The Retirement Corporation of America

Crafting A Suitable Estate Plan

SO WHAT YOU do is pretty straightforward. You craft an estate plan that minimizes any possible liability to federal estate taxes and also makes sure thatyour wealth at death is distributed according to your wishes.

However, crafting such an estate plan is one of the hardest things for anyone to do. This is a very complicated and very specialized branch of the law, so you're not likely to have the background that would enable you to make informed choices. Asking friends or business associates for help can be a mistake because they seldom have the background needed to help you make an intelligent choice. Even the family attorney may not be fully versed in what sets a top-notch estate lawyer apart from the "pack."

You want someone who does a significant portion of his or her work in estate planning. That point is very critical—picking a specialist in estate law, not someone who writes five wills a year. And the more wealth you have accumulated during your lifetime, and/or the more complications that might arise from distributing your wealth, the more you want a specialist in estate law.

How to Screen For Someone Suitable

You can find an attorney for your estate by asking the people who are most apt to work with such attorneys—an accountant, a banker, or a financial planner. In other words, your best bet probably is to ask other people who have expertise in financial matters. Make sure they understand your situation and have them recommend an attorney who not only is skilled in estate planning, but also who will feel comfortable working with an estate your size.

You'll be discussing some pretty intimate things with the attorney who plans your estate: how your wealth will be divided up among your children, who will inherit the family home, which child you intend to run a family business, etc. Therefore, the attorney must be someone you feel comfortable with—someone you trust and can talk openly to.

Once you get a recommendation, arrange a get-acquainted session with the attorney. See how things go and how you get along. Is there rapport? Do you feel comfortable discussing the most intimate details of your financial life with this person? Does the attorney talk in language you can understand, or in "legalese" that sails completely over your head? Commit yourself to this attorney only when you feel that this is the person you want to work with on your estate plan.

And there is something else to think about. It is likely to be many years before you die. The estate plan you make now may be revised a dozen times before it actually will be put to use. You want someone fairly young who will be around for a number of years. You might also be better off with a member of a law firm or a partnership, rather than a sole practitioner. That way, if the person you are working with dies or retires, there will be someone else close at hand to take over your estate planning.

When to Start Your Estate Planning

If you had perfect foresight and knew exactly when you were going to die, you could start your planning a few years before then. Obviously, you haven't a clue as to when you are going to die. And you need an estate plan in place, whether your death occurs at 40 or at 80.

The details of the plan will change over the years. When you are 40, your plan will have to include some specifics about caring for minor children if you should die. When you are 60, your plan might have to include passing along the ownership of a family business. When you are 80, the plan should include instructions for your medical care in case you become too ill to make decisions on your own.

You should start your estate planning when you first have children. If that has already happened, then you definitely should start your estate planning by the time you turn 40. If that, also, has already happened, then you absolutely must start your estate planning now—before much more time passes.

How to Pick the Right Executor

This is the person who will carry out the decisions you have made about the way things will be after you die. It's a short-term position, lasting only as long as it takes to carry out the provisions of your will and settle your estate. The executor has to be someone you trust, someone with personal integrity and common sense.

Ideally, the executor should have some financial and legal knowledge because both are going to be called upon in settling your estate. That doesn't mean you must name your attorney or your accountant as the executor, which is a mistake that a lot of people make. If the executor needs help, he or she can always hire an attorney or an accountant to handle the technicalities.

While the executor job won't last long, the person must be in "top form" while acting as executor. Your will should name a back-up executor in case your first choice for the job is no longer healthy and fit when you die. If you don't, and the executor isn't up to the job when you die, your family will have to go to court to have a new executor appointed. That's not very difficult to accomplish, but why should your family have that added burden?

Deciding Whether You Need a Guardian

A guardian is the individual who will have responsibility for your minor children after your death. Obviously you want someone who is compassionate, responsible, loving—someone with integrity.

One common mistake people make is to specify a couple to act as guardians to minor children. The will might say, "I name my sister Susie Smith and her husband, John, to be guardians for my minor children." What happens if Susie and John get divorced? Who winds up with the right to your kids? Specify an individual to act as guardian. Have the will say, "I name Susie Smith, my sister, as guardian for my minor children."

Another thing people do wrong is naming one person to handle all the chores of guardianship—taking charge of the child's personal development as well as managing his or her finances. A better approach is to pick several people to look out for your child's well-being. Pick someone who is compassionate, loving and warm to act as guardian for the child, and someone else with more financial acumen to be a trustee in charge of the child's money.

Keeping Your Estate Plan Up to Date

As with any other financial plan, you can't just make an estate plan once and assume it will work well throughout the rest of your life. Make your initial estate plan early. Then revise and update it any time there is a significant change in your life, or in the law governing trusts and estates.

A significant change would be a new marriage, the birth of additional children, changes in your financial condition, or changes in your goals and objectives.

An important reason for keeping your will and your estate plan as flexible as possible, is so anything less than a really significant life change can be handled within the context of the original plan. If every change in your life requires a change in your will or your estate plan, then you haven't been flexible enough.