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Estate Planning for Baby Boomers

Making excuses to delay estate planning is easy. In fact, maybe you’ve already thought: “I’ll worry about it when I’m older.” Or “My estate is too small to be affected.” Or even, “I don’t know what I’m going to do with my assets yet.” However, if you are unprepared when incapacity or death strikes, your family’s financial future may not be protected.

 

While there is no designated age for beginning to plan your estate, waiting too long may rob your beneficiaries of much of their inheritance. That’s why it’s important to take the time now -- before you need an estate plan.

 

Start with the Basics

 

What if you were to die intestate, that is, without a will? As the foundation of your estate plan, a will provides for distribution of your assets, names a guardian for your minor children, and appoints an executor or personal representative to see that your wishes are carried out. If you die without a will, a court will make these decisions for you. Consequently, your estate may not be distributed as you would have wished. Failing to make a will means you relinquish control over what will happen to your assets -- and perhaps your family’s financial status -- upon your death.

 

Minimize Estate-tax Consequences

 

It goes without saying that you don’t want a large portion of your assets to go to the government in the form of estate taxes. But that’s what may happen if you don’t plan ahead. You may already know that, under the tax law’s marital deduction, you can generally transfer all of your assets -- regardless of the amount --  to your spouse estate-tax free. So it may sound as if the government has already done some estate planning for you. But don’t relax just yet.

 

When your spouse dies, any remaining property will be included in your spouse’s estate. If the total exceeds the unified credit exclusion -- $1.5 million in 2005 in scheduled steps for several years before it returns to $1 million in 2011 -- taxes on your spouse’s estate could take a substantial part of the inheritance your children or other heirs would receive.

 

One way to minimize the estate taxes your beneficiaries will have to pay is to establish a trust that will distribute income to your spouse during his or her lifetime while sheltering assets for future heirs. Trusts can take many different forms, so consult with a professional financial advisor before making any decisions. 

 

Don’t Neglect Business Succession Planning

 

If you own a business, what would happen to it if you were to die unexpectedly? Without proper planning, part or all of your business might have to be sold to pay estate taxes. In addition, your business could suffer unless a competent manager succeeds you and a well-structured plan for ownership transfer is in place. There are many methods you can use to accomplish these goals, including partnerships, buy-sell agreements, and stock transfers. Once you’ve developed a plan, lifetime gifts, trusts, and life insurance all may be used to ensure that your family remains financially stable.

 

Leave a Paper Trail

 

An estate plan isn’t very useful if no one in your family knows what it is, so be sure to maintain clear records. Make a list of your assets, including securities, retirement plan accounts, savings accounts, real estate, life insurance policies, and so on, along with information to identify and locate the accounts. Make a second list of your liabilities, including loans, mortgages, and credit card obligations.

 

Personal information, such as your Social Security number, birth certificate, divorce decree, and similar documents, should be stored in a secure and accessible place. Include cemetery plot records and detailed funeral instructions. List the names, addresses, and phone numbers of your attorney, accountant, executor, and trustee, if applicable.

 

By letting your family know where your important records are kept, you’ll help to ensure the timely transfer of your assets to your heirs.

 

The consequences of waiting too long to plan your estate can be financially and emotionally devastating for your family. If you haven’t begun to plan your estate, a professional financial planner can help you get started and recommend strategies to help achieve your particular planning objectives.

 

By Scott L. Deaton, CFP, MBA

Mosaic Consulting, LLC

In conjunction with Lincoln Financial Advisors, a registered investment advisor

Scott L. Deaton, RFC, MBA, is a registered representative and investment advisor representative of Lincoln Financial Advisors Corp., 370 Southpointe Blvd., Suite 200, Canonsburg, PA 15317, phone 724-743-6159, email: Scott.Deaton@lfg.com, offering insurance through Lincoln affiliates and other fine companies. This information should not be construed as legal or tax advice. You may want to consult a tax advisor regarding this information as it relates to your personal circumstances.

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