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Getting Your Estate in Order

Because you've worked hard to create a secure and comfortable lifestyle for your family, you'll want to ensure that you have a sound financial plan that includes trust and estate planning. With some forethought, you may be able to minimize gift and estate taxes and preserve more of your assets for those you care about.

A Needs Evaluation

One of the first steps in the estate planning process is determining how much planning you'll need to undertake. Two key components of your initial evaluation are an estate analysis and a settlement cost analysis. The estate analysis includes an in-depth review of your present estate-settlement arrangements. This analysis will disclose potential problems in your present plan and provide facts upon which to base potential changes.

For example, you may believe that your current arrangements are all taken care of in a will that leaves everything to your spouse. However, if you've named anyone else as a beneficiary on other documents, such as life insurance policies and retirement/pension plans, those instructions, not your will, are going to govern the disposition of those assets. You want to ensure that all your instructions work harmoniously to follow your exact wishes.

An estate-settlement cost analysis summarizes the costs of various estate distribution arrangements. In estimating these costs, the analysis tests the effectiveness of any proposed estate plan arrangement by varying the estate arrangement, the inflation, and date of distribution assumptions, as well as specific bequests.

Estate Planning Checklist

Bring this four-part checklist to a qualified legal professional to discuss how to make your plan comprehensive and up-to-date.

Part 1: Communicating Your Wishes

  • Do you have a will?
  • Are you comfortable with the executor(s) and trustee(s) you have selected?
  • Have you executed a living will or health care proxy?
  • Have you considered a living trust to avoid probate?
  • If you have a living trust, have you titled your assets in the name of the trust?

Part 2: Protecting Your Family

  • Does your will name a guardian for your children if both you and your spouse are deceased?
  • If you want to limit your spouse's flexibility regarding the inheritance, have you created a Q-TIP trust?
  • Are you sure you have the right amount and type of life insurance for survivor income, loan repayment, capital needs, and all estate settlement expenses?
  • Have you considered an irrevocable life insurance trust to exclude the insurance proceeds from being taxed as part of your estate?
  • Have you considered creating trusts for family gift giving?

Part 3: Reducing Your Taxes

  • If you are married, are you taking full advantage of the marital deduction?
  • Since the federal estate tax disappears during 2010, have you considered how this one-year change could impact your estate plan?
  • Are you making gifts to family members that take advantage of the $13,000 annual gift tax exclusion?
  • Have you gifted assets with a strong probability of future appreciation in order to maximize future estate tax savings?
  • Have you considered charitable trusts that could provide you with both estate and income tax benefits?

Part 4: Protecting Your Business

  • Do you have a management succession plan?
  • Do you have a buy/sell agreement for your family business interests?

Finally, be sure to work with a qualified financial professional and tax professional. The federal estate tax is scheduled for a temporary repeal during 2010. Congress is expected to enact new legislation. Be sure you know the situation to help ensure you are minimizing taxes and maximizing gains for your heirs.


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