There are literally dozens of plans, techniques and products for saving the taxes and costs associated with transferring wealth after death: life insurance trusts; charitable remainder trusts; personal residence trusts; and many, many more. They are often tagged with acronyms such as ILIT, CRT, CRAT, CRUT and QPRT, each with its own tax or cost savings goals. There is no doubt that each tool can be right for someone. For the majority of the population, however, they are unnecessary.
Fundamental estate planning can eliminate estate tax on an estate of up to $1,000,000 in 2003 and $1.5 million in 2004. Those basic tax savings will increase incrementally to $3,500,000 by the year 2009. Spouses may transfer any amount of money between themselves with the use of the unlimited marital deduction. For most married couples, the tax bite comes only on the death of the second spouse. Singles and couples can avoid estate tax on the first $1,000,000 of assets ($1.5 million in 2004) in their estates without any planning.
For many people, the goal of saving on estate taxes is accomplished by a basic estate plan or no plan at all. So why go through the time and expense of planning if there aren't tax savings? For a variety of important reasons: cost savings, creditor protection, remarriage protection, bloodline protection, minor children, disability planning and to direct wealth to the proper beneficiaries. For many people, the non-tax goals are the most important reasons for planning.
If a will or trust-based estate plan is to succeed it is critical to plan with a counseling-oriented attorney. The only way for each person to plan for his or her needs and goals is to discuss them with a qualified estate planning attorney. Many of these important subjects are intensely personal and private, but are rarely given much thought by planners. The private nature of issues such as prior marriages, children outside the marriage, value and religious planning for children, and health care issues cause many advisors to ignore or gloss over the subject.
For example, when planning for a client with minor children the attorney will often ask whom the parents wish to be the guardians for their children. However, the details of such arrangements are overlooked. Issues involving payment for purchasing a larger house to accommodate the client’s children, transportation, private school, college, vacations, religious training are all issues that will arise in the real world if the guardians are called upon to look after the children. The client’s desires for their children should be incorporated into the plan – so that the plan will work when needed.
Admittedly, no one wants to think of unpleasant circumstances. But that is the responsibility of the estate planner – to raise issues and provide options to their clients. The entire purpose of estate planning is to deal with these issues with the client before they become problems. No one is helped if the plan fails to work. Estate-planning professionals must be trained and comfortable discussing options and educating clients so the clients can make intelligent decisions regarding all of the possible issues arising during and after their lives, not just financial and tax concerns.
Another area of concern for those looking to plan their future is the fact that estate plans, like bread, go stale (and sometimes mold). Change is inevitable. Changes in the laws, changes in personal finances and family circumstances, and increased knowledge in the legal community all work to make estate plans outdated. These changes can render older estate plans useless for both tax and non-tax planning. In some cases they can even create more problems and expense than would have occurred if no planning had been done. Congress has made significant changes in and tax law in the last few years. Estate plans should be reviewed in light of these changes.
Finally, you should be aware of all the costs involved in your estate plan. Our Statement of Philosophy Regarding Fees is available on our website.
In summary, basic rules to follow when you select an attorney to help you plan your estate are:
1. Use a
counseling-oriented attorney so that your needs and
desires are paramount in the plan.
NOTE: This information is designed to provide a general overview with regard to the subject matter covered and is not state-specific. The authors, publisher and host are not providing legal, accounting or any other advice which purports to be specific to your situation. The contents of this website are believed to be completely reliable. Nevertheless, some material may be affected by changes in the laws or interpretations of such changes since the material was entered on the website. If legal advice or other expert guidance is required, the services of a competent professional in the field of law, accounting, insurance or investments should be sought.
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