Estate Planning Basics: A Will and Updated Beneficiaries

The last Will and Testament of C.F.Beyer 1872/1876:Courtesy of Bradshaw79

The most important part of estate planning is having a will, say experts like Louis Kreisberg, Principal, Pioneer Wealth Partners. Unfortunately, over 50 percent of Americans die without one, resulting in leaving it up to a state court to decide how to distribute any assets you may have accumulated over your lifetime. If you have children, who cares for them will also be left up to the state courts.

If you have a desire to leave your assets to someone who is not your closest blood relative, or to an organization you support, the courts will not know, and your will not be done.

"Everyone should have a will," says one expert. "It allows assets to go to beneficiaries you name. And if you have children who are minors, it names a guardian, which is extremely important."

Another key aspect of estate planning is keeping the beneficiaries on your individual retirement accounts, 401(k) plans and life insurance policies up to date. Your bank accounts should also have a designated beneficiary.

"As people go through different milestones in life, they need to change their beneficiaries. If you had your parents listed and then you get married, those assets go to your parents. The beneficiary trumps any other estate planning you do."

Face the Future with Well Thought-Out Estate Planning

Nobody wants to consider the reality that they will no longer be among the living, but that day comes to all of us. There are a few simple steps all of us can take which will make that day easier on our loved ones to settle our affairs at a time of emotional trauma.

Here is a list of a few helpful actions to ease the path for those who will inherit you:

 1. Create a file and name it “My Estate Plan” and put it in an easily accessible place in your house. Be sure to keep all the papers together in this one file. This file should include a copy of your will, living trusts, end-of-life instructions, real estate records, and more.

 2. Name your executor. This person will be in charge of your estate. Most people name their spouses as their executors, but if this isn’t possible it is usually a child, other close relative, or trusted friend. 

3. Make your executor a co-signer on your financial accounts. Choose a secondary executor just in case something should happen to the primary.

 4. Rent a safe deposit box and keep copies of your estate planning file in it. Make sure that your primary executor is a co-signer for the safe deposit box, and give him/her the key.

 5. Specify what you would like your funeral to look like. Tell your executor what you decided, as well as family and friends.

 6. Be sure to keep your estate plan up-to-date. Revise your will whenever something changes in your life.

The New Focus on Estate Planning

According to the Wall Street Journal, many families are moving their estate planning focus away from avoiding estate taxes, to minimizing their capital gains tax burdens. Nowadays the federal estate tax is not the biggest worry for affluent people who would like to avoid paying taxes when their heirs inherit their wealth.

This is in contrast to how it was during the past ten years. Back in 2004, those with over $1.5 million in assets wishing to pass on their wealth after death, or who made gifts above that limit during their lifetimes, had to pay taxes at the top rate which was close to 50 percent. Married couples were forced to set up trust funds in order to benefit from the full $3 million exemption they were entitled to.

Adding to the complexity of planning was the fact that the tax burden kept changing every year. In fact, in 2010 the tax was completely gone, making it extremely difficult to plan for the future.

Last year Congress changed the estate tax law. Today the top estate-and-gift tax rate is set at a maximum of 40 percent and the exemption was changed to $5 million, with adjustments to take into account inflation, so that today’s exemption comes to $5.34 million. In addition, couples do not need to set up trusts to get the full benefit they are entitled to.

Now that individuals do not have to be so concerned with estate taxes, they can reap meaningful tax savings on capital gains by choosing smartly which assets to hold until death.

Confronting the Truth About Estate Planning

There are many goals of estate planning; one of which is to leave those you love in a better position than perhaps you began your life with. It means coming to the realization that one day you will no longer be alive. For many people this is a difficult realization to confront in all its ramifications.

When planning for your eventual death, the following issues will most likely arise:

• You will have mixed emotions about confronting the reality of inevitable death. When you understand that avoiding developing an estate plan will lead to your assets going to unintended beneficiaries and loss of money for your loved ones in unnecessary taxes and liabilities, perhaps that will charge you to action.

• Be sure to clearly communicate your wishes. Be sure to involve your loved ones and financial advisors. The more you clarify before your demise, the less likely there will be misunderstandings and disputes after.

• The way to communicate your wishes legally is through a will. Be sure to write one, the sooner the better. And keep it up to date whenever some change your status, or your children’s status, or any other relevant event, takes place.

• Consider establishing a living trust. This completely bypasses the entire probate process, saves on attorney’s fees, court control, contest clauses, unneeded taxes. It is private and entirely controlled by the family.