Estate Planning Tips

Name beneficiaries to avoid probate
Naming specific individuals as your beneficiaries, rather than simply naming your estate, allows assets to pass directly to your loved ones without undergoing the costly and time-consuming legal process known as probate. This is a good strategy to keep in mind not only for annuities, life insurance, IRA's, and qualified plans, but also for mutual funds (available only where the state and mutual fund company allow transfer on death registration).

Appropriately title assets to create equal estates
An important goal of estate planning is equalizing the estates of each party in a marriage. Equalizing your estates may help minimize estate taxes, a key consideration for estates valued at over $1.5 million in 2004.*

How does this work? Each individual has the right to a one-time tax credit to offset estate and/or gift tax. The rule is that an individual must first have a tax liability in order to use a tax credit. If a husband leaves all of his assets to his wife under the unlimited marital deduction, he has no taxable estate and therefore can't make use of his one-time tax credit. This leaves the entire joint estate to be taxed at the death of the wife, when only her applicable credit may be applied. This may result in a higher total tax bill for the couple than if their individual estates had been equalized.

One-way estate planning attorneys address this concern is by implementing a two-trust estate plan into a living trust document. At the death of the first spouse, the exemption equivalent amount ($1.5 million in 2004) funds the bypass, or credit shelter, trust. This amount is subject to estate tax, but escapes tax liability due to the applicable credit. At the death of the second spouse, the funds in the bypass trust are not subject to estate tax (assuming the trust was drafted properly). In order for this technique to work effectively, assets should be titled in the name of each spouse's living trust. Since estate tax rates can be as high as 50 percent, sound estate planning may help you save thousands of dollars.

Recognize the need for specialists
You may want to assemble an estate planning team to address your specific estate planning concerns. Such a team may include a financial advisor, an attorney, an insurance professional, a tax advisor, and a trust officer.

*This figure, known as the "exemption equivalent," is scheduled to increase by stages until it reaches $3.5 million in 2009. Estate taxes are scheduled to be repealed in 2010, but then reinstated to 2001 levels in 2011 with a $1 million dollar exemption.

Investments and investment advisory services offered through CUSO Financial Services, L.P. (CFS) an independent broker-dealer and SEC Registered Investment Advisor are Not NCUA/NCUSIF insured, are not credit union guaranteed and May lose value. Space Coast Credit Union is in partnership with CFS. Financial Advisors are employees of Space Coast Credit Union and registered through CFS. Member FINRA/SIPC).

The information on this page is for educational purposes only. SCCU is not engaged in providing estate planning or other advice. Please consult with a competent estate planning professional regarding any specific estate planning questions.