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Dolf Dunn Wealth Management, LLCDolf Dunn, CPA/PFS,CFP®,CPWA®
Private Wealth Manager11330 Vanstory Drive
Suite 101Huntersville, NC 28078
Women and Estate Planning Basics
August 01, 2012
When it comes to estate planning, women haveunique concerns. The fact is that women live anaverage of 4.9 years longer than men.* That'simportant because it means that there's a greaterchance that you'll need your assets to last for a longerperiod of time and a greater need to plan forincapacity. It also means that you'll need to takeresponsibility for your own estate plan.
What is an estate plan?An estate plan is a map that reflects the way you wantyour personal and financial affairs to be handled incase of your incapacity or death. It allows you tocontrol what happens to your property if you die orbecome incapacitated.
If you're married, the odds are that you're going tooutlive your husband. That's significant for a couple ofreasons. First, it means that if your husband diesbefore you, you'll likely inherit his estate. Moreimportantly, though, it means that to a large extent,you'll probably have the last word about the finaldisposition of all of the assets you've accumulatedduring your marriage.
Estate planning may be especially needed if you haveminor children; your net worth exceeds the federaltransfer tax exemption amount ($5,120,000 in 2012)or, if less, your state's exemption amount; you ownproperty in more than one state; financial privacy is aconcern; or you own a business.
Planning for incapacityIncapacity can happen to anyone at any time, butyour risk generally increases as you grow older. Youhave to consider what would happen if, for example,you were unable to make decisions or conduct yourown affairs. Failing to plan may mean a court wouldhave to appoint a guardian, and the guardian mightmake decisions that would be different from what youwould have wanted.
Health-care directives can help others make sounddecisions about your health when you are unable to.
These might include:
• Living will - a document that lists the types ofmedical treatment you would want, or not want,under particular circumstances.
• Durable power of attorney for health care(health-care proxy) - lets one or more familymembers or other trusted individuals makemedical decisions for you.
• Do not resuscitate (DNR) order - a legal form,signed by both you and your doctor, that giveshospital staff permission to carry out your wishes.
There are also tools that help others manage yourproperty when you are unable to, including:
• Joint ownership - allows another person to havethe same access to the property as you do. Forexample, if you and your spouse have a jointchecking account and you become incapacitated,your spouse would still be able to make mortgagepayments on time.
• Durable power of attorney - lets you name familymembers or other trusted individuals to makefinancial decisions or transact business on yourbehalf, even if you are disabled, or perhapsbecause you are disabled.
• Living trust - a successor trustee can step intoyour shoes to manage property in the trust ifsomething should happen to you.
Wills and probateA will is quite often the cornerstone of an estate plan.It is a legal document that directs how your property isto be distributed when you die. It also allows you toname an executor to carry out your wishes asspecified in the will and a guardian for your minorchildren. You can also create a trust in your will. Thewill should be written, signed by you, and witnessed.
Most wills have to be probated. The will is filed withthe probate court. The executor collects assets, paysdebts and taxes owed, and distributes any remainingproperty to the rightful heirs. The rules vary from state
An estate plan is a mapthat reflects the way youwant your personal andfinancial affairs to behandled in case ofincapacity or death.
Page 1 of 2, see disclaimer on final page
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2012
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for anyindividual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performancereferenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The tax information provided is not intended to be a substitute for specific individualized tax planning advice. We suggest that you consult with aqualified tax advisor.
Securities offered through LPL Financial, Member FINRA/SIPC
to state, but in some states, smaller estates areexempt from probate or qualify for an expeditedprocess.
For most estates, there's little reason for avoidingprobate, as the actual time and costs involved aremodest. And, there are actually a couple of benefits toprobate. Because the court supervises the process,you have some assurance that your wishes will beabided by. And probate offers some protectionagainst creditors, since creditors are generallyrequired to make their claims against the estate in atimely manner.
However, there are a number of reasons for avoidingprobate as well. For some complex estates, probatecan take up to two or more years to complete and tieup property that your family may need, while runningup executor fees, attorney fees, and insurance costs.And, if you have real estate in more than one state,probate may be required in each state. Also, wills andother documents submitted for probate become partof the public record, which may be undesirable if youor your family members have privacy concerns.
There are ways for you to avoid probate, if that is yourwish. Probate may be avoided by owning propertyjointly with rights of survivorship; by completingbeneficiary designations for property such as IRAs,retirement plans, and life insurance; by puttingproperty in an inter vivos trust; and by making lifetimegifts.
What happens if you die without awill or an estate plan?Whether or not you have a will, some property passesautomatically to a joint owner or to a designatedbeneficiary. For example, you can transfer propertysuch as IRAs, retirement plan benefits, and lifeinsurance by naming a beneficiary. Property that youown jointly with right of survivorship will automaticallypass to the surviving owners at your death. Propertyheld in trust will pass according to the terms you setout in the trust.
Property that does not pass by beneficiarydesignation, joint ownership, will, or trust passesaccording to state intestacy laws. These laws varyfrom state to state. The state laws for intestatesuccession specify how property will pass, generallyin certain proportions to various related persons. Forexample, a typical state law might specify thatproperty pass one-half to a surviving spouse, with theremainder passing equally to all children.
Trust basicsA trust is a versatile estate planning tool that canprotect against incapacity; avoid probate; minimizetaxes; allow professional management of assets;provide safeguards for minor children, elderly parents,and other beneficiaries; and protect assets fromfuture creditors. Most importantly, trusts can provide ameans to administer property on an ongoing basisaccording to your wishes, even after your death.
A trust is a legal entity where someone, known as thegrantor, arranges with another person, known as thetrustee, to hold property for the benefit of a third party,known as the beneficiary. The grantor names thebeneficiary and trustee, and establishes the rules thetrustee must follow in a document called a trustagreement. With a trust, you can provide variousinterests to different beneficiaries. For example, youmight provide income to your children for life, with theremainder going to your grandchildren.
You can create a trust while you are alive (a living orinter vivos trust) or at your death (a testamentarytrust). A trust you create during your life can be eitherrevocable or irrevocable. You retain the right tochange or revoke a revocable trust. An irrevocabletrust cannot be changed or revoked. A trust youcreate at death is irrevocable.
Transfer taxesWhen you dispose of your property during yourlifetime or at your death, your transfers may besubject to federal gift tax, federal estate tax, andfederal generation-skipping transfer (GST) tax. Yourtransfers may also be subject to state taxes.
Lifetime givingMaking gifts during one's life is a common estateplanning strategy that can serve to avoid probate andminimize transfer taxes. One way to do this is to takeadvantage of the annual gift tax exclusion, which letsyou give up to $13,000 (in 2012) to as manyindividuals as you want gift tax free. In addition, thereare several other gift tax exclusions and deductionsavailable to help you minimize transfer taxes. Makinga gift can also let you see the recipient enjoying thebenefit of your gift while you are still alive.
*National Vital Statistics Report, Volume 60, Number4, January 2012.
Use beneficiarydesignations, jointownership, and wills andtrusts to control thedisposition of yourproperty, so that you,rather than the state,determine who receivesthe benefit of yourproperty.
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