Estate Planning. Estate planning is a way to ensure that a person's property, healthcare and intentions are honored, and a comprehensive estate plan can effectively resolve various legal questions that may arise after people die. Here are some of them: What is the state of the testator's legal affairs? Do they own any real or personal property? How should it be disposed and to whom? Is there a need for a personal guardian to be appointed to care for the testator's minor children? What are the tax liabilities on the estate? What funeral arrangements are appropriate?
An estate plan can accomplish the following objectives:
• Identifying family members and others whom the testator wishes to receive particular items of property after death;
• Ensuring that this property will be transferred consistent with the testator's wishes, as quickly and with as few legal hurdles as possible;
• Minimizing the amount of taxes to be paid in order for the property to be appropriately distributed;
• Avoiding the time and costs associated with the probate process by utilizing such estate planning devices as living trusts;
• Prescribing the type of life-prolonging medical care that the testator wishes to receive, if unable to express these preferences;
• Detailing how expenses are to be paid; and
• Describing preferred funeral arrangements.
Choosing from among the various estate planning alternatives that are available can be difficult. Fortunately, there are Internet resources that provide useful guidance. These include www.ameriprise.com, www.estate.findlaw.com/estate-planning. FindLaw's estate planning center is a particularly comprehensive way to identify estate planning needs, recognize potential solutions, and locate an estate planning attorney to facilitate the process.
The essential foundation of an estate plan is the identification of principal objectives. Following is a list of typical estate planning goals and strategies for accomplishing them:
? Providing for the testator's immediate family. Husbands and wives want to make sure that there are sufficient resources for the surviving spouse, which often requires an income stream provided by life insurance. Couples with children want to assure that funds are available for their education and upbringing. For those with children under age 18, the couple should have a provision nominating personal guardian(s) for the children in their wills; absent this provision, a court will be without direction as it makes decisions about minor children's welfare.
? Providing for other relatives needing help. Testators who have family members whose lives can be difficult in their absence--an elderly parent or a disabled child, for example--should consider establishing a special trust fund to provide necessary support.
? Getting assets to beneficiaries quickly. Testators want their beneficiaries to have access to the assets that have been bequeathed to them. Strategies include insurance proceeds paid directly to beneficiaries; joint tenancies; living trusts; and other means that will use simplified or expedited probate that is available in many states.
? Planning for incapacity. One component of many estate planning processes is planning for possible mental or physical incapacity, which is especially important for single people. Living wills and durable health-care powers of attorney enable testators to decide in advance about life support options and selection of a personal guardian to make decisions about end-of-life medical treatment. Moreover, disability insurance can provide protection for testators and their families should the testator becomes disabled and unable to work.
? Minimizing expenses. Everyone wants to minimize the costs of transferring assets to their beneficiaries and good estate planning can reduce these expenses significantly.
? Selecting competent executors/trustees and giving them the necessary authority saves money, reduces the burden on the testator's survivors, simplifies the administration of the estate, and can reduce the probate court's involvement.
? Easing the strain on the testator's family. Estate planning provides an opportunity for the testator to plan for their funeral arrangements, reduce the costs of burial, or select cremation or other options.
? Helping a favorite cause. An estate plan can direct financial support for religious, educational, and other charitable causes, either during or after the testator's lifetime, while taking advantage of tax laws that encourage private philanthropy.
? Reducing estate taxes. A good estate plan will deliver the maximum assets to the testator's beneficiaries and the minimum to the government, an especially important goal as the estate approaches one million dollars in value, the figure that currently triggers the federal estate tax.
? Ensuring that the testator's business will continue after death. A small business can be thrown into chaos upon a principal's death or incapacity. The estate plan can direct its succession and continuation of its activities.
Personal and Family Information. It is extremely important to collect information to get prepared to meet with an attorney to begin the estate planning process. Here are some examples:
• The exact names and dates of birth of the testator and spouse to appear in the Last Will and Testament.
• Home address and telephone number of the testator and spouse.
• Country of nationality of testator and spouse.
• Names and dates of birth of children of testator and spouse or testator or spouse.
• Names and dates of birth of adopted children of testator and spouse or testator or spouse.
• Names and dates of birth for any deceased children.
• Names and dates of birth of any grandchildren of testator and spouse.
• Names of any previous spouses of testator and spouse; divorce decree.
• Significant personal information affecting testator, spouse or children/grandchildren (e.g., serious medical or physical condition requiring special care).
• Personal and family assets:
o Common stocks.
o Real estate assets, including location, type of property, legal description and how the asset(s) is held (e.g., joint tenancy with right of survivorship, land trust) and estimate of fair market value.
o Insurance policy details
o Personal residence; address; how held (e.g., single-family, condominium, similar); how title is held; fair market value; mortgage balance; mortgage life insurance (if any)
o Other residences, vacation homes (same information as above).
o Personal and household effects (e.g., automobiles, furniture, furnishings, books, pictures, valuable jewelry/antiques/art/coins/stamps/gold), including descriptions, estimated value and insurance information.
o Cash, cash deposits, and cash equivalents, with the name and address of the bank(s) or institution(s), ownership of each item.
o Checking, ordinary saving accounts, short-term U. S. obligations (e.g., treasury bills), certificates of deposit, money market accounts, pension and profit-sharing plans, IRAs, ESOPs, or other tax-favored employee-benefit plans, with the owner(s) name(s).
o Life insurance: company, name, address, and policy number; dace amount (i.e., proceeds) of policies; beneficiaries; cash value; loans, if any, against the policy; amount of accidental death benefits, if any.
o Term/group term insurance: company, name, address, and policy number; face amount of policies (proceeds); owner' beneficiaries; accidental death benefits.
o Similar information with respect to other life insurance or other insurance having life insurance features.
o Life insurance on the testator's spouse's life. Company, name, address, and policy number; face amount of ordinary life insurance; owner; beneficiaries; cash value; loans, if any; accidental death benefits.
o Term/Group life insurance. List company, name, address, policy number.
o Face amount of term/group term insurance; owner; beneficiaries; cash value; loans (if any); accidental death benefits.
o Other insurance on spouse's life.
• Closely held business interests.
o Nature of the business
o Form of organization (e.g., corporation, partnership, or the like)
o Estimated value.
o If a corporation, is an "S election" in force with respect to federal taxation?
o Belief that the business would continue to operate successfully in the event of testator’s permanent absence or the permanent absence of some other key person.
• Investment assets. How title is held and approximate value of the following:
o Publicly traded stocks and corporate bonds.
o Municipal bonds.
o Long-term U.S. Treasury Notes and Bonds.
o Limited partnership interests.
• Other interests of current or future value
o Interests in trusts.
o Anticipated inheritances.
o Other assets or interests of value.
• Liabilities: substantial financial liabilities not reflected in the above information. If secured, indicate the nature of the security. Substantial contingent liabilities, including personal guarantees. Insurance against any of these obligations?
Personal Estate Planning Objectives
• How would the testator dispose of the estate if there were no such thing as estate or inheritance taxes?
• In the event of the testator’s death, would the spouse or children be likely to receive income from sources other than the estate, e.g., resumption or initiation of employment?
• Testator’s personal objectives for family and the estate that override possible adverse tax consequences arising from trying to achieve them?
Guardians, Executors, and Trustees
• Guardians for minor children to be designated in the will in the event of death of testator and spouse.
• Guardian/substitute guardian of the person: name/contact information.
• Guardian/substitute guardian of the estate, if different: name/contact information.
• Principal/substitute executor: name/contact information.
• Principal/substitute trustees: name/contact information.
• Other factors. Facts or matters that do not seem to be covered by the other sections of this questionnaire?
• Community property. Property or any residency in a community property state (i.e., Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin).
• Powers of attorney given to any person? Name/contact information.
• Living will? Previously executed or currently desirable?
• Health care power? Previously executed or currently desirable?
Intestacy: Death without an Estate Plan
When a person dies without having executed a valid will, his or her property is distributed by “intestate succession" to persons according to state law. All 50 states have provisions governing intestacy, which distribute the decedent's wealth according to the way that the average person would presumably choose.
It is very important to recognize that intestate succession can differ substantially from what the decedent really would have wanted. No exceptions are recognized, nor are there any exceptions based on need or special circumstances.
Estate Planning and Probate Dictionary
Following is an explanation of commonly used words and phrases related to estate planning and probate.
AB trust. A trust designed to make sure the personal estate tax exemption of each spouse (currently $1.5 million) is used to the fullest extent possible, while allowing the surviving spouse to have use of the assets of the deceased spouse during the remainder of the surviving spouse's lifetime.
Administrator. A court-appointed person who manages the estate of a deceased person who has died without a will.
Attorney-in-fact. An individual designated in a power of attorney to act as the agent of the person who executed the document.
Basic will. A will that distributes everything to your spouse, if living, otherwise to your children when they reach the age of majority (18 years old).
Beneficiary. A person who receives funds, property, or other benefits from a will, contract, or insurance policy.
Durable power of attorney for health care. A written document in which an individual designates another person to make health care and health-related decisions in the event that the individual becomes incapacitated.
Durable power of attorney for property. A written document in which an individual designates another person to make his or her property and property-related decisions in the event that the individual becomes incapacitated and is unable to do so.
Estate tax. A tax that is imposed at a person's death, on the transfers of some types of property from their estate to heirs and beneficiaries.
Fiduciary. A person or institution that is legally responsible for the management, investment, and distribution of funds; i.e. the trustee identified in a trust.
Grantor. A person who transfers assets to another, usually into a trust.
Guardian. An individual with the legal authority to care for another, usually a minor child.
Incapacity. A person's inability to act on his or her own behalf, i.e., the "sound mind" requirement for drafting a valid will. A court makes a finding of incapacity.
Inter vivos trust. A trust that is created during a person's lifetime, which holds property for the benefit of another.
Intestate. A term used when a person dies without a will.
Joint tenancy with right of survivorship. A title that is often placed on co-owned property. At the death of one owner, the other owner will be legally entitled to sole possession of the property, regardless of what provisions are made in a will. A husband and wife often use this form of ownership.
Living trust. A revocable trust established during a grantor's lifetime that is used for the placement of some or all of the grantor's property. In a situation involving a married couple, a basic living trust does not effectively use the personal estate tax exemption of either spouse (the amount of a deceased person's estate that may pass to his or her heirs without estate taxes, currently $1.5 million). Because of this deficiency of a basic living trust, an AB Trust (discussed above) is often recommended instead to married couples with substantial assets.
Marital deduction. A federal tax deduction that allows one spouse to pass his or her estate to the other spouse without having to pay estate or gift taxes.
No will. A decedent dies without a valid will, so that his or her estate passes to heirs based on the laws of descent and distribution of his or her state.
Power of appointment. A legal right given to a person in order to allow him or her to decide how to distribute a deceased person's property. A "general" power of appointment places no restrictions on the named person, while a "limited" or "special" power of appointment places restrictions on who may receive distributions.
Probate. A process whereby a court reviews a will to make sure that it is authentic, and allows others to make legal challenges to the will.
QTIP Trust. A trust designed to permit a spouse to transfer assets to his/her trust while still maintaining control over the ultimate disposition of those assets at the spouse's death. QTIP Trusts are particularly popular in situations where a person is married for a second time but has children from a first marriage for whom he/she wants to reserve assets.
State death or inheritance taxes. Taxes that may be imposed by the state where a deceased person lived, or where his or her property is located after death.
Trust. A written document providing that property be held by one (the "trustee") for the benefit of another (the "beneficiary"). A trust may be created during the grantor's lifetime or after his or her death.
Trustee. A person named in a trust document who will manage property owned by the trust, and who will distribute the trust income or property according to the terms of the trust document. A trustee may be an individual or a business.
Will. A document that directs how property shall be distributed upon a deceased person’s death