Estate planning

From Wikipedia, the free encyclopedia

The law of wills and trusts

Part of the common law series
Inheritance
Intestacy · Testator · Probate
Power of appointment
Simultaneous death · Slayer rule
Disclaimer of interest
Types of will
Holographic will · Will contract
Living will
Joint wills and mutual wills
Parts of a will
Codicil · Attestation clause
Incorporation by reference
Residuary clause
Problems of property disposition
Lapse and anti-lapse
Ademption · Abatement
Acts of independent significance
Elective share · Pretermitted heir
Contesting a will
Testamentary capacity
Undue influence
Types of Trusts
Express trust · Asset-protection trust
Accumulation and maintenance trust
Interest in possession trust · Bare trust
Protective trust · Spendthrift trust
Life insurance trust · Remainder trust
Life interest trust · Reversionary interest trust
Charitable trust · Honorary trust
Resulting trust · Constructive trust
Special needs trust: (general)/(U.S.)
Doctrines governing trusts
Pour-over will · Cy pres doctrine
Other areas of the common law
Contract law · Tort law · Property law
Criminal law · Evidence

Estate planning is the process of accumulating and disposing of an estate to maximize the goals of the estate owner. The various goals of estate planning include making sure the greatest amount of the estate passes to the estate owner's intended beneficiaries, often including paying the least amount of taxes and avoiding or minimizing probate court involvement. Additional goals typically include providing for and designating guardians for minor children and planning for incapacity.

1 Estate planning tools
2 Remainder interests
3 Paying taxes
4 See also
5 External link

[edit] Estate planning tools

The tools involved in estate planning include the will, various types of trusts, beneficiary designations, powers of appointment, various forms of property ownership (Joint tenancy with rights of survivorship, tenancy in common, tenancy by the entirety, etc), gifting, 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, virtually all estate planning attorneys now advise their clients to also create a living will. Note that many people (and even some attorneys) confuse a living will with a durable medical power of attorney. The former controls solely those decisions that must be made at the end of the patient's life, while the latter is used to give decision-making authority to someone else (usually a family member or close friend). This person, the attorney-in-fact, then makes all medical decisions leading up to to the person's death, but has no such power to make end of life decisions for the patient. Those decisions are made by the patient in the living will; in the absence of a living will, and where the patient is incapable of making end-of-life decisions for him or herself, such choices are left to family members.

[edit] Remainder interests

The tax code allows wealthy 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.

[edit] Paying taxes

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.