Despite the fact that women control a majority of the wealth in America, the estate planning process is often driven by their male partners (who often die first), or their children. Since most adult women can expect to spend a significant portion of their lives as single, divorced or widowed, women need to be involved early and often in their personal estate planning. That's especially the case for the high net worth woman, since neglect of the process can have significant negative tax consequences.
Suppose you have a potential estate tax problem (the federal estate tax threshold is $1.5 million and the New Jersey threshold is only $675,000), and you need to confront your estate planning. Where do you start? What are some important things to keep in mind? Here are some practical suggestions to guide you:
1. Get advice. Don't be shy about getting advice. Estate planning is best approached as a cooperative effort among you, your estate planning attorney, your accountant and your investment advisor. You may also need the services of a private banker and an insurance specialist.
2. Expect your advisors to listen to you. Your advisors should be patient and take the time to talk with you--not around you or over you. If you are married, be sure they engage both of you in the process. If you are divorced or widowed, you should expect them to show a real willingness to listen to you after your spouse is out of the picture. If they don't meet these expectations, then find new advisors.
3. Start early, and start with the basics. Estate planning is an evolutionary process. If you are just getting started, focus first on the basic documents--a will, power of attorney, and healthcare proxy. You owe that to your family to avoid the expense and heartbreak of guardianship, and the host of problems that arise with intestacy (dying without a will).
4. Don't feel stupid or let yourself be overwhelmed by the process. Estate planning documents are often hard to understand. Feel free to ask questions. Understand what you sign. Some planners start the planning process by proposing a complex array of recommendations. Don't expect to absorb and act on all of the recommendations at once. Stay with the process, but don't be afraid to pace yourself. If you're troubled by a particular recommendation, then don't follow it.
5. Write down your priorities. Prepare your own personal "mission statement". Consider putting some of your personal wishes and instructions into letters of guidance to your family, executor, trustee, or guardian. While these letters don't have the legal effect of a will or trust, they can, as a practical matter, be a very effective (and compelling) way to direct your family and your fiduciaries after you are gone.
6. Do a frank self-assessment of the legacy you are leaving. What you do with your money is a reflection of the kind of person you are. Remember, wills are a matter of public record, and even your private documents (trusts, etc.) are likely to become matters of public record if they are subject to legal dispute after your death. If those documents have a "negative spin" (e.g., disinheriting a child), they can backfire into lawsuits that cause more grief to those you want to benefit. Think very carefully before you incorporate these sorts of negatives into your estate plan.
7. Pick trustees you can trust, and then trust them. Have confidence in their judgment, and give them enough leeway in your documents so that they can freely exercise that judgment. But consider giving them some non-binding guidance in a separate letter (see item #5 above).
8. Don't put the people you love in positions that will lead to conflict among them after your death. Consider banks or trust companies as executors and trustees if you know that relationships between family members will suffer if certain of them are put into those positions. Be realistic in your expectations. For example, it may not be a good idea to name your second husband and the daughter of your first marriage as trustees of a lifetime trust for him, if the remaining trust assets pass to her at his death. Their personal interests are likely to collide with their duties to each other as trustees.
9. Talk to your family about your estate planning while you are alive. Don't surprise them at your death. For example, if you intend to disfavor certain people in your will for reasons that have nothing to do with your lack of love for them (e.g., because they are wealthy in their own right), explain this while you are alive.
10. Activate your plan while you are alive. If you can afford it, give gifts during your lifetime. That way you'll have the opportunity to counsel and educate your family in dealing with wealth. It will also give you a better sense of how people perform as trustees (and how they behave as beneficiaries!). If you have substantial assets, don't make the next generation endure your death before they can enjoy any of your wealth. And charitable gifts made during your lifetime not only reduce your estate, but they also reduce your income taxes.
11. Take care of yourself first. Do not feel that you should deprive yourself so that your able, adult children can have more after you're gone. Enjoy your wealth while you are alive.
Estate planning is not just about death, it's also about life, and it needs your lifetime attention. If you have good help, and you know your own objectives, the process will be easier for you, and the results will be better for those you love and want to benefit.
