Financial Solutions

Financial Solutions

Financial Solutions

Financial Solutions

Sep 21, 2018

An Estate Planning Overview

Estate planning helps achieve personal and family goals while you are living, and ensures your wealth is distributed according to your wishes upon your death.

No matter what your age or how much wealth you have accumulated, you need an estate plan to protect yourself, your loved ones, and your assets. Estate planning is an ongoing process of preparation for the orderly administration and disbursement of your estate.


Why Plan Now?
Perhaps it is the subject matter—death, incapacity, taxes— that causes many of us to avoid estate planning. Or maybe it just seems like too much work, and we do not know where to begin. However, there are important reasons for having an estate plan—one of which is to avoid the probate process. Simply put, a well-designed estate plan can provide confidence that you and those you care for most will enjoy the security of your assets. Although estate planning requires the assistance of an attorney and a CPA, keep in mind that the financial professionals at Wintrust Wealth Management are available to guide you and assist you through every step of the process.


What is Probate and Why Should It Be Avoided?
Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion when you die. The court oversees payment of liabilities and the distribution of assets after your death. Generally, your personal representative (also known as an “executor”) will need to employ an attorney.

If you become unable to manage your own affairs or care for yourself, a probate proceeding may be required. The court determines whether you are legally incapacitated and may appoint a guardian or conservator to manage your assets. Without a proper estate plan in place, probate courts will have jurisdiction over your estate at your death. Probate proceedings vary from state to state, but overall, probate is time-consuming, costly, and public. Even in states where the probate process has been simplified, some degree of public disclosure is likely, meaning that anyone can learn what assets you owned and who will receive them. With sound estate planning the probate process can be avoided and your privacy maintained.


Probate and Taxable Estates
The probate estate and taxable estate are related, but different concepts. Your probate estate is made up of assets that are subject to the probate process. Your taxable estate refers to all assets that are subject to the federal estate tax. Generally, this includes all of your probate estate and much more—in fact, it includes just about any asset in which you have an ownership interest or control.

Taxable Estate
If you control the use or disposition of an asset, it will generally be part of your taxable estate. Your taxable estate includes your probate estate. It also includes many non-probate assets such as:

  • Assets held in a revocable trust
  • Assets held by joint tenants with rights of survivorship
  • Assets that have a beneficiary designation, such as transfer-on-death accounts, IRAs and retirement plans, life insurance, and annuities

Probate Estate
Your probate estate is a subset of your taxable estate. Legal title usually determines whether an asset is part of your probate estate. For example, non-trust assets held in any of the following designations will ordinarily be part of your probate estate:

  • Single name
  • Tenants-in-common
  • Community property


How You Title Assets Is Important
When you invest in a security, purchase a home, or buy other assets, the way you title them affects not only your immediate rights, but also how and to whom the assets will transfer at your death.

Ownership may take the form of single or joint ownership. With single ownership you own and control the assets during your lifetime. Joint ownership may be held as joint tenants with rights of survivorship—the most commonly used—tenants by the entirety, or tenants-in-common.

As noted above, any non-trust property titled in single name or as tenants-in-common will be subject to probate. Establishing a trust is an effective way to remedy problems that may exist with titling. Keep in mind that trusts are not reserved for only the rich and famous; many families of modest means may benefit greatly from trusts as well.


The Estate Planning Process – Six Steps
Step 1: Identify Your Financial and Family Goals
Your estate plan can accomplish a multitude of goals, such as:

  • Providing for your comfort during your lifetime and for continued asset management should you become incapacitated
  • Specifying the amount, manner, and timing of asset distributions to heirs
  • Easing or avoiding the probate process
  • Providing income for beneficiaries after your death
  • Leaving a nest egg for children, grandchildren, or subsequent generations
  • Reducing estate taxes

In addition, you may have specific needs or problems. These could include:

  • Dependents with special needs
  • Spendthrift beneficiaries
  • Second marriage
  • Non-citizen spouse
  • Control of assets
  • Charity beneficiaries

Step 2: Gather Records
After establishing your goals, take inventory of your assets and important documents including:

  • Business financial statements
  • Stock-option plan statements
  • Other business-related documents
  • Employment contracts
  • Partnership agreements
  • Buy-sell agreements
  • Life insurance policies
  • Net worth statement
  • Bank and brokerage statements
  • Stock and bond certificates
  • Trust agreements
  • Powers of attorney
  • Will
  • Disability-income insurance policies
  • Personal property and casualty insurance
  • Pension/retirement plan statements
  • Past three years’ federal tax returns
  • State/local tax returns
  • Safe-deposit box information and key
  • Divorce decrees
  • Prenuptial or post-nuptial agreements

Step 3: Evaluate Estate Planning Instruments
You have an estate plan—whether you have created it yourself or not—because if you die without a will, state law will determine how your assets will be distributed. State law will also determine who manages your assets if you are unable to handle your own financial affairs while you are alive. Your state’s plan may be quite different from the one you would devise. In some states, if you die without a will, your spouse may not receive all of your assets —your children or even your parents could share in your estate with your spouse.

Creating your estate plan lets you control how assets will be managed for your family and loved ones. You have many tools available to help you; some of those most commonly used are:

  • Will
  • Powers of Attorney
  • Revocable Living Trust
  • Credit Shelter Trust
  • Gifting
  • Irrevocable Life Insurance Trust (ILIT)

Determining the best estate planning strategies requires careful consideration by you, your Trust Administrator, and other financial and legal advisors.

Step 4: Put Your Team in Place
As you have read, you will need to work closely with a team of advisors to put your estate plan into place. Your attorney must draft any estate planning documents, including a will, powers of attorney, and trusts, if appropriate. If you have not yet developed a relationship with an attorney, your Financial Advisor can suggest several you can interview.

Choose your attorney and CPA carefully, selecting professionals you trust with working styles that match yours, your family’s, and those of your other professional advisors.

Make sure you are well-prepared for the meeting with your attorney. To make your appointment as productive as possible, take the time to:

  • Outline your objectives
  • Gather account statements
  • Have your Financial Advisor prepare a net worth statement
  • Determine how assets are titled and who owns what
  • Make a list of all beneficiary designations on IRAs, retirement plans, insurance policies, and annuities
  • List the names and ages of family members and their spouses
  • Decide whom you may want to be executor, guardian, or trustee

Step 5: Implement Your Estate Plan
Documents such as a will, trust, or power of attorney create the framework for your estate plan. To ensure that assets are distributed according to these documents, make sure you title assets appropriately and update beneficiary designations as directed by your attorney. Depending on your estate plan, you may want to:

  • Consolidate assets and consider the benefits of street name registration for your securities
  • Make annual exclusion gifts
  • Apply for life insurance
  • Tell your beneficiaries about your estate plan and where you have placed important documents

If you decide to delegate investment management of some or all of your assets to a trustee, your Financial Advisor can help implement that arrangement.

Step 6: Review Your Estate Plan
Ideally, you should review your estate plan each year. Discuss the timing of this review with your estate planning advisors and avoid busy seasons (holidays, tax season, etc.). However, major life changes sometimes warrant an immediate review. Make this review a time of reflection when you can calmly discuss:

  • Your family situation—weddings, births of children or grandchildren, divorces, deaths, health changes
  • Your estate planning objectives—benefiting a favored charity, reducing an estate tax liability, providing for different beneficiaries, etc.
  • Changes in your financial situation—a new job, changes in income, an inheritance, portfolio growth
  • New legislation that may affect your estate plan

Changing beneficiary designations and amending your will and/or trusts are relatively easy tasks. Your estate planning advisors can recommend when such adjustments are necessary.

Your estate plan will work better with regular maintenance. If you fail to review your estate plan regularly, you may expose your loved ones to unnecessary tax consequences, unintended results, or family disputes.


Understanding Your Choices
The Financial Advisors and Trust Administrators at Wintrust Wealth Management can work closely with you to detail your estate planning objectives, family circumstances, assets, and projected estate tax liability before you visit your estate planning attorney.

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