Chapter Two What Goals Do I Have?

Chapter One Chapter Three

Begin the process by completing these discovery steps before outlining what you want your plan to achieve. Being armed with this perspective can make the planning process more efficient when you’re ready to sit down with your legal, tax, and wealth advisors.

Step one: Complete your personal balance sheet.

Different kinds of property and ownership arrangements result in different ways that property is transferred upon an owner’s death. Here are some of the ways property is owned:

  • Single ownership
  • Tenancy in common
  • Right of survivorship
  • Trust
  • Beneficiary designation – including life insurance policies; Individual retirement accounts (IRAs); 401(k) plans; annuities; many types of employment benefits, such as stock options and deferred compensation
  • Community property

Having a personal and detailed balance sheet that reflects both the assets and their ownership lets you see your total financial picture, including assets that you might not otherwise consider, like life insurance and real estate as well as digital assets.

List all assets of financial and personal value. In a separate column next to each asset, indicate the way each asset is held: for instance, “trustee,” “individually,” “joint tenants with right of survivorship,” and so forth. For any beneficiary designation property (life insurance, retirement plans, and corporate benefits), list who is named as primary and secondary beneficiaries.

Have you considered your digital assets? It’s increasingly important to plan for what will happen to your social media and electronic content after you’re gone.

Step two: Assemble a list of your current estate planning documents.

Do you have a will? A revocable living trust? Nothing? “Nothing” may be a perfectly reasonable answer for some younger professionals who don’t have children, but there is no time like the present to document your wishes.

Keep your documents safe. Learn the three steps to secure and smart record keeping, from your birth certificate to your will.

Step three: Identify your key goals and issues.

Once you have your documents from steps one and two prepared, this is a good time to sit down with your wealth advisors to outline what you want your plan to achieve. Let values-based concerns – like family dynamics, personal relationships, and meaningful work — drive the financial decisions as you consider your legacy.

One of the first things people think of when they consider estate planning is the arrangements they’ll make for heirs, whether a surviving spouse, kids, friends, or charities.

Here are some potential considerations to discuss with your advisors as you identify potential challenges in fulfilling your goals.

  • Many married couples assume that the answer is that each will leave everything to the other. But what if there are children from a previous marriage? If both spouses have wealth of their own, then maybe the plan would be for the first spouse to die to leave some portion of his or her estate to his or her children from the previous marriage.
  • Another challenging point: how much is enough for children? Parents want to leave their children enough to increase their happiness but not so much that it impacts their initiative. This issue may be addressed by deciding to give children less or pass on wealth in a structured fashion (usually in trust).
  • Consider making gifts to grandchildren. This can benefit the children as well since they won’t have to cover expenses (like education) that the gift to the grandchildren may cover. Also, assets passing directly to grandchildren are not subject to creditor claims of the child. Gifts to grandchildren won’t be subject to estate tax at the child’s death.
  • For some sample scenarios for how wealth could be divided among children, scroll down to Dividing the Wealth.
  • If planning to give to charity, consider which approach may meet your situation:
    • Using a donor-advised fund can enable you to separate the timing of your grants from the timing of the tax deduction; potentially enjoy a larger deduction depending on assets; donate complex or highly appreciated assets while avoiding capital gains taxes; and delegate the administration of your account to simplify your recordkeeping.
    • A private foundation allows you to make grants to support social, educational, religious, or other charitable activities while potentially qualifying for tax advantages. Your foundation can be organized as either a nonprofit corporation or a charitable trust. There are some administrative functions required with managing a private foundation, including filing tax returns.

Any tax benefits depend upon your individual circumstances. Please consult your tax advisor.

While the operations of the Donor Advised Fund and its Pooled Income Funds are regulated by the Internal Revenue Service, they are not guaranteed or insured by the United States or any of its agencies or instrumentalities. Contributions are not insured by the FDIC and are not deposits or other obligations of, or guaranteed by, any depository institution.

Dividing the Wealth: Three Approaches

A retired parent with two children has two assets: a home worth $3 million and investment account worth $5 million.

Click below for some potential scenarios.