Estate Planning – Basic Steps For the Young Cardiologist

Estate planning is one of the last areas of planning we often see our clients address. This is not because they do not value it, but because these items may seem either too daunting or morbid to place at the top of one's to-do list. Nevertheless, if you have a young family or plan to start one soon, we would encourage you to consider these important items to ease the burden on your loved ones in the unfortunate event they are needed. This article will cover four areas of basic estate planning – wills, trusts, other documents and life insurance.

A will is a legal document that conveys the wishes of the deceased with regard to how they would like their assets distributed upon death. Most people have an idea of who they would like to receive their property. However, property may pass to unintended parties if this is not clearly outlined in a will. For example, if one dies without a will (having died intestate), then the state will decide which of your relatives receive each asset and this may cause discord among family members. Another valuable benefit of creating a will is the ability to name a contingent guardian to care for your minor children in the event both you and your spouse pass away. Without a will with a named contingent guardian, like your assets, the state will make that decision for you. Most people prefer to not have this happen, so having a basic will in force and periodically revising this will help avoid this scenario.

A trust is a separate legal entity that holds assets, manages them and distributes them to trust beneficiaries according to instructions outlined within the trust document. There are three parties involved with a trust. The grantor gifts assets to the trust. The trustee manages the assets, pays taxes and facilitates distributions to trust beneficiaries. The beneficiary(s) are entitled to the assets according to instructions outlined in the trust document. There are many types of trusts – revocable and irrevocable trusts, testamentary trusts (created by instructions set forth within a will upon death) and trusts designed for specific purposes, such as special needs trusts to provide care for a dependent with special needs.

Other Estate Planning Documents
When you draft your will, we would encourage you to ask your attorney about supporting estate planning documents. These include power of attorney, living will and HIPAA waiver to delegate your decision-making ability to someone else if you become incapacitated.

Life Insurance
Life insurance can be complicated today with the various types available, so we will focus on life insurance in two circumstances for basic estate planning purposes. The first is as pure protection to provide a benefit to the surviving spouse and children in the event of a premature death, especially of the primary income earner. Life insurance proceeds can allow the surviving spouse to take time off work and then go back to work part time to spend more time with children. They are also used to provide additional funding for retirement and pay off a mortgage, allowing the family to remain in their home rather than move to a less desirable neighborhood.

The second example is to provide an infusion of cash into an estate when needed. The current estate tax rate is 40 percent on estate assets above the federal estate tax exemption (currently $5.45 million for 2016). If the value of the deceased's estate exceeds the exemption amount, then the estate may owe a large amount in taxes. Estate taxes are due within nine months from the date of death, so if a significant portion of the estate is comprised of illiquid assets (such as real estate), then having a life insurance death benefit provide cash to cover estate taxes can be beneficial to avoid having to sell estate assets in a short period of time.

Establishing your basic estate plan does not need to be complicated and the items mentioned provide a good starting point. Please keep in mind we are not attorneys and this is not legal advice. We recommend you work with an attorney familiar with estate planning to draft these documents and for specific estate planning recommendations.

This article was authored by Marshall Weintraub and Michael Merrill, CFP, CLU, ChFC.

Marshall Weintraub & Michael Merrill are financial advisors with the independent financial services firm, Finity Group, LLC. To ask them questions or arrange a consultation, email them at Office Address: 4380 SW Macadam Ave, Suite 245, Portland, OR 97239. Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Finity Group, LLC and Cambridge are not affiliated.