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Estate Planning: Distributions - US

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Jamie Phelps
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What is the Software’s Default Estate Distribution?

Without specifying an estate distribution, the software will make a few basic assumptions about the distribution of your estate. 
 
1. If you are married or in a civil partnership and provided you’ve included your spouse or partner in your plan, the software will pass the entire estate on first death to the surviving spouse or partner. 
 
2. If you have a partner in your plan but are not in a legally recognized civil partnership and your partner is included in your plan as what we call, for lack of a better term, a “non-legal partner”, the estate will pass on first death to the surviving partner and will be taxed accordingly. 
 
3. If you are single, having no spouse or partner, but have children or grandchildren who are entered in your plan, the estate will be divided evenly among the surviving family members and taxed accordingly. 
 
4. If you are single and your plan involves no other family members, the software will calculate estate taxes and pass your entire estate to the intentionally ambiguously named “persons outside plan”. 
 
5. For couples, on the death of the second person in the couple, assets are distributed evenly among any survivors (children, grandchildren, other relatives) entered in the plan. If there are no survivors in the plan, the entire estate will pass to “persons outside plan”. 
 
 

Setting Beneficiaries on Individual Assets and for Protection Policies

These are only the initial default distributions used by the software. Any beneficiaries designated for specific assets and protection policies will override the general estate distribution. If you specify beneficiaries for a term or whole life policy, for example, these distributions will be made accordingly, regardless of your plan’s overall estate distribution. 
 
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For example, the software may be set to assume that your surviving spouse would receive 100% of your estate, but if you were to designate a child as the sole beneficiary of your term life policy, the policy's benefit will be received by your child. 
 
Note – If you do not designate at least one beneficiary for a protection policy, the software will assume benefits from the policy are distributed to the estate of the insured. This would be the case even if the policy is written in trust. To ensure that benefits paid from trust to specific people or to charity, rather than into the estate, either specify who the beneficiaries will be, if they are included as people within the plan, or set the policy beneficiary to the intentionally vague “persons outside of plan”. 
 

 

Estate Plans - How to enter an alternative estate distribution

The Estate Plans screen allows you to specify overall estate distributions if they are to be handled differently from the software’s default assumptions. 

 

1. To add an estate distribution to your plan, go to the Dashboard screen in AdviserGo. 

 

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2. Click the plus (+) button bottom-right and select Estate Plans. 

 

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Or if you need to view or edit an estate plan which has already been entered, on the Dashboard screen in AdviserGo, expand the Estate Plans section of the dashboard and click the link to the estate plan. 

 

3. Owner - Select the person in the plan whose estate distribution you are entering. 

 

In a plan, individuals can have only one estate distribution per person. If a person already has an estate distribution entered in the plan, their name will be filtered from this list of owners. 

 

Estate plans can be entered for the primary client -- the first entered when setting up the plan -- and the primary client’s spouse or partner. 

 

4. Name - The software will give the estate distribution a default name – e.g. Julia’s Estate Plan. You may enter in this field an alternative name for the estate distribution, if necessary. 

 

The right side of the screen shows the projected value of the owner’s estate at time of death. This total is normally a projection of one’s assets minus debts and other liabilities at time of death. 

 

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Note - Life expectancy is set on the Timeline screen, by positioning the person’s Mortality event on the planning timeline. The default life expectancy is normally age 90 or 100, but this can be changed by moving the Mortality event up or down the timeline. 

 

Items that reside outside of your estate are excluded from this number since this is an estate distribution. Insurance policies and other items that have specific beneficiaries, will also be excluded from this total even if they are set to pay into the estate.  

 

This estate allocation section of the screen is designed to give you a general idea of the future size of the estate and the amounts that could be distributed to the inheritors as specified in the estate plan. 

 

The amounts shown are gross of any potential  tax. This is not an actual estate tax calculation. 

 

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From this screen you can enter you preferred distribution strategy. In this example Chelsea has directed us to plan to distribute 50% of her estate to her current spouse. 100% of the remaining estate will then be distributed 50/50 between her daughter Isabella and an individual outside of the estate. See the entries below for how this would be entered. 

 

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The Estate Breakdown is then updated to the following. 

 

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Alternatively you can also plan to distribute the estate by asset type. 

 

Estate Distribution By Asset

 

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From here you will select each asset and assign a distribution %. Note that each distribution must equal 100%.

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Once you have completed your Estate Plan click "Done" in the top right corner. This will take you back to the Dashboard where your Estate Plan will be saved and accessible for future edits. 

 

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You can also test the Estate Plan by running a simulation in the Legacy Screen.

 

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Use the drop down bar to run the "if (client name) dies today" simulation and it will show the breakdown of the Estate Distribution. 

 

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Click here for more information on Distribution by Asset Type

 

 

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