Estate planning is a process that should “start at the end”. Who are the beneficiaries? What do they get, and when? All too often, however, we start in the middle. The focus is on the mechanics of making the transfer: probate fees, taxes, structures.
In the March 2011 edition of Advisor’s Edge Report, my colleague Elaine Blades tackles this subject. Elaine recommends determining “whom and/or what the client wishes to benefit and then working backwards to find the best method of doing so.”
In particular, Elaine looks at strategies that can be measured in dollars. She warns against probate fee workarounds, which often create more problems than they solve. By contrast, testamentary trusts – at least when they serve core planning objectives – are worth another look.
My own area of expertise, charitable giving, is especially susceptible to planning that starts in the middle. Sometimes I encounter people (who should know better) who focus exclusively on tax in giving. I always say you “don’t make money by giving it away”. Yes, good planning will reduce the cost and increase the charitable benefit, but impoverishment is an element of giving.
When philanthropy is part of an estate plan time should be spent making sure the right gift goes to the right charity with the appropriate directions or restrictions. It’s the end point that starts the planning process.