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The Essential Estate Planning Questionnaire and Checklist Provides Simple Questions in Preparing for Retirement

Last update on: Aug 06 2020
Estate Planning

Estate Planning is not all about reducing estate taxes.

That always was the case, but few people realized the importance of the non-tax factors until the 2001 tax law began the phase out of the estate tax. Every estate plan, regardless of the estate’s size, needs to address certain issues.

Ignore these issues, and your heirs will be worse off than they need to be. Tax issues, if there are any, should be considered only after the following issues are confronted.


Estate Planning Questions for Retirement: What Is the Estate?

Estate planning is getting assets to one’s objects of affection in the most efficient and lowest cost-way possible, and in the most appropriate ownership form. The first step is to develop a complete, clear description of your assets and liabilities. The estate also cannot be administered efficiently unless the executor or administrator knows what is in the estate. Frequently, it costs too much and takes too much time to administer an estate because the estate planning process failed to provide the administrator with details about the estate.

Prepare a statement of your assets and liabilities. List all your assets, including intangible assets, such as trusts of which you are a beneficiary, life insurance, investments, retirement accounts, real estate, business interests and valuable items such as jewelry and cars. Describe the property clearly, estimate its value, and state where your records on it are kept. Update the list at least annually. Be sure your estate planning administrator knows where to find the list.


Estate Planning Questions for Retirement: Who Is in Charge? 

An estate needs an administrator, personal representative, or executor. The name depends on the state, but the job essentially is the same. This person is legally responsible for getting the estate through the Probate process, paying debts, selling assets as needed and distributing the property as directed by the will.

Traditionally, the estate planning lawyer is named the executor. But in most states that entitles the executor to a percentage of the estate, regardless of the amount of work involved. To keep costs low, the best choice often is a responsible family member or friend of the family who will waive any fee or work for a reasonable fee. An attorney can be hired by the hour to handle the difficult or technical work. This is an important appointment and should be carefully considered.


Estate Planning Questions for Retirement: Who Should Share in the Estate?

Usually it is an easy choice to give the bulk of the estate to the surviving spouse and then to the children and perhaps grandchildren. But that isn’t always the case.

Sometimes serious thought is given to leaving a child out of the estate. Many families have a child whose behavior concerns the others. In most states a child can be disinherited completely. First, consider two other options. One option is to leave the property in a trust. Another family member or friend can distribute income and principal according to the trust guidelines. Another option is to leave the individual less than a full share of the estate. Provide in the will that this individual loses even that amount if he or she challenges the will and loses. The trick is to find an amount the individual won’t want to risk losing.

Blended families also present dilemmas. One example: Should stepchildren be included in your will, or are they already provided for by their biological parents?

Some people consider putting special friends or charities in the will. In that case, it is key to let other natural heirs know about the choice. They should not be surprised by the will, so they will not misunderstand the reasons for your actions.


Estate Planning Questions for Retirement: Should Shares Be Equal?

It is natural to leave children equal shares of the estate. Some parents want to leave less to children who have had more financial success than other children on the theory that they do not need the money. Unfortunately, if this intention is not clearly explained ahead of time, they often view it as being punished for success or an indication that the parents had more affection for the others. An option is to equally split about 80% of the estate and put the rest in a reserve trust. Let the trustee distribute that money according to needs or other standards you set. Another issue is whether higher lifetime gifts or other help for one offspring should be offset by the inheritance.

Leaving equal shares can be difficult when a family business is involved. There often are conflicts between the children who are running the business and those who aren’t. One solution is to provide life insurance benefits for those children not running the business or that enables those in the business to buy out the others. Another option is to give the children not in the business equal shares of equity and income but no voting interest.


Estate Planning Questions for Retirement: How Much to Give Now?

The old estate tax put a premium on using lifetime gifts to reduce an estate. Now, fewer estates need lifetime gifts to keep the estate tax bill low.

Lifetime gifts still can be valuable. Loved ones won’t have to wait to use your wealth to improve their lives, and you get to see the results. Some people use lifetime gifts to see how loved ones will use the money. This can help determine if the estate will be given outright or in a trust.

The traditional approach is to leave the bulk of the estate to your spouse with the children inheriting later. But the children might have needs in the meantime, such as wedding expenses or the down payment on a home. You might want to provide the children cash for such expenses if that can be done without depriving your spouse.

Lifetime gifts take many forms other than straight gifts of cash or property. You can pay tuition bills, contribute the down payment on a home, help start a business, or pay medical expenses. A popular gift is to pay for all or part of a family vacation.

When making lifetime gifts, be sure to retain enough to maintain your standard of living, including possible emergencies. You need to assume that at least one spouse will live well into his or her 90s.


Estate Planning Questions for Retirement: Should There Be Controls or Incentives?

When an heir is too young or otherwise unable to handle wealth responsibly, it is appropriate to give the property through a trust or with other restrictions. You need to decide which gifts and bequests should be made in this way, what the restrictions should be and when, if ever, they should be lifted. If some heirs will receive unrestricted bequests while others do not, you should explain this in advance.

In the last couple of decades, incentive giving became more popular. Generally, property is left in trust and doled out to heirs as they meet certain goals. Distributions might occur upon graduating from college or staying employed for a minimum time. Some people believe incentive trusts resolve the dilemma of how to give while ensuring children become responsible citizens.

Others, however, believe incentive trusts are too controlling or inflexible. If you use this tool, be sure the effect is not to channel children into activities they don’t really like or that are unsuitable for them. In addition, be aware that at some point the children likely will resent and feel stifled by the restrictions. An incentive trust should not be set up to last forever.


Estate Planning Questions for Retirement: What About Special Assets?

You might have a collection, personal mementoes, or other assets that mean a lot to you but not as much to your loved ones. Or the loved ones might not have the time or expertise to continue caring for the property or even to ensure receiving maximum value from selling the asset.

Give careful thought to such assets. Some people find it best to sell the asset themselves. Others line up a charity or someone else who eventually will buy or receive the asset.

Personal mementoes and effects, even when they have no real financial value, often cause the worst estate disputes. Be sure your estate plan establishes how such assets will be distributed among your heirs.


Estate Planning Questions for Retirement: Is It Good Enough?

Some people never finish a will or their estate planning, because they do not find the perfect answers to these questions. It is better to complete an estate plan in stages than to not have anything in place while you wait for the ideal solution.


Estate Planning Questions for Retirement: Withdrawal Rate.

One of the main factors in the longevity of a person’s retirement portfolio is his or her withdrawal rate. Having an accurate assessment of what your expenses are going to be in retirement is essential because it is going to impact how much you withdraw each year and how you invest your account. If you understate your costs, you easily outlive your portfolio. However, if you overstate your expenses, you can risk not living the type of lifestyle you could have in retirement.

Estate Planning Questions for Retirement: Roth assets.

Converting traditional retirement plan assets to a Roth Individual Retirement Account (IRA) are an appealing estate planning tool for many reasons:

  • Roth IRAs are not subject to required minimum distributions (RMDs), so they can keep growing until you pass them on to your heirs.
  • Your heirs will have to take RMDs, but they’ll be based on the heirs’ life expectancy and will be tax-free.
  • The taxes a person pays when he or she converts a traditional IRA to a Roth IRA are removed from the estate’s value (along with any future earnings they may have had on the tax money if it had stayed part of the estate), potentially decreasing future estate taxes.
  • Withdrawals from a Roth IRA won’t be included in a person’s modified adjusted gross income. They won’t count toward the thresholds for stealth taxes such as the tax on Social Security benefits, the Medicare premium surtax, and the 3.8% net investment income tax.
  • The amount converted will be included in your gross income for the year. That might push you into a higher tax bracket for the year.

Estate Planning Questions for Retirement:

The Bottom Line. This estate planning questionnaire provide guidelines for ensuring your estate plan is complete and meets your goals. You’ll be taken care of for the rest of your years, and your loved ones will receive the legacy you want them to have.



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