go through probate. Clearly state how taxes, expenses and debts are to be paid.
- Advantages Of Distributing Assets Through A Will
A will is usually cheaper than setting up a trust. Probate can lessen the time allowed creditors to make claims on the estate. Any disputes are usually settled in probate. A fiscal year as opposed to a calendar year can be selected for income tax purposes. Having a will gives you peace of mind.
- Disadvantages Of A Will
With a will there is no privacy. A will is a public document. If assets are in more than one state the will has to be probated in each state. Fees can be pretty high if it is a large estate as these fees are usually a percentage of the gross estate. Probate can sometimes be long and drawn out. No provision be made through a will, if you should become incapacitated. You would need a separate document called a Durable Power Of Attorney to take care of that eventuality.
- Advantages Of A Trust
A trust is a private document as compared to a will which is a public document. A trust also deals with issues of incapacity among others. It is a three party arrangement involving a grantor, a trustee and a beneficiary.
You either have a plan for the distribution of your assets or you do not. In any case you have an estate plan. In the former case you are directing your assets where you want them to go. In the latter case you are allowing the government to do it for you.
You should invest the time to properly distribute your assets through estate planning and save your loved ones the headache of getting their hands on the assets you intended them to have in the first place.
A comprehensive plan can be quite complex or simple depending on the assets held and how they will be distributed. The following areas should be considered:
- Consider Estate Shrinkage And Taxes
When an estate reaches a certain level the Federal Government levies a substantial tax against the estate. The estate tax must be paid before any property can be distributed to heirs. These taxes can be between 18% and 55%. These taxes can be legally reduced through proper planning.
There are certain assets that can be kept out of the estate, like life insurance proceeds. Through estate planning charitable giving can be tax exempt. A good life insurance policy in the amount of the anticipated estate taxes is one of the best ways to take care of estate taxes.
- It Is Vital To Protect Family Income
There are varying ways to provide an income for your family after your death. These I discussed on the Settlement Option page. A good estate plan can assure your family’s future.
- Liquidity At Death Through Proper Planning
This is the most ignored area when doing estate planning. They know where they want the assets to go, but what of the liquid dollars needed to pay estate taxes, funeral expenses, attorneys fees etc. Comprehensive planning can eliminate these problems.
It in vital to set up liquidity options when doing your estate planning as part of the estate may have to be sold in order to obtain liquidity, or loans, if available, may have to be obtained to pay the bills.
Life insurance proceeds are usually the best option for liquidity at death. If properly set up, the proceeds are generally free of taxes.
- Professionals Who Specialize In These Matters Can Be Invaluable
Attorneys and accountants who specialize in estate planning can be of great assistance. Banks can also assist, and of course a well qualified life insurance agent who have completed the advanced studies in estate planning and have kept up to date with the changes in the law.
If you want the best advice go to Joe Gandolfo PHD And Associates