Because you care enough to leave the very best

Dec. 1, 2001
Estate planning is too important to leave to fate and probate courts — especially when planning ahead provides financial security for your family and an orderly transfer of your assets.

Estate planning is too important to leave to fate and probate courts — especially when planning ahead provides financial security for your family and an orderly transfer of your assets.

You work hard all your life to provide the best for you and your family. It's only natural that you want the very best for them after you are gone.

Family members tend to avoid discussing "distributing my assets when I'm gone." You can't really blame them — it's a delicate subject. However, estate planning is too important to leave to fate and probate courts — especially when planning ahead provides financial security for your family and an orderly transfer of your assets.

Your estate consists of your interests in real estate, investments, and other possessions. An estate plan is an organized set of instructions that assures your directives for the management and distribution of your estate are carried out after your death. Understanding the basic parts of an estate plan is essential.

Start with the basics
Start estate planning with a review of all your beneficiary designations and the ownership of your accounts. Your legal advisor can help you determine the best form of ownership for your situation.

Your will. A will is a legal document usually drafted with the assistance of an attorney. You may name your beneficiaries, including charities, and provide explicit instructions about how your assets will be distributed. You may name guardians for minor children and designate an executor (or personal representative) to oversee the settlement of your estate. Note: If you die intestate — without a valid will — state law may determine these outcomes, which may not match your intentions.A living will. A living will is a legal document, again usually drafted with the assistance of an attorney, that states the type of medical care you want or don't want — such as heroic lifesaving measures — should you become incapacitated. A living will instructs your doctors and makes your wishes clear to your family. Consider executing a health care proxy or power of attorney; this allows you to appoint a person to make decisions about your medical care in the event you are unable to make them for yourself.Life insurance. A life insurance policy can offer a cost-effective way to accumulate assets to use for death-related expenses, support of surviving family members, or for estate taxes. The proceeds generally go to your named beneficiaries and are free of federal income taxes. Living trusts. Living trusts are legal documents, usually drafted by an attorney, that arrange for a third party (a trustee) to manage your assets. The trustee administers these assets for your benefit during your lifetime and for the welfare of your beneficiaries afterward.

Living trusts can be revocable or irrevocable. A key benefit of an irrevocable trust is the tax treatment. A federal gift tax may apply to the assets transferred to the trust, but trust assets are generally excluded from taxable estates. Irrevocable trusts may not be changed or revoked once established.

Tax-saving strategies. Generally, estate taxes do not apply upon the death of the first spouse. An unlimited marital deduction allows all assets of the deceased to transfer to the surviving spouse free of estate taxes.

Determining your possible estate-tax liability is not a do-it-yourself project. Seek out trusted and competent legal and tax advice for the appropriate estate planning and tax-saving strategy. The unlimited marital deduction, unified gift and estate tax credit, annual gifting, and other plan techniques can contribute to the efficient administration of your estate.

Items to discuss before meeting with an attorney
Guardians for minor children. Who is best able to raise your minor children? A brother, sister, or a close friend may be a better choice than a grandparent.

Executor. If all or part of your estate passes through probate, decide who you want to handle the details, like paying your debts and death taxes and distributing the remaining assets to your named beneficiaries.

Living trust. Is it important to avoid probate? Make a list of your assets and their approximate values, along with a list of mortgages on any property. Your attorney can give you an estimate of what it will cost your heirs to pass your estate through probate. The living trust is frequently used to avoid or reduce probate expenses. Ask your attorney to explain its advantages and disadvantages.

Trustee. If you have a trust, either in your will or a separate living trust, you must name a trustee to manage investments, pay taxes, make distributions, etc. If the trustee should die, you must provide one or more successor trustees.

A corporate or individual fiduciary. Executors and trustees are called "fiduciaries" because of the higher standard of care required to manage the assets of another person. Some people prefer to name co-trustees — an individual and a corporate trustee — to obtain the advantages of each.

Distributions to children. If you do not want your assets distributed outright to your children, they should probably be held in a trust. However, at some future time you will likely want to distribute assets to them. Many people like to distribute a portion of the estate at several different times — for example, a third at age 21, a third at age 25, and a third at age 35, etc.

Final heirs. In the event your children pass away prior to inheriting your estate, to whom would your estate pass? For example, you may wish to designate a certain portion to the husband's side of the family (parents, brothers, sisters, etc.) and a portion to the wife's family.

Charitable bequests. Would you be interested in making any charitable bequests, especially if it reduced your income and estate taxes?

Other questions. Would you want your children to remain in the present house? Is it important to reduce your death tax obligation?

Kathleen Adams, RDH, BS, is a financial adviser with Waddell and Reed ( She is currently trying to initiate money-management workshops for hygiene students and specializes in working with dental professionals. She can be reached at (800) 210-1357.