Estate planning
often involves a team consisting of an attorney, a financial professional, an
insurance professional, and yourself. However, whether you are establishing a
new estate plan or revising an existing one, only you can provide the guidance, direction, and information your
estate planning team needs to develop an effective plan.
Most estate planning
efforts begin with a questionnaire and an asset inventory. Although the process
may seem cumbersome, the more complete the information you provide, the better
equipped your team will be to help you achieve your goals. Even questions that
seem intrusive at first have specific purposes. Following are some examples of
the kinds of estate planning information you may be asked to provide:
Assets and Liabilities. A list of your assets, their estimated net
value, and documentation of the form of ownership (individual, joint tenancy,
tenancy by the entirety, and other forms of co-ownership). You will also need
to identify your liabilities and those of your spouse. If you live or have
ever lived, in a community property state, you will need to provide information
to separate your individual and community property and to determine who is
responsible for the management and control of community property.
Family and Other Beneficiaries. The names, ages, relationships, and special
needs of family members and other beneficiaries. A copy of property
settlements, other financial agreements, and court decrees from any prior
marriages of both you and your spouse.
Existing Estate Plans. A copy of your current will, along with
information on any contractual or legal restrictions on the disposition of your
assets. In addition, documentation of survivorship provisions and beneficiary
designations on insurance policies, retirement plans, employee benefit plans,
business buy-sell agreements, and other such assets.
Health Status. Information on your current health status
and that of your beneficiaries. Also, the average life spans of your ancestors
and their ages at death.
Objectives and Purposes. Your objectives, purposes, and hopes for
yourself and each beneficiary, along with an assessment of each beneficiary’s
ability to manage money.
Benefits of Team Work
Once fully
informed, your estate planning team can assist you in several important ways.
They can: 1) Analyze your assets to determine which you should dispose of during
your lifetime, which you should retain, and whether any special expertise may
be required to value and dispose of your assets; 2) Identify which assets may
be subject to probate and estate taxes and estimate the potential shrinkage due
to these costs; 3) Estimate and plan for the liquidity (cash) needs of your
estate, your surviving spouse, and other family members and beneficiaries (for
instance, cash may be needed to help cover estate taxes, probate costs, or for
income replacement); and 4) Guide you in selecting the best domicile—assuming
you have a choice—to help reduce the net effect of taxes on your estate.
No Plan is Final
Bear in mind that
no estate plan is permanent. Marriages, remarriages, births, deaths, new
employee benefits, and legislative changes may all necessitate adjusting an
existing plan or creating a new one. Also, the composition of your assets may
change over time. You can keep your estate plan up-to-date by notifying your
estate planning team of any relevant changes as they occur, and by responding
when they alert you to legislative changes that may affect your estate.
