Estate Planning: Why, When, Who, What, Where and How

Lehigh Valley Woman – Finance Section – October/November 2013

by Laurie A. Siebert, CPA, CFP®, AEP® Vice President, Valley National Financial Advisors

RELATED PODCAST: Estate Planning & Fiduciary Responsibility (Listen/Download)

The “Why” is in the “When”
When you take a trip to a new place, do you look up directions?  Do you get a map or put the destination in the GPS?  Would you send your loved ones on a trip with no directions? You are doing just that if you do not have an estate plan. When do you plan to have an accident?  When do you plan to have a disease?   When do you plan to die? You don’t.  That’s why your “when” has to be now and your “why” is because without a map, directions, or a GPS, those left behind are lost concerning your affairs.

Who?
When we talk about the “who” of planning, we need to put faces to that beyond ourselves. If you are single, maybe you don’t have anyone who relies on you but will you have to rely on someone if something happens to you physically or mentally? Who is the first person that you would have to ask for help?  If you haven’t had conversations with that person or those people, now is the time.  Will they be there for you and able to help?

If you have minor children, who will be their guardian if something happens to the primary caregivers?   When you consider the “who,” it might include geographical locations, financial means, religious beliefs, stability or relationship. But, don’t assume it has to be a family member.

The same applies for your executor or trustee and power of attorney selection.  The person who will be the guardian of your minor children is not necessarily the same person that will be your executor or trustee.  You may intentionally separate the duties.

There has been an inherent misunderstanding about estate planning in recent decades that estate planning is about avoiding estate taxes.  People get so worried about avoiding taxes that they forget to think about the “who” in their planning.  Who do you trust to carry out your wishes?  We might not know all the “whos” so we have to plan for the unknowns like future children or future marriage and substitute representatives.  Do you want individuals or charities to benefit from your estate? They require very different planning.

A March 7, 2013, Wall Street Journal article, entitled “Lost Inheritance” said that 70% of inherited wealth of affluent US residents was gone by the end of the second generation and ninety percent was gone by the end of the third generation.

The Lost Inheritance article went on to say that the primary reason for the lost wealth was not taxes or poor investments but a lack of trust and communication breakdown among family members.  You need to have the conversations.  Kids, have them with your aging parents and parents, have them with your kids.

What?
Take an inventory of your assets, liabilities and insurances.  Understand what your estate looks like and to whom you want it to go.

Where?
You need to think about the “where” of your twilight years and your long term care living arrangement. Do you live in a state that has an Inheritance tax, like Pennsylvania or New Jersey?  Do you have assets, like real estate, outside of the state where you reside which will trigger long distance management or when you die, ancillary probate?  And, where are all the people that you will need to help you in these endeavors?  They all make a difference in your planning.

How?
Get help from trusted advisors.  An in-depth review will allow us opportunities to develop strategies to mitigate the confusion and consequences of improper, or lack of, planning.

Who? – Beneficiaries, executors, trustees, attorney, advisor, decision makers

What? –Assets, liabilities, insurance, health

Where? –Location of assets, important papers, beneficiaries, agents

When? –Now and ongoing periodic reviews

How? –Documents, asset titling, transfers on death, gifting

We feel that it is critical to understand the “who, what, where, when and how” of your estate planning.  To make it easier for you, we start with an Estate Directives Worksheet so that you can start the process. Any questions?  Email me at lsiebert@valleynationalgroup.com for more information.

Be proactive, not reactive, and make the best of your choices.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein. Valley National Financial Advisors is the marketing name for Valley National Group, Inc. and its affiliates. Securities offered through Valley National Investments, Inc member FINRA, SIPC, 1655 Valley Center Pkwy, Suite 100, Bethlehem, Pa 18017 (800) 383-8297.