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Financial Literacy - Planning for your heirs
SPOTLIGHT
See a pro for estate planning
Estate plans need professional evaluation, says this estate planning professor.
Planning for your heirs

Spotlight: Ted Kurlowicz

What is de facto estate planning?

Plan for your heirs
Who needs estate planning?
What is de facto estate planning?
Who should evaluate an estate plan?
What does a will cover?
How much should a will cost?
When should people revisit their plan?

Ninety-two percent of households in America get some form of insurance, including group term at work, which is typically how people have some coverage. There's a beneficiary designation line, so people, generally without any advice at all, think of how to answer the "who" question. They multiply that when they set up their 401(k) plans, IRAs or when they receive any other employee benefit that might have a death benefit. When people set up securities accounts, brokerage accounts or financial institution accounts, many of these will automatically come with a beneficiary designation form to make the plan payable at death. Every one of those things is an estate plan where someone is answering a "who" question. People rarely think through what the risk exposures are by doing this.

If you have somebody who's never going to be competent to really handle a lump sum, you really absolutely need to do something different in answering the 'how' and 'when' questions for that person.

If you have any assets that you're going to transfer, the risk exposures are taxes, bad investing, bad organizing (during periods of time when some people in the family might have to organize the assets), exposing assets unnecessarily to creditors, problems with maturity and ages of beneficiaries and their capabilities. If you have somebody who's never going to be competent to really handle a lump sum, you absolutely need to do something different in answering the "how" and "when" questions for that person.

Many individuals have no probate; all of their estate plans have been done in this manner. They've got pieces of estate plans put together probably with just answering a "who" question.

A will is really a small part of where the average person is doing his or her estate planning. They're doing their estate planning in all these other little pieces. In a perfect world, they have a will, perhaps they have a trust, and their attorney and other advisers have made sure that all these other little pieces are coordinated. To do this people have to evaluate and compile the appropriate facts and then implement the plan to stay on the same page cohesively. It's hard to do.

Who should evaluate a consumer's estate plan?

An attorney who does estate planning or some other related financial professional who is capable of doing estate planning should evaluate the consumer's estate plan. If they are not an attorney, they should probably not be reading somebody's will and getting into intricacies of the will. Not every attorney is an estate planner. You've got to make sure you're getting your plan evaluated by somebody who really does it as a substantial part of their practice and doesn't look at a will every year or two.

-- Posted: Nov. 19, 2007
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