THE ESTATE PLANNING "MUST HAVE" LIST
1. You must have a REGULAR CHECK-UP of your estate planning instruments. Marriage, divorce, parenthood, widowhood, retirement and even a career move can change an otherwise solid plan from effective to ineffective in term or meeting your goals. Every year you should check your Will to make sure that it continues to reflect your wishes, goals and that the people designated in your Will to carry out certain duties are still in your life. You should likewise do the same for the beneficiaries that you have designated for your life insurance policies and for your retirement accounts. This is especially true if you have become divorced in the last year.
2. You must have an attorney whom YOU TRUST TO SHARE WITH all information, whether or not you deem it important. The same rules of sharing information apply to you and your spouse or partner. You may be aware of your own assets and net-worth but you may not always be aware of what your spouse and/or your partner is worth. If your spouse or partner is a business owner or a partner in a closely held business it is important that you understand the value of this business. Your assets should be written on paper and as close to accurate values as possible should be ascribed to each asset. Furthermore, you and your spouse should discuss potential problems and sensitive family matters. You must discuss all valuation issues and family issues with your attorney.
3. You must have a FINANCIAL POWER OF ATTORNEY instrument and HEALTHCARE POWER OF ATTORNEY instrument, which will include your LIVING WILL. If you become temporarily incapacitated or permanently incapacitated, your financial Power of Attorney instrument and Healthcare Power of Attorney instrument will guide the people who you have named to make decisions that follow your instructions and wishes. Your financial Power of Attorney instrument permits your appointed agent to take charge of paying your bills, make decisions regarding your investments, and make other financial decisions. Your Healthcare Power of Attorney allows your agent to make medical decisions when you are unable to communicate for yourself and also make end of life decisions (such as when you are unable to communicate AND you are either in an end-stage medical condition OR you are permanently unconscious). Without these instruments, a guardianship petition will have to be filed in court and a guardian of your estate and person appointed. State laws may limit some of the actions that your guardian is permitted to take. A guardianship hearing is a time consuming and expensive process and much less effective than the protection afforded by making certain these documents are prepared and properly executed during your capacity.
4. You must have the APPROPRIATE PEOPLE appointed to serve as your agent, executor, trustee, and guardian (for your minor children). You must choose people that you judge to be competent, and who are capable enough to handle decision making while following through with your wishes. You must talk to these people in advance and also speak with anybody who you intend to name as a back-up for these roles so that your wishes and goals are known. You may want different people to serve in different capacities. You may choose from your pool of people. This would include your family, friends, and even those professionals that represent you.
5. If you are fortunate to be in the position, you must have a PLAN TO GIFT. By gifting, you are taking advantage of the federal tax laws which allow you to “transfer” or “gift” up to $13,000 (for 2009) in cash or equivalents each year to anyone of your choosing without incurring either a gift tax on you or income tax on the person to whom you gift. A married couple can transfer up to $26,000 (for 2009) annually to anyone they want. You can gift to anyone: children, grandchildren, other family members and friends. The tax laws also allow you to make tuition and medical expense payments directly to the school or provider. However, because the rules are complicated you should not make any gifting decisions or take any action without consulting a competent attorney.
6. You must have a plan that allows your surviving spouse to take advantage of his or her FEDERAL EXEMPTION AMOUNT. If you leave everything to your spouse, you will not pay any Pennsylvania inheritance or federal estate taxes; however, your spouse’s estate, at his or her death, may incur an unexpectedly large tax bill. The idea is to do tax planning wherein you take full advantage of what is called the unified credit, which currently allows an individual to pass up to $3.5 million to heirs (for those dying in 2009), other than the spouse, free of estate tax. This means that each spouse, under the current tax laws, can pass up to $3.5 million to a non-spouse. The way to effectively accomplish this is by setting up a specific type of trust as a part of each spouse’s Will. In 2010, and only for people dying in 2010, there is no estate tax. In 2011, the estate tax exemption falls to $1,000,000. Because the future of the exemption amount is unknown past 2011, it is important to review how assets are owned between spouses and to consult with an attorney regarding your plan.
7. You must have a CUSTOM TAILORED estate plan. Every person is different and every person has different goals. Estate plans should be custom fitted to reflect your goals, your personal situation (first marriage, third marriage, non-traditional relationship, children, no children, just to name a few) and to protect your estate from taxes.
8. If you choose to do your estate plan yourself, you must have it REVIEWED by an attorney. At the very least, it is important to have an attorney review the instruments to be certain that they are signed in the proper sections of the instrument and to make sure that they are notarized where appropriate. By not executing your documents or by not having them properly executed (and notarized), you risk a Will contest and you risk estate litigation. If a Power of Attorney instrument is not properly executed, it will not be accepted by financial institutions or title companies and you will have to go through a guardianship procedure.
9. You must have your life insurance and your retirement account BENEFICIARY DESIGNATION FORMS coordinate with your estate plan. Almost all insurance and retirement benefits are designed to be passed outside of a Will or Trust agreement, unless the Will is intentionally designed to have proceeds from these accounts become a part of the estate. Because proceeds or account balances from life insurance policies and retirement plans are transferred directly to a beneficiary at the owner or insured’s death, it is important that your beneficiary designation forms are prepared in a way that merge and integrate with the rest of your estate plan.
10. You must have an UNDERSTANDING of how your assets are titled. If your assets are titled so they pass directly to your children, then they will not pass through your Will. Likewise, if all of your assets are joint with right of survivorship they will not pass through your Will. Therefore, if your Will names your children as your beneficiaries but your assets are titled in joint names with your sister, your assets will not pass through your estate (Will) and your children will not receive anything.
11. You must have a BURIAL/CREMATION INSTRUCTION letter separate from your Will. If your Will is in your safe deposit box and your burial instructions are embedded in your Will, then your family may not have access to your instructions prior to your funeral. Keep the letter separate and advise the appropriate people of its location.
DISCLAIMER: This information is not intended as legal advice and should not be construed as such.
Contact Us
Law Offices of Rise P. Newman, LLC
1515 Market Street
Suite 1520
Philadelphia, PA 19102
Tel: (215) 670-0055
Fax: (215) 557-0322
Rise P. Newman, Esq. E-Mail: rise@risenewmanlaw.com
Lisa A. Holland, Esq. E-Mail: lisa@risenewmanlaw.com
