When constructing an estate plan in New Jersey, it is important not to lose sight of the trees through the forest. Does this sound backward? The reason is that most people focus on big picture issues when estate planning, such as determining what to leave to each beneficiary, or whether to use a will or trust as the foundation of an estate plan.
While these big picture issues are very important, there are lots of smaller issues that impact estate planning decisions that often are neglected. We have provided an overview
of some of the details that can have a significant impact on the effectiveness of an estate plan.
Liquidity of Assets:
Many estates are primarily comprised of assets that are not cash. The estate is asset rich but cash poor. An estate might need to cover the expenses of a surviving spouse or children while the estate is administered after a breadwinner’s death. There also are operating costs associated with managing the estate that must be covered. When setting up an estate plan, experienced New Jersey estate planning attorneys can estimate these cash needs and assist you in determining the source of the funds. When an estate plan does not devote enough attention to cash flow issues, fiduciaries might need to conduct a “fire sale” of assets to cover these costs and other payments. This approach reduced the value of the estate because assets must be sold at less than market value.
Contents of the Estate:
While it may seem self-evident that the fiduciaries that manage your estate need to know what property makes up the estate, sometimes people fail to leave a journal or inventory of their assets. When fiduciaries do not have access to such an inventory, the process of determining exactly what assets comprise the estate can require extensive document review. This attempt to build an inventory of the estate assets might diminish the estate because of the expense associated with locating and identifying assets. The risk also exists that certain assets will be overlooked.
List of Creditors:
Before the estate can be settled and your assets are distributed to your beneficiaries, creditor claims must be satisfied. If you do not make a list of creditors available in electronic or hardcopy form for the person handling your estate administration, the estate might face creditor claims that your beneficiaries have no way to confirm or deny.
Updated Beneficiary Designations:
While your trust or will address many aspects of your estate succession planning, some assets will be transferred based on their beneficiary designation. These types of assets may include individual retirement accounts, annuities, employee retirement plans, and life insurance. Effective estate planning requires ensuring that the beneficiary designations for these assets are accurate and current.
We are one of the most experienced and accomplished estate planning law firms in New Jersey with more than 30 years of experience. If you have estate planning questions, we invite you to call us now at (201) 690-1642 to set up a consultation with a knowledgeable and experienced attorney in New Jersey or New York City.