Without a properly structured estate plan, your heirs may be paying unnecessary estate taxes and probate fees that in many cases can be dramatically reduced or even eliminated.
Q What do I need to consider prior to meeting with an estate-planning attorney?
It is also an excellent idea to decide on alternative choices, in the event your first choice is unwilling or unable to serve. If you name a married couple as guardians and one of them dies, consider whether you want their surviving spouse to act as the sole guardian. The same decision should be made in the event the guardians become divorced.
Another person to be selected in your estate plan is the executor. It is the executor's responsibility, via the probate process, to handle the details of paying any debts of the estate, pay death taxes, and distribute the remaining assets to the beneficiaries named in your will.
Prior to meeting with the attorney, be sure that you have made a list of all of your assets, including their value, as well as how each asset is owned-either individually or jointly titled. This will give the attorney a quick snapshot of the value of your estate as well as the level of probate exposure.
If you are going to use various trust strategies, you will need to name a trustee to manage investments and take care of issues relating to the trust, such as the various types of distributions that will be made. The trustee can be an individual or a corporate fiduciary such as a bank trust company.
Another decision deals with the ages of your children at the time the estate is distributed. If you desire not to distribute assets outright, in a lump sum, to your children in the event of your and/or your spouse's death, the assets can be held in trust for their benefit. The ultimate distribution does not have to be made as a lump sum. Many prefer to make distributions of a portion of the estate at several different times; ie, one-third at age 21, one-third at age 25, and one-third at age 30, or any other combination you feel works best for your children.
Lastly, you will need to make arrangements in the unlikely event that your children predecease the distribution of the estate. If this were to happen, decisions need to be made today as to whom the ultimate beneficiaries will be: other relatives, friends, or even charity.
While these issues are difficult and emotionally trying to address, planning ahead will eliminate wasted time sitting in the attorney's office, with the money clock ticking away.
Q What are the new rules regarding cost basis with mutual fund sales?
A The cost basis of your mutual fund shares is typically the purchase price, including any sales charges you paid when you purchased your shares. Beginning this year, the Internal Revenue Service began requiring mutual fund companies to report cost basis information to both investors and the IRS on the sale or exchange of mutual fund shares acquired on or after Jan. 1, 2012, called "covered shares." Covered shares are any shares acquired on or after Jan. 1, 2012, while non-covered shares are any shares acquired before Jan. 1, 2012, and shares for which cost basis is unknown.
Joel M. Blau, CFP, is president and Ronald J. Paprocki, JD, CFP, CHBC, is chief executive officer of MEDIQUS Asset Advisors, Inc. in Chicago. They can be reached at 800-883-8555 or firstname.lastname@example.org