August 18, 2020 | eFocus @ Legacy

The Benefits of a Well-Crafted Estate Plan

Financial planning is the latest “buzz” phrase in wealth management.  Folks want to make sure they have enough to fund their children’s educations, weddings, and their own retirement.    Retirees want their retirement savings to not only fit their lifestyle but last their lifetime.  Those who find themselves with an influx of cash from an inheritance, business sale, deferred employment payout, or even a lottery winning need planning.  Great care is taken to review assets, income, expenses, savings rate, and investments, including asset allocation.  Income tax ramifications are studied closely and planned for.  But what about estate planning?

Estate Planning Often Is a Neglected Part of Financial Planning.  Roughly half of all Americans have no Will and even fewer have an estate plan.  Why?  Perhaps it is difficult to talk about death or think about what happens to one’s assets and loved ones after death. Sometimes, the process is perceived to be complicated with too many decisions to make.  Whatever the reason, estate planning often is a neglected part of the financial planning process.  Yet, a well-crafted estate plan can provide many benefits and is well worth the effort.

What Is Included In a Well-Crafted Estate Plan?  Estate plans come in all shapes and sizes.  At a minimum, everyone should have a Will, Powers of Attorney (for health care and finances), and a Living Will.  A Will is especially important for naming the guardian of minor children and ensuring that probate assets will go to intended beneficiaries.  Without a properly executed Will, state law determines where assets go and the law may differ from one’s own plan, especially if there are children from a prior marriage.

A Will, however, may not be enough as it controls only probate assets.  Non-probate assets such as IRAs, 401(k)s, life insurance policies, revocable trust assets, joint bank or brokerage accounts, and jointly held real estate are handled differently. Such assets pass per their title, terms, or beneficiary designation.  As a result, a properly crafted estate plan will include more than a Will.

A Marital Property Agreement (MPA) is another important estate planning document for many Wisconsin residents and those in other community property states.  An MPA can provide certainty as to the classification and management of property owned by a married couple.  Specifically, it can help preserve the income tax benefits of marital property and/or ensure that certain property, such as inherited property, remains individual property.  It may also help avoid probate.

Why Avoid Probate? Probate is a court-administered process that requires the filing of certain documents and publication of legal notices.  It carries unique administration costs (such as an inventory filing fee) and its records are available to the public.  The process can also delay the distribution of assets.   In addition, ancillary probates for out-of-state real estate can be costly and time-consuming.  For some, avoiding probate is not a major goal.   For many, though, the privacy and delay concerns are reasons enough to strive for probate avoidance – or at least minimization.  As mentioned above, common probate avoidance techniques involve changing asset titles to joint ownership, naming POD (payable on death) or TOD (transfer on death) beneficiaries, creating and funding a revocable trust, and inserting a special probate avoidance provision in a Wisconsin MPA.

What Else Can A Well-Crafted Estate Plan Achieve?  Other goals one can achieve with a well-crafted estate plan include:

  • Business Succession
  • Charitable Giving
  • Planning for Incapacity
  • Tax Minimization or Avoidance
  • Creditor Protection
  • Planning for Current Spouse and Children from Prior Marriage
  • Digital Asset Handling
  • Planning for Beneficiaries with Special Needs
  • Preservation and Management of Family Recreation Property
  • Disposition of Precious Heirlooms and Other Tangible Personal Property to Specific Beneficiaries
  • Medicaid Planning
  • Funeral and Burial Instructions

Whether your estate is over or under the current $11.58 million federal estate tax exemption, we recommend an estate planning review.  We also recommend hiring an attorney who specializes in estate planning or has extensive experience with it, especially if your plan will require more than a basic Will and Powers of Attorney.  The costs will depend on the size and complexities of your estate and goals. However, with the right attorney, the costs will bear fruit, namely peace of mind that the estate you have worked hard to build will benefit to the maximum extent possible your intended beneficiaries.

Legacy Private Trust Company does not draft estate planning documents.  However, with our extensive estate planning and administration experience, we can be an important part of your estate planning team.  We work closely with our clients’ attorneys, accountants, life insurance agents, and any other advisors to ensure that our clients’ planning goals can be achieved.

To learn more about the planning and other services that Legacy provides, please contact Brenton Teeling at bteeling@lptrust.com or 920-967-5020.