YEAR END ESTATE & TAX PLANNING

     If you do not have a will or a trust it may be time to consider preparing one. As the end of the year approaches, it is time to start thinking about year-end planning strategies to make sure your estate is in order and to maximize tax savings.

     From an estate planning perspective, year-end is a good time or to review (or prepare) your current will and trust. Recent tax law changes have made many wills and trusts out of date. Also make sure your executor and trustee designations are still accurate.

     Determine if your lifetime directives are still current. There have been changes in the law affecting the validity and acceptability of Durable Powers of Attorney. Make sure you have an updated Living Will and Designation of Health Care Surrogate on file with family members and health care providers. Let your family know your desires as to funeral arrangements and anatomical gifts.

     Take inventory and list contents of safe deposit boxes. Remove wills and codicils, trust instruments, insurance policies on your life, burial instructions, cemetery plot deeds, and any property which does not belong to you to prevent the necessity of a court order to retrieve them upon your death.

     Review and update your life insurance policy and retirement plan beneficiaries and contingent designations. If you have a taxable estate, perhaps ownership of your life insurance should be transferred to a trust or to your heirs.

     Look at how your bank accounts are titled and who is named to receive funds at your death. Generally, naming heirs as "joint owners" is too risky for liability purposes. Instead, put these accounts in your trust or use a "Payable on Death" (POD) designation. POD designations do not solve estate tax problems, but the account will not be tied up in the probate process.

     If you are a business owner, you should review existing business buy-sell agreements, prepare agreements if there are none, and re-value the purchase price under those agreements that require periodic review. Buy-sell agreements are critical to preserve the value of a family business and provide liquidity at a time when family members are grieving and unable to make sound business judgments.

     Consider making annual exclusion gifts to your heirs. $11,000 annual gifts can reduce the value of an appreciating estate. If you pay family medical or educational expenses directly to the institution you can still make the $11,000 gifts.

     Not all year end tax planning is estate tax oriented, there are ways to save on income taxes, too. Basic year end income tax planning involves receiving income later and paying expenses earlier. Look at what your tax bracket will be this year and next year to determine whether to accelerate expenses and/or defer income. For instance, you may prepay deductible expenses, make an added mortgage payment or prepay your property tax, and you may bunch up your medical expenses so you will have enough to itemize deductions in a given year. Charitable contributions should be made before December 31 to receive a deduction that year. If you have passive income, up to $3,000 of those gains can be offset by passive losses.

     Year end planning can be a complex process. You should seek qualified, professional advice to make the best decisions about the control of your estate. Once designed, the plan should be reviewed annually to ensure it still achieves your objectives.

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