Welcome to our first of a six-part series on building a comprehensive estate plan designed to protect you and your heirs for many generations to come. Because as we say, "Where today's plans, become tomorrow's legacy."
Part 1 - Building a Road Map for Estate Planning and Financial Success
Part 2 – Building Your Estate Planning Team
Part 3 - Risk Management
Part 4 - Core Documents and Essential Components to a Comprehensive Plan
Part 5 - Customization of Trusts
Part 6 - Legacy Component
We hope you enjoy this series and as always, feel free to drop us a note, a question, or simply a smile. Our goal is to equip you and your family with the insight and information necessary to design and implement a solid estate plan.
Part 1 - Building a Road Map for Estate Planning and Financial Success
Start With The End in Mind
You may get to a destination without the end in mind, but it may not be the one that you choose. Often, advisors jump in and tell you what they think you want to hear without genuinely listening to what you wish to accomplish. That is why it is crucial to start with the end in mind.
Ask yourself the following questions:
What is it that you want to accomplish?
Why do you want to create a plan in the first place?
Each client has a different goal in mind when beginning the planning process. For example, clients come to us with the following frequent concerns:
"I want to transfer as much wealth to my family without giving too much to Uncle Sam."
"How can I protect my heirs from losing their inheritance in a lawsuit or divorce?"
"How can my money outlast me despite longevity or health care costs?"
"I want to protect my assets in case of a severe decline in the market…"
"I need to protect my loved ones against frivolously spending their inheritance" and more...
Each one of these is a valid concern or desire. The goal is for you to identify which one is the driving force for you.
Plan for Constant Change
After you design a uniquely appropriate plan for your dynamic situation, you will have to integrate that static plan into a long-term plan that you can monitor, tweak, adjust and implement with caution over a prolonged period.
A garden needs constant pruning and water, and such is the case with a well-drafted estate plan.
If there is a change of circumstances or a change in the law, and we do not consider this, the well-drafted plan may no longer fit the circumstances.
For example, you have a wonderful plan that gives your children the maximum tax-free exemption and the remainder to your spouse (when the exemption is $600,000). Years later (fast forward to today), the exemption moves to $11,580,000, and the result is that nothing passes to your spouse, and everything passes tax-free to your children. This outcome may not be the "destination" that you had in mind.
Building that road map or yellow brick road takes a village, and in this case, a well-oiled and communicative team (which we dive into further in Part 2 of this series).
Capturing "Use it or Lose it" opportunities
Finally, some opportunities arise along the road of your planning destination that may require you to take action promptly.
As the laws are ever-changing, it is essential to stay up to date and capitalize on new opportunities. In our recent special report, we discuss potential changes based on the outcome of the Presidential Election.
In the past two years alone, there have been three significant tax law changes: The Tax Act, the SECURE Act, and the CARES Act (each with their own set of new opportunities).
A few notable changes in these Tax Acts consists of:
- A stark change in the IRA distribution law
- The elimination of the required distribution from your 2020 IRA
- The elimination of the itemized deductions
- The doubling of the standard deduction under the Tax Act
Unless you are a CPA or Tax Attorney fluent in these tax law changes, we highly encourage you to build a road map and share it with a knowledgeable team of advisors. It is ideal to have these advisors also communicating with each other to have a bullet-proof estate plan.
Communication plus collaboration = Estate planning success