Carlton Financial Group - Insurance, IRAs, College Planning and more

Estate planning is the process of accumulation and distribution of an estate to fully encompass the objectives of the estate owner. If you hear the term "estate planning" and believe it is only for the super wealthy, you may be surprised to learn most people have a need for a properly designed estate plan, they just do not know the right questions to ask to get the ball rolling. What everyone does know is the end result they are after. They know what possessions they want to distribute, when, and to which person(s) or charity. If you have minor children, children from another marriage, dependents with disabilities or special needs, own a business, or have charitable objectives you need assistance with estate planning.

Now, before I begin, you history buffs may be interested to learn about how the estate tax came to exist and how many times it has been reformed since its inception:

1797                 Estate tax enacted to pay for tensions with France
1802                 Repealed when the threat of war ended
1862                 Estate tax re-enacted to fund the Civil War
1870                 Estate tax repealed
1898                 Estate tax reinstated for Spanish-American War
1902                 Repealed when war was over
1916                 Estate tax back for World War I
1930                 Various changes; similar to today's estate tax structure
1976-1993       Nine major pieces of estate tax legislation introduced
1997                 Unified credit increases and new family business exclusion
2001                 Economic Growth and Tax Relief Reconciliation Act of 2001

Most people today are (unknowingly) using 2010 estate planning techniques which combined with current market conditions it is very similar to playing Russian roulette. Currently the estate tax exclusion is  $3,500,000 for 2009 and in 2010 the estate tax is repealed (gift tax remains) before reverting back to the 2002 limit of $1,000,000 in 2011. NOTE: the Obama administration is highly considering keeping the estate tax in 2010.

Below are just a few KEY benefits/reasons as to why you would need to have a up-to-date estate plan.

    •    makes sure children and dependents are cared for
    •    avoid probate which could immediately diminish 10% of your estates value
    •    reduce estate taxes and pass more on to your heirs
    •    provides complete privacy and peace of mind

To design an estate plan you will need to form your team which consist of an attorney, insurance professional, and your accountant/CPA. They should coordinate efforts to align the financials of the estate with the necessary documents (wills, various trust, business agreements, powers of attorney, beneficiary designations, etc) and provide the correct funding source (life insurance) to pay the appropriate taxes. Now, I hear a lot of clients say, "I have a Will, so everything is taken care of." The problem with only having a Will is that it can be contested by anyone (in most states). Some examples of inadequate estate planning would be Leona Helmsley, J. Howard Marshall and Anna Nicole Smith, Terri Schiavo, and Elvis Presley. Get this, the $10,165,434 Presley estate was diminished by $7,374,635 as a result of taxes and various other fees (which could have been prevented). Had they properly planned, we would not even have access to this information. The end result of a properly designed plan will enable you to control the distribution of your estate while minimizing taxes and doing so in complete privacy.

"Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do." Mark Twain

1. Noodlemonkey on February 6, 2009 @ 9:52 AM