You need not be wealthy to benefit from estate planning - Ahwatukee Foothills News: Money

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You need not be wealthy to benefit from estate planning

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William Hertzog

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Posted: Wednesday, December 21, 2011 5:00 pm

Many people dole out financial gifts in life but pay little attention to how their assets will be divided after they die. A well-conceived estate plan will help ensure that you and your heirs will enjoy the security of your assets. Yet, many people fail to plan because they believe mistakenly that estate planning is reserved for the wealthy.

It is true that husbands and wives may pass any amount of assets to the surviving spouse without being subject to federal taxes. This simply defers taxes until the death of the second spouse. However, maximizing the marital deduction can actually result in increased estate taxes.

By the way, don't count on a repeal of the estate tax. Regardless of the estate tax's future, your need to plan a smooth and efficient method to transfer wealth to the next generation or charities you wish to benefit.

And for single people and married parents who have children from a former marriage, there are particular issues to consider. Your wishes most likely won't happen unless you have legal documents in place that clearly state your intentions for how your heirs will be treated.

If you've been putting off getting your estate in order because it seems like an overwhelming task, you should know that planning to leave your assets in an orderly fashion is often easier than you anticipate.

It is important to think about whether you have the essential legal documents in place to direct the intended assets to those you love after you die. Take a close look at how your beneficiaries are named on important assets, such as retirement plans. Many assets transfer to the beneficiaries named in the documents concerning those assets, regardless of what your will says. Most people named their beneficiaries when they first established a retirement account. It may be high time for you to review this information in view of changes in your family situation.

Trusts can be an effective way to avoid probate, to pass your assets on as you intend, and to keep matters private. Various kinds of trusts can help you to avoid probate, provide for continued investment management in the event of your incapacity, ensure an orderly distribution of assets when you die, plan for minor and/or incapacitated children, and fulfill your charitable goals. You'll want to talk with your estate planning advisors about the type of trust that best meets your and your family's needs.

We have talked about federal estate tax, but there's more. Some states also impose gift, estate or inheritance taxes. The rules vary widely from one state to another. In some, the applicable exclusion (or asset level at which they begin to impose estate taxes) is lower than the federal exclusion. For that reason, estates not subject to federal estate taxes may still need to plan for state estate taxes. It's important to work with your financial advisor, accountant, and attorney to determine how your state's legislation will affect your overall plan.

These professionals can guide you through the estate planning process both to mitigate estate taxes and to ensure that both your values and your view of the future are reflected in the legal documents your attorney puts in place on your behalf.

William J. Hertzog, CIMA, is first vice president of investments for Wells Fargo Advisors, LLC, in Ahwatukee. Reach him at (602) 952-5133 or www.TheHertzogGroup.com. Wells Fargo Advisors, LLC, member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company. Note: Investment and insurance products are not FDIC insured, not bank guaranteed and may lose value.

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