Estate / Legacy Planning

This portion of your financial plan contains a sample analysis of an estate settlement arrangement. The intention is to illustrate the anticipated settlement expenses and disclose any potential problems in a plan.

This section will provide facts upon which to base decisions concerning alterations in an estate plan. In order for an estate plan to be effective, it should meet the following objectives:

  1.  Determine the most advantageous means of owning family properties.
  2.  Minimize estate and income taxes, administrative expenses, executor’s commissions and attorney fees.
  3.  Provide adequate and available money to meet known and anticipated settlement expenses due to death.
  4.  Preserve the assets you have worked hard to accumulate.
  5.  Provide funds for educational expenses and for debt repayment, if desired.
  6.  Provide an adequate income for your survivors.

Estate Settlement Cost Analysis

The Estate Settlement Cost Analysis summarizes the costs of various estate distribution arrangements. The precise determination of how we arrived at those costs are in the following report, Estate Settlement Analysis.

The estate arrangement, the inflation assumptions and year of death assumptions as well as specific personal and charitable bequests can be varied order to test the effectiveness of any proposed estate plan arrangement.

The Need for Will Preparation

Will your family know what to do when you die? Will all the members affected know how to respond if you become disabled? Are you personally prepared to deal with a disability-related early retirement? If not, it will not be your plans that fail. The problem will be the failure to plan!

Common Pitfalls

Every family, every year, should be sure to train itself to be prepared for the worst of circumstances. Yet, most people do not bother to take the essential measures.

Many do not have adequate amounts of life insurance. Others neglect their wills. Many people with complex needs have only a simplistic will when a carefully drawn trust is really needed. Some haphazardly purchase financial products and have no overall financial plan.

Every estate is planned, either actively or passively. Either you maintain control, or the government does it for you. If you do not bother, your family may suffer undue duress and expense due to protracted court proceedings. You can avoid all this by planning ahead.

Reason to Plan

In the case of a minor child or elderly parent For example, You would not think of leaving them alone without a baby sitter. Nor would you allow someone else to decide who that baby sitter should be. it is important for you to specify a guardian (and alternate guardians) in your will.

Your spouse or family members cannot be expected to know all your financial arrangements. You can save them a lot of anguish by keeping records current, including bank account numbers, insurance policies, real estate deeds and records, stocks, bonds and other investments, wills, trust agreements, employee benefit records, birth certificates, marriage license, military service records and Social Security information.

Employee benefit accounts and beneficiary arrangements change frequently, and often it is appropriate to change prior elections.

It is essential to keep an inventory of all your property, mortgage information and an informal letter of instructions regarding estate administration.

It is also important to make sure you are doing everything possible to assure adequate income at retirement. Take full advantage of savings, investments, insurance, individual retirement accounts and all the products and services available to you. Your professional financial advisor may help you understand the advantages and disadvantages of each.

Special Arrangements May be Needed

You owe it to yourself and your loved ones to become informed, and to teach your survivors now, how to make decisions and handle money. Maintaining your financial safety often means that you or your spouse, if you are not well, may not be able to handle money, run a business or manage an investment portfolio. It would be unfair and unwise to thrust these burdens on the wrong people.

If you have a mentally challenged, learning disabled or physically handicapped child, you must plan ahead. Such children may never be able to care for themselves. The same might apply to a parent or dependent sibling. Such cases call for special legal arrangements, and frequently require special funding efforts to be effective.

Every closely held business owner should consider what will happen if a business associate dies or becomes disabled. What will happen to your survivors if you meet with an accident? Could your spouse or children take over if they had to?

Would you want them to? If there are no written, binding plans, could the wrong employees take control?

Suppose you are single. Who will act for you later, if you do not act for yourself now?

You may have important charitable objectives. Government cutbacks have shifted some responsibility for social services back to the public, and many worthwhile organizations have a great need for funds. You may be contributing time and money now – what about a legacy after your death?

Benefits of Planning

Controlled estate planning will systematically uncover problems and gaps in your estate and provide solutions. For example, you can plan against:

  • Excessive transfer costs: The improper plan or group of documents might cause too much tax, payable too soon.
  • Lack of liquidity: Or not enough cash to pay taxes and other predictable expenses could result in the forced sale of your liquid assets or other income producing property. This is an especially critical factor for owners of closely held businesses or investment real estate.
  • Improper disposition of assets: This could result in the estate being disposed of in equal but inequitable shares among your children, even if their needs vary greatly. It may also be an improper disposition of assets to leave two or three hundred thousand dollars in life insurance to a 21-year-old child or to a spouse – without the benefit of a trust arrangements to prioritize for proper investment – or to preclude wild spending.
  • Inadequate income if disability occurs: Electing the maximum benefits from your employer-sponsored plans, and filling in the gaps with personal disability coverage and insurance waivers of premium.
  • Inadequate income for your family at your death: To maintain your standard of living, the family will typically need 80 percent of your present gross income. This must be adjusted periodically for inflation, additional debts incurred, education funding needs and special family circumstances.

How to Proceed

Consult with a professional financial advisor to check all your insurance. review your will and trust, making sure these documents will do what you want them to do in the most effective manner.

Inform your heirs, before they become heirs, where your personal and financial documents are located – especially a durable power of attorney. If you are married, measure your needs annually, establish your priorities, and then develop and put into effect plans to make sure that your financial future is sound.

It is not necessary to cancel and entirely redraw your legal instrument. A will can be modified by a codicil (amendment), and some forms of trust agreements are also subject to alteration. Of course, your attorney will be familiar with the correct procedures.

Neither Lion Street Financial, LLC, nor its registered representatives, offer tax or legal advice. Federal tax laws are complex and subject to change. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.  Please contact us if you wish to have formal written advice on this matter.

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by Advisor Launchpad to provide information on a topic that may be of interest. Advisor Launchpad is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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