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Estate Planning 101 – Part 5

December 18, 2010


    Hi Jerry. As we conclude our series on the basics of building a solid estate plan, I would like to remind your listeners to take the time to talk with the people that are going to execute your estate plan, to make sure they know your wishes and also what steps you have already implemented.

    Over the last several weeks we talked about what estate planning is and who might need it.  We discussed how to do it and where do you begin.  We also suggested that taxes could be the largest potential expense to your estate.

    Today let’s focus on the effects of Probate, liquidity issues, what happens if you become incapacitated and some goals you may want to consider in developing your estate plan.

    Probate is the court-supervised process of proving, allowing, and administering your will. The probate process can be time-consuming, expensive, and open to public scrutiny. Avoiding probate may be one of your most important goals. To develop a successful probate avoidance strategy, you will need to understand how the probate process works in your state, how to estimate probate costs, and what assets you own are subject to probate.  It is important that you take time to understand the probate process.

    Estate liquidity refers to the ability of your estate to pay taxes and other costs that arise after your death from cash and cash alternatives. If your property is mostly non-liquid, for example if you own real estate or have business interests, your estate may be forced to sell assets to meet its obligations as they become due. This could result in an economic loss, or your family selling assets that you intended for them to keep. Therefore, planning for estate liquidity should be one of your most important estate planning objectives.

    Planning for incapacity is a vital yet often overlooked aspect of estate planning. Who will manage your property and make health-care decisions and financial decisions for you when you can no longer handle these responsibilities? You need to ask and answer this question because the consequences of being unprepared may have a devastating effect on your estate and loved ones. You should include plans for incapacity as a part of your overall estate plan.

    Let’s talk about the three documents that everyone should have in place.  The first document is a current will.  The Will in itself does not avoid Probate, however it will give probate direction on how you wanted your estate distributed.  If you do not have a current will, your state already has established guidelines on how your estate will be distributed.  The second important document is the durable power of attorney that is where you will name someone to make decisions on your behalf when you can not make those decisions.  You need to name someone to make financial decisions and health decisions.  So obviously the people you name to make these decisions are people you trust.  The third document is the living will.  This document will help the person you named as the durable power of attorney for health decisions to know what your wishes are.  This will help take the burden off of them when it is time to make those hard final health decisions.

    As I conclude this series, let me give you some ideas you may want to consider.  First of all your goals and objectives are personal, but you can’t formulate a successful plan without a clear and precise understanding of what they are. They can be based on your particular circumstances and the factors that may affect your estate, as discussed earlier, but your feelings and desires are just as important.  So the following are some goals and objectives you may want to consider, You should:

    • Provide financial security for your family
    • Ensure that your property is preserved and passed on to your beneficiaries
    • Avoid disputes among family members, business owners, or with third parties (such as the IRS)
    • Provide for your children’s or grandchildren’s education
    • Provide for your favorite charity
    • Maintain control over or ensure the competent management of your property in case of incapacity
    • Minimize estate taxes and other costs
    • Avoid the cost and delays of probate
    • Provide adequate liquidity for the settlement of your estate
    • Transfer ownership of your business to your beneficiaries

    Over the last few weeks we have talked about the importance of developing an estate plan.  Remember, it may seem like a daunting task at first, but I can ensure you that it is well worth the time and cost to have it completed.

    The final question I will ask you is simple:  If you could choose two beneficiaries of your estate and the choices are: your heirs, your favorite charity or the federal government which two would you pick?

    With the year coming to an end I would like to wish all the listeners a Merry Christmas and a safe and happy New Year.

    I trust this financial insight has been helpful and I look forward to the next time when I can help you provide the foundation for a lifetime of financial independence.

    About John Bearss: John R. Bearss is a Retirement Specialist with the Christian Financial Advisor Network. He has been helping clients and financial professionals understand financial strategies for 24 years.

    Disclaimer: John Bearss is a registered representative of and does offer securities through Sicor Securities, Inc.  Lifetime Decisions Management, nor it’s representatives provide legal or tax advice.  Please consult your CPA or qualified tax advisor before making any decisions. Lifetime Decisions Management, Inc. is not a subsidiary of nor controlled by SICOR Securities, Inc.

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