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Library of Congress Control Number: 2023931207
ISBN 978-1-394-15854-6 (pbk); ISBN 978-1-394-15855-3 (ebk); ISBN 978-1-394-15856-0 (ebk)
Part 4: Life, Death, and Taxes
Part 5: Estate Planning for Family Businesses
Part 6: Crafting a Comprehensive Estate Plan
#1: $5,000 to darling daughter
#2: $7,000 each to all three
#3: $21,000 to the fairest of them all
Playing Hopscotch: Understanding Generation-Skipping Transfers
Knowing the rules for skipping generations (so you don’t break ’em)
Looking Deeper into Generation-Skipping Transfers and the GSTT
PART 6: CRAFTING A
PART 7: THE PART OF TENS
About This Book
Estate Planning For Dummies is written in easily understood language from cover to cover, with liberal use of examples. Some of the topics we cover are very basic — the estate-planning fundamentals we cover in Chapter 1, for example — while other material, such as the chapters on trusts, is more advanced and complicated.
If you’re considering estate planning for the first time, you may want to skim through the book cover to cover just to get an idea of what’s here, and then settle down and use the book as a reference on specific topics as they come up. If you’ve had a bit more exposure to estate planning, you may want to selectively read certain chapters, and either skip or skim others. We recommend at least skimming every chapter, even if you currently have (for example) a will, a few trusts, and various types of insurance policies, and understand the basics pretty well.
Foolish Assumptions
The most important assumption we’ve made about you is that you’re ready to dive into estate planning or at least are curious about what estate planning involves. Maybe you already have a basic will, but time has passed since you prepared that will and your life has become more prosperous — and complicated — and you need to look into trusts, will substitutes, estate tax considerations, and many other topics that make up your estate.
Perhaps you used an online will preparation website or even created a simple trust using a website that helps customize a trust to your particular needs. Congratulations — that’s a great start! But as you’ll see in this book, estate planning is about much more than simple wills and trusts. Modern family situations can get very complicated, and your wishes for your estate could be equally complicated . . . or maybe even convoluted. Fear not! No matter what your particular estate situation happens to be, just follow along, and we’ll walk you through both simple and complex decisions and steps that you need to make.
Icons Used in This Book
As with all For Dummies books, icons in the margins call your attention to various points we make (or try to make!) about estate planning.
When you see the Tip icon, the accompanying material is some action you should consider taking to make your life easier.
The Warning icon is exactly that: a warning of some dire consequence that may occur should you make the wrong move with your estate planning.
When you see the Technical Stuff icon, the accompanying material falls into that category of “Thanks, but that’s more than I really needed to know.” You can certainly get the gist of any chapter’s contents by skipping all the Technical Stuff material, but if you want to get “under the hood” for that chapter’s topic, a few moments spent with this technical stuff can help you thoroughly understand that topic — just like the estate-planning professionals!
The Remember icon highlights the key point or two that can help you be a better estate planner.
Beyond the Book
In addition to what you’re reading right now, this product also comes with a free access-anywhere Cheat Sheet. There you can find quick reference material about wills, trusts, and other important estate-planning topics. To get this helpful content, simply go to www.dummies.com and type Estate Planning For Dummies Cheat Sheet in the Search box.
Where to Go from Here
Now it’s time to dive into the world of estate planning. If you’re totally new to the subject, you won’t want to skip the chapters in Part 1 because they provide the foundation for the rest of the book. If you’ve already started your estate planning with a basic will and maybe a simple trust, we still recommend that you at least skim Part 1 to get a sense of how to get beyond all the hype, buzzwords, and generalities related to estate planning.
From there, you can read the book sequentially from front to back, or jump around as needed, using the table of contents and index as your guide. Whatever works best for you is how you should proceed.
1 Getting Started with Estate Planning
IN THIS CHAPTER
» Understanding what your estate is
» Planning what will happen to your estate
» Realizing that your estate-planning goals are different from other people’s
» Comprehending estate-planning lingo
» Stepping onto the critical path for estate planning
» Putting together your estateplanning team
Chapter 1
Congratulations: You Have an Estate!
The protection and control that you need.
No, the above phrase isn’t the marketing slogan for a new deodorant. Instead, it expresses the two most important reasons for you to spend time and effort on your estate planning:
» After you die, the government will try to take the portion of your estate that the current tax law says it’s entitled to, but you have the opportunity to protect your estate by minimizing that tax bite.
» You want to have as much control as possible over how your estate is divided up. Basically, you want to decide what will happen to your estate rather than have a jumbled set of complicated laws dictate who will get what.
You may have spent time working on a financial plan throughout your life, as well as crafting your retirement plan. Your estate plan accompanies those other two plans and makes up the third leg that supports your life’s overall “financial stool.”
Without a solid estate plan, however, your “financial stool” can’t stand on just those two other legs. Even worse, even though you may not be around to witness the complications and damage, all your hard work on your financial and retirement plans could be severely compromised in the absence of a solid estate plan.
Before you can plan your estate, you need to understand what your estate really is. Many people think that for the average non-billionaire, estate planning involves only two steps:
» Preparing a will
» Trying to figure out what inheritance and estate taxes — the so-called “death taxes” — apply (and if so, then how much money will go to the state and federal governments)
But even though wills and death taxes are certainly important considerations, chances are, your own estate planning will involve much, much more.
This chapter presents the basics of estate planning that you need to get started on. In this chapter, we show you why estate planning is every bit as important as saving for your child’s college education or putting money away for your retirement. In fact, your estate plan is the continuation and culmination of your personal and family financial planning.
What Is an Estate?
In the most casual sense, your estate is your stuff (all your possessions). However, even if your only familiarity with estate planning comes from watching a movie or TV show where someone’s will is read, you no doubt realize that you aren’t very likely to hear words like “I leave all of my stuff to. . . .” Therefore, a bit more detail and formality is in order, which we provide in this section.
The basics: Definitions and terminology
“All my property.”
Think of that phrase when you plan your estate.
» Taxes you owe to the government
» Any IOUs to people that you haven’t paid off yet
Basically, all debts you have are as much a part of your estate as all the positivebalance items.
In addition to understanding what your estate is, you also need to know what your estate is worth. You can calculate your estate’s value as follows:
1. Add up the value of all the positive-balance items in your estate (again, your banking accounts, investments, collectibles, real estate, and so on).
2. Subtract the total value of all the negative-balance items (the remaining balance of the mortgage on your home, how much you still owe on your credit cards, and so on) from the total of all the positive-balance items.
The result is the net value of your estate, which you could think of as your “personal balance sheet.” In most cases, the result is a positive number, meaning that what you have is worth more than what you owe.
If calculating a net value by subtracting the total of what you owe from the total of what you have seems familiar, you’re right! In the simplest sense, calculating the value of your estate involves essentially the same steps that you follow when you apply for many different types of loans (mortgage, automobile, educational assistance, and so on).
However, in many cases — including perhaps your own — determining what the parts of your estate are, and what they’re worth, can be a bit more complicated than simply creating two columns on a sheet of paper or in your computer’s spreadsheet program and doing basic arithmetic. If you’re a farmer, for example, you need to figure out the value of your crops or livestock. If you own a small oneperson business, you need to calculate what your business is worth. Or perhaps you and six other people are joint owners of a complicated real estate investment partnership; if so, what is your share worth?
In Chapter 2, we discuss more technical and sometimes more complicated ways to determine your estate’s value.
For now, another point to keep in mind is that, in addition to what you have right now, your estate may also include other items that you don’t have in your possession, but will at some point in the future, such as:
» Any future payments you expect to receive, such as an insurance settlement or the remaining 18 annual payments from that $35 million lottery jackpot that you won a couple of years ago!
