Basic Estate and Financial Planning Tips – January 2009 Issue

As we enter a new year, it is a good time to take stock of estate planning and financial positions. In this letter and the next newsletter, I will point out several things that people should consider regarding their personal situation.

1. Naming Successor Attorneys-In-Fact, Executors, Trustees, and Guardian. Many people spend the time to do estate planning documents such as Durable Powers Of Attorney, Advance Directives For Health Care, Health Care Powers Of Attorney, Wills, and Trusts. Often people think about who they want to serve in the appropriate fiduciary capacities. However, people frequently do not think about who would be the alternates if the primary designee could not serve. It is important to name successors in estate planning documents so in the event the primary designee cannot serve, you have a back up. Also, it prevents you from having to return to a lawyer to prepare an alternative document if the prime designee is unable to serve.

2. Be sure and have beneficiary designations consistent with your financial plan. It is important to remember how assets are transferred at death. A Will will cause a transfer only of assets in the decedent’s name. A Living Trust transfers only assets titled in the name of the Living Trust. Many assets have beneficiary designations for transfer at death: such as life insurance policies, IRA’s, pension and profit sharing plans, and annuities. It is important to have the beneficiary designations of all of these assets arranged to meet your total financial and estate plan.

3. Consider when Trusts adequately meet the client’s estate planning needs. Historically, estate planning has involved trusts, and a big reason for that has been to plan to minimize estate tax consequences. However, with the Federal Estate Tax Exemption now at $3.5 million, and the Tennessee Inheritance Tax Exemption at $1 million, many families are not using trusts. Alternatively, spouses are leaving all assets to each other, and then the second spouse is leaving all assets to the children. One major benefit of having a trust is asset protection. Creditor deterrence can be needed on account of remarriages, in-laws, “out-laws,” and others who may notice than an heir is now worth millions of dollars. A trust can keep the trust beneficiary “out of the middle” and serve as a controlled release of family wealth. Additionally, trusts with a typical “spendthrift” clause provide creditor protection for the trust beneficiary.

4. Be sure and plan for family business succession. Frequently, a younger generation is involved in the family business. A parent oftentimes has a desire to leave the family business to one or more children working in the family business. Yet the parent still wants to treat all children equally, including those not involved in that business. Special planning needs to be considered to treat all children fairly and equitably in handling the family business. This planning is in addition to any estate tax planning that may be necessary associated with that business being a significant part of the parents’ assets.

RAINEY, KIZER, REVIERE & BELL, P.L.C.

William C. Bell, Jr.

Source: William C. Bell, Jr.

Tags: estates