Importance of Estate Planning

"In this world nothing can be said to be certain, except death and taxes."

- Benjamin Franklin

Although there isn't too much we can do about the former, there may be a lot we can do about the latter. In simple terms, estate planning is a problem solving process that allows you to build and conserve your assets while taking care of your lifetime needs, and to transfer your estate to your heirs at the lowest possible tax cost upon your death. How you hold title to and subsequently transfer ownership of your estate may directly impact how much of your estate may be subject to probate and taxation.

Many of us may have wills, and some might even have trusts or powers-of-attorney. But most of us simply aren't prepared. 

How an estate plan makes a difference  

• It protects you and your estate should you become incapacitated from accidental injury, illness or cognitive impairment.
• It protects you from a conservatorship, should that become necessary.
• It ensures your wishes regarding the distribution of your estate are known.
• It helps reduce estate settlement costs and taxes.
• It helps avoid unnecessary delays and probate.

Why a will, by itself, may not be enough!

Take a moment to answer these four questions:

• Do you own real estate that is titled Joint Tenancy with Right of Survivorship, Tenants in Common or Tenancy by Entirety?
• Do you have checking, savings or brokerage accounts?
• Do you have employer-sponsored retirement accounts or IRAs?
• Do you own life insurance or annuities?

For most of us, the above comprises the vast majority of our total net worth. Did you know none of these assets pass through your will? 

Real estate passes by title. The balance of the above assets pass by "Pay on Death" or "Transfer on Death" designation. That's a lot of money riding on a simple form, yet the number of incomplete or out-of-date beneficiary designation forms filed with banking, financial and insurance institutions is staggering! 

I filled out my beneficiary designation when I first opened my account, and nothing's changed.......or has it?

Have you married, divorced, re-married or had any new additions to the family since you filled out the original form? Are your designations multigenerational or have you inadvertently disinherited a loved one? For that matter, do YOU have copies of all of your beneficiary forms? As we stated before, incorrect or incomplete beneficiary designations may result in unintended consequences. Consider the following article that initially appeared in the January 31, 2005 edition of the New York Post titled "Pension Pickle".

"A Brooklyn man says he was left destitute when his late wife's pension, worth nearly $1 million, was awarded to his sister-in-law on a technicality - and is hoping the state's highest court will hear his case. "I lost the best thing that ever happened to me," said Bruce Friedman, 61, of his late wife, Anne. "I had no idea there was a question I wasn't the beneficiary." The Friedman's were happily married for nearly twenty years when Anne, a former city school principal, died suddenly of a massive heart attack in September 2001. 

"Friedman said he never doubted he'd be entitled to the lump-sum payment of $900,862 because the Teachers' Retirement System sent out annual statements that indicated his wife had named no beneficiary. That would make him, her closest living relative, the beneficiary. But after she died, officials found a form which had been filled out 27 years ago, four years before the couple met on a 1978 blind date. It indicated Anne's mother, uncle and sister should collect. Anne's mother and uncle (had) died, so the money was awarded to the sister......" 

A Manhattan Supreme Court ruling held that Anne's intention of making her husband the beneficiary could not be assumed and the paperwork that was on file (albeit from 27 years earlier) was clear. The court's decision was upheld by the Appellate Division in December 2004.

Whenever we undertake working with a client, one of the most valuable services we provide is a review of the client's current estate plan, and in particular, their beneficiary designation forms for ALL accounts held, whether the account was opened through us or another entity. There is simply too much at risk to not do so. 

As evidenced by the above article, the lack of basic estate planning can result in potentially devastating, unintended consequences for your spouse and family. But estate planning is more than just a will and beneficiary designations. It may include one or more types of trusts, various powers-of-attorney, a directive to physicians or living will, or additional documents specific to your family's circumstances. And it also considers the type and coverage amount of all life and long-term care insurance policies as these are frequently used to help:

• Replace lost income due to the death of a spouse.
• Infuse liquidity into the estate to meet final expenses, retire debt or pay taxes.
• Create or equalize an estate (highly useful for blended families or second marriages).
• Endow a favorite charity, alma mater or organization.
• Conserve financial resources should a long-term care need arise.

It is our belief your interests are better served by integrating your estate and retirement income planning strategies. Both are designed around the same underlying pool of assets and share the common objectives to grow, preserve and protect your financial capital.   

We are fortunate to have established relationships with two estate planning law firms, depending on the size and complexity of your estate. One of the firms we work with offers a significant discount for clients we refer. They have also developed a handout entitled "Estate Planning: What You Need to Know to Make an Informed Decision" which discusses basic estate planning concepts in an easy to read and understand format. To receive your free copy, click here.  

If you would like to schedule a complimentary appointment to discuss your estate planning needs or ask us a question on any of the above concepts, please select the appropriate link below:

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