Every year since 2009, during the third week of October (the 17th through the 23rd in 2023), estate planners across the country recognize National Estate Planning Awareness Week. They work to help the public understand the value of estate planning and how it aligns with their overall financial plan. Whether you are new to estate planning or you’ve had an estate plan in place for years, here are some key items to be aware of and regularly review.
Let’s begin with a will
A will nominates a person or organization to handle the job of estate settlement and provides a roadmap for how to properly proceed. It inventories the property expected to be owned by the estate, identifies the heirs, and specifies a pattern for property distribution. It should also identify any major liabilities the executor might have to contend with. Serving as executor is a service of Arvest’s trust division, and a role our company is proud to handle.
But what happens when there is no will? Without a will, estate settlement can be a major trial for heirs. The estate still has to be settled, so the state provides a will substitute, called the law of intestate succession. The specifics vary from state to state, but generally, there will be provisions for surviving spouses and children, or for more distant relatives if necessary. For example, the famed singer Prince died without immediate heirs, and a years-long court fight ensued over who was entitled to inherit his assets.
A will is a necessary piece, but there is more to consider.
There are do-it-yourself templates for creating a will, but this approach is usually not ideal. Rather, it is important to meet with an estate planning attorney who will typically cover many related topics important for planning the estate.
Additional documents. What happens upon temporary incapacity? One can delegate the power to make financial decisions to a trusted relative through a power of attorney document. The power may be tailored narrowly or expansively, as circumstances warrant. Medical decision-making may also be delegated, and one may specify how much or how little extraordinary medical efforts should be expended.
Nonprobate property. Many estates include property whose disposition is not controlled by the will. Jointly owned property passes by operation of law. Retirement plan benefits and insurance proceeds are typically paid to named beneficiaries. In the absence of a beneficiary, payments would go to the estate. When developing an estate plan, it is important to consider all such assets in evaluating how the will should be drafted.
Living trusts. A revocable trust created during one’s life should be considered as a supplement to the will. Such a trust can provide financial protection upon incapacity, and its benefits to the family will not be interrupted by the death of the grantor. When a corporate fiduciary such as Arvest is named as trustee, the assets will have the benefit of professional management.
Special considerations. Family owned businesses present a range of tricky estate planning questions. Who will provide successor management? How will heirs who are not active in the business be treated? Is the business so valuable that estate and/or inheritance taxes will be a consideration?
Philanthropy is another subject an estate planner is likely to ask about. There are a range of strategies to consider, from outright gifts to charitable trusts and private foundations. Each strategy has important tax consequences to consider and discuss with a qualified tax advisor.
Lifetime gifts. Often an estate planner will recommend steps to begin implementing elements of an estate plan immediately. The donor has the added satisfaction of seeing how the wealth will be used as it is passed on. A plan of regular charitable gifts may be started. Lifetime gifts to children and grandchildren could also be considered. In 2023, up to $17,000 may be gifted to any one person without federal gift tax or the need to report the gifts; one may make an unlimited number of these annual exclusion gifts.
Other wealth management issues
A meeting with an estate planner may also uncover matters that are only tangentially related to drafting a will and settling an estate. These may include:
Investments. Does the portfolio’s asset allocation mesh with the individual’s financial goals and risk tolerances?
Stock options. Prepare an exercise strategy addressing the method of exercise, timing of exercise and resulting tax consequences for qualified and non-qualified stock options.
Titling of Assets. Review how assets are currently titled and recommend appropriate changes to coordinate with the wealth transfer plan during life and after death.
If you are part of the majority – those without an estate plan – contact an estate planning attorney or an Arvest Trust Officer who can connect you with an attorney as part of a larger financial review. You can also find local estate planning attorneys and more information about estate planning from the National Council of Estate Planners and Councils.
If you are ahead of the game and already have an estate plan in place, it’s a great week to review your plans. An annual review or a review every few years is highly recommended, as assets and accounts may have changed, and beneficiary changes may be needed as well. This is also a great time to share information about estate planning with your friends and family.
Estate planning can be worthwhile no matter your age or financial situation. It can provide a great comfort to your heirs after you’re gone, by having a trusted professional manage the financial responsibilities of the estate settlement process and allowing loved ones the time they need to grieve without being saddled with those responsibilities. For larger estates, it can also create an easier transition of assets and minimize the tax impact when transferring wealth.
Each year let’s move a little closer to being able to say the majority of Americans have a comprehensive estate plan in place.
This content has been prepared by The Merrill Anderson Company and is intended as a general guideline.
© 2023 M.A. Co. All rights reserved.
Arvest Wealth Management does not offer tax or legal advice – consult licensed professionals for advice.