Black MBA - Summer 2008 - (Page 57)

should happen. If you are charitably inclined, creating a private family foundation may be a way to continue a family legacy, provide needed resources to the community and also keep your family involved in these decisions. An added bonus of effective estate planning is the ability to take advantage of the tax benefits that the IRS has provided to minimize any tax that may be imposed on your estate. WHY IS AN ESTATE PLAN NECESSARY? Dying without an estate plan will create unanticipated turmoil for your loved ones. Consider these facts: The majority of Americans (58 percent) lack a standard will. In legal language, this is called “dying intestate.” If a person dies without a will, his or her assets will go through a probate process that is referred to as “administration.” In this case, the assets will be distributed based on the specific state statutes that govern intestacy. For example, some states say that if a person dies without a will (after creditors and funeral expenses have been paid), if there is a surviving spouse, one half of his or her assets will pass to the surviving spouse and the other half will pass to any surviving children. If the children are minors, a guardian may be appointed to manage the assets, and all distributions will be under the supervision of the probate court. The result is that one half of the assets are distributed to the surviving children, leaving the surviving spouse without sufficient assets to provide for his or her own care and lifestyle. Under the majority of state intestacy laws, if there is no surviving spouse, 100 percent of the assets go to the children. This may be contrary to what was intended. The only way to avoid this result is to create a valid will. It is a common misconception that if assets are titled in joint tenancy, there is no need for a will or complicated estate planning. Remember, when you re-title assets in your name and the name of another person who is not your spouse, you may be in effect making a taxable gift to this person. This may result in very poor income and estate tax consequences. Plus, adding another person’s name to your assets may subject your property to the other person’s creditors. Obviously, this is not what you want. Sixty-nine percent of Americans have no living will or medical directive. Consider the very high-profi le Terri Schiavo case. This case involved a woman who suffered brain damage and was in a persistent vegetative state for 15 years before a court determined (after seven years of legal proceedings) that her feeding tube would be removed. If Terri had executed a living will or medical directive, she could have made her wishes known regarding whether or not life-prolonging measures should be used to sustain her life. Only 27 percent of Americans have created healthcare powers of attorney (POA) and only 26 percent have created property or fi nancial POA. The creation of POA for property and health care will make sure that if you are not able to make decisions for yourself, the POA will designate someone to act on your behalf and make decisions about your property or health care. Without these documents in place, if you were to become disabled and were no longer able to handle your fi nancial affairs, the court – not you or your family – would appoint a conservator to manage your assets. In some cases, if there is no qualified family member, a court-appointed guardian of the person may be appointed to make health care decisions. As with any court action, there would be a public record of these proceedings, and your assets would be used to pay legal fees, conservator fees and court costs. Only about one in five (21 percent) Americans has created a trust as part of an estate plan. Although a will is the most common vehicle used to create an estate plan, it is only the fi rst step in the process to make sure that your assets are distributed according to your wishes. While a will does provide specific directives regarding how and to whom you want to leave your assets, it does nothing to take advantage of the tax benefits that are available to lower your estate tax. Also, it does not escape the often The objective of estate planning – no matter the size of your estate – is to ensure that your assets are managed in a way that will allow you to achieve your long-term financial and personal goals. BlackMBA • Summer 2008 57

Table of Contents Feed for the Digital Edition of Black MBA - Summer 2008

Black MBA- Summer 2008 Contents Mailbag Up Front From the President & CEO Politics of Change Catalyst for Change: Results of our 2008 Political Poll Know Whose Shoulders You Stand On: The Legacy of H. Naylor Fitzhugh Howard University: Changing With the Times Straight Talk: CEO to CEO Creating Your Own Sandbox Dual Threats Avoiding the Faux Pa Invest in Your MBA Everything You Need to Know About...Estate Planning On Campus Plan Ahead The Big Show What's in a Name? On the Move Market Forecast Jeff Friday Keith Wyche Life Lessons On the Ground Real Biz A Golden Opportunity Entrepreneurial Institute Tech Tools Read for Success Stacey Tisdale Advertiser Index

Black MBA - Summer 2008

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.