Estate Planning 101
Estate Planning Basics:
- A good estate plan helps ensure the right people will receive the right property at the right time.
- When you die, your assets are subject to a number of expenses that can significantly reduce the size of your estate left to your heirs.
- Proper estate planning can minimize these expenses and determine how the costs that remain will be paid.
Who will inherit your assets?
- If you are married, how do you want to provide for your spouse?
- Should your children share equally in your inheritance?
- Does one of your children have special needs? If yes, should they receive a disproportionate amount?
- Do you want to include parents, grandparents, grandchildren, or others?
- Would you like to make gifts to charity?
Which assets will they inherit?
- Will closely held business stock pass only to those children who are active in your business?
- Will you compensate the others with assets of comparable value?
- If you own rental property, is it appropriate for all beneficiaries to inherit it? Consider the needs of each beneficiary as well as their ability to manage property.
How and when should they inherit assets?
- Should assets be placed in trust? Trusts can provide professional asset management capabilities that an individual beneficiary lacks. However, trusts can be inflexible.
- Age and maturity are probably the two most important aspects to consider. Should you place assets in a trust with distributions to be made over a period of years as beneficiaries mature? Should some assets be distributed immediately?
- The size of your estate will affect your decisions. Could a large inheritance adversely affect a beneficiary's personality or work ethic?
- To avoid this, large estates are often distributed to beneficiaries over an extended period of time.
Should you start a gifting program now?
- Transfer tax benefits.
- Remove appreciation of the gift from your estate.
- Psychological benefits. For example, a child who is active in a family business and receives a gift of company stock may be more motivated to contribute to the growth of the company.
- Regular gifting can provide a training period during which a donor can help a child learn to mange gifted assets.