• Essential Estate Planning
  • December 23, 2003 | Author: Elizabeth P. Mullaugh
  • Law Firm: McNees Wallace & Nurick LLC - Harrisburg Office
  • In today's uncertain legal and economic environment, estate planning can be a daunting process. Before even seeking out legal counsel or a financial planner, map out your assets and liabilities, taking care to specify how each asset is owned, and consider your goals for the plan. Do you want to leave significant charitable legacies? Do you want your child's inheritance to be protected from soured marriages or creditors? If something were to happen tomorrow, will your spouse have sufficient resources to continue his or her current lifestyle?

    Knowing the extent of your assets and mapping out your estate planning goals can help you and your advisors find the right solutions. What follows are several general factors to consider in shaping the most effective plan.

    Federal Tax Planning. Assuming the federal estate tax is still in place over the next few years, it is important to consider asset ownership to take maximum advantage of the available exclusions and credits. Each spouse should own sufficient assets to fund his or her unified credit equivalent amount ($1,000,000 in 2003; $1,500,000 in 2004).

    Powers of Attorney. Granting someone else the power to deal with assets and exercise other powers through a durable general power of attorney in the case of incapacity can avoid court proceedings such as guardianships and allow tax planning to be done to adjust for changes in asset holdings or applicable law.

    Living Wills and Healthcare Powers of Attorney. Recent national news stories put new importance on making known your wishes about end of life care and on appointing someone to make health care decisions for you if you are unable to do so.

    Stock Options. Unexercised stock options can be a source of adverse income and estate tax results. Make sure you understand the nature and extent of any options well before retirement.

    Charitable Giving Alternatives. Many options exist for charitable giving during life and at death which can help to minimize taxes while meeting philanthropic goals. Consider earmarking a portion of qualified retirement plan asset to charity to avoid inheritance, estate and income tax. Charitable remainder trusts can allow for diversification of assets while avoiding the immediate impact of capital gains tax.

    Protecting Minors. Testamentary transfers (those taking place at death) to younger beneficiaries can be made to custodial accounts which delay outright distribution to the beneficiary until age 25. Other options include trusts, which can delay outright distribution to any age, and guardianships, which are court appointed arrangements that terminate at age 18.