FAMILY ASSET DISTRIBUTION PLANNING
By Harold S. Small, J.D., CPA (inactive), AEP
For many years people have referred to estate planning thinking in terms of estate tax savings. However, we currently have no estate tax, and the planning is really for the distribution of assets to family members.
What is Family Asset Distribution Planning? It is determining who is to get what and when and then making that happen through appropriate documents. The basic tools are, of course, a will and a trust. The language in these documents names those that are important to the author [testator/trustor(s)], designates who is to receive personal property, who is to receive other assets, when distribution of the assets is to occur, who will make decisions about and direct the administration of the estate after death, and who will act as the guardian of minor children. These issues are much more important than tax planning.
As discussed in another article at this site, consideration should be given to when it will be best for assets to be distributed. For example, children need protection either because of their minority or their spending habits. That protection can come in the form of providing for distributions of income only for a period of time, distributions subject to other standards for a period of time, and distributions at different ages or increments of time following the death of the testator/trustor. Directions may also be given to spend monies from a trust for specific purposes for one or more beneficiaries.
Who is to be given Mom’s wedding ring? Who is to be given grandpa’s stamp collection? Who is to be given tools? Who is to be given a watch? Who is to be given a specific car? These are all questions that can have answers specified in a will and/or a trust. You can control what occurs instead of leaving it to interpretation of a statute.
Other documents that need to be considered and/or used in connection with Family Distribution Planning include an Advance Health Care Directive (living will in some jurisdictions), durable power of attorney, property agreement or declaration, beneficiary designations (e.g. insurance, employee benefit plans, and IRA’s), title transfer documents (e.g. grant or quitclaim deed, assignment of partnership interest, new stock certificate), and other documents depending upon jurisdiction.
The Advance Health Care Directive provides the name of the person(s) that will be asked to make medical decisions for you if you cannot make them yourself. This document also gives you the ability to give instructions as to what you want done under various circumstances. An attorney can assist you with the preparation of this document.
Beneficiary designations should be in place for retirement accounts, IRA’s, and life insurance. By having beneficiary designations in place (including alternates/successors) the asset(s) will not be subject to estate/probate administration. Also, the assets go where you want them to go. By using an irrevocable life insurance trust you may remove assets from being a part of an estate administration and also from estate taxes.
Title transfers/conveyance of title to a trust is important so that the assets are not subjected to estate administration, sometimes referred to as probate. It saves fees and costs, it saves time, it limits inconvenience, and much or most of the information relating to assets may be quiet as estate administration may not be needed.
While estate tax issues may become important once again, they currently are not as important as addressing some of the issues and questions posed above. If you do not have planning documents (at a minimum a will and a trust) then you should see an attorney at your earliest opportunity. As may be evident, only some of the time do we have an idea as to when death may occur from a specific illness. All too frequently, death surprises us with its suddenness. The best way to prepare and to protect your family and loved ones is to review your planning documents and get them updated. If you do not have a will and a trust, then call an attorney and schedule an appointment to have the documents prepared for you.
The attorneys having the greatest experience and that are best suited to assist you are those that have the designation of Accredited Estate Planner™, those that belong to Estate Planning Councils affiliated with the National Association of Estate Planners and Councils, and those that have certification from a state bar association where certification is possible. Seek out and use an attorney that can assist you.
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© 2010 by Harold S. Small, J.D., CPA (inactive), AEP
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