A Short Examination of Your Estate Plan

Comment: “Is it time for me to review my estate planning?” That is a question that many of our clients ponder from time to time. The goal of this paper is to turn that broad question into a series of more specific questions that may help you identify more effectively some relevant issues that may need attention. Recognizing that good estate planning concerns all of your assets and all of the people you love most may provide the incentive for you to spend three minutes taking this self-examination. We hope it proves helpful to you.

1. Do my closest family members know that the executed originals of my Will and other important estate planning documents are kept in ____________________?
2. My current Will was done in ______(year) and I last reviewed it thoroughly in ______(year). Given changes that have occurred since I worked on my Will, including changes in asset values, would it be a good idea for me to have my overall plan and documents reviewed and possibly updated?
3. Since I last seriously worked on my planning, both the estate tax exemption and the generation-skipping transfer tax exemption have increased substantially, specifically to $5 million for individuals dying in 2011-2012.
4. Question for married persons: Are our assets allocated between my spouse and me in a manner that will allow us to take advantage of the “tax shelter” provided by these exemptions regardless of who dies first? (Comment: If you have not reviewed this allocation recently with counsel, your family may not be positioned to take advantage of major tax savings that a reallocation plan could offer. Since certain assets do not count in this planning, the analysis is usually tricky enough to require the guidance of counsel.)
5. Do I remember whom I have left in charge of my estate? Do I still have the best possible lineup of original and successor Executors and Trustees to carry out my intentions? Question for those who have named family members as Executors: How will my family actually get my estate administered? (Do not underestimate the complexity of this assignment!)
6. Questions for those who have named a bank as an Executor or Trustee: Do I (and my family) understand how banks operate when they are given these responsibilities? What do banks charge? Would it help for me to meet with the bank representatives to discuss these issues?
7. Do I have any assets (such as a valuable second home, certain business assets, certain heirlooms, etc.) that need special attention not addressed in my existing documents?
8. I am aware that who will receive some of my most important assets at my death will be determined not by my Will but by beneficiary designation forms filed with third parties (such as IRA holders or life insurance companies), and I also realize that “contingent beneficiaries” will be entitled to these assets if my “primary beneficiary” does not survive me. Should I review the beneficiary designation documents I have signed for my life insurance policies, IRAs, and 401(k) accounts to make sure I know who will be entitled to these assets (as primary beneficiary or as contingent beneficiaries) at my death? Do I understand who will pay the estate taxes on these assets?(Comment: This is another tricky issue that most people do not fully understand and that may call for explanation by counsel.)
9. Are there aspects of my planning that may lead to squabbles or fights within the family that I ought to give special attention to? Examples: Potential problem areas between the children and a stepmother; leaving a valuable asset to the children jointly; the possibility that some, but not all, children may seek executors fees; etc.
10. Are there any asset disposition possibilities that would simply make me feel better about my Will?
11. My basic plan is that eventually my (or our) assets will pass to or for the benefit of the children. Have I provided the proper ages for my children to receive their inheritance outright?
12. Should I give more assets to the children (and/or grandchildren) at my death without making them wait for my spouse to die?
13. Should I provide any bequests to faithful employees or to someone dear who really needs help?
14. Should I include more protection for parents or other special relatives?
15. Should I give more to a charity in honor of ______________________ or to promote ________________ (recognizing that the IRS will in effect“pay” almost half of the amount given to charity)?
16. Question for those with long-term trusts for their children: Do I understand how much in after-tax assets may go to the children outright by a certain age and how much will remain in trust during their lifetimes? Is this balance between “outright” and “long-term trust” assets best for the children?
17. Do I know the range of what my ultimate estate tax bill is likely to be? How will cash be raised to pay not only the tax bill but also debts and expenses of administration?
18. I feel okay about my Will, but have I sufficiently considered those strategies that could reduce my family’s ultimate estate tax bill?
19. Do I have an effective annual giving program in place for my children and grandchildren? What can I afford to give them and what form should I use for making gifts? Knowing that it generally takes time for most tax-savings strategies to produce the best results, is it now time for me to explore family limited partnerships, GRATs, charitable trusts, sweetheart loans to the children, etc.?
20. If I get very sick or am in a terrible accident and cannot manage my affairs, I want to have both financial and health care powers of attorney in place that will allow the people I trust most to make decisions on my behalf. I last signed powers of attorney in _________(year). Is my lineup of agents named then still okay or should it be revised?
21. Should I prepare a memo to my family discussing certain assets, advisors or business associates I trust (or do not fully trust); my feelings about certain sensitive issues; or other items that might prove helpful to family members (or others) if they have to deal with these matters in my absence?