Q: What is included in an Estate Plan?
A: An Estate Plan can contain a Will, an executor, a trust plan including gifts to minors and charitable gifts and disability planning.
Q: When is the best time to review your Estate Plan?
A: Everyday personal and family changes can make yesterday’s well-delivered plan inadequate today. Consequently, you should be aware of events that signal the need for an estate plan review and possible revision.
You probably will want to consider the needs of a new child or grandchild in planning your estate.
The death of your spouse or another beneficiary can greatly affect your plan. So, too, can the death of your executor, your children’s guardian or your trustee.
If you marry, you will want to review your estate plan. When your children marry, you may want to revise your plan.
Most people review their estate plans if they divorce. But many fail to consider the effects of a beneficiary’s divorce on that beneficiary’s inheritance. For example, if your Will gives your son and his wife joint ownership in your home, think of the problems that could arise if they divorce and you don’t revise your Will.
- Relocation to another state
If you move to a new state, your estate will be settled according to the laws of that state. Certain provisions of your estate plan that are valid in your current state of residence could be invalid under the laws of the new state. Also, having your executor and witnesses to your Will residing in a state hundreds or even thousands of miles away could hamper the administration and settlement of your estate.
- Changes in Estate Composition
A substantial increase or decrease in the value of your estate since you designed your estate plan may make a review or revision necessary.
- Business Changes
Certain business changes signal time for an estate plan review. These changes include starting, buying or selling a business; entering into a buy-sell agreement that provides for the sale of your business interest when you die; changing your business legal form; and the death of a business partner or another important member of your firm.
- Tax Law Changes
On average, the tax law changes every couple of years. Any changes in the law may make your estate plan outdated. The phase out and eventual repeal of the estate and generation-skipping transfer taxes are prime examples.
The best way to keep your estate plan up-to-date is to review it on a regular basis. We would be happy to help. We can review your plan with you and your other professional advisors to determine whether changes are needed. We also can tell you more about the estate-planning strategies we’ve discussed here and how you can use them to ensure your loved ones future financial security.
Q: How can I tell if my Estate Plan is on target?
A: Use the following ten-point checklist to find out. Just answer each question Yes or No. Every No answer may indicate a gap in your estate plan.
Does your Estate Plan:
- Include an up to date Will?
- Name a guardian for your minor child?
- Name an executor (or personal representative) and trustee you are confident will carry out your wishes?
- Take into consideration any special medical or educational needs certain family members may have?
- Include provisions for long-term health care for you and your spouse and/or other dependents should the need arise?
- Take advantage of the benefits of lifetime gifts?
- Include charitable gifts?
- Provide investment assistance for family members who may need help managing their inheritances?
- Minimize taxes?
- Provide for a smooth and tax-advantaged transfer of your business interests at your retirement or death or if you become disabled?
Q: How Can I determine my estate worth?
A: Everyone has assets, a home, car, personal property, savings accounts, retirement money, etc. You may be surprised at exactly how much you are actually worth. Use this simple worksheet to estimate what your estate is worth.
|Certificate of Deposit, Money Market Account and Other Cash||$______________|
|Stocks, Bonds and Mutual Funds||$______________|
|Mortgages and Other Debts Owed to you||$______________|
|Employer-Sponsored Retirement Plan Benefits||$______________|
|Individual Retirement Accounts||$______________|
|Vacation Home/Time Share||$______________|
|Other Real Estate||$______________|
|Business or Partnership Interests||$______________|
|Life Insurance Proceeds||$______________|
|Automobiles and Recreational Vehicles||$______________|
|Other (furniture, personal belongings, etc.)||$______________|
Glossary of Estate Planning Terms
Person appointed by a court to manage the estate of a person who dies without a Will.
A person designated to receive the income, principal, or proceeds of a trust, estate, insurance policy or retirement plan.
A trust having a charitable organization as a beneficiary.
An institution which acts for the benefit of another. One example is a bank acting as trustee.
The tax paid by the administrator or executor of a person's estate or of the estate's assets.
EXECUTOR (OR PERSONAL REPRESENTATIVE)
Someone appointed by a person in a Will to carry out the Will's provisions. A “co-executor” acts as executor with another or others.
A person in a position of trust or confidence. The fiduciary is bound by a duty to act in good faith. Examples: trustees, executors and administrators.
A property interest which cannot be currently possessed, used or enjoyed.
Tax on gifts generally paid by the person making the gift rather than the recipient.
GIFT-TAX ANNUAL EXCLUSION
The provision in the tax law that exempts the first $11,000 (as adjusted for inflation) in present-interest gifts a person gives to each recipient during a year from federal gift taxes.
The total value of an individual's property for estate-tax purposes.
A person legally appointed to manage the rights and/or property of a person incapable of taking care of his or her own affairs. A “guardian ad litem” is appointed by the court to prosecute or defend an action for a minor. Also known as a “conservator.”
A person entitled to inherit a portion of the estate of a person who has died without a Will.
Any right in property.
Dying without a Will.
The ownership of property by two or more persons, usually with the right of survivorship.
LIFE INSURANCE TRUST
A trust that has the proceeds of a person's life insurance policy as its principal.
A trust that goes into effect while the trust creator is still living.
POWER OF APPOINTMENT
The authority given by one person to another under a trust agreement or Will to decide who will receive and enjoy an interest in property.
POWER OF ATTORNEY
A document which authorizes a person to act as another person's agent.
The proving of the validity of a Will.
A court with the power to probate Wills and settle estates.
Those estate assets which fall within the jurisdiction of the probate court before being transferred to another person. Life insurance proceeds, for example, are not generally part of the probate estate.
SUCCESSOR TRUSTEE OR EXECUTOR
An individual or institution which takes the place of a trustee or executor who can no longer hold office.
A person who makes or has made a Will.
A trust established in a Will which begins after the testator's death.
A legal relationship where property is transferred to and managed by another person or institution for the benefit of another person.
The document which creates a trust and established the rules which control the trust's management.
The person or institution entrusted with the duty of managing property placed in the trust. A “co-trustee” serves as trustee with another. A “contingent trustee” becomes trustee upon the occurrence of a specified future event.
A legally executed document which explains how and to whom a person would like his or her property distributed after death.
Investment Terms to Know
The process of dividing investments among several classes of assets to limit risk and increase opportunities.
A mutual fund that invests in a combination of securities (usually stocks and bonds).
The debt instrument (or “IOU”) of a corporation or government entity that promises to pay a specified rate of interest for a specified time period, with principal to be repaid when the bond matures.
CD (Certificate of Deposit)
Record of money deposited in a financial institution for a set period of time at a specified interest rate.
Securities that represent an ownership interest and give the investor voting rights in the issuing corporation.
Interest earned not only on an original investment but on its accrued earnings as well.
Investing in different types of investments to spread risk.
Payments made by a corporation to its shareholders from past and current earnings. The amount an investor receives is based on the number of shares owned.
Investments with specified payment dates and amounts, primarily bonds that pay interest.
The stock of a firm whose earnings are generally growing faster than the economy or market norm.
A stock with a history of paying steady dividends.
A mutual fund with an investment mix that mimics a specific stock or bond market index, such as the S&P 500 Stock Index or the Lehman Brothers’ Government/Corporate Bond Index.
The rate of change in the prices of consumer goods. Usually, inflation is measured by the Consumer Price Index for All Urban Consumers, which is computed monthly by the U.S. Department of Labor.
The risk that an investment will not generate a higher rate of return than the rate of inflation and that the investment will lose real purchasing power.
The investment market in which large amounts of short-term funds are loaned and borrowed.
An investment company that enables its shareholders to pool their funds to be professionally managed as a single investment account.
The capital sum invested, as distinguished from interest or profit.
Printed material offering a security for sale that fully discloses legally required information about the security.
The profit (or loss) earned through investing.
S&P 500 Stock Index
A composite index of 500 large company stocks compiled by Standard & Poor’s Corporation. The S&P 500 is used as a broad measure of stock market performance.
The unrealized increase or decrease in an investment's value during a specific time period, plus any income or gains generated by the investment during that period.
Short-term U.S. government debt securities with maturities of less than one year. T-bills are sold at weekly auctions at a discount and are redeemed at face value.
The interest or dividend paid on a security. Yield is usually stated as a percentage of the security's price. Some investment advisors also include capital appreciation as part of the yield.
Investment products are: Not FDIC insured, not guaranteed by the bank or any government agency, not a bank deposit and may lose value.