Where there's a will.

Having a comprehensive estate plan is not just for the rich. Plan now to make your loved ones' lives easier after you're gone.

FOR CICILY O'BRYANT, IT WAS THE DEATH OF her husband. For Eugene Parker, it was having to handle the burials of his mother and his grandmother. For Kevin Smith, it was a fatal accident that struck down a young colleague that reinforced the importance of planning. In each case, a firsthand look at how cruel fate can be to the unprepared convinced each to make things easier for his or her own loved ones by developing a comprehensive estate plan.

"It's a touchy subject," says Parker, 42, a Fort Wayne, Indiana, attorney who devotes most of his professional efforts to handling the business affairs of athletes such as Deion Sanders and Emmitt Smith. "A lot of people don't prepare their affairs as well as they should. They're thinking in terms of their own death, but the real question is what their family will do. The more you do now, the less stress your survivors will have to face."

Indeed, nobody lives forever. And no matter how much we want to deny it, we'll all put in a final appearance one day. At that point, your survivors--the people who loved you--will have to make some critical decisions. Should you be buried or cremated? Should your vital organs be left to science? Should you have a quiet family memorial service or a funeral ceremony open to the community? In each case, tough decisions have to be made quickly, and in a way that won't cause hard feelings among the living.

Financial matters must be addressed as well. All the assets you have at your death, from your bank balance to your antique quilts, have to be parceled out to friends and family--hopefully according to your wishes. Titles to your stocks, real estate and cars have to be passed on. And, as you no doubt can imagine, the process can be incredibly unsettling to those you leave behind and unfair to those least able to fend for themselves, so it's best to do the groundwork while you're still breathing.

In other words, you should put together a complete estate plan to reduce the tensions that inevitably will appear after your death. Put your plan in writing and name a trusted friend or relative to carry it out.

What should go into your estate plan? Here's a checklist:

[check] A WILL. If you don't draw up a will, you run the risk that the government will decide just how your worldly assets are distributed--in other words, who gets what. "When you draw UP a will, you're in control," says Parker.

Having the government decide is not always bad. In some states, half of all your assets go to your children if you die without a will. But minors may become wards of the state, and your surviving spouse may have to account to a court for every penny spent on the children's behalf.

"I kept putting off making a will because I found it very difficult to face reality," says Kevin Smith, M.D., 38, a surgeon in Houston who's married and has two young daughters. Smith did, finally, draw up a will with the help of certified financial planner and attorney Cheryl Creuzot. Creuzot runs her own firm, Financial Strategies Group, based in Houston, a marketing affiliate of the larger AFP (Associates in Financial Planning) Group. "A lot of people think you need to be wealthy to have a will, but that's not true," she says. "Anyone who has assets and concerns about the disposition of those assets should have a will." What's more, Creuzot advises, it's best to have your will prepared by an attorney who specializes in estate planning. Do-it-yourself enthusiasts, unfortunately, aren't around to see their relatives beset by problems or haggling over the details.

[check] AN EXECUTOR. In your will you'll name an executor (sometimes known as an administrator or personal representative). After your death, prior to distributing your assets, he or she will have to take inventory of your assets, protect them against loss, pursue outstanding claims, pay bills, file tax returns and pay taxes.

An executor's job is not to be taken lightly, nor is your task of choosing one. For one, your executor will be responsible for protecting your heirs and making sure they receive their due. In addition, he or she can be liable to the IRS and/or beneficiaries if the administration isn't handled properly.

While naming your spouse to serve as executor may be your first instinct, Orlando J. Antonini, a financial planner with the San Francisco CPA firm of John R. Antonini, recommends that you fight the urge. After your death, he says, "He or she probably will be too distraught to act effectively." Antonini also recommends that you skip having a corporate entity, such as a bank trust department, take on the role. "There's no guarantee you'll have the same people working for you over time," he points out, "and, besides, the people there keep banker's hours."

Your best bet? Try grown children. If that's not practical, you can name a professional advisor, such as an accountant or an attorney, to serve. And remember, fees for professional services come directly out of your estate, so it's probably best to set up a fee schedule in advance.

Whomever you choose to serve as executor, make sure you get his or her consent to serve before placing them in your will. Also consider naming a backup executor, in case whomever you originally chose can't serve.

The next step is only logical: Go over everything with your executor. "Your executor should know what your assets are, how the title is held and where the paperwork can be found," says Antonini. "Your executor should see your will, or at least know what's in it, so there will be no surprises. If your executor isn't a family member, he or she should meet your heirs to get an idea of the personalities involved." Because your executor will be responsible for filing tax returns after your death, schedule a meeting to get both your tax preparer and executor together. That, experts say, will help things go more smoothly.

[check] "GUARDIANS. If you have minor children, you should name guardians in your will, in case both you and your spouse die in a common disaster. Again, you should get the guardians' permission before naming them. "I know of a couple who died together," says Creuzot. "They had named their children's aunt as a guardian but not told her. It worked out all right, but it would have been better if she had been prepared."

Married couples may argue over who'll be named guardian--someone on my side of the family or someone on yours. "I've been working with one couple for nearly a year," says Femi Shote, a certified financial planner with the New England Financial Group in Waltham, Massachusetts. "The issue of choosing a guardian has been holding up everything. If they don't reach some compromise, the entire plan may never be executed."

[check] A LETTER OF INSTRUCTION, You probably won't change your will every time you buy a new car or sell mutual fund shares. Therefore, you may want to leave a letter of instruction in addition to your will. The letter should spell out, in some detail, exactly what your assets are and how you'd like them distributed. Remember, it's not a legally binding document, but it will go a long way in helping your executor locate just what you owned before deciding how to distribute your possessions.

"The death of a loved one is a very emotional time for the survivors," says Parker. "People may argue over who gets that plate or who gets that picture. The more you do while you're alive, spelling out your wishes, the easier it will be for your loved ones." Suppose, for example, you have some valuable watches you want to leave to your nephew or some jewelry you want a cousin to have. That type of bequest can be handled in a letter of instruction to the executor.

Although your bequests should be discussed in detail with everyone concerned while you're alive, there may be some things you'd rather not discuss during your lifetime. In that case, you might want to make a video recording, with a final message to your heirs as well as any instructions you care to provide. "I recommend that everyone have a `death drawer,'" says Antonini, "known to all the family members. In that drawer you can leave a video and a letter of instruction spelling out your wishes for your property." Even if you explain everything carefully to your heirs, it can't hurt to go over it all again, on tape and in writing, so everyone knows exactly what you had in mind.

[check] LIFE INSURANCE. If your income will be missed after your untimely death, you need some insurance. That's a fact that's all the more important if your children are minors. Here, the trick is to buy just enough coverage to cover your earning power, but not so much more that you're wasting money that could go toward important items--such as your kids' tuition while you're alive.

"Don't go by rules of thumb, such as `buy six times your income in life insurance,'" advises John Sestina, a certified financial planner in Dublin, Ohio. "Instead, you should work through a careful analysis with a professional advisor. Determine what your family's income needs will be, what sources of income will be available and how much life insurance will be necessary to provide the income that will be lacking."

Once your insurance needs are set, you can decide what type of life insurance to buy. One option is "term" insurance, which is relatively inexpensive. It covers your needs over a set amount of time, but accrues no value over time. Your other choice, "cash value" or "permanent" insurance, provides a cash value account in addition to pure insurance.

"I decided against term insurance," recalls Dr. Smith. "After the term is over, you have nothing to show for it. My policy has an investment account that enables my money to grow in mutual funds within the policy. I'll be building wealth while I protect my family."

"Many young professionals prefer cash value policies, especially variable life insurance," says Creuzot. "They like to invest through insurance policies because they're creditor-proof in some states, including Texas. The money builds up, without being taxed, and there are techniques to gain access to some of that money tax-free."

You need liquid assets to pay estate taxes. The cheapest way to pay estate taxes is through life insurance. Then again, there are many financial planners who feel that it's best to devote a minimal amount toward term insurance, and then invest whatever you save on variable life insurance to keep your money working. Ask your financial planner to spell out the details. (See "Buying Life Insurance," October 1997.)

[check] FUNERAL AND BURIAL ARRANGEMENTS. Does it make sense to pay for your funeral in advance? The main advantage of prepaying for funeral and burial arrangements is peace of mind, says Seattle financial planner Mark Spangler. Your survivors won't have to fuss over arrangements during a time of stress. That's especially true if your loved ones live far away from you and travel delays might complicate matters.

"Most funeral homes offer plans," says Spangler. "You should ask among your friends and acquaintances for the names of reputable funeral homes, then request a few brochures." And remember: buy the services you really want. Don't let yourself get pressured into paying for unnecessary rituals.

Also consult with your attorney before making any commitment to a funeral home. That way you'll be sure to describe any arrangements you make in the letter of instruction that accompanies your will. Otherwise, your executor may pay a second time for your funeral arrangements or a burial plot, unaware that you've already made arrangements.

Make sure your executor has all the details and that any deeds or contracts are in an accessible place. Don't put your funeral and burial wishes in your will if the will is kept in a safe-deposit box. That box may not be opened until after the funeral--too late for your burial instructions to be followed.

Technically, funeral arrangements are the responsibility of family members rather than your executor. However, there may be some confusion as to which family members should make the decisions. Because the executor eventually will pay the bills (out of your estate), it's probably better to entrust that person with the necessary documents.

[check] REVOCABLE TRUSTS. Although some people think of trusts as being arrangements for the super-rich alone, the truth is much different these days. Trusts are available and invaluable to people of moderate or even modest means.

Start with a definition: A trust is an entity created to hold and manage property or some other goods for the benefit of someone or some group of people. And under certain laws the property or goods held in a trust are often shielded in part from taxes.

A revocable trust, as the name suggests, is one that can be canceled by the creator. When you create a revocable trust, you usually will want to act as trustee to retain control of the trust assets. A co-trustee should be named, or a successor trustee can be designated, to step in if you are certified incompetent by more than one doctor. The backup trustee might be your spouse, a grown child, even a bank trust department; if it becomes necessary, the co-trustee or successor trustee can take over management of the trust assets. Moreover, assets that you have transferred into a trust are immediately available to your heirs, saving them the time and expense of going through probate court to sort through your affairs after you die.

[check] IRREVOCABLE TRUSTS. These trusts are more permanent, often designed to survive after your death. "I have created an insurance and testamentary trust in my will," says Parker. "After my death, my life insurance proceeds will go into the trust, to provide income to my wife and our five children. For certain purposes, the principal can be used as well. I want my children to have what they need but I think it would be harmful if they received too much, too soon."

Cicily O'Bryant, 65, also has five children, all grown now. "One of my children has had some health problems," says O'Bryant, who works for an educational program near her home in Mattapan, Massachusetts. "I think that he'll always need some extra income, help with housing and so on. Therefore, I have set up a trust that will go into effect at my death. The money in the trust will provide for him."

Keep in mind that the trust's trustee, the person or institution that will manage the trust assets, is a key person indeed. "Selecting the right trustee can be extremely difficult," says Shote. "You need someone who'll be responsible in handling trust assets, yet you also want someone who'll be sympathetic to the needs of the beneficiaries. At the same time, if you name one family member as trustee, you want to be sure that you don't offend the others who weren't named."

Who makes a good choice? "It's hard to generalize," says Shote. "In my own case, I named a professional advisor and a colleague at work to serve as co-trustees. That way, I know that they have to agree on any decisions, which gives me some additional comfort."

[check] A POWER OF ATTORNEY. Your estate plan should include measures to protect you and your assets if you can no longer manage your own affairs. Such "incapacity planning" usually begins with a "durable" power of attorney, a document that names an agent, someone who can take charge by signing checks, paying bills and making other financial decisions on your behalf. (The durable power of attorney can name more than one agent, stating whether they may act singly or if they must act in concert.) Virtually every state recognizes a durable power of attorney, which remains in effect if you, the principal, become unable to supervise matters.

As a safeguard, you might consider having your document declare that the power will go into effect only if you're judged incompetent by more than one doctor, including your personal physician. Such contingent powers are called "springing" powers, also accepted in most states.

[check] COORDINATE YOUR ASSETS, You may have the best estate plan money can buy, yet not have your property distributed to whom you want in the most tax-efficient manner. Most people believe that a will controls the ultimate distribution of all their assets. According to Cheryl Creuzot, nothing could be further from the truth. How property is titled can result in its distribution outside of what the will directs.

For example, many stock brokerage accounts are titled as joint tenants with rights of survivorship (JTWROS). This titling results in the immediate transfer of the account upon death directly to the surviving joint owner. Similarly, many assets are distributed in accordance with beneficiary designations. For example, life insurance, retirement plans and annuities are distributed directly to the named beneficiary. In many instances, there is a lack of coordination between the titling of assets and beneficiary designations, and the plan outlined in the will. This can result in the will having insufficient assets to take advantage of tax-saving strategies that it was designed to accomplish.

[check] AN ACTION PLAN. Getting the results you want also may require some "inheritance planning" for your heirs. If you leave hundreds of thousands of dollars to a spouse who has never handled large sums of money, will he or she be prepared to manage it well? If you leave an apartment you own in California to your son, how will he manage to oversee it from his home in Michigan?

To avoid a sticky situation, tell your heirs what you'll be leaving them, and why. Ideally, you should go over your estate plan with each heir. That isn't always practical because of personality clashes. If that's a concern, include a professional advisor (lawyer, accountant, financial planner) in such meetings. That makes the meeting more businesslike and may help keep your heirs from being touchy about certain subjects. "No matter how you handle things," says Shote, "don't bury your head in the sand." If you face up to the fact that your death is inevitable, you can make life easier for your survivors.

RELATED ARTICLE: TAXING MATTERS

You can't take it with you, but you'll be able to leave more of it to your heirs. If you know anything about estate taxes, you know their bite can be hefty: they kick in at 37% of what assets you pass on, and peak at 55%.

Relief, however, has come in the form of the 1997 tax law. The bill expanded the "unified credit," which covers lifetime gifts as well as bequests. In 1998, we can each transfer up to $625,000 worth of assets, free of estate or gift taxes. This allowance will increase in stages until it reaches $1 million in 2006. (Owners of small companies may get some additional relief.)

With careful planning, you and your spouse can use this credit in tandem. That means that married couples can pass on up to $2 million, tax-free, assuming they both live until at least 2006.

If you don't have $1 million or $2 million in the bank, can you forget about the estate tax? Not really. Estate tax is assessed on all your assets: cash, stocks, bonds, mutual funds, retirement plans, real estate, home furnishings, life insurance policies, artwork, collectibles and so on. If you're not a millionaire now, by that measure, you may well be when all things are added up.

Our recommendation: If you want to keep as much as possible in the family and cut the IRS out of your estate, it will pay to find a savvy tax pro.