Practice Areas

The goal of estate planning is to provide a vehicle for the accumulation, management and preservation of assets during your life, and a plan for the distribution of those assets at the time of your death. Estate planning is a team effort, involving your financial planner, CPA, personal banker, life insurance professional and estate planning attorney.

Asset Accumulation. In this phase of estate planning, it is critical to establish goals, both short and long term, and to gather a team of advisors to assist you. You should define your goals, analyze your resources, allocate those resources among varied investments, and diversify those investments to match your risk tolerance. Proper income tax planning is vital to the accumulation phase of estate planning. Insurance is also an important aspect of most plans, since it is used to provide financial security in the event of disability, security for loved ones in the event of your death, and to provide estate liquidity to pay the expenses and taxes attendant to your death. There are many other uses for insurance as well, particularly when a closely held business is a part of your estate.

Asset Management and Preservation. Many factors affect your ability to manage your assets during your life. Without proper planning, your incapacity could result in substantial wasting of estate assets because of the necessity of a guardianship proceeding. Using living trusts, Durable Powers of Attorney for Health Care, Durable Powers of Attorney for Property and Living Wills can often avoid needles expense. Proper planning becomes critical, since an estate plan takes such issues into consideration. Depending on the size of your estate, federal and state death taxes can consume as much as 55% of the value of your estate. With proper planning, death taxes can be substantially minimized or even avoided. Administration costs as the result of your death are another element that can consume anywhere from 3% to 10% of the value of your estate, depending upon whether a probate proceeding is required. Proper planning can reduce administration costs both during life and at the time of death.

Asset Distribution. The distribution of your assets is probably the most important element of your over all estate plan. You should determine who you want to benefit upon your death, and then analyze each beneficiary's character, and physical and mental health. You should also define your values and then set goals for each of your beneficiaries. Some of the many questions you should ask about each of your beneficiaries are:

• Is the beneficiary currently capable of managing assets?
• Is the beneficiary frivolous with their spending habits?
• How will the beneficiary be influenced by his or her spouse?
• How will an inheritance affect the beneficiary?
• Will an inheritance help the beneficiary achieve his or her goals or cause the abandonment of those goals?

An estate plan generally consists of a properly drafted and funded living trust, a companion or pour-over will, a Durable Power of Attorney for Property, a Durable Power of Attorney for Health Care and a Living Will. Often other documents serve specific purposes beyond the standard or foundational needs of a client. Irrevocable trusts can be used to accomplish various estate planning goals. Other vehicles, such as Charitable Remainder Trusts, Qualified Personal Residence Trusts and Family Limited Partnerships are very effective in accomplishing a client's non-tax and tax objectives.

ADMINISTRATION

Administration is the process of determining and distributing assets at death. Estate administration is required absent a properly funded trust, in which case a probate proceeding may become necessary. Probate is required, subject to exceptions, even if a will has been executed (testate estate), and where a person left no will (intestate estate). When a living trust was the person's primary estate planning document, and assets were properly titled in the name of the trust during the person's life, trust administration is generally necessary. Assets which have a beneficiary designation, such as life insurance, annuities, IRAs, profit sharing plans, 401(k) plans and other retirement assets, are controlled by the beneficiary designations on file.

Immediately after death, the personal representative, executor or successor trustee must create a list of all assets, determine exactly how they are titled (joint tenancy, individually, in trust, etc.), determine beneficiary designations where applicable, and determine date of death values. All liabilities of the estate must also be determined, and any outstanding bills and expenses must be paid.

Ownership of assets at death determines whether they are subject to probate, and how and to whom those assets will be distributed or allocated. Ownership also determines whether an asset will be included in the taxable estate for death tax purposes.

The value of assets at death determines the size of the taxable estate for death tax purposes. It will also determine the income tax basis of those assets in the hands of the beneficiary. This new basis will determine potential gain or loss if the beneficiary should later decided to sell those assets.

The administration process also involves the filing of necessary tax returns, including a final income tax return, a federal estate tax return, if applicable, a state death tax return, and a fiduciary income tax return for the estate or trust, and the payment of all taxes.