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Life Insurance- an Important Estate Planning Tool
What is Estate Planning?
Estate planning is an important part of financial life. It is the process of transferring the assets we've built during our lifetimes to those we love at our deaths with the least amount of loss and delay.
Unfortunately, many people seem to find it difficult to do their estate planning. Sadly, many people spend more time planning their vacations than they do planning their estates. They look at estate planning as a burden instead of an opportunity.
Estate Planning Is an Act of Love
Estate planning isn't something we do for ourselves; we do it for those we care about. When you get right down to it, it's an expression of love. It is also a responsibility. In estate planning we use our own time and energy so that our assets can be efficiently transferred to the people we care most about. If you are someone who is procrastinating on estate planning, here's a question for you to think about:
"Do you love your family enough to spend some of your own time and money to potentially save them thousands of dollars in costs & taxes and countless hours of work?"
We all want to help our families as much as possible. It's part of our responsibility. What is sometimes surprising about estate planning is that while we do it to help our families, we often wind up helping ourselves.
What Can Estate Planning Do For You?
What do you get when you do your estate planning and keep it up-to-date? You may not have spent much time thinking about it, but implementing an estate plan can give you at least two benefits: Control and Peace of Mind.
Control - Most people don't realize that even if they haven't done any planning, they still have an estate plan; they have the "government's plan." Our state legislatures have decided that estate planning is too important to be left undone.
The "government's plan" in your state is usually a "one size fits all" plan that wasn't designed with you or your family in mind. It wasn't written to fit your circumstances or to achieve your goals. It's a generic plan for everybody. When you create your own plan, you take back control so you can be sure the right things go to the right people, at the right time, at the right cost and with the right management.
Peace of Mind - When you are done with your planning, you will probably feel pretty good. It's easy for family members to fight over who should get what from a parent's estate. Longstanding sibling rivalries and distrust often come to the surface when a parent's estate is to be distributed. No one wants his/her death to create family animosity or trigger a family feud. You can design your estate plan to bring your family closer together instead of pushing it apart. When you've completed your estate planning, you know you will have done what you can to:
• Protect the financial security of your spouse/partner
• Promote good relationships between surviving family members
• Preserve family assets by reducing expenses and taxes
• Provide younger family members a good example for their own estate planning
• Show your family that you loved them.
A Will Is Only Part of an Estate Plan
Many people think that once they've signed their wills, their estate planning is done. That would be a mistake. There's usually more to estate planning than just drawing up a will. For most people a will only transfers some of their property-the assets they own by themselves at the time of death. Other assets may not be affected by their wills at all.
The Best Estate Plan Is a Coordinated Plan
How a particular asset will be distributed at death depends on a variety of factors. That's because we acquire our assets one at a time over many years. Each time we acquire a new asset, we don't usually stop to think how it should be owned to best fit into our estate plans. Consequently, most of us have unconsciously developed a "patchwork" estate plan that uses a variety of distribution options.
A good estate plan considers the different assets we own and coordinates how they are distributed so our overall wealth transfer goals can be accomplished. It matches each asset we have with the options for passing it on. It manages the assets in an integrated strategy to deliver the right assets to the right people, at the right time, for the right cost and with the right amount of management assistance, if any, is needed
Common Estate Planning Tools
There are several other commonly used estate planning tools that need to be kept in mind. They include:
Powers of Attorney-These are written documents that allow us to give someone else the authority to act on our behalf while we are alive. A financial power of attorney gives someone else the ability to handle our financial affairs. A healthcare power of attorney gives someone we trust the ability to make medical decisions for us if because of sickness or injury. They are effective only while we are alive.
Lifetime Gifts-If we are legally competent, we don't have to wait until we die to transfer property; we can give away any of our assets while we are alive. People regularly make gifts to friends, family members and charitable organizations. Many people enjoy making gifts because it gives them the ability to see the benefits the gift can generate while they are living. There are a number of tax rules regarding gifts and many strategies have been developed over the years to use lifetime gifts as part of an integrated estate plan.
Trusts-Trusts are contractual agreements in which a person (a grantor) transfers money or assets to a third party (a trustee) who agrees to hold and manage the property for the benefit of others (the beneficiaries). The trustee preserves, manages and distributes the property according to the grantor's directions as they are written in the trust agreement.
Life Insurance-This is a contract between an individual and a life insurance company for the payment of a death benefit at the time a designated insured dies. Life insurance is often used in estate liquidity planning because of its ability to pay the death benefit income tax free at a time when money is needed to pay estate settlement costs. These death benefits can be paid outside the probate process and, with proper planning, they can avoid federal estate taxes.
A Good Estate Plan Stays Flexible and Up To Date
Estate planning is not a "one and done" plan. We need to review our plans regularly because our families, our assets, our responsibilities, our objectives and the tax laws change over time. We would be wise to review our estate plans at least every three to five years so they stay current with our families, our finances, our objectives and the law.
Assemble an Estate Planning Team
Depending on our individual situations, creating an integrated estate plan can be simple or complex. It's usually a good idea to involve a variety of financial experts to provide advice. An experienced attorney can help draw up the needed legal documents, including wills, trusts and powers of attorney. A good accountant or CPA can provide invaluable tax advice. Investment professionals can help us manage our financial assets. Insurance professionals can evaluate our health, medical, property and life insurance coverages and analyze other policies currently available. A funeral director can be invaluable in deciding on final arrangements and minimizing funeral costs.
Take Care of the Ones You Care About
Estate planning is a responsibility of adulthood and an act of love for the people we care most about. It protects the assets we've assembled over our lifetimes and the families we've built, loved and cared for. An estate plan creates a strategy to coordinate the orderly transfer of our property while setting aside enough liquid assets to pay off the debts, taxes and settlement costs that come with finalizing our financial affairs. A good plan can give us control over the future use of our assets and the peace of mind to know we've done everything we can for those we love.
SHELLY ALVAREZ
Shelly Alvarez Insurance & Financial Services, PLLC
19141 Stone Oak Parkway, Suite 104-316
San Antonio, TX 78258
(210) 827-8787 Phone
(210) 497-0174 Fax
shelly@shellyalvarez.com E-mail
SBE/WBE Certified
Tags: estate planning, kw commercial sa, kw commercial san antonio, life insurance, link legrand, Luke LeGrand, San Antonio Commercial Real Estate, Shelly Alvarez, Shelly Alvarez Insurance & Financial Sevices
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