Putting Together The Pieces Of Estate Planning

Estate planning procrastination often boils down to the fear of mortality. Many people would rather not deal with death, so they postpone estate planning. As a result, many Americans don’t even have a will.

There are plenty of reasons to have an estate plan. They keep your assets in the family and distribute them according to your wishes.

You don’t want Uncle Sam to get more than his fair share, and you don’t want to leave your heirs with a costly legal and financial nightmare that can take years to resolve in the courts.

The 3 Basic Steps Of Estate Planning

Planning your estate isn’t hard – getting started involves three steps:

1. Take stock of your assets, including investments, retirement accounts, insurance policies, real estate and business interests.
2. Decide what you want to do with those assets, who should inherit them, who should run your estate and who should make significant decisions if you become incapacitated.
3. Consult with your attorney. Having a lawyer increases the chance that your documents are worded properly and your estate conforms to state law. Your attorney can also show you how to save on estate taxes.

Building Your Estate Plan

Estate planning can range from simple and straightforward to sophisticated and complex. Here are some elements to consider:

• A will – Your last will and testament is the center of your estate plan. It provides for the management and distribution of your assets, arranges for tax savings, and may include provisions for the care of your spouse, children and others. Also, it lets you designate heirs such as friends, relatives, charities or others who might be overlooked if you die without a will. When there’s not a will, you die “intestate,” which means the state gains control over the management of your assets. And control, not value, is the real issue here. Adults who have any assets should have a will.
• Asset conservation – Preserving your assets is a major goal of an estate plan. Inflation, a prolonged illness or a job loss can seriously erode the value of your estate. And federal and state taxes could take a chunk after your death.
• An executor – If you die intestate, a probate or surrogate’s court will choose an administrator for your estate and, if necessary, a guardian for your children. The court will also distribute your property pursuant to statutory guidelines, regardless of any unwritten wishes you may have expressed during your lifetime. A will allows you name an executor of your choice. Decide carefully. Most people don’t realize the complexity and time involved in the job. Choose someone who you feel can handle it and who you trust will be fair. You may even want to consider naming a professional as an executor or co-executor with a relative or friend. Here’s a comparison of the advantages of choosing a professional or personal executor:
  • Professional executor: Understands estates and trusts; impartial
  • Personal executor: More familiar with the family; low or no fees

• Durable power of attorney – This document names the person who will make financial decisions for you in the event of incapacitation. A power of attorney is “durable” when it states that it will survive your disability. You can name a separate individual to handle your health in a document known as a health care proxy. For example, you may want your attorney to handle your assets and your spouse to make decisions affecting your health. You can also sign a living will, which puts you, rather than a medical professional or the courts, in control of life support systems if you fall into an irreversible coma or are in the final stages of a terminal illness. If you fail to have a health care proxy or durable power of attorney for health, a guardian or conservator may be appointed by a court if you are found to be incapacitated.
• Living trust – You can achieve the same financial goals if you put your assets in a living trust and name a successor trustee to manage those assets if you become incapacitated. A revocable living trust preserves confidentiality by keeping private and out of probate, your estate’s value, assets, trust provisions and the names of your beneficiaries. You can manage the trust during your lifetime, but the moment you die or become incapacitated, the trustee takes immediate control.

Once deciding upon the sorts of bequests you wish to make, be sure to have a conversation with your heirs regarding your plans. By outlining your intentions, you lessen the chance for misunderstandings between your heirs.

Estate Planning For Different Life Stages And Circumstances

One important thing to note about estate planning is that it can have a different focus depending on your stage in life. For instance, for young families, the focus is often on setting up trusts because minor children can’t directly inherit assets. Young parents may also want to set up a guardianship to ensure they know who will be caring for their child, or they may need to set up pet trusts, special needs trusts and things of this nature. The goal is to focus mostly on the family.

At an older age, though, the focus may be more on medical planning, such as setting up a medical power of attorney or a living will. Business owners may want to consider business succession planning. Elderly individuals who may find themselves in a nursing home or assisted living center may need to consider long-term care planning and the costs associated with it.

Ideally, a person can start planning at these early stages in life and then review the estate plan periodically, making updates as they grow older and life changes.

Questions Frequently Asked About Estate Planning

At Ronald J. Cappuccio J.D., LL.M. (Tax), I have answered many questions about estate planning. Here is brief information about one of the most commonly asked questions I answer.

Q: How often should I review and update my estate plan?

A: There are two general ways to handle updates. First of all, you could set up a review schedule, such as reviewing your estate plan annually or biannually. Secondly, you can look for key life events – marriage, divorce, the birth of a grandchild, the death of a beneficiary, etc. – and make updates at the appropriate times. It may be wise to have a set schedule to ensure the estate plan doesn’t become massively outdated, but to also keep an eye on key events and make updates when necessary.

Q: Who should I choose as the executor of my estate?

A: You need to choose someone you trust and who understands your wishes, as they are going to play a major role in whether or not your estate plan is followed. It is also wise to choose someone who is detail-oriented, understands complex financial transactions and has good communication skills. Furthermore, it is helpful to find someone who lives nearby and who is willing to take on this role. Do not choose someone just because they have the proper skills if they think it will be emotionally overwhelming to be named the estate executor.

Q: Can I leave my child out of my will?

A: First, you need to see a tax and estate planning attorney. When a client wants to exclude a normal beneficiary from a will, such as a child or grandchild, I like to review the reasons. Sometimes, it is because the beneficiary cannot handle finances or needs some controls on the money. In that case, a trust can be set up to solve the problem. If the testator truly wants to disinherit the person, I specifically mention the person’s name and provide a general statement about excluding them.

Contact Me To Learn More About Estate Planning In New Jersey

Legal advice and representation for estate planning matters should only come from a licensed attorney. I can help you with that.

You may text me at 856-745-4330 or call my office in Cherry Hill at 856-665-2121. If you prefer, contact me online through my secure website.