What does Estate Planning mean? Estate planning is a process designed to help you manage and preserve your assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. But what estate planning means to you specifically depends on who you are. Your age, health, wealth, lifestyle, life stage, goals, and many other factors determine your particular estate planning needs. For example, you may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all you'll need. Or, you may have a large estate, and minimizing any potential estate tax impact is your foremost goal. Here, you'll need to use more sophisticated techniques in your estate plan, such as for example; a trust, family limited partnership, and tax-beneficial gift-giving techniques.

Do I need an Estate Plan? To help you understand what estate planning means to you, the following sections address some estate planning needs that are common among some very broad groups of individuals. Think of these suggestions as simply a point in the right direction, and then contact us for professional advice on how to implement the right plan for you.

The Estate Plan Annual Check Up

All estate plans are based in large part on two broad areas of law which change constantly; state property laws, and federal tax law. As lawmakers change these laws you need to update your estate plan to keep up-to-date on the latest developments in the law to ensure that you goals are met. Additionally, over time personal situations change that require revisiting your existing estate plan; such as, marriage, divorce, birth or death of family members or friends, and changes in financial situations.

The Basics: Are you over the age of 18?

In most states a child under the age of 18 is not legally capable of executing estate planning documents. Since death or incapacity can strike anyone at anytime, all adults over 18 should consider having:

  • A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so. 
  • An advanced medical directive: The three main types of advanced medical directives are (1) a living will, (2) a durable power of attorney for health care (also known as a health-care proxy), and (3) a Do Not Resuscitate order. Be aware that not all states allow each kind of medical directive, so make sure you execute one that will be effective for you. 
  • A basic will: If you're young, single, and have no children, you may not need much estate planning. But if you have some material possessions, you should at least write a will. If you don't, the wealth you leave behind if you die will likely go to your parents, and that might not be what you would want. A will lets you leave your possessions to anyone you choose (e.g., your significant other, siblings, friends, other relatives, or favorite charity).

General Categories

The links below are broad categories which fit most people however, the specific and particular needs of each individual and/or couple will vary. Select the link that best describes your situation, or feel free to browse them all.

Married Couples

Married couples are effectively treated as one economic unit for federal gift tax and federal estate tax purposes, as long as each spouse is a U.S. citizen. This is accomplished using the unlimited marital deduction--a powerful estate planning tool, because you can conceivably give or leave your entire estate to your spouse tax free. The deduction not only allows spouses to shift wealth between each other without incurring gift tax or estate taxes, but also allows spouses to maximize the benefits that result (e.g., equalizing your estates to take full advantage of the applicable exclusion amount). This is especially important since the passage of the Economic Growth and Tax Relief Reconciliation Act of 2001 (the 2001 Tax Act) signed by President Bush on June 7, 2001, which has increased the exclusion amount (as described in a following section). Married couples should also consider creating a bypass or credit shelter trust.

Unmarried Couples

You've committed to a life partner but aren't legally married. For you, a will is essential if you want your property to pass to your partner at your death. Without a will, state law directs that only your closest relatives will inherit your property, and your partner may get nothing. If you share certain property, such as a house or car, you should consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically.

Married with Children or Single Parents

If you're married and have children, you and your spouse should each have your own will. For you, wills are vital because they can name a guardian for your minor children in case both of you die simultaneously. Likewise, for single parents, if you pass, and you do not have a will or if fail to name a guardian in your will, a court may appoint someone you might not have chosen.

Furthermore, without a will, some states dictate that at your death some of your property goes to your children and not to your spouse. Equally as important for single parents, if minor children inherit directly, either the surviving parent or grandparents if the parent is single, will need court permission to manage the money for them.

You may also want to consult a attorney about establishing a trust to manage your children's assets in the event that both you and your spouse die at the same time.

Perhaps, you will also need life insurance. Your surviving spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family. Life insurance can play a vital role in any estate plan regardless of wealth or income level.

Financially Comfortable and Looking Forward to Retirement

If you're in your 30 or 40s, you're probably feeling financial comfortable. You've accumulated some wealth and/or paid of some of your debt, and you're thinking about retirement. This is where estate planning overlaps with retirement planning. It's just as important to plan to care for yourself during your retirement as it is to plan to provide for your beneficiaries after your death. Keep in mind that as a practical matter, without a substantial change in the Social Security System, Social Security will probably not be around in 10-20 years. Even if Social Security survives and is around when you retire, those benefits alone will not provide enough income for your retirement years. Consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account (IRA), Roth IRA, and/or Annuities.

High-Net-Worth / Wealthy Individuals & Couples

Depending on the size of your estate when you die, you may need to be more concerned than ever about federal estate taxes, regardless of the gradual elimination of these taxes under the 2001 Tax Act. Here is a brief explanation about how your estate planning may be affected by this law and why it is important that you re-evaluate your current plan soon.

The 2001 Tax Act gradually eliminates estate taxes by increasing the amount that is exempt from these taxes over several years (from $1 million in 2002 and 2003 to $3.5 million in 2009); reducing the top estate tax rate over several years (from 50 percent in 2002 to 45 percent in 2007 through 2009); and finally repealing estate taxes for persons dying after 2009. However, under a provision in the law, pre-2001 Tax Act rules will return after 2010.

Federal gift tax remains.

The applicable exclusion amount is $1 million in 2002 and beyond. The gift tax rates follow the estate tax rates, except that the top gift tax rate in 2010 (when there will be no estate taxes) will be 35 percent (the top marginal income tax rate in 2010 under the 2001 Tax Act). The law contains several other changes, some of which are retroactive. These changes are complicated, and the uncertainty that exists makes planning difficult.

Contact one of our Estate planning attorneys to re-examine your existing estate plan in light of the uncertain and volatile federal estate and gift taxes, and to discuss various estate planning vehicles that may help you minimize you estate's potential Estate Tax exposure and/or achieve your personal estate planning goals, such as:

  • Revocable and Irrevocable Trusts
  • Charitable Remainder Trusts
  • Grantor Trusts 
  • Spend-Thrift Trusts
  • (UGMA Trust) Uniform Gifts to Minor's Act Trust
  • (QTIP Trust) Qualified Terminal Interest in Property Trust
  • (QPRT Trust) Qualified Personal Residence Trust
  • (GRAT) Grantor Retained Annuity Trust
  • (GRIT) Grantor Retained Income Trust
  • (GRUT) Grantor Retained Unitrust
  • (ILIT) Irrevocable Life Insurance Trust

Elderly or Ill

If you're elderly or ill, you'll want to write a will or update your existing one, consider a revocable living trust, and make sure you have a durable power of attorney and a health-care directive. Talk with your family about your wishes, and make sure they have copies of your important papers or know where to locate them. Effective use of Trusts and proper estate planning can help ensure that you remain qualified for Medicaid and / or other need based assistance programs.

Our lawyers help people undertake the estate planning process, and draft wills and trusts that make their wishes known. We also handle estate administration and estate litigation. For more information about these areas of practice, follow the links below.