Estate planning involves a complex web of tax, property, probate and trust law applied to family dynamics at some future time.
You have an estate plan. If you have not signed documents creating one, then the law will create one for you. And you deserve better than a default scenario.
In fact, putting in the effort toward estate planning can yield immense financial and emotional rewards. So, what are the essential elements for crafting the perfect estate plan?
1. GET STARTED. Estate planning is a process. You are developing a plan to transfer wealth by gift or inheritance to your intended beneficiaries. First, focus on your goals. Is your goal avoiding or deferring unnecessary taxes? Or is the point of your plan to keep wealth from “spoiling” your child? Do you want to make sure that your wealth stays in the family and away from creditors or inlaws? Simply articulating your goals sets you on the right path.
2. HONOR THE ART. There is an art to developing a perfect estate plan. You are not buying a document; you are hiring a licensed professional for services. There is no element of planning in mass-produced templates available online or from a “trust mill” office. Instead, estate-planning advice by its very nature is personal. So, keep it personal: Lost opportunities and misguided goals often result when the task is delegated to a personal business manager or family officer.
3. BUILD YOUR TEAM. Right now, you are in control. Yet, when the plan plays out, others will take the reins. Often, a spouse or family member named as the trustee or executor is not equipped to suddenly step into your shoes. The document can go only so far.
The inevitable trauma surrounding a death or incapacity is exponentially reduced when the attorney, accountant and financial advisors are on board to ease the financial transition. How do you select the right advisors? Look for individuals with technical expertise, experience and demonstrated good judgment who exhibit a passion for their work and a genuine interest in helping you achieve your planning goals.
4. MAKE GIFTS. Practice makes perfect. Given today’s extended life expectancies and the unpredictable tax laws, years of accumulated gifts have proved to be the most effective and satisfying means of estate planning.
The best estate plan begins with lifetime gifts. This is true not only because of the myriad of available tax-savings strategies, but also for the collateral benefits of watching what happens when you transfer wealth. How does the beneficiary react to the gift? If the gift is in trust, how does the trustee handle the wealth-management and administrative functions? Often, you will be able to take advantage of teaching opportunities to guide the process.
Overall, there never seems to be an “ideal” time to begin estate planning. Yet, the perfect plan will evolve if you get started now, recognize and value the art involved, select the planning team and make lifetime gifts in order to see the results.