An estate plan is one of the best ways to help assure 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 and may lead to:
> Creating a will, trusts and various other related legal instruments
> Purchasing one or more types of life insurance or investment solutions
> Developing a strategy for making lifetime gifts
In developing a plan, the following should be considered:
1. What will happen to your assets upon your death?
How and when do you want your heirs to inherit your assets?
2. Who will you want to manage your estate?
Who will be your executor and your trustee?
3. Who will care for your minor children?
4. What is your anticipated estate-tax liability and how do you want to fund that liability?
What are your liquidity needs?
5.What is your family situation?
What is your spouse’s ability to manage money?
Do you need to provide for your children? For your parents?
Do you want to fund the educational needs of your children and grandchildren?
6. How do you want to manage your retirement accounts?
How have you set up the beneficiary designations on your retirement accounts?
7. Are you interested in giving part of your estate to charity?
Identifying Appropriate Strategies
Your financial advisor can help you assemble a team of professionals, including legal and tax advisors, to work with you, if you so choose. Together with these advisors, your financial advisor may help determine which strategies and investment solutions are most appropriate to address your specific estate-planning needs.
You and your team of professionals may discuss and analyze issues such as:
1. What is the best way to fund your estate-tax liability?
Is it appropriate to purchase life insurance to meet this need?
If so, what type of insurance and how much?
Are you healthy enough to qualify for insurance?
2. What is the best strategy for you to consider when funding the educational needs of children and grandchildren?
What kinds of wills and trust instruments are needed to meet your needs?
What kinds of wealth-transfer planning should be considered for making lifetime gifts?
3. What is the best way to pursue your charitable objectives?
There are a variety of vehicles and services that can be utilized to implement your estate-planning strategies:
Life Insurance
Life insurance can play an integral part in providing for your family after your death. It can be used to address many needs, including:
▪ > Income replacement
▪ > Estate liquidity (to help pay any estate taxes or other liabilities that may be due, either by your estate or your beneficiaries)
▪ > Business succession planning
Personal Trust Services
As part of a comprehensive estate plan, a personal trust can help you preserve your wealth during your lifetime. And, in the event of death or disability, a personal trust usually pro- vides for the ongoing management of your assets. It can also facilitate the transfer of assets to your loved ones or to charity and may help to protect your wealth for several generations.
Consider A “Lifetime Giving” Strategy
You may also want to consider adopting a “lifetime giving” strategy designed to reduce your taxable estate. There are a number of ways in which assets can be “gifted” to loved ones during your lifetime without incurring any federal gift tax.
The Importance Of Titling Your Assets Correctly
It’s important to make certain that your assets are titled correctly so they pass to your heirs as you intend. You should review all of your beneficiary designations so they are up to date and consistent with the provisions outlined in your will. While your will may state your intentions, the ownership and subsequent transfer of your certain assets may be legally dictated by how they are titled.
Adapting Your Current Estate Plan To Tax Law
Changes in June 2001, the economic growth and Tax relief reconciliation act of 2001 (“The 2001 Tax law”) was signed into law. The 2001 Tax law made substantial changes to the transfer tax system (estate, gift and generation-skipping transfer tax), which create many estate-planning challenges and opportunities. For example, between 2007 and 2011, the amount of assets exempt from federal estate taxation will fluctuate be- tween $2 million and $3.5 million with estate and generation- skipping transfer tax rates repealed entirely for the calendar year 2010. In 2011, however, if Congress does not act to make the repeal permanent, the highest estate-tax rate may revert back to 55 percent with a $1 million estate tax exemption. some of these changes may dramatically impact a pre-existing estate plan and alter the amounts that pass to different beneficiaries.
Review Your Strategy
Your needs and goals may be very different tomorrow than they are today. That’s why it is important to meet with your financial advisor at least annually to review and re-examine your strategy and make adjustments when necessary once your estate plan is in place. Your financial advisor, in conjunction with your other advisors, can help you to address new needs as they arise. For example, what if:
> You have a birth or death in the family?
> Your choice for executor, trustee or guardian is no longer appropriate?
> You buy or sell a property or business?
> Your marital status — or that of any of your designated beneficiaries — changes?
> The estate tax laws change in a way that may impact your situation?
> You change your mind about the charitable organizations and causes you’d like to support?
This article has been written and provided by UBS Financial Services Inc. for use by its financial advisors.
UBS Financial Services Inc. does not offer tax or legal advice. The information in this article is intended to provide general information about estate planning strategies and is not meant to be all-inclusive or to provide specific advice. You should consult your attorney and tax advisor regarding your personal circumstances be- fore implementing any estate planning strategies.
