1st Jan 2013

The turning of the calendar presents a great opportunity to evaluate whether your financial affairs are in order.  If you do not have an estate plan, it is a good time to resolve to meet with an estate planning specialist immediately.  If you do have an estate plan in place, it is important to consider any significant changes that have occurred in your family and financial situations since your last review.  Additionally, the beginning of the new year is a great opportunity to ensure that your trust is funded, that your beneficiary designations on retirement accounts and life insurance policies are up-to-date and that your insurance coverage is sufficient.

This newsletter will discuss some of the important issues to consider as part of your annual estate planning review.

For the Procrastinator

If you do not have a comprehensive estate plan in place, it is crucial to meet with an estate planning specialist to discuss your estate planning needs.  Without a plan in place, your estate and beneficiaries may be subjected to significant costs and headaches at your incapacitation as well as increased taxes at your death.

One of the primary goals of estate planning is to make the transfer of assets from you to your beneficiaries as smooth and quick as possible.  Having an estate plan in place will provide benefits during your life and at death.  Upon your death, if you have an estate plan in place, your loved ones will receive your assets based on the terms and conditions that you have provided in your estate planning documents.  This transfer can be accomplished without the involvement of the probate court and without delayed access to the assets.  Without an estate plan in place, your assets will likely have to go through the probate process, during which your beneficiaries may not access your assets without court approval.  The probate process is lengthy, lasting at least six months but usually 12 to 18 months.  Administration of a probate estate also costs significantly more than a fully executed estate plan.

Understanding how assets are transferred at an individual’s death, the burdens and costs of probate and the differences between a Will and Revocable Living Trust are crucial aspects of understanding your estate planning needs.  It is important that you work with an estate planning specialist to determine your needs and ensure that the transfer of assets will be as simple and efficient as possible during a difficult time.

For the Proactive Planner

If you have taken the initiative to have an estate plan prepared, it is important to review your plan and ensure that it continues to serve your needs and will achieve your goals.  Typically, an estate plan should be reviewed every few years or if there has been a significant change in your family or financial situation.  This may include marriage, divorce, the birth of a child or grandchild or the death of a beneficiary or trustee.  However, the annual changes in the estate and gift tax laws provide an additional issue that must be considered.

If it has been at least a couple of years since you reviewed your estate planning documents, it is important to make sure that they are still the right documents for you and your family.  Changes to your documents may include changing specific gift items that no longer exist, the order of trustees or the terms and conditions for the distribution of assets to your beneficiaries.  Additionally, if flexibility for changes in your family situation, such as future born descendants, or changes in the federal and state tax laws was not incorporated into your documents, it is important to recognize such flaws and consult an estate planning specialist.

Funding Your Trust

The funding or re-titling of property to your Revocable Living Trust is a very important, yet often neglected, part of estate planning.  Proper funding of a Revocable Living Trust will allow you to retain full control of your assets while also minimizing the effects of taxes and reducing the size of your probate estate. Without proper funding, the benefit of avoiding probate and certain tax benefits may be minimized or lost altogether.

If you have invested the time and effort to have an estate plan prepared, but have not received the proper advice or have not completed the funding of your Revocable Living Trust, your estate plan will fall short of achieving some of the most fundamental goals of estate planning.

Life Insurance

Life insurance can serve many different purposes; the beginning of the new year is a good time to evaluate whether your life insurance coverage continues to satisfy those purposes.  Whether you own life insurance to supplement income in case of death, to provide liquidity to pay estate tax liability at death or as a gifting or asset protection strategy, the type of insurance and the amount of coverage you need may change as your circumstances change.

For a detailed discussion of this issue, please see the May 2012 Newsletter, Estate Planning With Life Insurance.

Advanced Planning

As circumstances change, your estate planning needs may change as well.  Whether because of your family or financial situation or because of changes in the tax laws, you and your family may benefit from additional estate and gift tax planning or asset protection planning.  These goals can be achieved through the use of advanced planning techniques such as Irrevocable Life Insurance Trusts, Gift Trusts, Limited Liability Companies or Grantor Retained Annuity Trusts.

The beginning of the new year provides a great opportunity to reevaluate your circumstances and your estate planning needs.  If you are uncertain about whether you need estate planning or whether your existing plan will continue to achieve your goals and protect your family, take this opportunity to contact an experienced estate planning attorney to review your needs.

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