Estate Planning:
Legacy and End of Life Planning

Estate planning is something most of us do not like to think about.  However, the cost in terms of estate penalties and taxes visited on the family of the deceased are substantial enough that everyone should take note to review their current estate plan or create one so as to avoid such eventualities.

When we say "Estate" and "Estate Plan" we are referring to everything you own and how it changes hands upon death as well as the consequences of those changes.   Because the State and the Government taxes based on ownership, an estate plan helps to alleviate those taxes and penalties by ensuring a smooth transition of assets from the deceased to their beneficiaries.  Thus, estate planning concerns the practice of making sure this occurs with as little cost as possible while at the same time retaining the wishes and objectives of the original owner.

Knowing this we can formulate some of the aspects of an estate plan and why these items are important:

  1. Will and Testament -- A will serves as a legal document that transfers ownership to heirs or beneficiaries upon death.  Without a will the State usually assumes control to the detriment of the estate.  Another important aspect of a Will is that it preserves the wishes and the desires of the deceased in writing so that any plans he/she had for certain assets can be passed on at death without being lost.
  1. Ownership Changes -- A good estate plan usually prevents taxable events by changing ownership of current assets in such a way that the death of the owner is no longer a taxable event.  Usually this involves established third party corporate entities, which can legally own assets just as a real person.  Involving an estate attorney in this aspect of estate planning is a necessity because of the complexity of tax laws involved.
  1. Third Party Representation -- Since, the entire concept of estate planning revolves around the demise of the owner it stands to reason that someone must be chosen as his or her representative in carrying out the dispensation and management of his or her assets.  Many estate plans will designate a non-interested party such as a trusted attorney or family friend while others will designate a surviving spouse or family member.  Regardless, the important concept is that the third party carries out the wishes and desires of the deceased ensuring that the wishes for the deceased's estate remains unchanged after death.
  1. Taxable Analysis -- The most important part of estate planning is an evaluation of how death will affect all assets within the estate in terms of taxation.  This analysis is very detailed and requires a very high level of specialized knowledge regarding tax law in order to be done properly.  It is also important that the person undertaking such analysis have a working knowledge of taxation laws in the specific state in which the majority of the estate resides.  Because of the complexities involving taxation, larger estates usually rely on a team approach where many members of a Law/Investment/Accounting firm involve themselves in the process.

  2. Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.