If you think estate planning is only for the very rich, you’re wrong. Certainly larger estates are subject to large taxes, but taxes are only one reason for estate planning. Here are seven more, some of which may be more important to you:

1. Plan who receives what size share of your assets.

2. Decide how and when your beneficiaries will receive their inheritance or income.

3. Decide who will manage your estate (executor, trustee, etc.) and be responsible for distribution of the assets.

4. Reduce estate administrative expenses and delays.

5. Select a guardian for your children.

6. Provide financial management for funds that may pass to grandchildren.

7. Provide for the orderly continuance or sale of a family business or investment real estate property.

If you don’t have a plan, state laws will determine who inherits your assets and when they receive them. The court will appoint a guardian for your children and the administrator for your estate. Your estate could wind up paying a substantial amount of unnecessary taxes and administrative costs.

Most people have strong feelings about who should inherit their assets and when. However, they are less sure about what to consider as they select an executor and trustees.

Your executor is your personal representative after your death and is responsible for such functions as:

• Administering your estate and distributing the assets to your beneficiaries.

• Paying your estate’s expenses and any outstanding debts.

• Ensuring that all life insurance, employee benefits and retirement plan proceeds are received.

• Filing the necessary tax returns and paying the appropriate federal and state taxes.

In short, your executor administers your will. Once these duties are met, that job is over. But you need a trustee if your will creates trusts to accomplish more long-term goals. Your trustee is responsible for managing the trust’s assets and ensuring that the beneficiaries are provided for in accordance with the provisions of the trust.

Individuals are often torn between choosing an individual as their executor or trustee or naming a corporate entity, such as a bank. Many people name both as executors or co-trustees. Below are the advantages and disadvantages of each.

ADVANTAGES:

• Specialist in handling estates and trusts.

• No emotional bias.

• Impartial - usually free of conflicts of interest.

• Never moves or goes on vacation.

• Never dies or gets sick.

DISADVANTAGES:

• Usually has little familiarity with the family.

• Administrative fees may be higher.

• Rarely will continue any family-owned business.

• Rarely maintains real estate requiring management.

ADVANTAGES:

• More familiar with the family.

• Administrative fees may be lower.

• May be familiar with family business interests.

DISADVANTAGES:

• Probably not experienced in handling estates and trusts.

• Could have an emotional bias.

• May not be impartial toward all heirs.

• Could have schedule conflicts.

• Could be incapacitated at times.

A living trust (also known as a self-declaration or revocable trust) is a legal document that resembles a will. It contains instructions for managing your assets should you become disabled and directions for the distribution of your assets upon death.

Living trusts have two major benefits. Assets in a living trust don’t go through probate. Probate is the process of proving and administering a will under the jurisdiction of a court. It can be a time consuming and potentially expensive process. It also subjects your private financial affairs to public scrutiny. All probate records are public documents!

A living trust provides a perfect vehicle for managing your assets in the event of a disability. While you are alive and well, you can act as your own trustee. In the event of disability or death, the successor trustee that you selected takes over.

Settlement expenses and probate costs are an important aspect of estate planning. So are federal and state taxes. While taxes aren’t the only estate planning consideration, because they can be so expensive, they are an important one. If your taxable estate exceeds $625,000, your estate is subject to marginal tax federal rates starting at 37% and going as high as 55%. A $2 million taxable estate would be subject to estate taxes of close to $600,000. After 1998, the minimum subject to federal estate taxes is scheduled for small annual adjustments.

The size of your estate is increased by the death benefit of all life insurance you own as well as any court settlements payable as part of a "wrongful death" action.

Any assets passing to a surviving spouse pass free of federal tax. Although the initial transfer is tax free, the marital deduction only defers estate tax until the death of the spouse.

If you are willing to pass all of your assets to your surviving spouse upon your death, you can use the marital deduction to avoid federal estate tax at your death. These assets will ultimately be taxed in your surviving spouse’s estate. However, this has two drawbacks:

• Your assets are added to those of your spouse.

(Places the estate in a higher bracket)

• If your spouse remarries they may be re-directed.

(Depending on your spouse’s new will)

There are other ways to take advantage of the marital deduction even if you don’t want to give your spouse completely free access to all the funds. For example, you can create a trust that qualifies for the marital deduction because all of the income from it is distributed annually to your surviving spouse. You can give your surviving spouse as much or as little access to the principal as you wish. This strategy is especially useful when you want to ensure that the principal remains available for your children.

You and your spouse are each entitled to a unified credit against your estate tax liability. This credit will then have the effect of eliminating any tax on estates of up to the amount of the credit.

To take full advantage of this credit in both your estate and your spouse’s estate, regardless of the order of death, it is important to structure your estate plan properly. You may need to consider such strategies as a family trust and direct bequests to children. For maximum benefit, both you and your spouse should own at least $625,000 of assets directly in each person’s name. This includes life insurance proceeds. The estate plan should consider the impact of either order of death and also the effect of inflation on specific assets within the estates.

You can also reduce your federal estate tax liability by making lifetime gifts to family members. Current law allows each individual to give up to $10,000 per donee annually without incurring any gift tax. These gifts are not included in your estate, and subsequent appreciation of the gifted assets is taken out of your estate, too. This $10,000 is scheduled for future indexing adjustments.

For example, suppose you give $10,000 worth of non-voting stock in your successful company to your child and the value of that stock appreciates at 20% per year. If you live another 21 years, that stock will be worth about $460,000. The $10,000 tax-free gift today could save more than $250,000 in future estate taxes.

A Charitable Remainder Trust provides income to individual beneficiaries. At the end of the term of the trust, the remaining principal goes to charity. Charitable Lead Trusts distribute income to charity. At the end of the term of the trust, the principal is distributed to individual beneficiaries.

Both types of trusts provide a partial benefit to charity. Government tables determine the size of the current charitable deduction for the "partial" gift. With charitable trusts, you benefit your favorite charity, receive an income tax deduction and reduce your taxable estate.

If you are not confident all is in order, you probably should have a review. An Estate Plan Checklist can be helpful. A financial advisor can organize all the data and prepare summaries and cost illustrations. However, if documents are required you will need the services of an attorney - preferably one specializing in estate planning.