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Understanding The Estate Planning Process

Considering all the time and effort that’s required to put money and equity aside for the future, the ultimate disposition of those funds should not be left to chance. Your assets need first to be available to you and your family during your lifetime. We can assist you in this process and help you provide for your family and friends after your death.

In the absence of your estate plan in the form of a will or trust, state law will control how your assets will be distributed. Further, an estate plan can help reduce or eliminate taxes and can provide for ease of administration by the person or institution you choose.

Wills operate on assets solely owned by the decedent and serve as instructions on the disposition of the decedent’s assets. Likewise, a trust controls only those assets transferred into the trust. A revocable or living trust may be changed during one’s lifetime, as can a will, in order to provide for flexibility and changes in circumstances. An irrevocable trust cannot be changed, so serious consideration must be given when using this alternative. There must be coordination between the estate planning document and the manner in which assets are held.

Many assets can pass outside a will or trust but must be considered as part of the total plan; such assets often comprise part of the taxable estate. For example, life insurance policies and retirement plans allow for beneficiaries to be designated. In Rhode Island, jointly held financial accounts will likely go directly to the surviving account owner. This is fine as long as it is what you want and the potential resultant tax is taken into account.

Consideration should also be given to the estate tax consequences of any estate plan. As of Jan. 1, 2014, the exclusion amount for federal estate taxes is $5.34 million and is indexed for inflation in subsequent years. There is an unlimited marital deduction for assets passing to a decedent’s spouse. As of 2014, Rhode Island does not tax estates of less than $921,655, and there is also an unlimited marital deduction. However, a Rhode Island estate tax return must still be filed even for estates that do not attract Rhode Island estate tax. If you want to save taxes on your estate assets for the benefit of your children or your spouse, competent professional advice and planning are essential.

Are there special circumstances in the family, such as a child with special needs or a spouse who may be exhibiting early signs of dementia? Is there a favorite charity that you would like to benefit directly or indirectly? Is it necessary to avail financial management expertise? Do you need to protect assets from creditors or others?

A will and living trust can be prepared to address these issues and more. They provide flexibility and can help save estate taxes if that is a goal. At Moore, Virgadamo & Lynch, Ltd., we have been assisting families in creating and updating estate plans. We look forward to helping you. There is no one right answer for everyone. We can assist in finding the right answer for you.

The starting point requires you to gather information concerning all assets in which you have an interest and consider where you want these assets to end up. Who will you appoint to carry out your plan as executors or trustees? Who should be appointed as the guardian for your minor children?

There are many decisions to be made – decisions that should not be left to others. Please contact us so that we can assist you in devising a plan that meets your goals and objectives. As part of your planning, we can assist with health care directives, such as durable health care powers of attorney, as well as general durable powers of attorney.