Estate Planning: Starting the Process

By Jim Gianelli

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When it comes to planning your estate, it’s best to start the process with an estate planning attorney, preferably a state-certified specialist. But other advisors may play a vital role: your accountant, banker, insurance agent, financial advisor or broker. You may also wish to involve your family, your doctor and, if applicable, your spiritual advisor.

Here is how each of these individuals can help.

Accountant

Your accountant can share valuable information with the attorney, such as an asset’s purchase date and price (this establishes the cost basis, vital for capital gains purposes), or how a business is structured (i.e., whether it is an S or C Corporation, which has huge implications as to how trusts for children are structured).

Your accountant will also need to know – particularly if you do any advanced estate, gift tax or asset protection planning – the tax status of any trusts you’ve created and the tax consequences of gifts you’ve made. Charitable remainder trusts, irrevocable life insurance trusts or other irrevocable trusts necessary to save federal estate taxes require the accountant to file a Form 1041 income tax return yearly.

Any large gifts made to children (more than $13,000 each per year) require filing of a Form 709 gift tax return. And any estate in excess of the federal estate tax exclusion will require a form 706 death tax return. On a related note: Individuals could pass up to $3.5 million tax-free to heirs in 2009 and 2010, but that amount will drop to $1 million in 2011 if Congress does not act quickly. The inaction and ineptitude of Congress, if it fails to prevent this absurdity, will be the subject of a future article.

Accountants are also vital to the trust termination, probate or conservatorship process if the trustee, executor or conservator is required to do a complex accounting.

Banker, insurance agent and financial advisor

Your banker, insurance agent or financial advisor can provide important information to your estate planning attorney, such as account titles, cash values and beneficiaries of your life insurance policies, and values and beneficiaries of your retirement accounts and annuities.

These advisors should make sure your accounts are properly funded into your revocable living trust, and that beneficiary designations are updated to comply with your new or updated estate plan. They are also essential in funding sub-trusts in more advanced estate plans. And an insurance agent familiar with irrevocable life insurance trusts is invaluable in cutting estate tax costs.

Family members

 

Involving your family in your estate plan can promote harmony and avoid confusion and distrust later. If you keep everything a secret, then your estate plan will be more prone to challenges after you die, since only your professional advisors will know your true intent.

Involving your family in these complex transactions from the beginning may give them peace of mind after you’re gone, since they’ll already understand what was done and why. And if a family member is your main trustee, executor or health care agent, it is essential that he or she understands the duties and obligations involved.

 

Physician

It is often necessary to involve the family physician in the estate planning process, particularly if the time comes when your mental capacity is in doubt. Almost all of my estate planning forms require a physician’s certification of the client’s incapacity before a trustee, attorney-in-fact or health care agent can act.

Also, physicians are directly involved in decision making, along with the health care agent named in the advanced health care directive. A good physician will identify who is in charge of health-care decisions while trying to involve the whole family in the process. And, when it is advisable or timely, he or she will discuss DNRs (“Do Not Resuscitate” forms), which spell out when a person may be removed from life support.

 

Spiritual advisor

Spiritual advisors may be important to include in estate planning, particularly if your religion has specific canons about what should happen to your property after you die, or mandates certain decision-making with respect to health care decisions (such as Christian Scientists or Jehovah Witnesses).

So you can see that, when it comes to successful estate planning, it often takes a “village” of professional advisors, family members, physicians and spiritual advisors.

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