Estate planning involves the preparation of legal documentation designed to provide for the efficient management and disposition of one’s assets in the event of incapacity or death. The process begins with determining the nature and value of one’s resources, with particular attention to ownership of those assets, and considers the options for minimizing or eliminating multiple forms of taxation on the transfer of those assets. It is a process that continues with the inevitable changes in one’s family and financial circumstances.
Essential Estate Planning
Given the significant increase in the estate tax exemption, some Americans believe that there is no need to address their estate planning. The truth: it is essential to have a current estate plan, with a basic complement of legal instruments to provide for the unexpected. In the proper legal framework, one may name attorneys-in-fact for financial and health care matters, select guardians for minor children, and designate the heirs to receive assets after death, perhaps is trust for certain beneficiaries. In the basic estate plan, that framework is built with a Last Will and Testament, a Power of Attorney, and an Advance Medical Directive.
Advanced Estate Planning
The concerns which motivate a person to implement an estate plan are just the starting point, since the planning process often brings out more complex issues which require evaluation and decision. Advanced estate planning involves more sophisticated estate and tax planning techniques, such as asset protection strategies, dynasty trusts for multiple generations, new entity formation, and intergenerational and charitable planned giving alternatives. These techniques call for customized provisions for revocable and irrevocable trust instruments, one or more of which are combined to create a comprehensive estate plan designed to ensure wealth preservation for generations to come.
Planning for Blended Families
“Blended families” are families in which multiple family groups can be identified as heirs to a husband and wife, typically in a second or later marriage. While many facets of blended family life are similar to the traditional nuclear family, the potential for legal and emotional complications in the context of the estate planning process is significantly greater. Questions such as the appointment of executors and trustees or the division of assets as among the surviving spouse and children not of that marriage can present significant challenges due to the potential for conflicting interests and loss of control. We have experience in proposing alternative solutions to these sources of conflict and drafting the proper legal instruments to create a structure for protection of the respective interests of the blended family.
Estate Planning with Retirement Accounts
The rules governing the taxation of qualified and non-qualified retirement accounts are decidedly complex. Accordingly, decisions by owners and beneficiaries alike to establish new beneficiary designations, to convert to a Roth IRA, or to “stretch” required minimum distributions from an inherited IRA should be made only after consultation with an experienced tax advisor. In the context of planning estates with significant retirement accounts, our clients are advised regarding the income and estate tax consequences of the designation of primary and contingent beneficiaries, and some well-informed clients choose to implement a combination of specially-designed trusts and customized beneficiary designations to provide fiduciary protection for certain heirs.
Estate Planning for Business Owners
The three leading causes of the failure of inherited family-owned businesses result when the deceased owner: (i) fails to establish an adequate estate plan, (ii) fails to arrange for transition of control of the enterprise to the next generation, and (iii) fails to provide the necessary funds for the purchase of business interests and the payment of estate tax liability where it applies. However, strategies and solutions are available to business owners, including traditional estate planning tools, buy-sell agreements, change of entity types, and creative financial arrangements for the family (including retirement plans, consulting agreements, business purchase insurance, and estate tax funding), one or more of which can be used to set the stage for a successful business succession.