Estate Planning

A well structured estate plan considers the lifetime needs of the individual goind the plan and the needs of his or her loved ones. In it fullest sense, an estate plan addresses an individual’s desire to:

  • provide for personal health care and manage personal affairs and assets if they become incapacitated
  • leave a legacy – of property as well as memories, life experiences, care and support for loved ones and special causes
  • manage and reduce federal and sate taxes fo the maximum amount of assets is transferred to heirs and beneficiaries

An estate plan is a set of legal documents or tools that provide insturctions for accomplishing the three main goals of an estate plan (described in the section “The Purpose of an Estate Plan”). These documents include legal and medical powers of attorney, a will, trusts, and beneficiary designations.

Estate planning involves the will, trusts, beneficiary designations, powers of appointment, property ownership (joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety), gift, and powers of attorney, specifically the durable financial power of attorney and the durable medical power of attorney. After widespread litigation and media coverage surrounding the Terri Schiavo case, many estate planningattorneys[weasel words] now advise clients to also create a living will. Specific final arrangements, such as whether to be buried or cremated, are also often part of the documents. More sophisticated estate plans may even cover deferring or decreasing estate taxes or winding up a business.

Many people confuse a living will with a durable medical power of attorney. A living will sets out directives concerning end of life decisions, whereas a durable power of attorney gives all medical decision making authority to an appointed individual upon incapacity, including end of life decisions. Some people have both a living will and a health care power of attorney. In some countries, legal trust lawyers and estate planning attorneys may require or prefer to have some form of accreditation or licensing, such as an MTI or CSEP designation

The tax code allows people to set up charitable remainder trusts and set up qualified personal residence trusts to own their personal residence yet leave it to their children without estate tax.

Because the United States tax code does not tax life insurance proceeds as income, a life insurance trust could be used to pay estate taxes. However, if the decedent holds any incidents of ownership like the ability to remove or change beneficiary, the proceeds will remain in his estate. For this reason, the trust vehicle is used to own the life insurance policy and it must be irrevocable to avoid inclusion in the estate.

Mediation serves as an alternative to a full-scale litigation to settle disputes. At a mediation, family members and beneficiaries discuss plans on transfer of assets. Because of the potential conflicts associated with blended families, step siblings, and multiple marriages, creating an estate plan through mediation allows people to confront the issues head-on and design a plan that will minimize the chance of future family conflict and meet their financial goals.

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