Estate Planning

No matter your net worth, it’s important to have a basic estate plan in place.  Such a plan ensures that your family and financial goals are met after you die.  An estate plan has several elements that are essential:  a will, power of attorney, and a living will or health-care proxy (medical power of attorney).  For some people, a trust may also make sense.  When putting together a plan, you must be mindful of both federal and state laws governing estates.

Your estate is your net worth, or the sum of all of your assets including legal rights, interests and entitlements to any kind of property, less all liabilities owed by the person.  Good estate planning now includes your digital assets, online identities and a complete list of online account, password and security question answers.

Getting started with Estate Planning is one of those things most people would rather avoid.  Talking about your own mortality is not usually something done over dinner, but it’s an important conversation to have.  Take the first step and start the conversation with your family and loved ones.  When you’re ready to finalize the plan, your Charter Trust Wealth Advisor will make sure your plans are in order and will effectively convey your final wishes.

Young or old, rich or poor, everyone needs a solid estate plan.  A well thought out Estate plan may include one or all of these:

  • A Will
  • A Living will
  • Trust fund
  • Revocable (Living) Trusts
  • Special Needs Trusts
  • Power of Attorney
  • Healthcare Directives
  • Structuring of Gifts and Giving Programs
  • Structuring Family Business Arrangements
  • Structuring Digital Asset Documents

Charter Trust Company can be retained for the collection, and valuation, of all assets for inventory purposes and possibly for estate tax purposes.  Examples of assets include real estate, securities, cash, life insurance, and personal property.  This inventory must be accurate for several reasons, including providing the starting point for the preparation of required accountings for the estate.

There are different methods employed for valuing the different types of assets.  For example, securities are valued by determining their market value on the date of death.  Other assets, such as real estate or jewelry, may require an appraisal to determine their fair market value.

Once all the assets have been valued, Charter Trust will prepare an inventory of the estate assets to be filed with the probate court, if appropriate.

In the estate settlement process the Executor or Administrator is responsible for reviewing and paying all debts, expenses, legacies and taxes on behalf of the Estate. A complete portfolio review may need to be completed to be sure there are sufficient funds to pay the obligation of the estate. Charter Trust can assist in completing this task to ensure the Estate is properly administered.

Upon death, Charter Trust can ensure the necessary tax returns are prepared on behalf of the decedent’s estate.  A final lifetime individual income tax return (Federal Form 1040) for the decedent usually will be required.  This return includes only income earned through the date of death.  Income paid after the date of death should be claimed on the estate’s income tax return.  This return is called a “Fiduciary Income Tax Return” (Federal Form 1041).  It is important to work with someone who is familiar with preparing decedents’ final lifetime returns and fiduciary returns so that income is reported and deductions are claimed on the proper returns.  If timely filed, certain elections may be taken to minimize the tax owed.

If the gross estate (i.e., the value of all the decedent’s property) is near or exceeds certain thresholds, estate tax returns (Federal Form 706) must be filed.  The estate tax is based not only on the income of the decedent or the estate, but the value of the decedent’s property.  These tax returns are quite complex and they must be filed along with the taxes owed within nine months of the decedent’s death, unless an extension is granted.  Failure to file and pay the tax may result in the assessment of penalties and interest against the estate or personal representative.

During the estate settlement process the management of assets needs to continue. There are many variables that should be considered. They include preservation of principal, liquid cash requirement to pay debts, expenses and taxes. Charter Trust has experience to help the family, executors or administrator to look at the total picture of the estate and other factors to manage both probate and non-probate assets in a prudent manner. Communication is an important part of the process, and Charter Trust has worked closely with families to meet legal and family requirements.

If you have a living trust, the assets held in your trust could be managed by the trustee and distributed according to your directions without court supervision and involvement.  This can save your heirs time and money.  And because the trust would not be under the direct management of the probate court, your assets and their value (as well as your beneficiaries’ identities) would not become a public record.  Your heirs and beneficiaries would still have to be notified about the living trust and advised, among other things, of their right to obtain a copy of the trust.

If your assets (those in your name alone) are not in a living trust when you die, they would be subject to probate and would be a matter of public record.  Probate is a court-supervised process for transferring assets to the beneficiaries listed in one’s will.

After your death, a petition would be filed with the court (usually by the person or institution named in your will as the executor).  After notice is given, a hearing would be held.  Then your will would be admitted to probate and an executor would be officially appointed.  An inventory of your assets would be filed with the court and notice would be given to your creditors so they could file claims.  The process would end once the court approved a final distribution of assets.  Probate can take more time to complete than the distribution of property held in a living trust.  In addition, assets tied up in probate may not be as readily accessible to the beneficiaries as those held in a living trust.  The cost of probate is often greater than the cost of managing and distributing comparable assets held in a living trust.

This section will be updated shortly.