An estate plan can be designed by clients and their professional advisors to achieve the client's personal and financial objectives. Or, it can be an arrangement imposed upon survivors by state intestate succession laws if someone dies withŽout a valid, up-to-date will. Even though a will is the most basic estate planŽning tool, two out of three Americans die without one.
A comprehensive estate plan can arrange the ownership, management and distriŽbution of your assets in ways that meet your needs and objectives while miniŽmizing estate shrinkage. Without such a plan, whatever you may think is going to happen to your estate after you're gone probably won't.
? Estate settlement and distribution -- Estate transfer is a privilege that can be exercised only by following specific legal procedures designed to protect the rights of deceased's heirs. Estate settlement, as this process is called, involves the assigned executor making an inventory of the person's business and personal assets, paying all debts and claims against your estate, identifying the legal heirs of the remaining estate assets, and distributing those assets accordingly.
? The problem of estate shrinkage -- The costs associated with estate settlement include funeral expenses, medical bills, legal fees, administration costs and other debts, as well as various federal or state taxes. These costs can drastically shrink the size of your estate. Because they must be paid before the estate can be fully settled, they can also delay distribution of your remaining assets to your heirs.
? The need for estate liquidity -- Estates are often cash poor. Unless sufficient liquidity has been provided, the forced sale of nonliquid assets to pay settlements costs can compound estate shrinkage. In these situations, the buyer always has the upper hand. But even people of modest means who never considered themselves rich enough to need much estate planning can be in for a shock. In addition to having to settle-up with Uncle Sam and state tax collectors, creditors must be paid in full before a taxpayer's heirs can receive their inheritances.
? A false sense of security about estate taxes -- Part of the problem may be that people are so concerned about reducing their income taxes, they forget that the federal estate tax rate is virtually double the income tax rate. Actually, anyone with at least $600,000 in assets has a potential federal estate tax liability and may also face state death taxes. Federal estate tax laws, particularly the unlimited marital deduction, have lulled many taxpayers into a false sense of security. Even with a will, anyone who thinks "leaving it all to my spouse" is the way to avoid estate taxes and other estate settlement hassles needs to think again.
? The marital deduction is an important estate planning tool. It provides that any assets passing to a surviving spouse pass tax free at the time the first spouse dies (assuming the surviving spouse is a U.S. citizen). However, the marital deduction ends after the first death. Unless the surviving spouse remarries, the real impact of the federal estate tax is felt at the secŽond death. In fact, the bill may even be higher if the estate continues to grow.
? The "second-death" problem -- How big a mistake can it be for an estate owner to leave everything to his or her spouse under the marital deduction? Consider this example: A married couple with two children each have assets of $1 million, which they intend to leave to each other under the unlimited marital deduction. If the husband dies first and leaves his entire $1-million estate to his wife under the unlimited marital deduction, his taxable estate will be zero. As a result, howŽever, if the wife does not remarry, her gross estate at her death could be $2 million, under the unlikely assumption that the assets will not appreciate. Without some careful estate planning, the federal estate tax could take a big bite out of the children's inheritances at their mother's death.
Meeting estate planning objectives. If an estate is going to be big enough to tax, a will is just the beginning. The client may also need to do some additional estate planning to meet other imporŽtant objectives:
? Avoiding probate
? Reducing or eliminating estate shrinkage
? Providing sufficient liquidity to cover estate settlement costs
? Minimizing federal estate taxes and state death taxes
? Providing for the orderly disposition of a business or professional pracŽtice
? Maintaining the family's lifestyle and meeting other financial secuŽrity objectives,
To avoid making mistakes, people need professional advice from a qualified attorney, trust officer, accountant or other financial advisors. Estate planning has helped countless numbers of people reduce their estate tax liabilities and prevent the needless loss of business and other assets.
Remember, however, that while tax savings may be a primary issue, they're not the only issue. Estate planning is also a way for people to reflect, perhaps for the first time, on what they'd like to have happen to their property after they're gone. Much of the cost and inconvenience of estate settlement can be reduced or eliminated during a person's lifetime. It can be done by making decisions to impleŽment strategies for conserving and distributing your assets most advantageously. Among these strategies are the use of:
? Jointly owned property
? Lifetime gifts
? Wills
? Trusts
? Life insurance
Planning to provide for a family's needs at the household head's death is essential, especially if the employer's pension option is "single payer." Annuities offer the security of a guaranteed death benefit, which passes to the owner's named beneficiary(ies) free of the costs and delays of probate. With some annuities, a spouse who is the primary beneficiary has the option of assuming ownership of the annuity and continuing to accumulate money on a tax-deferred basis.
Retirees should continually review their estate plans because life's changes often create a need to alter these arrangements.
Want More? Send questions and comments to w.willard3@knology.net
Bill Willard has been writing high-impact marketing and sales training for the financial services industry for over 30 years. Through interactive, Web-based "Do-While-Learning?" programs, e-Newsletters and straight-talking articles, Bill helps agents and advisors get the job done: profitably improving performance, skipping expensive mistakes, and making the journey to success faster, smoother, easier. And fun!
Here below are some of the reasons why buyers may... Read More
Today's residential real estate market for investors has become very... Read More
One of the biggest mistakes people make when selling a... Read More
With the recent release from the UK's biggest mortgage lender,... Read More
Prospecting for leads is by far the most difficult part... Read More
When buying and selling homes, the property purchase is often... Read More
Thinking of trading up on an investment resort property? If... Read More
If you're thinking about buying a home but have declared... Read More
What is title insurance and why should any buyer get... Read More
Buying a house is one of the most exciting things... Read More
So, it's home hunting time. Where do you start? Who... Read More
One of our investor students told us of an interesting... Read More
According to the National Association of Realtors, For Sale By... Read More
Even though its importance is often overlooked, a great sales... Read More
In the old days people generally only bought land and... Read More
Why without asking your boss? Two reasons, one, he or... Read More
Like a monarch, Red Haring reigned in the deep leather... Read More
Before you list you home for sale, determine what you... Read More
San Diego county has always been known for its Luxury... Read More
As soon as you decide to put your home on... Read More
For small business owners, commercial real estate investment is the... Read More
Rental real estate is a solid way to make money.... Read More
Letting agents play an important role in the buy-to-let industry... Read More
Even if your real estate contract has been written on... Read More
The Real estate market in Spain keeps gaining momentum and... Read More
Solving problems while maximizing valuesThis story has a few good... Read More
So, your selling your home. Prepare yourself both physically and... Read More
The Southern California city of San Diego has all the... Read More
The real estate agent is a valuable source of potential... Read More
Anyone interested in real estate should be able to talk... Read More
Real estate investing is not in any list of high... Read More
Learn how to sell your property faster and at the... Read More
Buying and selling property is not as easy as you... Read More
When buying a home, it can be easy to overlook... Read More
Home staging is the concept of preparing a house for... Read More
Alphabet Letters after a person's name seem to bestow some... Read More
The preconstruction process is an innovative real estate investment opportunity... Read More
Real estate agents, Canadian citizens and foreign investors interested in... Read More
Title insurance is generally associated with insuring a purchaser's or... Read More
Please don't call it "flipping."Some real estate investors who practice... Read More
There are a great many books and web sites devoted... Read More
Q: Hi Lou, I have a property under contract that... Read More
These are real building questions that I received from readers... Read More
Good Homes Under $50,000? My wife Ana and... Read More
If you've read my first article, BUDGETING YOUR LOG HOME:... Read More
Investment Real Estate, First Things FirstConsidering investing in property? What... Read More
STEP#1. First you have to recognize that in order to... Read More
If you are thinking of relocating to Maui, this article... Read More
Real Estate investing can be used to gain wealth in... Read More
Buying foreclosures can be extremely profitable for real estate investors.... Read More
Although real estate bankruptcy cases no longer dominate the bankruptcy... Read More
Wrapping a property is a simple concept that can create... Read More
I have been seeing the market on fire for a... Read More
She reached the phone on its second ring. "This is... Read More
Books on real estate are a dime a dozen-and most... Read More
You've listed your home for sale, you have a Buyer... Read More
Are you using the equity from your home to purchase... Read More
In addition to zoning, some properties have covenants recorded at... Read More
You could be forgiven for thinking that property is the... Read More
If you've read my article "Purchasing Property With No Money... Read More
Real estate values rise and fall in cycles. Currently home... Read More
When you call sellers, what do you say? When you... Read More
San Diego county has always been known for its Luxury... Read More
Whether you are a real estate investor looking for a... Read More
Want to know why Strata Title Hotel Investments can be... Read More
So you're interested in entering the world of property management?... Read More
Real Estate |