Estate planning

From Wikipedia, the free encyclopedia

Wills, trusts and estates
Part of the common law series
Wills
Legal history of wills Joint wills and mutual wills Will contract Codicil Holographic will Oral will Sections Attestation clause Residuary clause Incorporation by reference Contest Testamentary capacity Undue influence Insane delusion Fraud No-contest clause Property disposition Lapse and anti-lapse Ademption Abatement Satisfaction of legacies Acts of independent significance Elective share Pretermitted heir Wills and conflict of laws
Trusts
Express Resulting Constructive Common types Bare Discretionary Accumulation and Maintenance Interest in possession Charitable Purpose Incentive Other types Protective Spendthrift Life insurance Remainder Life interest Reversionary interest Testamentary Honorary Asset-protection Special needs (Supplemental Needs) Governing doctrines Pour-over will Cy-près doctrine Hague Convention (conflict law) Application in Civil law Dishonest assistance
Estate administration
Intestacy Testator Probate Power of appointment Simultaneous death Slayer rule Laughing heir Advancement Disclaimer of interest Inheritance tax
Related topics
Advance directive (Living will) Totten trust
Other common law areas
Contract Tort Property Criminal law Evidence
v t e

Estate planning is the process of anticipating and arranging for the disposal of an estate during your life. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses. Guardians are often designated for minor children and beneficiaries in incapacity.^[1]

It overlaps to some degree with elder law, which additionally includes other provisions such as long-term care.

Devices

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, estate planning attorneys now often 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.

Remainder

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.

Trust provisions for beneficiaries

Trusts may be used to set up certain provisions for how minor children or developmentally disabled children will be distributed funds. For example, a spendthrift trust may be used to prevent wasteful spending by a spendthrift child, or a special needs trust may be used for developmentally disabled children.

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

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.

Estate planner

Estate planning is usually a legal and tax specialty for an attorney or an accountant. Credentials for certification of estate planners include Trust and Estate Practitioner, Chartered Financial Analyst, Certified Financial Planner and Chartered Trust and Estate Planner.

Designation of an IRA beneficiary

In the United States, without a beneficiary statement, the default provision in the custodian-agreement will apply, which may be the estate of the owner resulting in higher taxes and extra fees.

Identity: A specific, identifiable individual must be designated as beneficiary.
Contingent beneficiary: If the primary beneficiary predeceases the IRA owner, the contingent beneficiary becomes the designated beneficiary. If a contingent beneficiary is not named, the default provision in the custodian-agreement applies.
Death: At the IRA owner's death, the primary beneficiary may select his or her own beneficiaries. There is no obligation to retain the contingent beneficiary designated by the IRA owner.
Multiple accounts: An IRA owner can split an IRA into several IRA's each with different beneficiaries, assets and value.

References

↑ Veasey, Westray B.; Craig G. Dalton Jr.; Poyner Spruill LLP (May 24, 2013). "Why You Need an Estate Plan Post 2013 Tax Act". The National Law Review. Retrieved 26 May 2013.

Bibliography

Society of Certified Senior Advisors (2009). "Working with Seniors Health, Financial and Social Issues".
William P. Streng, J.D., Estate Planning, Estates, Gifts and Trusts Portfolios, Vol. 800 (2nd ed. 2012), Bloomberg BNA.

External links

This article is issued from Wikipedia. The text is available under the Creative Commons Attribution/Share Alike; additional terms may apply for the media files.