Is Your Estate Plan in Order?

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Physician's Money Digest, September30 2004, Volume 11, Issue 18

Research suggests that the majorityof adult Americans actuallyhave no estate plan, will, livingwill, or power of attorney. If you signedyour wills more than 5 years ago, youshould strongly consider going back toyour attorney to review them. Much hashappened since then—including a majorchange in the estate and gift tax laws. Inparticular, the amount of your estate thatis exempt from taxes has increased andwill continue to do so in the coming years.Naturally, you'll want to make certain thatyour will takes full advantage of theseincreases. This is particularly important ifyour estate has increased significantly invalue over the past few years.

Revising Your Will

If you're married, does your will leaveyour estate outright to your spouse? If itdoes, do you believe that they are capableof managing large sums of money? Ifone spouse tends to handle the moneyfor the family, it may leave the otherspouse inexperienced in financial matters.If this circumstance fits you, youmay want to consider using a trust foryour spouse and naming a professionalfinancial manager as trustee for yourspouse or as cotrustee with your spouse.

Think for a minute about the benefi-ciaries you have designated in your currentwill. Are the distributions to yourbeneficiaries still appropriate? Leavingassets directly to adult children—whoare now very successful in their ownright and also have large estates—onlyincreases their potential estate taxes. Abetter choice may be a trust that bene-fits the children but does not end up aspart of their estate. You can effectivelyskip estate taxes for a generation ofheirs while continuing to benefit them.

If you have minor children, have youchosen a guardian? This is whom you designateto raise your children should youdie prematurely. Review your choices anddecide if they still seem appropriate.Speaking of your children, when doesyour will distribute assets to them?Children are often receiving their inheritanceas early as age 21. Do you believethat your child would be capable of handlinga large sum of money at age 21?

Estate Adjustments

If your estate has grown significantlyand will be subject to estate taxes, haveyou made proper provisions for providingthe cash to pay those taxes? I remember acase where a retirement account was theonly source of available cash to pay theestate taxes. The withdrawals from theretirement account to pay the taxes triggeredincome taxes, thus requiring evenmore distributions from the retirementaccount, triggering more income taxes.Well, you see the problem.

Another important consideration isyour choice of trustee for any trusts youhave created or that will be createdunder your will. This person will controlyour money, possibly for decades. Makesure that your appointment of trustee isstill appropriate today.

Stewart H. Welch III, CFP®, AEP,

is the founder of The Welch

Group, LLC, which specializes in

providing fee-only wealth management

services to affluent retirees

and health care professionals

throughout the United States. Mr. Welch has been

recognized by Money, Mutual Funds Magazine,

and Worth as one of the top financial advisors in

the country. He is the coauthor of J. K. Lasser's

New Rules for Estate and Tax Planning (John

Wiley & Sons; 2002). He welcomes questions or

comments at 800-709-7100 or www.welchgroup.com. This article was reprinted with permission

from the Birmingham Post Herald.