| Sargent & Lundy Savings Investment Plan |
| WILLS: WHAT TO DO |
The following excerpts are from an article in "The Wal-Mart 1998 Tax & Savings Guide". The opinions of the author, Lorayne Fiorillo, may or may not reflect those of the SIP Committee. You've heard it a million times, but it probably hasn't sunk in yet: You need a will. You need one even if you're sure you don't have enough money to leave anyone, even if you're young and healthy, even if you're too single or too busy to bother. If you die without a will, your property may be distributed according to the laws of the state you live in. How would you feel if the wealth you had struggled a lifetime to accumulate was suddenly reduced by half and distributed in a manner you never intended? We'll say it again: you need a will. A will, in fact, is just a start. You also need an estate plan to spell out who should care for young children or older parents, manage your business, and make decisions for you if you become incompetent. Even though you won't be around to reap its benefits, estate planning is one of the most important parts of financial planning - and often the most neglected. How do I do it? Start by writing down everything you own, both assets and liabilities. Assets are: * real estate (your home, rental property, and land) * cash on hand (savings and checking accounts, certificates of deposit, and money market and credit union balances) * personal property (cars, clothes, collections, artwork, jewelry, furnishings, books, and so on) * retirement accounts (IRAs, SEPs, and Keogh plans) * employee benefits (group life insurance, stock options, 401(k) and defined benefit plans, profit sharing, and company pensions) * accounts receivable (anyone who owes you money and the amount owed, including mortgages or ongoing professional fees) * life insurance policies (including second-to-die policies and business succession programs, as well as whole life and term policies; list the beneficiaries any loans taken from the policies) * business interest (list who your partner is or if the business is a sole proprietorship). Liabilities are: * taxes * accounts payable (bills, mortgages, loans, and margin accounts) * credit card balances. Next, think about your property. There are two types: probate and nonprobate. Probate property includes any asset passed on according to an individual's will; it is subject to probate costs, which vary by state but range from 1 percent of the estate's value to as much as 10 percent, and the supervision of the probate court. Nonprobate property is any property that passes outside of a will. Such property is not subject to the supervision of a court or probate fees. Examples of nonprobate property are: * assets owned jointly with a "right of survivorship" - i.e., property owned by a husband and wife that passes directly to the surviving joint owner. * assets held in trust, which pass to an heir in accordance with a trust agreement * life insurance proceeds, which are paid directly to beneficiaries * pension plans, including IRAs, which pass directly to named beneficiaries * annuities, which pass directly to all named beneficiaries. What about taxes? Like death, they're a certainty. But there are ways to reduce how much the estate will owe. * Gift giving allows you to transfer up to $10,000 each year to an unlimited number of individuals, family or not, free of gift taxes. For married couples, gifts of $20,000 can be made yearly to an individual without paying gift taxes. If you give away assets that are expected to increase in value, you remove all future appreciation of the property from your estate, reducing your estate's future tax liability. In death, as in life, gifts to qualified charities are also tax-deductible. * By giving assets that are expected to increase in value you remove all future appreciation of the property from your estate - and reduce your future estate-tax liability. * Gifts to qualified charities are tax-deductible to the estate. Whom do I call? Choosing someone to administer your estate can be complicated. Settling an estate often takes a year or more of wrestling with paperwork, tracking down assets, and filing tax returns. Though at first it may seem like a great honor, it's really a headache. Select someone who isn't daunted by the legal system and who has a good rapport with your attorney or another legal professional. If your estate is valued at $625,000 or more, you may want to enlist the aid of an accountant in filing the estate tax return. Should the estate contain stocks, bonds, mutual funds, or other investments, a financial adviser can help settle the estate. Then, when you've done as much preparation as you can by yourself, sit down with an estate-planning attorney and get the help you need. Properly preparing your estate can cost several hundred dollars in a simple case and several thousand dollars if your estate is large or your family situation or finances are complicated. But it's money well spent. Without good professional advice, all of your work and planning can be undone by a simple mistake. |
This page updated on 3/16/98