We’re pleased to provide you with insights like these from Boston Private. Boston Private is now an SVB company. Together we’re well positioned to offer you the service, understanding, guidance and solutions to help you discover opportunities and build wealth – now and in the future.
A smart estate plan helped the heirs of these celebrities. It could help your family too.
What do Elizabeth Taylor, Frank Sinatra, and Steve Jobs all have in common? Each of these larger-than-life celebrities had an effective estate plan in place that left the bulk of their fortunes to the people and causes they cared about.1
- Liz Taylor created a surprisingly simple estate plan that used trusts and other non-probate asset transfers to keep her affairs private and achieve her goals without overly burdening her family. She left her entire fortune to her children, grandchildren, and several charities, including a large bequest to benefit AIDS research.
- Frank Sinatra left a detailed will that established trusts to give generous bequests to family members. He also included a ’no-contest clause’ so anyone who challenged his will would be disinherited immediately, regardless of the outcome of their claim.
- Those who knew Steve Jobs say he used a network of living trusts, charitable bequests, and real property transfers to avoid an onerous 35% estate tax on most of his $7 billion fortune and keep everything as private as possible.
Estate plans are not just for the rich and famous, they are a necessary tool for everyone to leverage in ensuring that their objectives are met before any incapacity or after they pass.
4 compelling reasons for creating an estate plan
“Estate plans are not just for the rich and famous, they are a necessary tool for everyone to leverage in ensuring that their objectives are met before any incapacity or after they pass,” says Gerald E. Baker, J.D., Executive Managing Director, Head of Trust & Fiduciary Services. “It’s an integral component of financial planning as it gives you the ability to direct what happens to your assets.” It also helps you:
1. Reduce stress – and legal hassles – for your spouse and loved ones Organizing your assets now —making sure beneficiary designations are up to date and property is titled correctly or in trusts —and preparing the appropriate documents for future transfers will relieve others of the burden of trying to guess how you want decisions to be made after your death. It can help prevent the legal conflicts that arise when no direction is given. A well-conceived estate plan is also essential for your well-being and your family’s financial security if you become temporarily incapacitated due to illness or injury. Considering that 1 in 4 workers today will be disabled for 3 months or more during their careers2, a plan with the right documents in place becomes a smart investment of your time.
2. Transfer assets with tax efficiency While having an estate plan doesn’t necessarily mean you’ll pay fewer estate taxes, there are situations where taxes on estate proceeds can be minimized or deferred to the next generation. For example, when you specify in your will that your spouse will receive all of your assets, he or she can take the full marital deduction. Any estate taxes due are then deferred until the death of the second spouse.
3. Ensure that your wishes are honored Going through the exercise of creating or updating your estate plan also means you’ll have the right documents in place so that you—and not the courts—can decide:
How your assets are managed and who manages them when you’re not able to
Who can make decisions about your medical care if you are incapacitated
What your preferences are for end-of-life care
How your minor and dependent children will be cared for in your absence
4. Protect your family’s privacy Because a will becomes a public record when it goes through the state probate/settlement process, many people opt to pass on assets through trusts instead. Trusts are legal entities that are not subject to probate so they can remain private and provide money to beneficiaries more quickly. The privacy and flexibility offered by trusts make them ideal vehicles for implementing an estate plan.
Check in every 3-5 years, or whenever life changes
Even if you’ve already done the legwork to create a will (as Liz, Frank, and Steve did), you could still be at risk if you haven’t checked in recently to make sure that your will and other estate planning documents are up-to-date.
Most advisors suggest taking a look at your estate plan every three to five years—or whenever your life situation changes. “Estate plans are living/breathing documents that need to be maintained throughout your lifetime. As your life evolves, so too must your documentation directing the disposition of your estate,” says Baker.
Some of the situations that can trigger a check-in are:
- A life event such as marriage, divorce, or the birth of a child (where a guardian must be named)
- Immediate concerns about going on an extended vacation, receiving an inheritance, getting an insurance settlement, or (less frequently!) winning a lottery
- A business need, including capital investment in your company, selling or liquidating your business, or entering a partnership
It’s especially critical for people to revisit their estate plans when they enter into business or professional partnerships, If you are doing business with a group of partners, you want to make sure all the partners have estate plans and buy/sell agreements in place if one of the partners were to die.
The opinions expressed and information contained in this article are given in good faith, may be subject to change without notice, and are as of the date issued. The accuracy and completeness of this information is not guaranteed. Since each client’s situation is unique, please review your specific investment objectives, risk tolerance and liquidity needs with your advisor before a suitable investment strategy can be selected.
2 - Chances of Disability: Me, Disabled?, disabilitycanhappen.org, July 3, 2013 http://www.disabilitycanhappen.org/chances_disability/disability_stats.asp