Estate Planning Overview

Estate planning ensures that your property is properly managed, accumulated, and distributed upon your death with maximum ease and minimal costs, delays, and problems. Additionally, estate planning allows you to provide for and designate guardians for minor children, plan for incapacity, medical care decisions, maintain privacy protection, and minimize or eliminate creditor claims.


With proper planning you can minimize or totally eliminate estate taxes, probate fees, and court costs. Poor planning results in unnecessary taxes, fees, costs, and judicial involvement that can increase anxiety and stress to you and your family.


If you have a Will, probate will be required. This is a time consuming process, and requires approximately one to three years or more (depending on the complications in the estate) before your property is distributed. Moreover, probate results in substantial attorney’s fees, executor fees, and administrative costs. Probate fees are calculated as a percentage of the “gross value” of your estate whether your assets are worth $100,000 or $5,000,000. A Living Trust avoids all probate fees.


If you have a Will there is little that can be done to minimize or eliminate estate taxes. A Living Trust can be set-up to substantially minimize or avoid all estate taxes.


A Living Trust (sometimes referred to as an inter vivos trust) is a legal document that allows you to give your property to your beneficiaries just like a Will. However, a Living Trust, unlike a Will, avoids probate, the delays in transferring property, involvement with the legal system, attorney’s fees, executor fees, probate fees, and other costs. By use of a Living Trust, the disposition and transfer of property may be arranged within hours rather than years.


A Living Trust is also harder to challenge than a Will. Therefore, it provides a level of security against potential challenges by disinherited relatives. Since a Living Trust usually will have been in place for a considerable period of time before the death of the Trustor, and since there is no court proceeding initiated to determine the validity of the trust document, it becomes much more difficult for disinherited relatives to successfully challenge the estate plan.


A Living Trust is also private, and therefore protects the private details of your life and financial affairs from public disclosure. A Will on the other hand, must be probated with the court, which provides a transparent public proceeding where the private details of your life and affairs are disclosed to the public.


A Living Trust is particularly advantageous where the Trustor owns real estate in more than one state, since separate ancillary probate proceedings may be required in each state where real property is located. As a result, probate fees soar even higher.


A Living Trust can also be drafted to provide for management of assets during any period of illness or incapacity of the Trustor. This flexibility will normally avoid the necessity of expensive conservatorship proceedings in the future, and will provide the smooth transition of control from the Trustor to a trusted, selected individual or entity.


In a Living Trust, it is possible for the Trustee to hold assets that will be used for support, maintenance and education of young children or others who need to be protected. If properly set-up, it avoids the necessity of expensive and protracted judicial intervention.


A Living Trust can be set-up to distribute assets to your children directly so that should a spouse remarry, there is no danger that the decedent’s assets will go to the new spouse and the spouse’s family instead of the Trustor’s children.


As a part of estate planning in larger estates, one should consider devising a gift program. It is possible to make annual gifts to reduce a person’s taxable estate. There is an annual gift tax exemption of $12,000 per person per year. For example, in the estate plan for a married couple, it is possible to gift $24,000 per child per year without any gift or estate taxes.


If the gift program utilizes a “Crummey” Trust the money will be held in a trust and cannot be touched by your children until death. Further, placing funds in a “Crummey” Trust protects that property against creditor claims, and avoids probate like other trusts.


Another popular subcategory of a Living Trust is the Charitable Remainder Trust (“CRT”). The CRT may permit the Trustor to convert highly appreciated assets into higher-yield holdings, thereby improving the Trustor’s income flow, while avoiding tax on capital gains generated by the sale. The ultimate beneficiary of such a trust must be a charitable organization, but the Trustor who intends to leave some portion of his or here estate to charities may want to carefully consider this variation or its close relative, the Charitable Lead Trust.


Even the Trustor who had not intended to make charitable bequests may find that the present benefit of such an arrange makes the charitable trust attractive. Further, the Trustor who utilizes charitable trusts receives a substantial deduction of current income taxes.


Joint tenancy is a form of holding title to real property and provides for the right of survivorship; however, a Living Trust provides for survivorship and is superior in providing for control and tax planning.


This material is designed to provide you with a brief outline and general information. This guide is not intended to be an estate plan. Estate planning is complicated, subject to exceptions and alternatives; it is necessary for each individual to have his or her estate plan individually and personally tailored to individual needs.