OCEAN CITY – Estate planning allows couples to protect themselves from the unexpected and ensure their legacy wishes are met. An effective estate planning strategy can help you and your partner work towards the tax-efficient transfer of assets and provide the surviving partner with the liquid assets necessary to cover immediate expenses such as estate taxes. It can also allow you the legal access to handle your partner’s financial and healthcare affairs in the event one of you becomes incapacitated.
The groundwork for your estate plan will be established by legal documents that describe how you want your finances and health care decisions to be handled. While Merrill Lynch does not provide legal, accounting or tax advice, our financial advisors will work with your outside professionals, including your attorney, to facilitate your estate planning strategy. Documents that will need attention include a will, revocable living trust, living will, durable power of attorney, advanced health care directive or proxy, and a HIPPA release.
You may be able to lessen the impact of estate taxes by using a variety of trust-related and wealth transfer tactics to reduce the size of your taxable estate. Due to the complex issues and potential tax implications involved, you’ll want to consult your financial advisor, attorney and tax professional and ask how to use various types of trusts to reduce tax liabilities, protect assets and create cash flow.
These strategies potentially reduce your tax obligation, and certain charitable trusts can generate a cash flow to you or your loved ones and help you achieve your charitable intentions.
Investigate creating charitable gift annuities, pooled income funds or other strategies offered directly by certain nonprofit organizations.
Give directly to your loved ones while you are still alive. Removes the asset, its future appreciation, and its income from your estate and, thus, your potential estate tax obligation.
Explore other sophisticated estate planning strategies that will "discount" your estate valuation for tax purposes.
For tax management and estate distribution you should consider the following:
Designate beneficiaries for your workplace retirement plan and IRAs. May allow your partner to roll the funds over into an inherited IRA and defer income tax liabilities while growing the assets in a tax-exempt environment.
Consider a Trusteed IRA. Talk to your financial advisor about the benefits of a Merrill Lynch Trusteed IRA.
When appropriate, designate co-owners or beneficiaries of your bank accounts, investments, real estate, corporate and personal life insurance policies and other assets. While this may be convenient, please note the assets are still part of your taxable estate and generally will not be governed by the terms of your will or trust. While it removes the asset from probate proceedings, it also eliminates certain estate planning options available only through wills and trusts.
Properly title all other investments and real estate holdings. Affects how much of your property is considered part of the taxable and/or probate estate. Your attorney can help you maintain the necessary documentation regardless of which option you choose. Be aware that re-titling could have significant gift, income and estate tax ramifications.
Since estate planning is complex, we encourage you to contact your Merrill Lynch financial advisor, attorney and accountant to discuss your particular situation.
(A Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-8520.)