The Retirement Corporation of America


FOR THE MOST part, you make financial plans for the rest of your life. But what you have created in life remains after you have died. So one aspect of financial planning must consider all the things that might happen to your wealth after you are dead. That aspect, of course, is estate planning. Remember, smart estate planning is not only for the very wealthy.

•  The tax law of 2001 made dramatic changes to the estate tax. It cut the estate tax burden, year by year, between now and 2009. Then, in 2010, the estate tax is repealed completely--only to reappear in 2011. If that sounds confusing, it most certainly is. You can't make assumptions about what will happen to the estate tax over the long run--which is why you have to start estate planning while you are still relatively young.

•  Estate planning is not for the "do-it-yourselfer." It is complicated stuff. Only attempt it with an attorney well versed in estate planning. Even your family lawyer may not have all the skills and experience to do the best job of estate planning possible.

•  Even if the estate tax does vanish after 2010, that won't eliminate the need for estate planning. Minimizing estate taxes is only one part of estate planning. It further includes such issues as making sure your wealth goes to whom you want to have it, that your financial affairs are wisely managed even if you are incapacitated and can't manage them, and that your wishes about medical treatment in your last days are respected.

•  Estate planning is all about the documents that are necessary to make sure your final wishes are carried out. You must have a will, and someone must be able to make financial and medical decisions on your behalf when you are no longer able to do so. You should also have a living will that states how aggressively you want doctors to fight to keep you alive when your death has finally become imminent.

•  One absolutely key element of any estate plan is deciding how your estate should be divided up after your death. That takes careful planning and a lot of thought in order to keep the distribution of your estate from launching a feud that could tear the family apart.

•  Few family-owned businesses survive into the second generation, and fewer make it to the third generation. One reason for that is that owners of those businesses haven't given enough thought to business succession planning--how ownership of the business should be passed along when the founder is no longer able to run the enterprise.

•  If it doesn't belong to you, they can't tax it. That's why sound estate planning includes giving assets away while you are still alive. You want to handle this area carefully, given the uncertain state of the estate tax. Still, giving away part of your wealth now can make both you and the recipients feel better. And you might want to "step-up" your giving if Congress does bring back the estate tax at some point.

•  The rules on how much you can give away were complicated to begin with. In the 2001 tax law, Congress made them more complicated. In fact, although Congress voted to end the estate tax in 2010, it also voted to keep the tax on gifts in place beyond that date.

•  Trusts sound hard to grasp and they seem to be for only the very wealthy. Still, you could create a trust just to make sure that your money continues to support some worthwhile cause after your death. Furthermore, you might want to create some trusts to protect your wealth while the estate tax is being phased out. Finally, if Congress does bring back the estate tax, trusts could be an important weapon in your battle to keep your estate tax liability to an absolute minimum.