Estate planning involves the process of determining how certain tasks will be handled if an individual becomes incapacitated during life and arranging for the disposal of one’s assets at death.
This is a complicated area and involves the intersection of multiple legal concepts, including business organization and succession planning, tax law, real estate law, and elder law.
Estate planning is important no matter one’s age or the amount of property one owns.
It is through estate planning that a person can decide which loved one should receive specific property after his or her death, as well as whether a certain relative should receive nothing (be “disinherited”). Estate planning also allows a person to select who will manage his or her assets in the event of incapacity.
When a person dies, his or her estate is comprised of all of the assets owned at the time of death. Assets in a decedent’s estate can include real estate, checking accounts, savings accounts, all forms of investment including stocks and other securities, life insurance policies and personal property, such as cars, furniture, and clothing.
The law provides for ways an individual may plan ahead for the disposition of his or her estate. Lawyers, accountants, and various financial planners often assist individuals with the estate planning process.
Estate planning prepares for more than financial and property matters.
It allows for decision-making in advance on the type of medical care someone wants to receive should he or she become incapacitated and unable to decide for himself or herself. It also allows for pre-planning (and pre-payment) of funeral arrangements and their related expenses.
Estate planning tools include wills, various types of trusts, and prenuptial and spousal agreements.
The drafting of a Last Will and Testament can be complicated. For example, do you need a basic will or a pour-over will? Another complex issue is determining the type of trust that is needed. Should you have a Living Trust, an AB trust, or a QTIP trust? In many cases, the client’s estate plan will need to include providing guardians to care for minor children and perhaps aging parents or other relatives. Proper estate planning involves determining the client’s goals and objectives for taking care of their loved ones in the manner the client desires while minimizing the tax consequences of transferring a person’s property under state and federal transfer tax laws.
Lawyers will consider the use of wills, revocable and irrevocable trusts, and pre-marital and marital agreements as well as choice of legal ownership including joint tenancy and community versus separate property. Furthermore, they will address complex tax considerations which involve not only estate and gift taxes but each asset’s stepped-up basis at death, the impact of the unified credit, and the impact of the marital deduction upon property passing to a surviving spouse.