Estate planning is one of those topics that most people would rather not talk about. After all, it involves at least two subjects – death and taxes – that are not too pleasant to ponder. Yet, estate planning is actually one of the most important and fulfilling steps anyone can take on behalf of his or her family. Because many of our clients have accumulated significant wealth, and even for those in the early accumulation phases of financial planning, we include various levels of estate planning with almost all of our clients.
Last Will and Testament Estate Planning, in its simplest form, means planning for the disposition or distribution of your assets upon your death.
3 Goals for a Good Estate Plan:
- To make sure your wealth reaches the individuals or organizations you select in the manner that you choose.
- Minimize the effect of federal or state taxes on your estate.
- Select who will handle various functions on your behalf.
Without an estate plan…
- State law will determine who inherits your assets – even if it means they pass to distant relatives or to children who lack the maturity to properly care
- The court appoints administrators who may not necessarily have ideas that are compatible with your own.
- You may pay unnecessary taxes and expenses.
- The court appoints a guardian for your children.
- Your family could be forced to sell your assets – at less than market value to pay the estate taxes you owe.
Estate planning, in a broader sense, however, is an ongoing process. For a young, single person, an estate plan may consist of simply a Will. A couple just starting out might have Wills and own a modest home and bank accounts in their joint names. When children arrive, whom to name as the children’s guardian and how to provide for them and your spouse in the event of unexpected death or incapacity become estate planning concerns. And, once an individual starts to realize his or her financial goals, asset preservation and how to avoid estate taxes become important factors in estate planning.
If you are like most people, you will work an entire lifetime to accumulate assets: a home, cars, savings, property, etc. The small amount of time and money required to create an estate plan will help ensure that your assets are passed on to the people you want with the best possible tax consequences. The more you understand the estate planning and probate process, the better the chance that your estate plan will accomplish your desires.
Our team at Main Street Wealth Group is well trained and educated in the areas of estate planning. We can help quarterback the process as we will need to work with othere professionals, such as estate planning attorneys and CPAs, to make certain all of the legal documents necessary to complete your estate plan are in order.
Calculating your potential estate tax is complex, especially under current tax law where the tax factors are continually adjusting. However, to effectively plan your estate, you need at least a basic understanding of how the tax works. Estate taxes can take a large part of your estate. Currently, federal estate-tax rates range from 18% to 45%, but are set to go back up to 37% to 55% in 2011. We can help walk you through the process so that you fully comprehend the magnitude of estate taxes in your specific situation, and more readily recognize the value of advanced planning.
A Will is the cornerstone of estate planning, but in most cases that is only the beginning. Included among the many additional planning strategies and tools used for estate planning are: “Will substitutes” such as “living” trusts; joint ownership; community property; beneficiary designations; credit shelter or by-pass trusts; QTIP trusts; life insurance trusts; gifts; “Crummey” trusts; charitable trusts; minority ownership discounting; family limited partnerships and more. Given the extremely high tax rates, and with all of these complex tools at your discretion, it doesn’t take long to discover how valuable professional advice and counsel can be in the area of estate planning.