What you don’t know can hurt. Just ask these estate planners.
1. What are the limitations of my will? Do I need a trust? While we are living longer, we’re more likely to reach a state of mental incapacity while we’re here. In addition to a will, which only has power after death, every estate plan needs a health care directive, for any time a person can’t speak for himself, says Bonnie Wittenburg, an estate planning attorney at Wittenburg Law Office.
Also, wills cannot control the terms for which estate funds are distributed. Trusts, however, can set the ages at which children receive their inheritance and regulate funds.
2. How can I meet the real needs of my heirs? A key element of estate planning is the idea of “fair versus equal,” says Paul Gullickson, an accredited estate planner of Gullickson Group. Splitting up assets equally among siblings may not be the fairest way to pass on your estate. Perhaps one is in greater need of assistance because of a disability or greater family size. Also, if there is a business involved, consider which sibling gains more joy from managing the day-to-day operations.
3. How do all of my asset documents work together? “Beneficiary designations actually supersede anything you have in a will,” says Russell McAlmond, an accredited estate planner with Evergreen Capital Management. Consequently, if only one child is a designated beneficiary on an account, the funds will go directly to that child and not to all siblings, despite opposing wishes expressed in the will.
4. Are my assets titled into the name of my trust? “People sometimes think that once they set up a trust with the attorney, they’re done,” Wittenburg says. “They’re really not, because assets still need to be titled into the name of the trust.”
If assets are titled into any name other than that of the trust—even the estate holder’s name—a trustee has no legal right to manage or distribute them according to the terms of the trust.
5. Do I need more life insurance?
“Instead of thinking about how we would provide for our spouse, we should be thinking about what would be the benefits for us if we were the survivor,” says Christine Fahlund, vice president and senior financial planner of T. Rowe Price Group. Thinking critically about personal needs for survival upon the death of a spouse and what can be afforded in premiums for life insurance can help a couple decide together what an appropriate plan would demand, Fahlund explains.
6. What of my estate assets will be taxed? It’s a common misconception that money in a revocable living trust is tax-free. Federal estate tax law is rapidly changing. In addition, “each state has its own tricky tax rules for trusts,” writes author Rachel Emma Silverman in The Wall Street Journal Complete Estate-Planning Guidebook. Working with a knowledgeable estate planner will help minimize what Uncle Sam will inherit from your estate.
7. What’s all this talk about probate? Should my goal be to avoid it? Probate has a reputation for being a lengthy, expensive court process that holds assets in limbo instead of transferring them smoothly to heirs.
This is another aspect of estate planning that varies state by state, but McAlmond cites two general cases when avoiding probate should be a priority: if confidentiality is desired or if multiple properties are owned in different states.
8. Is it a good idea to add my child as joint owner to my bank account or my home? “It’s not fair to the other siblings, because technically the child who is the joint account holder owns the money,” says Bonnie Wittenburg. Even if he or she plans to fairly distribute the assets to family members and organizations designated in the will, there are other problems.What estate holders need instead is to appoint their child or another trusted individual as a durable power of attorney.
9. How can I prepare my heirs to receive their inheritance? Wayne Johnson, a certified financial planner and accredited estate planner with Syverson Strege & Company, tells his clients “it’s about passing along their values, not just their valuables.” To achieve this goal, Johnson suggests heritage planning, a process in which family members engage in projects and activities that build a culture of trust and communication and establish a form of family governance. It can be as simple as regularly coming together to plan a family vacation or volunteering together.
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