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The Need for A Personal Estate Plan


One of the toughest questions anyone has to face is, “Will my family be provided for in the event that something happens to me?” The ability to answer “yes” with a high degree of certainty depends on how well you plan now for life's unforeseen and unexpected events.

Ask an investor for his or her list of things to do, and it's likely that developing or reviewing an estate plan is somewhere on the bottom. It's easy to see why: estate planning can be complicated and confusing, and it touches upon issues that most of us would rather not deal with.

But the fact is that estate planning needs to be one of the cornerstones of your overall long-term financial strategy. An estate plan is one of the best ways to ensure that after your death, your assets will be handled as you intended. The estate planning process typically involves working with your financial, tax and legal advisors to:

  • Create a will, trusts, and various other related legal instruments;
  • Purchase one or more types of insurance, and
  • Develop a strategy for making lifetime gifts.

By taking your specific situation and financial goals into consideration a comprehensive estate plan can offer you protection for and control over your financial affairs. That's why it's important to speak with a financial advisor about the concerns you have for taking care of your family in the event that you are no longer able to do so.

A.Getting Started:

Seven Key Questions

To see why a properly developed personal estate plan is so important, ask yourself the following questions:

1. What happens to my personal wealth if I became incapable of handling my affairs?

  • Without a plan, the court picks the successor manager or your affairs.
  • With a plan, you pick the successor manager of your affairs.

2. Who will raise our children?

  • Without a plan, a judge decides without the benefit of your insight.
  • With a plan, you nominate the guardian of your choice.

3. How will my family inherit my assets?

  • Without a plan, your family receives your assets without the benefit of your direction. In essence, your state's intestacy statute writes your will.
  • With a plan, you decide which of your family members get your assets, as well as when and how they get them.

4. I have a “blended” family from different marriages. What happens to those children?

  • Without a plan, your priorities are not even considered. Children from different marriages may not be treated according to your wishes.
  • With a plan, you decide what goes to your current spouse, as well as what goes to children from different marriages.

5. How can I ensure that my money stays within my family?

  • Without a plan, your spouse’s new family may benefit from your assets in the event of remarriage. Or, if your child passes away prematurely, your daughter/son-in-law and a new spouse may receive your assets.
  • With a plan, your family can receive absolute asset protection. A trust can ensure that your assets stay in your family.

6. What happens to my Individual Retirement Accounts (IRS’s)?

  • Without a plan, your beneficiary may experience burdensome income tax consequences because of large required distributions within a short period of time. You and your beneficiary may not gain the advantages created by new IRA distributions rules.
  • With a plan, your beneficiary may be able to minimize the income tax bite by “stretching out” distributions over time and enjoying the benefits of tax-deferred compounding. Also, you and your beneficiary can take maximum advantage of new distribution rules.

7. What will happen to my business?

  • Without a plan, there is no succession planning; no successor is names.
  • With a plan, you provide for the orderly succession of a business or distribution of property; this enables you to put a person of known competence in charge of the operation of the business.

B. What’s Involved in Estate Planning?

Here are some of the key tools and basic strategies that make up a comprehensive estate plan:

1. Your Will

This document is your blueprint for distributing your assets to your beneficiaries. When drafting your will, you can customize its provisions to meet your individual wishes. Also, you can appoint a personal representative (sometimes called an executor) to distribute your assets. If you have minor children, a will allows you to name their guardian.

2. Trusts

With the trust setup, you transfer ownership of designated property to a trustee for management in accordance with terms that you set out in a written document (the trust agreement). Trusts combine investment and possible tax-saving opportunities with the ability to provide for the well being of loved ones, even after your death. There are two broad categories of trusts used in estate planning inter vivos trusts and testamentary trusts. Inter vivos trusts are established during your lifetime using a trust agreement, and can become effective as soon as you establish and fund an account for the trust. Testamentary trusts are established under your will and become effective only after your death. A trust can serve a number of purposes. It can allow you to:
Protect Family Assets. Say you leave assets to your spouse (or “significant other”) without the protection of a trust, and your spouse later remarries after your death. In that case, your spouse’s new husband or wife can eventually end up controlling the distribution of your assets.

Minimize Estate Taxes. Through proper planning, you may be able to protect up to $5 million from federal estate taxes ($10 million if you are married).
Plan for incapacity. A will has no effect until death. If you establish a revocable living trust, however, your assets and financial affairs may be managed during your temporary or permanent incapacity. Without a trust setup, or if you don’t execute a durable (immediately effective) or springing (one that is triggered by a specific event, such as mental illness) power of attorney, a family member or an attorney must petition the court to declare you legally incapacitated or incompetent. In that case, the court will appoint someone to manage your affairs, most probably not the person of your choosing.

Minimize expenses and avoid probate. Assets held in a revocable living trust can avoid probate and also many probate-related expenses. A revocable living trust arrangement is particularly useful in those states where probate is complex. (Consult with a qualified attorney to see if you live in one of those states.)
Avoid publicity. A revocable living trust is a private document and is subject to public scrutiny. Unlike a will, it does not have to be filed with the court as a public document

3. Life Insurance.

Life insurance can play an integral part in protecting your family from financial strain or loss after your death. Life insurance can be used to address many needs, including:

  • Income replacement,
  • Estate liquidity (i.e., to pay any estate taxes that may be due, either by your estate or your beneficiaries), and
  • Business succession planning.
  • Among the more common types of life insurance that can be used to address these needs are: term, whole life, variable life and survivorship life.

4. Lifetime Giving.
One method of reducing your tax¬able estate is through lifetime giving. There are a number of ways in which assets can be "gifted" during your life without incurring any federal gift tax.

For example, you can give up to $13,000 (indexed for inflation) each year to any number of individuals without incurring federal gift tax. (This $13,000 figure is often referred to as the "annual exclusion.") If you are married, you can generally gift up to $26,000 per donee without incurring federal gift tax if "gift splitting" is elected. Keep in mind that in order to qualify for this annual exclusion, the donee must have access to the gifted property. In other words, you generally can't claim that you've made a gift to someone if you retain ownership and control of the property, cash or other asset. (There are some exceptions to this general rule, however; for example, when certain trust setups are used.)

Marini & Associates, P.A. can help You Implement Your Estate Planning Strategy. As you can see, estate planning is a dynamic, constantly changing process that can:

  • Ensure the continued growth of your hard-earned assets,
  • Allow you to control how your assets are used and/or distributed after your death or disability; and
  • Enhance your family's future.

Marini & Associates, P.A. offers a comprehensive and diverse array of estate planning programs, trust resources and investment vehicles. We have ready access to these resources and will work with you to assist you in implementing your estate planning strategy.

After reviewing your situation, it maybe determined that establishing a trust(s) and/or purchasing life insurance will best serve to protect and preserve your estate. If so, Marini & Associates, P.A. will design the appropriate strategies to meet your specific needs.

This can help enable to protect the assets you've spent a lifetime accumulating, provide for the future financial needs of your heirs, and leave a lasting, fulfilling legacy for years to come.

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