Estate Planning at Retiree Benefit Services

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Estate Planning

Retiree Benefit Services, Inc. can help you design a plan to shelter your estate against the elements. Protecting what you have built against the erosion of estate taxes. Meeting liquidity needs. Incorporating your business interests, and arranging charitable gifts.

	How Your Estate Is Taxed		What Happens If You Don't Have a Will?
	Will You or Won't You?		Making A Will
	Using Trusts To Distribute Property And Reduce Taxes		How To Arrange Charitable Gifts

You've spent years building your estate, Now spend a few moments to preserve it for future generations with the help of Estate Planning. You can get more details on applying these concepts to your situation by consulting your estate planning team - your attorney, insurance agent and accountant - or by contacting us.

How Your Estate Is Taxed
At your death, your estate's personal representative must file the federal estate tax return (Form 706) if the value of all your property exceeds $675,000. This amount is scheduled to increase to $700,000 in 2002; $850,000 in 2004; $950,000 in 2005 and $1 million in 2006. Federal estate tax rates range from 37 percent to 55 percent. This tax must be paid within nine months of the date of your death. Most states also have a state death and/or inheritance tax, although it's usually much smaller than the federal estate tax.

Here's how the federal estate tax works. All assets you own or control are taxed in your estate. There are a few tax breaks available: final expenses, administrative costs and debts may be deducted, as well as all of your property that passes to your spouse or to charity. Finally, the IRS gives everyone a tax credit -called the unified credit -to shelter additional property from the federal estate tax. The applicable exclusion of $675,000 yields a tax credit of $220,550 that can be subtracted from an estate's tax liability. As the applicable exclusion increases, so does the corresponding tax credit. For most people, if their property is worth less than the applicable exclusion, there will be no federal estate tax due.

The following example shows how the federal estate tax works
for a single person, widow or widower (no marital deduction).

COMPUTING THE FEDERAL ESTATE TAX *
GROSS ESTATE (ALL ASSETS)	$3,000,000
Administrative costs:
Funeral, medical	(15,000)
Attorney, executor (2%-4% of gross estate)	(90,000)
Debts	(50,000)
Prior taxes due	(0)
ADJUSTED GROSS ESTATE	$2,845,000
Deductions:
Marital	(0)
Charitable	(100,000)
TAXABLE ESTATE	$2,745,000
Federal Estate Tax	1,155,650
Unified Tax Credit	(220,550)
FEDERAL ESTATE TAX DUE	$935,000

* Assumes death occurs in 2000 or 2001.

Will You Or Won't You?
A will is a legal document that describes how you want your property distributed and managed after your death. If you die without a will, the probate court distributes your estate according to state laws. Most people wish to control how their property is distributed and consult an attorney to draft a will to make sure those plans are carried out.

A will is more than a declaration of property ownership in the event of your death. It may, among other things:

	Preserve a large estate by limiting the impact of estate taxes and administrative costs,
	Designate a personal representative or executor to manage the estate and dispose of it according to your instructions, and
	Name a preferred guardian to care for minor children or other dependents.

What Happens If You Don't Have A Will?
If you fail to create a will before you die, the probate court will distribute your estate according to your state's intestacy laws. A majority of states have adopted part or all of the Uniform Probate Code, which provides the following structure for distributing property if you die without a will (in testate):

	If there is a surviving spouse, all property passes to the spouse.
	If there is a surviving spouse and one child, half of your property passes to the spouse and the other half to the child.
	If there is a surviving spouse and two or more children, one-third of your property passes to the spouse and the remainder is divided in equal shares among the children.
	If there is no spouse and no children, the property is evenly divided between your parents. If no parents are living, it's evenly divided among the descendants of the parents.
	If there are no living relatives, the property reverts to the state.

Making A Will

A will is a highly personalized, legal document designed to distribute your property at your death according to your wishes. You should consult an attorney, who will draft the will. To prepare for a meeting with your attorney, gather the following information.

Before naming a personal representative, guardian or trustee, make sure you have that person's consent. Determine what authority -and the limits on authority -you wish that individual to have. It's also a good idea to name a successor in the event the first one named can't serve.

It is important to choose a guardian to serve in the event both you and your spouse die. Failing to provide for the custody of your children can cause family discord or separation.

Using Trusts To Distribute Property And Reduce Taxes
A trust is a property right held by one person for the benefit of another. The person creating the trust, called the settlor, has an attorney draft a trust document, then places the property into the trust. A designated trustee manages the property and distributes it according to the settlor's intent.

Trusts are more than a means of distributing property at your death; they can help reduce estate taxes, provide liquidity for your heirs, prevent the costs and delays of probate and provide professional management of your assets.

	List of property owned -real and personal
	Bank Accounts Home Insurance Business Stocks and Bonds Personal Belongings
	How property is owned
	Whose name is on the title?
	List of debts and names of creditors
	List of Beneficiaries
	Names and addresses of those who are to be your heirs (those you wish to benefit). What do you want each to have?
	Names and addresses of personal representative (executor), guardian and trustee

Giving Your Property Away
The Internal Revenue Code allows you to give up to $10,000 a year ($20,000 for a gift-splitting married couple) to each recipient with no gift tax consequences. Using this annual exclusion amount is particularly wise when the property you're giving away is rapidly appreciating. Although gifting requires that you completely relinquish ownership in the gifted property, lifetime gifts still remain an effective way to reduce the size of your estate tax liability.