Estate planning for everyone

How do you want to make your lasting mark?

When you think of your future, what do you want your legacy to be? Leaving a legacy isn't always about money — it may also take into account the values or lessons you've learned and what you want to pass on to others.

Of course, a large part of estate planning is making sure that all of your assets — your money, property, insurance proceeds and personal belongings — go to the individuals and organizations that are most important to you.

Think about what purpose you want your financial legacy to serve. Financial security for your family and loved ones? Donations to a charity? Support for your community?

Without a proper will, your assets will be distributed according to the laws in your state of residence, which may not reflect your wishes. To ensure your wishes are carried out as you intend and to efficiently transfer your estate, you need a customized plan.

Step 1 - Determine what matters most to you.

What kind of legacy do you dream of creating? What is most important to you?

Here are some considerations:

• Providing financial protection for your family and loved ones
• Supporting higher education
• Supporting your place of worship
• Making your community a better place
• Protecting the environment

If these or similar values are important to you, your estate plan will ensure that your inheritance is handled according to your requests.

Step 2 - Assess your current situation.

Use the following formula to take a snapshot of where you are today:

Everything you own
- Everything you owe
---------------------------------------
= Your financial legacy

Everything you own: cash, real estate, personal property, business assets, investments, retirement plans, life insurance death benefits and anything else you have interests in.

Everything you owe: mortgages, credit card deb, loans, other debts and taxes.

Your financial legacy: what you expect to leave to family, friends, charitable causes and others.

Will your current plan accomplish these goals?

Step 3 - Determine your plan to distribute your assets.

Determining both who will receive assets and how they will be transferred are critical to help ensure your intentions are realized. Work with a financial advisor, tax advisor and estate-planning attorney to determine which of the following estate-planning tools are right for you.

Will

A will directs where your estate assets will go. Your will can:

• Name specific individuals or institutions to receive your assets or cash
• Name an executor who will be responsible for carrying out your wishes
• Appoint a guardian for your minor children or disabled family members

Power of Attorney

Granting someone durable power of attorney gives him or her written authorization to make decisions on your behalf if you become incapacitated. For example, an individual with power of attorney can pay your bills and keep your business running while you are unable.

Trusts

A trust ensures control of where your money goes by giving power to a trustee who must follow your wishes. Examples of types of trusts include those that benefit your spouse, children (including individuals with special needs) and charities or trusts that reduce estate taxes.

Lifetime gifting

Gifts given during your lifetime allow you to enjoy seeing your beneficiaries use your assets. In addition, any gifts you make reduce the value of your estate, potentially lowering estate and inheritance taxes.

Keep in mind that in 2009 there is a:

• Federal estate tax on assets over $3.5 million at your death, except for assets given to a spouse or charity
• Federal gift tax on annual gifts of more than $13,000 per year given to any one beneficiary while you are living
• Federal gift tax on other gifts above $1 million during your lifetime (with certain exceptions such as gifts to a spouse or charity)

Ownership and beneficiary designations

Ownership and beneficiary designations generally supersede the provisions in your will or trust. A financial advisor can help you establish or update your beneficiaries through a beneficiary review. Make it a habit to review and, if necessary, update your financial papers, including your beneficiary designations, every time you experience a major life event such as a marriage, divorce, family death or birth of a child or grandchild.

Selling assets during your lifetime

Selling assets to family members or others keeps the future growth of those assets out of your estate. The transfer may also go more smoothly and efficiently during your lifetime while you are present to assist.

For example, one way to transfer a business is by an installment sale over time, which the family member can pay out with future profits of the company. In this way, the capital gain taxes created by the sale can be spread out over time. Because the property is sold in a bona fide sale for what is called "full and adequate consideration" rather than gifted or left in your estate, you avoid gift, estate and inheritance taxes on this property.

Life insurance

To pay off everything you owe at your death, list in your will which assets your executor should use. If you don't have enough of these assets, you may consider purchasing a life insurance policy for the difference.

Insurance can also be used to balance or strengthen your estate. For example, if your assets consist mainly of a sizable business you want to give to one child, you may want to balance your estate by purchasing life insurance to benefit the other children. Or if you want to fund a trust for a special-needs child, you could strengthen your estate by purchasing additional life insurance. You'll need to consider how the life insurance proceeds could affect any estate tax liability.

Step 4 - Make your estate-planning goals a reality.

An Ameriprise financial advisor can coordinate your financial planning activities with a team of professionals. This offers you a tailored, holistic approach to help you achieve your financial planning goals, in addition to your estate-planning goals.

How a team of professionals can help

Financial advisor:

• Helps you choose appropriate investments and insurance to grow and protect your estate assets
• Reviews your investments and insurance policies, including your retirement plan assets and employee benefits
• Reviews your ownership and beneficiary designations
• Assists the trustee in appropriately funding the trust(s)

Tax advisor:

• Tells you the effect of estate, gift, inheritance and income taxes on your estate assets
• Evaluates the estate, gift and income tax consequences of the estate plan you are considering

Attorney:

• Drafts the will and/or trust(s) and gives you related legal advice
• Assists you with determining the appropriate kind of will and trust documents, as well as the best gifting and transfer strategies for you