Family Estate Planning

Family estate planning is no longer for the rich and famous alone. It is for anyone who wishes to control the distribution of their assets, name the guardian of their dependents, and reduce the tax burden to their heirs. While attorney's fees will be incurred in the short run, the cost savings and peace of mind in the long run may be worth it. Failure to plan can create conflict among family members and incur unnecessary expenses for your heirs. Estate taxes alone can run as high as 55% of what you want to leave to them.

There are generally four basic steps to begin the estate planning process. First, gather all personal and family information and decide whom you wish to benefit. Next, take an inventory of your assets and liabilities in order to determine your personal net worth. Then, decide what you would like to accomplish and rank these objectives in order of priority. Finally, consult with a qualified attorney who can help you determine the best legal plan and strategies to meet your goals and objectives.

Every person is currently allowed to transfer $650,000 in assets to their heirs-during their lifetime or at death-free of gift and estate taxes. This amount, known as the unified credit exemption equivalent, will gradually increase to $1 million by 2002. While this may seem like a large amount, it includes life insurance proceeds, future inheritances and corporate stock options as well as investment and personal assets. One goal of your estate plan should be to make maximum use of this unified credit exclusion amount.

A will traditionally has been the cornerstone of most estate plans, and it is still important. Your will may be used to appoint an executor to manage and settle your estate, detail how your property will be distributed upon your death, and designate the guardian for your children if necessary.

After your death, the executor will administer and settle your estate through probate. Probate is the process of the court-supervised transfer of a decedent's assets in the manner provided by a valid will. Because of the public nature of the proceedings, delays, and costs involved with the probate procedure, many people try to avoid it. Some assets, by their nature or registration, will automatically pass to heirs outside of probate. Life insurance, individual retirement accounts, retirements plans, transfer-on-death registered accounts, property held in joint tenancy with rights of survivorship, and property held in a living trust are some examples of these.

Another way to avoid probate and minimize estate taxes is to gift a portion of your estate before your death. You can take advantage of the annual gift tax exclusion of $10,000 per recipient, and, together, a husband and wife can gift up to $20,000 annually to any individual. This figure will be indexed for inflation in $1,000 increments. Monetary gifts of any amount used to pay for qualified medical expenses or school tuition are also tax-free, provided the money is sent directly to a school or medical provider. Trusts are another popular estate planning tool. A trust can help you manage assets even before your death. It can be established to manage assets for your family in the event of your death, to avoid probate, and to minimize or eliminate estate taxes.

With the help of your advisers-attorney, accountant, and Financial Advisor-you can explore various trust options. Some trusts allow cash to be removed only at the discretion of the trustee. Others may specify that the donor receive income from the trust during lifetime, with the principal passing directly to heirs upon their death. Essentially, a trust can be written to accomplish almost any goal.

Estate planning is a continuous process. It is important that you periodically review your estate plan to be sure that it matches your current situation and objectives. As changes occur, your plan should be reviewed and updated to optimize the benefits that can be derived and to account for changes in your personal situation and the tax laws.

ENB Associates Inc. is a wholly owned subsidiary of Evans National Bank. Securities are offered by O'Keefe Shaw & Co., Inc. Member NASD, and SIPC. Products purchased through O'Keefe Shaw may lose value, are not deposits with obligations of, or guaranteed by Evans National Bank or affiliates and are not insured by the FDIC.