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Legacy and Estate Planning

The definition of estate planning goes beyond just having a will. It includes organizing your assets to pass to the next generation (or two) with the least family disputes, minimizing the amount of federal and state taxes an estate must pay and naming individuals to make financial decisions for you when you no longer can. Comprehensive planning can be complex including numerous legal documents and insurance strategies.

We can assess your situation explain appropriate planning techniques and suggest a competent estate planning attorney (if you do not have one) who can draft the necessary legal documents to achieve your goals. Completed documents should be reviewed regularly to make sure your wishes are still being addressed and comply with current laws.

Having estate-planning documents doesn't always mean the estate planning goals are being accomplished. Usually this is a result of not clarifying objectives before legal documents are drafted. To implement solid plans it is important to keep these five things in mind:

Unneccessary Death Tax

One of the most important things for an advisor to check in this area is if a married couple is properly using a credit shelter trust when their assets exceed the estate death tax exclusion amount, which next year may be $1 million (if Congress doesn’t act). While the unlimited marital deduction protects widowed spouses when assets are passed, advisors need to keep later generations in mind. By working with a client in advance and recognizing potential asset challenges that come with death tax, advisors can use a credit shelter trust and protect heirs from future tax bombs on the state and federal level.

Unnecessary Probate Costs

Many experts claim that the average U.S. probate cost is 6 percent of the gross estate. This means it’s a percent of the assets, regardless of what the liabilities are. This can create unnecessary expenses, especially where leveraged property is involved. The most common thing that leads to probate is the titling of non-retirement assets with either a single name or joint tenancy. With such titling, when the last account owner dies, typically those assets will go through probate.

A good advisor should be aware of such issues and make sure to point out potential titling problems.

Property Titled Retirement Account Beneficiaries

This is an area that’s often overlooked when an estate plan is drafted. According to a number of recent studies, less than 40 percent of retirement accounts use secondary beneficiaries. In this type of a situation, if the primary beneficiary pre-deceased the retirement plan owner and the beneficiaries weren’t updated, which is often the case, those assets would be subject to probate before they would go to the heirs.

Also, there are at least five common types of beneficiaries that can be used on a retirement account: a spouse, children, a charity, a trust or a non-family member. The rules for each group are different and, therefore, require altered strategies to minimize unnecessary costs and potentially wasted time for heirs.

Assets in Other States

Make sure that all assets owned in other states are using the correct legal documents to insure those assets will get to the right heirs in a timely manner. Trusts are valid under state law, not federal law. If an individual drafts the trust in the state he lives in and he titles property owned in other states into that trust, the trust may be invalid because of different state laws and, therefore, subject the property to probate. It’s not the job of a good financial advisor to decipher all the state laws, but to identify the problem and get their clients to an estate-planning attorney familiar with a particular state’s laws.

Partnership Between Planner and Attorney

Recognize the value in a strong partnership between financial planner and estate planning attorney. It’s vital that people have not only a strong estate plan, but have their finances secured as well. Financial planners and advisors should work hand in hand with estate-planning attorneys in certain areas, as it’s beneficial to the client’s financial well-being. Often, attorneys may be reluctant to refer clients to a financial planning firm, due to lack of relationship or experience. However, when determining which financial firm to partner with, attorneys and their clients should:

  • Make sure the planner has at least 5 years of experience
  • Make sure the planner is fee-only to avoid any conflicts of interest and that they are always acting in the best interest of their clients
  • Check the SEC website to ensure that the advisor doesn't have any disciplinary actions against them

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