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Piecing Together Your Estate Plan

Have you developed an estate plan yet? Maybe you are slowly putting together the pieces of the puzzle. With the help of an experienced estate planner, you can devise a comprehensive plan that meets your family's needs for the future.

Here are several components you might include in a typical estate plan:

Will: A will is usually the centerpiece of an estate plan. For one thing, your assets are distributed according to its terms. Secondly, it may contain other key provisions (e.g., naming the guardian for minor children). And you can use a will to establish tax-saving trusts (more on this later).

Naturally, a will does not do much good if your assets cannot be located or the terms are not clear. It is generally recommended that you prepare a letter of instructions to accompany your will.

Credit shelter trust: This type of trust is used by married couples to maximize the tax benefits of the federal estate-tax exemption in conjunction with the unlimited marital deduction. Currently, the credit can be used to shelter up to $2 million from estate tax.

Note: This figure will increase to $3.5 million by 2009 before the estate tax is eliminated in 2010. However, the tax is scheduled to be revived in 2011 with a lower estate-tax exemption—$1 million.

Living trust: A living trust allows you to pass assets to your beneficiaries without going through the probate process. In some cases, this can save both time and money for your family. However, a living trust is generally used as a complement to a will—not as an outright replacement.

Living trusts may cause other complications, depending on the applicable state laws. Be sure to get expert advice in this area.

Charitable remainder trust: If you own property that has appreciated in value, you might set up a charitable remainder trust (CRT). Typically, the trust provides you with income during your lifetime. After your death, the proceeds go to a designated charity. Added incentive: You are entitled to a current tax deduction based on the value of the property transferred to the trust.

Living will: A living will, when valid under state law, typically provides that an individual should not be kept alive by artificial means in the event of a disabling injury or a terminal disease. Be careful about the wording.

Life insurance trust: In brief, the trust acquires an insurance policy on your life (or you may transfer an existing policy to the trust). Each year you put money in the trust to pay the premiums. The life insurance proceeds generally are not subject to federal estate tax upon your death (unless you die within three years of transferring a policy to the trust).

Don't look at each piece of the plan separately. Try to assemble a plan that coordinates all the different components.

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	[ return to list ] Piecing Together Your Estate Plan Have you developed an estate plan yet? Maybe you are slowly putting together the pieces of the puzzle. With the help of an experienced estate planner, you can devise a comprehensive plan that meets your family's needs for the future. Here are several components you might include in a typical estate plan: Will: A will is usually the centerpiece of an estate plan. For one thing, your assets are distributed according to its terms. Secondly, it may contain other key provisions (e.g., naming the guardian for minor children). And you can use a will to establish tax-saving trusts (more on this later). Naturally, a will does not do much good if your assets cannot be located or the terms are not clear. It is generally recommended that you prepare a letter of instructions to accompany your will. Credit shelter trust: This type of trust is used by married couples to maximize the tax benefits of the federal estate-tax exemption in conjunction with the unlimited marital deduction. Currently, the credit can be used to shelter up to $2 million from estate tax. Note: This figure will increase to $3.5 million by 2009 before the estate tax is eliminated in 2010. However, the tax is scheduled to be revived in 2011 with a lower estate-tax exemption—$1 million. Living trust: A living trust allows you to pass assets to your beneficiaries without going through the probate process. In some cases, this can save both time and money for your family. However, a living trust is generally used as a complement to a will—not as an outright replacement. Living trusts may cause other complications, depending on the applicable state laws. Be sure to get expert advice in this area. Charitable remainder trust: If you own property that has appreciated in value, you might set up a charitable remainder trust (CRT). Typically, the trust provides you with income during your lifetime. After your death, the proceeds go to a designated charity. Added incentive: You are entitled to a current tax deduction based on the value of the property transferred to the trust. Living will: A living will, when valid under state law, typically provides that an individual should not be kept alive by artificial means in the event of a disabling injury or a terminal disease. Be careful about the wording. Life insurance trust: In brief, the trust acquires an insurance policy on your life (or you may transfer an existing policy to the trust). Each year you put money in the trust to pay the premiums. The life insurance proceeds generally are not subject to federal estate tax upon your death (unless you die within three years of transferring a policy to the trust). Don't look at each piece of the plan separately. Try to assemble a plan that coordinates all the different components. [ return to list ]
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