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Estate
planning is the process of developing a
program for effective management,
enjoyment, and disposition of your
property at the least possible tax cost.
Making a will is a crucial part, but estate
planning includes much more. When
you plan your estate, you are creating a
blueprint of how you want your
financial and personal affairs handled
after you can no longer handle them.
Planning your estate involves making
many decisions , including decisions
about
With so many decisions to make and so much information to absorb, estate planning can be overwhelming. You can make it easier if you separate it into five basic steps. |
Initiate the discussion
Many estate plans never get written because it is so difficult to bring up the subject of death. Adult children don't want their parents to think they are greedy or want to take over. Husbands and wives don't want to give the impression that they don't trust their spouses to look after them, and elderly parents often prefer not to think of old age and death at all. As one woman put it, "My father thinks that to make a will is calling it quits. After he draws it up, he may as well crawl away and die."
There is no easy way to begin a discussion on estate planning. One way is to use this estate planning program as a springboard. Estate planning books, magazine articles and seminars in your community also offer natural icebreakers. Often the bad experiences of a family in which someone died without a good plan will start other families thinking.
Once the topic has been approached it should be easier to discuss concerns and goals. Tough choices often must be made, but the alternative is to abandon your right to decide. No one else can plan for your family like you can. Take a deep breath and begin.
List your objectives
Your family's goals are unique. And the goals of the family may be different than those of the individual.
Talk with your family and get an idea of their goals. Does your child expect to take over the family business? Do your children expect equal shares? Or, will some be content with a lesser share so a needier brother or sister can have more? Do your parents feel comfortable being named guardians of your minor children? Does your spouse in a second marriage agree that your assets be distributed to your children from your first marriage? Does your spouse feel confident that he or she can manage the property after your death?
After you have a feel for your family's goals, sit down and list your individual goals as well. Rank your objectives in order of importance if they conflict. Use the checklist provided as a guide. Once your goals are clear, your estate plan can be tailored to meet your particular needs.
Compile information.
Your attorney, as well as other professionals you may consult, will need background information before they can help you plan your estate. Call your attorney, and ask what information you should bring to the appointment. You will need to review your financial situation, listing assets and liabilities. Accurate information about your net worth is particularly important for tax planning.
You also need to determine how your property is owned. Do you have a life estate or do you own property outright? Whose name is on the deed or bank account? This information is vital to determining how to legally transfer that property.
Before visiting your attorney, list the people you want as beneficiaries and personal representatives. Be sure of kinship status, full names, (including nicknames and maiden names) and proper addresses. Consider how you want your estate distributed should you outlive your beneficiaries.
The important thing to remember is that your estate plan will be only as complete as the information you give your professional. You can save time and money by taking stock of your situation and compiling pertinent information before your appointment.
The questionnaires listed in the section Information Needed may help you compile this information.
Choose professional advisers
Estate planning is extremely technical. Most people do not have time to develop the expertise needed to draw up and keep current a good estate plan. That is why you should consider a team of professionals to help you. Professionals such as an attorney, a life insurance underwriter, an accountant or tax adviser, a trust officer, and a financial planner are invaluable sources of information and advice. Life insurance underwriters or agents can review your insurance coverage and help you organize information for your attorney and tax adviser. The underwriter or agent will suggest ways to help you avoid liquidity (cash flow) problems upon your death. Many insurance companies also suggest alternatives to avoid unnecessary death taxes.
Accountants or tax advisers are also knowledgeable of death taxes. They will help you calculate the tax consequences of various types of transfers. Accountants or tax advisers can advise in business or property management, valuation of assets, and business continuation or sale.
Trust officers can suggest alternatives in choosing executors or setting up trusts. They also offer management and investment services. Financial planners review your entire financial situation, and identify strategies to achieve your financial goals. They work with other professionals to develop your insurance, investment, retirement, and estate plan.
The attorney is the key member of the team. He or she coordinates the work and helps you evaluate the advice of the others. Final decisions about your estate plan are made with your attorney's confidential assistance. The attorney then draws up the legal documents required.
Keep things updated
Suppose you drew up your will and "put things in order" several years ago. How often should you update your estate plan? Although you may change your will whenever you wish, there are three basic reasons to consider updating your will.
- When there has been a change in your life.
- When there has been a change in the law.
- When you have changed your mind.
You should review your will periodically to see if it needs updating. Events that may trigger the need to update your will include the following.
- Marriage or divorce.
- Birth of children or grandchildren.
- Death of a loved one.
- Move to a new state.
- Major change in financial circumstances.
- Changes in the law (taxes, estates, probate, trusts, etc.).
Your attorney can review your estate plan to help you determine if you need to update it.
Prepared by Carol A. Schwab, J.D., LL.M.,
Professor and Extension Specialist, NC State University.This publication is provided as a public service and is designed to acquaint you with certain legal issues and concerns. It is not designed as a substitute for legal advice, nor does it tell you everything you may need to know about this subject. Future changes in the law cannot be predicted, and statements in this publication are based solely on the laws of North Carolina in force on the date of publication.
Date: May 2000
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