Test Your Own Estate Plan

If you have set up your estate plan with the various typical recommended documents, you are two steps ahead of the game.

However, as evidenced by numerous estate transfers gone bad, your plan may not be as tightly wrapped as you think.

Why not test your estate plan while you live to make sure it is set up correctly to enact your transfer wishes? After all, you can’t change it once you are dead.

How to test your own estate plan.

Step 1. Assemble your documents.

Find and examine your will, trust(s), partnerships and corporate documents, powers of attorney, durable powers of attorneys, etc. to make sure they are up to date and available in the location you shared with your executor. Are there guardianship documents for any minor beneficiary you may have designated and if so, are they available to your executor.

Step 2. Collect your beneficiary designations.

Call, look up online or write for the beneficiaries you have set up in any accounts. Examine your house and vehicle titles if you have transfer on death options specified for them. Review your trust documents to make sure you still have the correct beneficiaries designated.

Step 3. Check the gift and estate tax exclusion amounts in effect.

Ask your accountant for the latest information concerning gift and estate tax exclusion amount as it changes frequently.

Step 4. Check the estate tax rates in effect (state and federal).

Get the current estate tax rates for your state and federal taxes.

Step 5. Find the exact ownership titles for each of your assets.

Make a list of everything in your estate and how it is titled.

Step 6. Make a list of each asset, what would happen to it and any notes that may be needed.

Ignoring what you want to happen, walk through what you think will happen – based on the evidence you have collected.

You can do this yourself or in conjunction with the person who created your estate plan documents, or even with an independent third party. Consider including your executor or successor trustee in the walk through.

This walk through is intended to find any issues with your current plan, as it would be executed under the laws of your area. Use as many scenarios as you need. If you are married, walk through what would happen if you die and your spouse lives, if your spouse dies and you live, if both of you die together and etc.

Step 7. Review the list to look for potential problems and changes needed.

Remember, if you have a designated beneficiary on a specific asset, it overrides your will or your trust or any other document you have prepared.

Remember that the death benefit of any life insurance policy is included in the owner’s estate for estate

tax purposes.

As you review your list, ask yourself:

What assets will pass directly to beneficiaries – which ones? What if one of the primary beneficiaries is already dead? What if he or she declines the asset? Is there a final beneficiary that can take possession if all other listed beneficiaries are deceased? What if the beneficiary is a minor? Who will manage that asset for them?

What assets will be required to go through the probate process?

If you have a will, but no trust and have assets that aren’t assigned specific beneficiaries the asset will probably have to go through probate. If you have designated a minor as a beneficiary, and there is no designated guardian, the child’s parents may have to go through court to be able to manage the assets.  Remember that assets that go through probate are going to be in public records.

What assets will be available to the surviving spouse? If you have a trust that provides for rolling assets into an irrevocable trust at your death, will your spouse have enough other assets to maintain their lifestyle? What amounts of after tax income will be available to them.

If your spouse depended on you for health insurance, will he or she be able to continue that insurance?

If your spouse is incapacitated, will their care continue after you die?

Do you have any wishes that you have not put in writing? Maybe you want your Mother’s jewelry to pass along to your granddaughters or perhaps you want your Roth IRA to be left funded as long as possible to secure the tax free benefits for your grandchildren.

Do your executors, trustees and heirs know where to find documents outlining your wishes and can they get to them after your death?

Are your executors, trustees and heirs prepared to play their parts in making your final wishes a reality?

You may have to spend a few bucks to make sure your plan will get the job done, but these are dollars well spent. You may need to review your plan more than once, as the laws change under it – to make sure you are maximizing tax reduction and maximizing the benefit your estate will give to your heirs.

Then again, you’ll be dead – so you probably won’t be caring anymore!

Additional resource:

Merrill Lynch Estate Planning Checklist:  http://wealthmanagement.ml.com/Publish/Content/application/pdf/GWMOL/Estate-Planning-Checklist_090712.pdf


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