An estate plan is important for individuals with a wide range of financial situations. In fact, estate planning may be more important if you aren’t wealthy because mistakes will have a much greater impact on your loved ones.

Simply stated, estate planning is a method for determining how to distribute your property during your life and at your death. It is the process of developing and implementing a master plan that facilitates the distribution of your property after your death and according to your goals and objectives.

At your death, you leave behind the people that you love and all your worldly goods. Without proper planning, you have no say about who gets what, and more of your property may go to others, like the federal government, instead of your loved ones.

If you care about

  • how and to whom your property is distributed, and
  • ensuring that your property is preserved for your loved ones,

you need to know more about estate planning.

Estate planning requires effort on your part

To start, you’ll want to come to terms with dying, at least to a degree that you can deal with the necessary planning.

Understandably, your death can be a very uncomfortable subject, unfortunately, the discussions in this area are full of references to your death, so it really can’t be avoided. Some statements may seem too businesslike and unfeeling, but tiptoeing around the subject of dying will only make the planning process more difficult.

You will understand the process more easily and implement a more successful estate plan if you approach it in a straightforward manner.

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Who needs an estate plan?

Estate planning is important for individuals with a wide range of financial situations. In fact, it may be more important if you have a smaller estate because your final expenses will have a much greater impact on your estate.

Wasting even a single asset may cause your loved ones to suffer from a lack of financial resources

Your estate plan can consist of strategies that are simple and inexpensive to implement (e.g., a will or life insurance). If your estate is larger, the estate planning process can be more complex and expensive.

Implementing most strategies will probably require you to hire professional help of some kind, an attorney, an accountant, a trust officer, or an insurance agent, for example. If your estate is large or complex, you should consult with an estate planning expert such as an estate attorney or financial planner for advice before the implementation stage.

In deciding on your course of action, you should always consider whether the benefit of the strategy outweighs the cost of its implementation.

Estate planning may be especially needed under certain circumstances

You may need to plan your estate especially if:

  • You are concerned that your assets may be subject to gift or estate taxes
  • You have children who are minors or who have special needs
  • Your spouse is uncomfortable with or incapable of handling financial matters
  • You have a pre- or post-marital agreement
  • You own an interest in a family business
  • You are concerned about asset protection
  • Your children or other heirs do not get along
  • You have property in more than one state
  • You intend to contribute to charity
  • You or your spouse have children from a previous marriage
  • You anticipate receiving an inheritance
  • You have special property, such as artwork or collectibles
  • You are concerned about probate and privacy

Isn’t an estate plan only for the rich?

In a word, no.

Estate planning allows you to implement certain tools now to ensure that your concerns and goals are fulfilled after you die. Your objective may be to simply make sure that your loved ones are provided for. Or you may have more complex goals, such as avoiding probate or reducing estate taxes.

Estate planning can be as simple as implementing a Will and purchasing life insurance, or as complicated as executing irrevocable trusts and exploring other sophisticated tax and estate planning techniques. Therefore, estate planning is important whether you consider yourself wealthy or not.

The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased

While irrevocable trusts offer numerous advantages, they incur up-front costs and often have ongoing administrative fees. The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning attorney and your legal and tax advisers before implementing such strategies.

Asset protection in your estate Plan

Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card companies, business creditors, and the creditors of your loved ones.

To protect your property from such claims, you’ll have to evaluate each tool in terms of your own unique situation. You may decide that liability insurance may be sufficient protection for your business because your exposure to a claim is low. For high exposure, you may want to create a business entity or an offshore trust to shield your assets.

No asset protection tool is guaranteed to work, and you may have to adjust your asset protection strategies as your situation or the laws change

Liability Insurance for Asset Protection

Liability insurance is your first and best line of defense and is at the top of any plan for asset protection. You should consider purchasing or increasing umbrella coverage on your homeowners policy. For business-related liability, purchase umbrella coverage and/or increase your liability coverage under your business insurance policy.

Generally, the cost of the premiums for additional liability coverage is minimal compared to what you might be required to pay under a court judgment should you ever be sued

Dividing assets between spouses for Asset Protection

Perhaps you work in an occupation or business that exposes you to greater potential liability than that of your spouse. If so, it may be a good idea to divide assets between you so that you keep only the income and assets from your job, while your spouse takes sole ownership of your investments and other valuable assets.

Generally, your creditors can reach only those assets that are in your name

Using business entities for Estate Plan asset protection

Business entities provide two types of protection:

  • shielding your personal assets from your business creditors, and
  • shielding business assets from your personal creditors

Consider using a corporation, limited partnership, or limited liability company (LLC) to operate the business. Such business entities shield the personal assets of the shareholders, limited partners, or LLC members from liabilities that arise from the business.

The liability of these owners will be limited to the assets of the business

Conversely, corporations, limited partnerships, and LLCs provide protection from the personal creditors of a shareholder, limited partner, or member.

In a corporation, a creditor of an individual owner is able to place a lien on, and eventually acquire, the shares of the debtor/shareholder, but would not have any rights greater than the rights conferred by the shares.

In limited partnerships or LLCs, under most state laws, a creditor of a partner or member is entitled to obtain only a charging order with respect to the partner or member’s interest.

The charging order gives the creditor the right to receive any distributions with respect to the interest. In all respects, the creditor is treated as a mere assignee and is not entitled to exercise any voting rights or other rights that the partner or member possessed.

Asset protection trusts can protect trust assets from creditors

People have used trusts to protect their assets for generations.

The key to using a trust as an asset protection tool is that the trust must be irrevocable and be the owner of your property. Once given away, these assets are no longer yours and are not available to satisfy claims against you.

To properly establish an asset protection trust, you must not keep any interest in the trust assets or control over the trust.

Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary’s creditors can reach trust property depends on how much access the beneficiary has to the trust property.

The more access the beneficiary has to the trust property, the more access the beneficiary’s creditors will have. Thus, the terms of the trust are critical.

There are many types of asset protection trusts, each having its own benefits and drawbacks. These trusts include:

  • Spendthrift trusts
  • Discretionary trusts
  • Self-settled trusts

Since certain claims can pierce domestic asset protection trusts (e.g., claims by a spouse or child for support and state or federal claims), you can bolster your protection by placing the trust in a foreign jurisdiction.

Offshore or foreign trusts are established under, or made subject to, the laws of another country (e.g., the Bahamas, the Cayman Islands, Bermuda, Belize, Jersey, Liechtenstein, and the Cook Islands) that does not generally honor judgments made in the United States.

A warning about fraudulent transfers
The court will ignore transfers to an asset protection trust if:
  • A creditor’s claim arose before you made the transfer
  • You made the transfer with the intent to defraud a creditor
  • You incurred debts without a reasonable expectation of paying them

minimize estate taxes with an Estate Plan

You can minimize estate taxes by: (1) taking advantage of certain allowable tax exclusions, deductions, and credits, (2) using an estate freeze technique, or (3) employing post-mortem planning.

how to do an estate plan

Estate tax exclusions, deductions, and credits

Under the federal tax system, individuals are generally allowed to make gifts of up to $17,000 in 2023 per donee each year gift tax free under the annual gift tax exclusion.

In addition, individuals are allowed to exempt a certain amount of property from the gift and estate tax.

Further, transfers of property between U.S. citizen spouses are fully deductible, as are transfers of property to qualified charitable organizations.

There are many exclusions, deductions, and credits that if effectively used can minimize estate taxes. You need to understand what these exclusions, deductions, and credits are, and how they work in order to take full advantage of them.

States also have their own exclusions, deductions, and credits, although they may not be the same as the federal system.

Estate freeze

An estate freeze is any planning device that allows you to freeze the present value of your estate and shift any future growth (or potential growth) to your successors.

Example. You give land valued at $100,000 to your children. Twenty-five years later, you die. The land is valued at $500,000 on the date of your death, but only $100,000 is included in your taxable estate because the value of the land froze on the date you gave it to your children (as a lifetime gift).

There are many ways you can freeze the value of property. Estate freezing techniques range from relatively simple (e.g., installment sale or private annuity) to the more complex (e.g., gift- or sale-leaseback). You need to know what these techniques are and how they are used in order to know which, if any, is best for you.

This generally works for state taxes also

Post-mortem estate planning

There are many post-mortem (i.e., “after death”) techniques that can help keep the value of your property as low as possible in order to minimize federal estate taxes. Even though these techniques are implemented after your death, you should understand each of them now because if you believe your estate might benefit from them, there may be things you need to do now to ensure that your estate will qualify for these elections after your death.

Charitable Giving

Charitable giving can play an important role in many estate plans. Philanthropy cannot only give you great personal satisfaction, it can also give you a current income tax deduction, let you avoid capital gains tax, and reduce the amount of taxes your estate may owe when you die.

There are many ways to give to charity. You can make gifts during your lifetime or at your death. You can make gifts outright or use a trust. You can name a charity as a beneficiary in your Will, or designate a charity as a beneficiary of your retirement plan or life insurance policy. Or, if your gift is substantial, you can establish a private foundation, community foundation, or donor-advised fund.

Making outright charitable gifts

An outright gift is one that benefits the charity immediately and exclusively. With an outright gift you get an immediate income and gift tax deduction.

Make sure the charity is a qualified charity according to the IRS. Get a written receipt or keep a bank record for any cash donations, and get a written receipt for any property other than money.

Will or trust charitable bequests and beneficiary designations

These gifts are made by including a provision in your Will or trust document, or by using a beneficiary designation form. The charity receives the gift at your death, at which time your estate can take the income and estate tax deductions.

Charitable trusts

Another way for you to make charitable gifts is to create a charitable trust. You can name the charity as the sole beneficiary, or you can name a non-charitable beneficiary as well, splitting the beneficial interest (this is referred to as making a partial charitable gift). The most common types of trusts used to make partial gifts to charity are the charitable lead trust and the charitable remainder trust.

Charitable lead trust

A charitable lead trust pays income to a charity for a certain period of years, and then the trust principal passes back to you, your family members, or other heirs. The trust is known as a charitable lead trust because the charity gets the first, or lead, interest.

A charitable lead trust can be an excellent estate planning vehicle if you own assets that you expect will substantially appreciate in value. If created properly, a charitable lead trust allows you to keep an asset in the family and still enjoy some tax benefits.

How a Charitable Lead Trust Works

How a Charitable Lead Trust Works

Example. John, who often donates to charity, creates and funds a $2 million charitable lead trust. The trust provides for fixed annual payments of $100,000 (or 5% of the initial $2 million value) to ABC Charity for 20 years. At the end of the 20-year period, the entire trust principal will go outright to John’s children. Using IRS tables and assuming a 2.0% Section 7520 rate, the charity’s lead interest is valued at $1,635,140, and the remainder interest is valued at $364,860. Assuming the trust assets appreciate in value, John’s children will receive any amount in excess of the remainder interest ($364,860) unreduced by estate taxes.

Charitable remainder trust

A charitable remainder trust is the mirror image of the charitable lead trust. Trust income is payable to you, your family members, or other heirs for a period of years, then the principal goes to your favorite charity.

A charitable remainder trust can be beneficial because it provides you with a stream of current income; a desirable feature if there won’t be enough income from other sources.

How a Charitable Remainder Trust Works

How a Charitable Remainder Trust Works

Example. Jane, an 80-year-old widow, creates and funds a charitable remainder trust with real estate currently valued at $1 million, and with a cost basis of $250,000. The trust provides that fixed quarterly payments be paid to her for 20 years. At the end of that period, the entire trust principal will go outright to her husband’s alma mater. Using IRS tables and assuming a 2.0% Section 7520 rate, Jane receives $50,000 each year, avoids capital gains tax on $750,000, and receives an immediate income tax charitable deduction of $176,298, which can be carried forward for five years. Further, Jane has removed $1 million, plus any future appreciation, from her gross estate.

Private family foundation

A private family foundation is a separate legal entity that can endure for many generations after your death. You create the foundation, then transfer assets to the foundation, which in turn makes grants to public charities. You and your descendants have complete control over which charities receive grants. But, unless you can contribute enough capital to generate funds for grants, the costs and complexities of a private foundation may not be worth it.

A general guideline is that you should be able to donate enough assets to generate at least $25,000 a year for grants.

Donor-advised fund

Similar in some respects to a private foundation, a donor-advised fund offers an easier way for you to make a significant gift to charity over a long period of time. A donor-advised fund actually refers to an account that is held within a charitable organization. The charitable organization is a separate legal entity, but your account is not — it is merely a component of the charitable organization that holds the account. Once you transfer assets to the account, the charitable organization becomes the legal owner of the assets and has ultimate control over them. You can only advise, not direct, the charitable organization on how your contributions will be distributed to other charities.

Community foundation

If you want your dollars to be spent on improving the quality of life in a particular community, consider giving to a community foundation. Similar to a private foundation, a community foundation accepts donations from many sources, and is overseen by individuals familiar with the community’s particular needs, and professionals skilled at running a charitable organization.

Your Estate plan and leaving a legacy

You’ve worked hard over the years to accumulate wealth, and you probably find it comforting to know that the assets you leave behind after your death will continue to be a source of support for your loved ones and the causes that are important to you. But to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now.

There are four basic ways to leave a legacy: (1) by Will, (2) by trust, (3) by beneficiary designation, and (4) by joint ownership arrangements.


You can leave property by Will in two ways: (1) making specific bequests and (2) making general bequests.

A specific bequest directs a particular piece of property to a particular person (“I leave Aunt Martha’s diamond broach to my niece, Jen”). A general bequest is typically a percentage of property or property that is left over after all specific bequests have been made. Typically, principal heirs receive general bequests (“I leave all the rest of my property to my wife, Jane”).

With a Will, you can generally leave any type of property to whomever you wish, with some exceptions, including the following:

  • Property will pass according to a beneficiary designation even if you name a different beneficiary for the same property in your Will
  • Property owned jointly with rights of survivorship passes directly to the joint owner
  • Property in a trust passes according to the terms of the trust
  • Your surviving spouse has a right to a statutory share (e.g., 50%) of your property, regardless of what you leave him or her in your Will
  • Children may have inheritance rights in certain states
Leaving property outright to minor children is problematic. Instead, you should name a custodian, or use a trust.


You can also leave property by using a trust. Trust property passes directly to the trust beneficiaries according to the trust terms.

There are two basic types of trusts: (1) revocable (or living), and (2) irrevocable.

Revocable trusts are very flexible because you can change the terms of the trust (e.g., rename beneficiaries) and the property in the trust at any time. You can even change your mind by taking your property back and ending the trust.

An irrevocable trust, on the other hand, can’t be changed or ended except by its terms, but can be useful if you want to reduce estate taxes or protect your property from potential creditors.

You create a trust by executing a document called a trust agreement.

You should have an attorney draft any type of trust to be sure it accomplishes what you want.

A trust can’t distribute property it does not own, so you must also transfer ownership of your property to the name of the trust (commonly known as “trust funding”). Property without ownership documentation, known as tangible personal property, (e.g., jewelry, tools, furniture) is transferred to a trust by using an Assignment. Property with ownership documents must be re-titled or re-registered.

You must also name a trustee to administer the trust and manage the trust property. With a revocable trust, you normally name yourself trustee, but you’ll need to name a successor trustee who’ll transfer the property to your heirs after your death.

A revocable trust is also a good way to protect your property in case you become incapacitated.

The use of irrevocable trusts involves a complex web of tax rules and regulations and involves upfront costs and may require ongoing administrative fees. You should consider the counsel of an experienced estate attorney before implementing an irrevocable trust strategy

Beneficiary designations

Property that is contractual in nature, such as life insurance, annuities, and retirement accounts, passes to heirs by beneficiary designation.

Typically, all you have to do is fill out a form, sign it and file it with the company

Beneficiaries can be persons or entities, such as a charity or a trust, and you can name multiple beneficiaries to share the proceeds.

You should name primary and contingent beneficiaries

You shouldn’t name minor children as beneficiaries. You can, however, name a custodian to receive the proceeds for the benefit of the minor child.

You should consider the income and estate tax ramifications for your heirs and your estate when naming a beneficiary.

For example, proceeds your beneficiaries receive from life insurance are generally not subject to income tax, while your beneficiaries will have to pay income tax on proceeds received from tax-deferred retirement plans (e.g., traditional IRAs).

Check with your financial planning professional to determine whether your beneficiary designations will have the desired results

Be sure to re-evaluate your beneficiary designations when your circumstances change (e.g., marriage, divorce, death of beneficiary). You can’t change the beneficiary with your Will or a trust. You must fill out and sign a new beneficiary designation form.

Some beneficiaries can’t be changed. For example, a divorce decree may stipulate that an ex-spouse will receive the proceeds.

Joint ownership arrangements

Two (or more) persons can own property equally, and at the death of one, the other(s) becomes the sole (joint) owner. This type of ownership is called joint tenancy with rights of survivorship (JTWROS).

A JTWROS arrangement between spouses is known as tenancy by the entirety in certain states, and a handful of states have a form of joint ownership known as community property.

There is another type of joint ownership called tenancy in common where there is no right of survivorship. Property held as tenancy in common will not pass to a joint owner automatically, although you can leave your interest in the property to your heirs.

Joint ownership arrangements may be useful and convenient with some types of property, but may not be desirable with all of your property.

For example, having a joint checking account ensures that, upon your death, an heir will have immediate access to needed cash. And owning an out-of-state residence jointly (e.g., a vacation home) can avoid an ancillary probate process in that state. But it may not be practical to own property jointly when frequent transactions are involved (e.g., your investment portfolio or business assets) because you may need the joint owner’s approval and signature for each transaction.

There are some other disadvantages to joint ownership arrangements, including:

  • your co-owner has immediate access to your property,
  • naming someone who is not your spouse as co-owner may trigger gift tax consequences, and
  • if the co-owner has debt problems, creditors may go after the co-owner’s share.
Unlike with most other types of property, a co-owner of your checking or savings account can withdraw the entire balance without your knowledge or consent

How to do an estate plan

Designing an estate plan is a process that is unique to each person but don’t be intimidated or overwhelmed. Even the most complex plan can be achieved if you proceed step by step. Remember, the peace of mind that comes with developing a successful estate plan is worth the time, trouble, and expense.

Understand your particular circumstances

Begin the estate planning process by understanding your particular circumstances, such as your age, health, wealth, etc.

Understand the factors that will affect your estate plan

You will need to have some understanding of the factors that may affect the distribution of your estate, such as taxes, probate, liquidity, and incapacity.

Clarify your goals and objectives

When your particular circumstances and the factors that may affect your estate are clear, your goals and objectives should come into focus.

Understand the strategies that are available

With these goals and objectives now clear, you can begin to consider the different estate planning strategies that are available to you.

Seek professional help

Seeking professional help (an attorney and financial advisor) will help you understand the strategies that are available and formulate and implement your estate plan.

Formulate and implement a plan

Finally, after following these steps, you can formulate and implement a plan that works for you. Here are a few basic tips: (1) make sure you understand your plan, (2) rely on people you trust, and (3) keep your documents and information organized and within easy reach.

Perform periodic reviews

When you have implemented your estate plan, be sure to perform a periodic review and, if necessary, make revisions that reflect any changing circumstances and tax laws.

The primary factors to be considered in your estate plan

The primary factors that may affect your estate are your beneficiaries, taxes, probate, liquidity, and incapacity.


One of the largest potential expenses your estate may have to pay is taxes, which may include federal transfer taxes, state death taxes, and federal income taxes.

Federal transfer taxes

The federal transfer taxes include (1) the federal gift tax and estate tax and (2) the federal generation-skipping transfer (GST) tax.

Federal gift tax

Gift tax is imposed on property you transfer to others while you are living. You need a basic understanding of how the gift tax system works to minimize gift tax liability.

Under the gift tax system, in 2023 you are allowed a $12,920,000 lifetime applicable exclusion amount that reduces your gift and estate tax liability.

Any applicable exclusion amount you use during life effectively reduces the amount that will be available at your death.

Also, in 2023 you are allowed to give $17,000 per donee gift tax free under the annual gift tax exclusion (the annual gift tax exclusion is indexed for inflation, so this amount may change in future years).

Certain other types of transfers can be made gift tax free. You need to understand what these types of transfer are and how they work to take full advantage of them.

Federal estate tax

Generally speaking, estate tax is imposed on property you transfer to others at the time of your death. You need a basic understanding of how the estate tax system works for several reasons.

Saving your property for your beneficiaries

Estate tax rates could reach as high as 40% in 2023, which means that a large chunk of your estate may go to the federal government instead of your beneficiaries. If you want to preserve your estate for your beneficiaries, you’ll need to know how to minimize estate tax with respect to your property.

Reducing estate tax liability

Under the estate tax system, you are allowed an applicable exclusion amount that reduces your estate tax liability. Also, there are exclusions, deductions, and other credits available that allow you to pass a certain amount of your estate tax free. You need to understand what these exclusions, deductions, and credits are and how they work to take full advantage of them.

Providing for the payment of estate tax

Generally, estate tax must be paid within nine months after your death. To avoid depriving your beneficiaries of what you intend for them to receive, you should provide that specific and sufficient assets be set aside and used for this purpose. In addition, these assets should be sufficiently liquid to pay these expenses when they are due.

Planning for estate tax expense

Although calculating estate tax can be complex, you should estimate what the amount of your estate tax may be (if any), so that you can arrange to replace that wealth.

GST tax

Another federal transfer you need to understand is the federal generation-skipping transfer (GST) tax. The GST tax is imposed on property you transfer to an individual who is two or more generations below you (e.g., a grandchild or great-nephew).

Not surprisingly, the IRS wants to levy a tax on property as it is passed from generation to generation at each and every level. The purpose of the GST tax is to keep individuals from avoiding estate tax by skipping an intermediate generation.

A flat tax rate equal to the highest estate tax then in effect is imposed on every generation-skipping transfer you make over a certain amount. You are allowed a GST tax exemption of $12,920,000 in 2023.

Currently, some states also impose their own GST tax. Check with an attorney or your state to find out what may be subject to your state’s GST tax, and how and when to file a state GST tax return.

State death taxes

States also impose their own death taxes. You should be aware of what the death tax laws are in your state and how they may affect your estate.

There are three types of state death taxes: (1) estate tax, (2) inheritance tax, and (3) credit estate tax (also called a sponge tax or pickup tax).

Some states also impose their own gift tax and/or generation skipping transfer tax

State estate tax

State estate tax is imposed on property you transfer to others at your death, much like federal estate tax. The state estate tax calculation for most states is similar to the federal calculation.

State inheritance tax

Unlike estate tax, the inheritance tax is imposed on your beneficiary’s right to receive your property. Tax is due on each beneficiary’s share of your estate. Beneficiaries are grouped into classes (generally based upon their familial relationship to you) and are taxed accordingly.

Although inheritance tax is due on each heir’s share of your estate, it’s your personal representative who writes the check from your estate to pay it

State credit estate tax

Some states impose a credit estate tax (also referred to as a sponge tax or pickup tax). Most states that imposed a credit estate tax have “decoupled” from the federal system (i.e., they’re imposing some form of stand-alone estate tax.)

The federal system allows a deduction for state death taxes for the estates of persons dying in 2005 and later

Federal income taxes

In the estate planning context, you should be aware of three federal income tax considerations:

Income taxation of trusts

If your estate plan includes the use of a trust, you need to know that a trust may be an income tax-paying entity. The trustee may be required to file an annual return and pay income taxes on trust income.

Decedent’s final income tax return

Your personal representative or surviving spouse has the duty of filing your last income tax return that covers the tax year ending on the date of your death.

Income taxation of your estate

Your estate is considered a separate income taxpaying entity. Your personal representative must file and pay income taxes on any income your estate receives (e.g., interest from bonds, or dividends from stock).


Probate is the court-supervised process of proving, allowing, and administering your Will. The probate process can be time-consuming, expensive, and open to public scrutiny. Avoiding probate may be one of your most important goals. To develop a successful avoidance strategy, you’ll need to understand how the probate process works, how to estimate probate costs, and what is subject to probate.


Estate liquidity refers to the ability of your estate to pay taxes and other costs that arise after your death from cash and cash alternatives. If your property is mostly nonliquid (e.g., real estate, business interests), your estate may be forced to sell assets to meet its obligations as they become due. This could result in an economic loss, or your family selling assets that you intended for them to keep. Therefore, planning for estate liquidity should be one of your most important estate planning objectives.


Planning for incapacity is a vital yet often overlooked aspect of estate planning. Who will manage your property for you when you can no longer handle these responsibilities? You need to ask and answer this question because the consequences of being unprepared may have a devastating effect on your estate and loved ones.

You should include plans for incapacity as a part of your overall estate plan

What are your estate plan goals and objectives?

Your goals and objectives are personal, but you can’t formulate a successful plan without a clear and precise understanding of what they are. They can be based on your particular circumstances and the factors that may affect your estate, as discussed earlier, but your feelings and desires are just as important.

The following are some goals and objectives you might consider:

  • Provide financial security for your family
  • Ensure that your property is preserved and passed on to your beneficiaries
  • Avoid disputes among family members, business owners, or with third parties (such as the IRS)
  • Provide for your children’s or grandchildren’s education
  • Provide for your church or favorite charity
  • Maintain control over or ensure the competent management of your property in case of incapacity
  • Minimize estate taxes and other costs
  • Avoid probate
  • Provide adequate liquidity for the settlement of your estate
  • Transfer ownership of your business to your beneficiaries

What are some estate plan strategies?

An estate planning strategy is any method that facilitates the distribution of your assets and the settlement of your estate according to your wishes.

There are several estate planning strategies available to you.

Intestate succession

Intestate succession is a strategy by default and is a means of transferring your property to your heirs if you have failed to make other plans such as a Will or trust. State law controls how and to whom your property is distributed, who administers your estate, and who takes care of your minor children. Without directions, your opinions and feelings are not considered. Indeed, one of your primary goals in planning your estate may be to avoid intestate succession.

Last Will and Testament

A Will is a legal document that lets you state how you want your property distributed after you die, who shall administer your estate, and who will care for your minor children. Everyone with minor children should have a Will.

Will substitutes

A Will substitute, for example, payable on death bank accounts, allows you to designate a beneficiary of certain property that will automatically pass to that beneficiary after you die and avoids passing through probate.


A trust is a separate legal entity that holds your assets that are then used for the benefit of one or more people (e.g., you, your spouse, or your children). There are different types of trusts, each serving a different purpose, and include marital trusts and charitable trusts.

Joint ownership

Joint ownership is holding property in concert with one or more persons or entities. There are different types of joint ownership, such as tenancy in common and community property, each with different legal definitions, requirements, and consequences.

Life insurance

Life insurance is a contract under which proceeds are paid to a designated beneficiary at your death. Life insurance plays a part in most estate plans.


A gift is a transfer of property, not a bona fide sale, that you make during your life to family, friends, or charity. Making gifts can be personally gratifying as well as an effective estate planning tool.

Tax exclusions, deductions, and credits

There are several important estate planning tools you can use that are offered by the federal government. These include the annual gift tax exclusion, the applicable exclusion amount, the unlimited marital deduction, split gifts, and the charitable deduction.

How often should you review your estate plan?

Conducting a Periodic Review of Your Estate Plan

With your estate plan successfully implemented, one final but critical step remains: carrying out a periodic review and update.

Imagine this: since you implemented your estate plan five years ago, you got divorced and remarried, sold your house and bought a boat to live on, sold your business and invested the money that provides you with enough income so you no longer have to work, and reconciled with your estranged daughter.

This scenario may look more like fantasy than reality, but imagine how these major changes over a five-year period may affect your estate. And that’s without considering changes in tax laws, the stock market, the economic climate, or other external factors. After all, if the only constant is change, it isn’t unreasonable to speculate that your wishes have changed, the advantages you sought have eroded or vanished, or even that new opportunities now exist that could offer a better value for your estate.

A periodic review can give you peace of mind

Every year for large estates

Those of you with large estates (over the applicable exclusion amount) should review your plan annually or at certain life events that are suggested in the following paragraphs. Not a year goes by without significant changes in the tax laws. You need to stay on top of these to get the best results.

Every five years for small estates

Those of you with smaller estates (under the applicable exclusion amount) need only review every five years or following changes in your life events. Your estate will not be as affected by economic factors and changes in the tax laws as a larger estate might be. However, your personal situation is bound to change, and reviewing every five years will bring your plan up to date with your current situation.

Upon changes in estate valuation

If your net worth has changed more than 20% over the last two years, you may need to update your estate plan.

Upon economic changes

You need to review your estate plan if there has been a change in the value of your assets or your income level or requirements, or if you are retiring.

Upon changes in occupation or employment

If you or your spouse changed jobs, you may need to make revisions in your estate plan.

Upon changes in family situations

You need to review your plan if:

  • your (or your children’s or grandchildren’s) marital status has changed,
  • a child (or grandchild) has been born or adopted,
  • your spouse, child, or grandchild has died,
  • you or a close family member has become ill or incapacitated, or
  • other individuals (e.g., your parents) have become dependent on you.
For example, many states have a law revoking all or part of your Will if you divorce or marry.

Upon changes in your closely held business interest

A review is in order if you have:

  • formed, purchased, or sold a closely held business,
  • reorganized or liquidated a closely held business,
  • instituted a pension plan,
  •  executed a buy-sell agreement,
  • deferred compensation, or
  • changed employee benefits.

Upon changes in a part of your estate plan

Of course, if you make a change in part of your estate plan (e.g., create a trust, execute a codicil, etc.), you should review the estate plan as a whole to ensure that it remains cohesive and effective.

Upon major transactions

Be sure to check your plan if you have:

  • received a sizable inheritance, bequest, or similar disposition,
  • made or received substantial gifts
  • borrowed or lent substantial amounts of money
  • purchased, leased, or sold material assets or investments
  • changed residences
  • changed significant property ownership,
  • become involved in a lawsuit.

Upon changes in insurance coverage

Making changes in your insurance coverage may change your estate planning needs or may make changes necessary. Therefore, inform your estate planning attorney if you make a significant change to life insurance, health insurance, disability insurance, medical insurance, liability insurance, or beneficiary designations.

Upon death of trustee/executor/guardian

If a designated trustee, executor, or guardian dies or changes his or her mind about serving, you need to revise the parts of your estate plan affected (e.g., the trust agreement and your Will) to replace that individual.

Upon other important changes

None of us has a crystal ball. We can’t think of all the conditions that should prompt us to review and revise our estate plans. Use your common sense.

Have your feelings about charity changed? Has your son finally become financially responsible? Has your spouse’s health been declining? Are your children through college now? All you need to do is give it a little thought from time to time.

Do I need an attorney to prepare my estate plan?

Legally, no. Practically speaking, yes. A Will or trust does not need to be prepared by an attorney for it to be legally effective. A document that you draft yourself, or even a preprinted form purchased in an office supply store, will be legally effective if you are of legal age in your state (i.e., 18), are mentally competent, and execute the document properly.

However, most people feel uncomfortable with a do-it-yourself documents. They generally have some questions that should be addressed by an experienced estate planning attorney.

In addition, some people have more than just basic concerns or are in complex situations where drafting the documents properly is vital. Legal assistance can help ensure that your intentions are clearly communicated and no questions exist at the time of your death.

You should also seriously consider professional assistance if your personal situation includes concerns such as:

  • You have minor children, children from a prior marriage, or a beneficiary with special needs
  • You own significant assets and are concerned about minimizing estate taxes at your death
  • You want to achieve certain goals, such as controlling the management and distribution of your property after your death
  • You have heirs you wish to disinherit, or there is a chance your documents may be contested after your death

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