Making an Effective Estate Plan: Estate planning is the arrangements of one’s financial affairs through asset ownership and legal documents to provide for one’s goals related to the management and disposition of one’s estate . Most people focus on having a will or trust that meets the minimum legal requirements, but for a truly effective estate plan, the minimum legal requirements are usually not enough. An effective estate plan is one that truly accomplishes your objectives and that balances competing objectives according to your priorities.
What Are Your Objectives? Your estate planning goals might involve the desire to provide for lifetime needs, protect assets against lawsuits and other claims, assure the distribution of your estate to your intended beneficiaries, reduce or eliminate taxes and other expenses, coordinate business and retirement planning with other planning, protect beneficiaries from mismanagement and from the claims of creditors and ex-spouses; and/or discourage or encourage certain types of conduct for family members.
Who Are Your Beneficiaries? After your lifetime needs are met, you undoubtedly want to have your worldly possessions benefit others. We use the term “beneficiaries” to refer to those who benefit from your planning. For most people, their primary beneficiaries are family members, including members of one’s immediate and extended families. In this memo, “family” includes all those with whom you have a special connection, even if there is no biological connection. In addition to family members, your beneficiaries may also include those whom you desire to assist, and many people include one or more charitable organizations to accomplish some of their objectives.
What Legacy Do You Want to Leave? The phrase “leaving a legacy” is normally focused on making distributions of income or property to one or more beneficiaries, but it can be much more than that. In preparing your estate plan, you should also consider that the legacy you leave can include a legacy of values so that your wealth will make a positive difference for your designated beneficiaries.
(i) Your estate-planning documents can encourage your individual beneficiaries to be productive members of society, to provide for their own needs and the needs of their dependents, and to meet the needs of others in the community and in the world.
(ii) An expression of values and purpose, combined with incentives for positive conduct and disincentives for negative conduct, can increase the chances that the income or wealth you provide each beneficiary will make life better for them and others.
(iii) Regardless of the size o your estate, consider providing for one ore more qualified charities, especially if the resources available to your family members are more than adequate to provide for their needs or if larger gifts to your family will not significantly improve their lives or could end up facilitating an undesirable lifestyle.
(iv) You cannot provide for a distribution of more than you have, which will force you to make choices – perhaps hard choices – regarding the allocation of your resources and regarding the choice of estate-planning tools to implement.