National Estate Planning Awareness Week, the third week in October, was adopted by Congress in 2008 to help the public understand what estate planning is and why it is a vital component of financial wellness. It is estimated that more than half of all Americans do not have an updated estate plan. However, taking this important planning step can save your family both time and assets. Families who do not plan often spend far more on unanticipated problems caused by their failure to plan than the cost of the actual plan.
FIND A GOOD ESTATE PLANNER
One of the best and easiest ways to find a reputable trusts and estates attorney is to ask for a referral from a trusted financial advisor, accountant or insurance agent. The referring advisor may attend the initial meeting to help guide you through the process. This is often beneficial. It is important that all your advisors know each other and communicate with one another to give you the best advice possible.
EVERYTHING GOES TOGETHER
Many estate planners take a client centered approach to estate planning. Think of a wheel with the client at the center or hub and the client’s advisors as spokes circling around the client. When each advisor knows what is going on with the other facets of the plan, there are no surprises and the best possible outcomes are achieved for the client.
For instance, purchasing life insurance will increase a client’s taxable estate, unless the policy is applied for and purchased by an irrevocable life insurance trust that is property established and maintained. So it is important that you speak with your attorney before you apply for a life insurance policy. Likewise, your attorney can provide an estimate of any estate taxes due on your death, which you can share with your life insurance agent to determine how much coverage you will need.
Planning can also result in income tax consequences. Your accountant will need to know if trusts are established and funded during your lifetime and if you plan on making any lifetime gifts. If you make an outright gift of an asset, the person you gift the asset to also takes your basis in the property for tax purposes. If you are gifting low-basis stock or a home that you purchased in 1960 for $35,000, you may want to re-think the best way to get that asset to your heirs.
ACHIEVE YOUR FINANCIAL GOALS
Your advisors can offer solutions to meet your goals and advise on issues that may not have come to mind. Estate planning is vital to achieving your goals in an efficient manner that maximizes estate and income tax savings for both you and your heirs.