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Posted: February 25, 2009

With a good estate plan, everyone is a beneficiary

A guide to allocating your assets and ensuring your legacy

John Lester

There’s no drama like family drama, especially when it comes to money. Unclear instructions or requests, especially upon a loved one’s death, can lead to emotional upheaval. To save your heirs additional heartache after you’re gone, and to keep your interests alive, a thoughtful estate plan is a valuable gift.

Estate planning begins with a close examination of what matters most to you and what matters most for the next generation. This will help you decide who will receive which assets, where your money will go and how it will get there.

Many of America’s wealthiest have made it clear that they don’t expect their heirs to live idle lives, and they’re dividing their estates accordingly. But you don’t have to be wealthy to have an estate plan. 

An estate plan provides clear instructions for the division of all your assets —including property, automobiles, jewelry, bank accounts and investments. A good estate plan also takes into consideration how you’d like to have your legacy carried on.

In order to provide for your heirs, while ensuring that your values and wishes are honored, here are some wealth transfer strategies you may want to consider.

Trusts are written to help families pass along values as well as assets. Establishing an irrevocable trust can help encourage your heirs to pursue certain activities, such as getting an advanced degree or having a unique experience like living abroad.  Trusts may also benefit a worthwhile cause, such as a charity or arts organization.  Trusts combine investment and possible tax-saving opportunities with the ability to provide for a loved-one’s well being.

Trusts generally allow you to transfer ownership of assets to a trustee who will manage them for the beneficiary or beneficiaries. Trustees hold many responsibilities, including accurate accounting, tax filings, executing and recording transaction in the trust and making payments from the trust. It is important to have a trustee you can depend on to keep your interests at heart.

Grantors can specify certain dollar amounts to be distributed to beneficiaries during a given period, while giving the trustee leeway to provide for specific needs like medical expenses, education or a home. Some grantors also may authorize distributions to pay for things like a wedding or business investments.

Charitable split-interest trusts
Charitable remainder trusts and charitable lead trusts may suit your philanthropic estate planning desires. Consult your attorney or tax advisor to help determine which approach is right for you.

With a charitable remainder trust (CRT) the grantor conveys assets to the trusts, which are generally sold.  The proceeds of the sale are reinvested in a diversified portfolio with the grantor receiving a certain payment from the trust each year. The designated charity receives the assets of the trust upon the grantor’s death or at the end of the prescribed term (not in excess of 20 years). 

Upon funding a CRT, the grantor receives a charitable deduction for the present value of the remainder interest ultimately passed on to charity, subject to certain limitations. CRTs are tax-exempt, although grantor distributions are subject to current and accumulated income and gains. As such, a CRT may permit tax-deferred diversification of appreciated assets contributed by the grantor’s chosen charity.

A charitable lead trust allows the charity to receive distributions from the trust for a specified time period, while remaining assets pass onto beneficiaries at the conclusion of that period. Beneficiaries thus receive a delayed gift and the chosen charity benefits in the meantime.

Marital Trusts
The most direct way to obtain a martial deduction of for the donor to simply bequeath property directly to his or her spouse, making the spouse the owner when an individual passes on. However, you may wish to place restrictions on the bequest or influence how assets are distributed. In such cases, Qualified Terminable Interest Property (QTIP) trusts may be used. Your tax or legal advisor can assist you in deciding on the best approach for using the marital deduction or QTIP trusts.

A well established estate plan can benefit not only your heirs but also your legacy.  It can be a testament to your life and memory. With the right plan in place, you can ensure that you pass along more than just your wealth, and that those you leave behind are well taken care of, just as you’d want them to be.

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John Lester is the Colorado market area manager for UBS Wealth Management. This article has been written and provided by UBS Financial Services Inc. As a firm providing wealth management services to clients in the U.S., we offer both investment advisory programs and brokerage services. Advisory services and brokerage services are separate and distinct, differ in material ways, and are governed by different laws and separate contracts. For more information, please visit our website at

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