Wills, Trusts & Probate

Five Tips For Estate Planning

Accomplishing the important goal of passing wealth to the next generation requires careful estate planning. Here are some tips that can help you began thinking about how you can leave the best possible legacy for your family.

1. Create a will
A will gives you the opportunity to appoint guardians for minor children as well as executor for the state. The executor will serve the vital function of gathering and disbursing the assets of your estate and will also handle the related tax issues. While you may initially consider making a relative or close family friend the executor of your estate, it is important to choose an executor based on his or her ability to perform these tasks.

2. Update your beneficiary designations
It’s important to make sure that beneficiary forms for IRAs, pensions, and insurance have been filled out and completely updated, especially after major life events such as births, marriages, and divorces, If your beneficiary designations are outdated or inaccurate, your assts may pass to people you did not intend to benefit.

3. Establish a living will or health care proxy
Only about 20% of Americans have created living wills for health care. A living will is a legal document that offers specific details on how you would like to be cared for in the event you become too ill to make your own health care decision s. Without a medical directive outlined in a legal document such as a durable power of attorney, health care proxy, or living will, families in many states cannot legally act on a loved one’s wishes.

4. Set up a power of attorney
If you become disabled, it’s important to make sure that your financial affairs will be conducted the way you want. You can protect yourself by creating a durable power of attorney. You also may want to ensure that your power of attorney has full authority to carry out your wishes. For instance, the Health Insurance Privacy and Accountability Act (HIPAA) may restrict power of attorney from gaining access to your medical records. To prevent this from occurring, make sure to include HIPAA release language in your disability planning documents.

5. Help to minimize estate taxes through trust and gifting
Establishing a trust outside of your estate allows you to pass assets directly to your beneficiaries without incurring estate taxes. Any assets held in a trust are not subject to probate (the judicial process sometimes needed to validate a will). Annual gifting is another way to reduce the taxable amount in your estate. As of January 1, 2006, individuals will be allowed to gift $12,000 per beneficiary on an annual basis with no gift tax consequences. Couples will be allowed to gift $24,000 per beneficiary, and there’s even “accelerated gifting” option to donate $60,000 (or $120,000 for a couple) once every five years.

Your investment professional, estate planning advisers, and/or tax attorney can help you identify all of the ways to plan your estate and pass on wealth to the next generation.