Five Reasons You Need an Estate Plan By Jim Martin
   You may be asking yourself, "But do I really need an estate plan?" If you have assets - no matter how small - then you need an estate plan. Whether you're single, married with a family, or the owner of a family business, you need to protect the assets you've built for those you leave behind.
   An essential part of any estate plan is the will. This is the primary document for transferring your wealth upon your death. However, the will is actually the end result of the estate plan. You need to begin planning for the transfer of your estate long before your will is read.
   Planning involves developing a strategy for reducing the taxes created by your estate and build security [measures] to protect your family and your business at your death. That $1 million term insurance policy may seem like the answer to your problems while your alive, but upon your death it turns into $1 millions worth of taxable income. Even though federal income tax rates may top out at 39.6%, marginal estate tax rates can be as high as 55%.
   If you're the owner of a family business, then your business may be the most valuable asset in your estate. Unfortunately, many family businesses are not passed onto the next generation, because of poor planning. Without a succession plan or a buy-sell agreement, the management of the business may not fall into the right hands, which could lead to disaster for your business and your family.
   Beginning an estate plan early will help you no only avoid the legal pitfalls of dying intestate, or without a will, thereby protecting your business and family, but it also will set the course for transferring your estate prior to your death, reducing loss value due to taxes or confusion.
   Keep in mind, estate planning does not just involve developing an impersonal plan for transferring your estate; it also involves asking yourself some very personal questions about who inherits which of your assets and when and how they should receive them.
   However, if you're still be wondering whether you need an estate plan, then you need to consider answering the following questions.
   1. If you're married, how you want to provide for your spouse? The marital deduction allows you to pass on your estate to the surviving spouse tax free, but this doesn't solve your estate tax problems. The initial transfer is tax free, but it really only defers estate tax until the death of the surviving spouse. You may want to consider creating a trust that would hold the assets for the benefit of your spouse and still qualify of the marital deduction.
   By creating a trust, the surviving spouse will receive principle distributions upon request to the trustee managing the estate. The trust can be structured to be as flexible as you need it to be. The only requirements of such a trust are that all income must be provided to the surviving spouse, no assets may be diverted from the trust to anyone other than the spouse during the spouse's lifetime, and the trust must be included in the surviving spouse's taxable estate when the spouse dies.
   You must also consider other issues; such as will the surviving spouse eventually distribute the estate or in the case of a business owner, pass of stock as requested. With prior planning, you will be assured that your spouse and your remaining heirs will receive your estate as you request.
   2. Should your heirs share equally in your inheritance and have you considered the psychological affects of their receiving large sums of money or how it might affect their future? And if you're single, will your heirs be prepared to handle your estate?
  You may want to consider beginning to transfer your estate prior to your death by annually gifting your heirs. You can gift as much as $ 10,000 per year per donee without any gift tax consequences. A married couple can give away $20,000 per year per donee.
   Or as with a spouse, you may want to consider establishing a family trust. Assets placed in a trust and managed by an executor will reduce estate taxes and provide long-term financial security. When considering establishing a trust, you'll need to know the future implications of creating a trust and select the best one for your family.
   If you're single, you can also create a trust that ensures that your designated heirs receive their inheritance in the manner you desire. A trust can also provide them with the financial management assistance they may be unprepared to handle at the time of your death.
   Another option might be to create a family limited partnership. With a family limited partnership, you converting your estate plan into a business, which will allow you to remain actively involved in the plan will your still alive. You'll be able to give assets to your children and grandchildren without giving up control of or income from those assets.
   3. If you own a family business, should stock pass only to the ones who are active in the business and should you compensate the others with assets of comparable value? As an owner, you will need to decide if you want your business to continue to be run by your family after your death or if you want to sell it.
   Regardless of your choice, you'll need a succession plan that outlines how your business will be managed at your death. Whether you are gifting the family business to your remaining heir or creating a contractual buy-sell agreement to protect your shares, a succession plan will control what happens to the company in the event of your death.
   With prior planning, you will protect the interests of the business you've spent your life creating as well as protecting the future of your family.
   4. What if you die and leave young children? Who will manage your estate and provide their .future? The management of your estate will have direct results of the financial security of you're your children. You can determine in advance who will be the guardian of your children in the event that both you and your spouse die and determine how they will be taken care of emotionally and financially. You will need to select a guardian who values are similar and one who is prepared to take on the responsibility of your children.
   You will also need to select an executor/trustee who will administer and distribute your estate according to your wishes and ensure that your children the financial security of your children. You will need to take extra care, weighing the advantages and disadvantages, as you select an executor to manage your estate.
   Don't put off estate planning until it's too late. Without a will, your children could be left in the hands of court a appointed administrators and your children may not receive the full benefits of your estate.
   5. Who will help you develop your estate plan? Depending on the size of your estate and how soon you begin the planning process, you may need a team of professionals made up of a financial advisor, an investment advisor, an executor, and an attorney.
   Each of these professionals will be able to analyze your assets to make recommendations on establishing trusts or a family limited partnership, purchasing insurance, securing that your investments and other interests are not overly taxed, and creating contractual agreements to protect your business.  Protecting your greatest assets - your heirs - begins by creating an estate plan. Keep in mind that an estate plan is preparation of leaving a legacy to your heirs, you shouldn't over look creating a comprehensive financial plan that incorporates planning for retirement, potential disability or elder care for parents. It's never too soon to get started with developing a financial plan, but it can be too late. Back