Estate Planning

Have you talked to your financial planner lately?  Or the person who sold you a life insurance policy?  Your CPA?  It makes sense for an estate planner to tell you that you need an estate plan, but other trusted advisors would also agree that it’s something worth considering.  "But I’m not rich.  I don’t have an ESTATE to plan!” you say.  However, most people, regardless of wealth or age, can benefit greatly from an estate plan.

Estate planning may serve the following purposes:

Practice Areas

Estate Planning
  • Avoid a Death Tax.  The details of tax laws change at the whim of Congress, but whether a death tax is imposed has not changed for almost a century.  Tax rates are scheduled to increase to 55% in 2013.  However, estate planning techniques may be employed to reduce or completely eliminate taxes imposed on your estate.  

  • Avoid Probate.  Probate is a court-supervised process of validating a deceased person’s will and transferring his or her assets to the beneficiaries.  The process can be both expensive and time consuming.  By transferring assets into a living trust, you may help your heirs avoid the headache of a prolonged probate process.

  • Nominate Guardians for Minor Children.  Families with young children may be especially inclined to have their estate plan in place to nominate guardians for their minor children.  By planning your estate, you have the power to nominate persons you trust to take care of your most precious earthly possessions – your children – in the event you and your spouse die.

  • Avoid Conservatorship.  In a conservatorship, a court-appointed individual manages the personal care of someone who cannot properly provide for his or her own needs.  Like probate, it is a cumbersome, time-consuming and expensive process that may be avoided with a proper estate plan.  An estate plan that includes a durable power of attorney may avoid a conservatorship by appointing an agent to manage your financial affairs in case of your incapacity.  As a result, financial issues that arise in such circumstances may be addressed in a timely fashion by a person you trust.

  • Plan for End of Life Medical Care.  By setting up an advance health care directive as a part of your estate plan, you can designate an agent to make health care decisions on your behalf if you become incapable of making such decisions yourself.  In addition, the directive may include your wishes regarding end-of-life care including life-sustaining treatment, instructions for organ donation and disposition of your remains.  Such instructions will guide your agent when he or she steps in to make those decisions on your behalf.

  • As you can see, an estate plan can benefit more than just the wealthy.  By planning ahead, you can ensure your involvement in some of the most important decisions affecting your family.

    Business Succession Planning

    If you are a business owner, there is another layer of planning that should be considered.  What will happen to your business if you die?  Fewer than 30% of business owners have any sort of succession plan in place yet a business can occupy a majority of that owner’s wealth.  The following questions should be addressed when planning for the succession of one’s business

    • Are things in place such that your business can continue without you?

    • How will your surviving family members be cared for without you operating the business?

    • Have you identified successors to your business?  Do those successors know of your wishes with regards to the continuation of the company?

    • If the successor of a business is a child, will he or she inherit the entire business?  How would other children be compensated? 

    • Do you instead want to sell your business or your share of the business when you pass away?  If so, are your partners in agreement with the sale of your share? 

    Business succession planning often includes management, tax, accounting, business and financial planning and may involve more than just an attorney.  Insurance and family matters may also factor into successful planning.  

    Trust Administration

    Trust administration is the process of carrying out the terms of your trust whether it is a simple living trust or a more complicated irrevocable life insurance trust (ILIT).  A common myth in estate planning is the living trust myth - the idea that once a living trust has been created, its administration is simple and free of expenses.  People who put a trust together often do so because they want to avoid a long and expensive process to settle affairs.  Although a properly funded living trust should avoid probate, the carefully drafted terms of the living trust should still be carried out.  In many cases, not much is required while the people who created the trust (i.e., the grantors) are alive.  However, when one grantor passes away, the terms of the trust may require that the assets of the trust be divided for tax purposes.  Failure to administrate the trust at this point (e.g., when one spouse passes away) may result in the loss of certain tax exemptions. 

    In some cases, trust administration is also ensures that assets of the first spouse to die will be set aside for his or her intended beneficiaries (rather than to his or her spouse’s future spouse or children).  Without trust administration, the surviving spouse can benefit individuals that the deceased spouse did not intend to benefit.

    Probate/Estate Administration

    Probate may be required for estates of individuals who did not have a trust or for assets that were not included in a living trust.  The probate process requires the collection of the decedent’s assets, payment of debts and taxes, notification of beneficiaries and distribution of the estate to the persons entitled to receive the property.

    Probate can be an expensive and long process.  Fees are set by statute and can add up to 2-7% of the total estate value.  Assuming no litigation, estates can be settled in about 9-18 months. 

    The Law Office of Tiffany K. Chiu can assist clients through probate by acting as counsel to the survivors, determining the appropriate procedures to follow and carrying out the procedures.

    In accordance with Internal Revenue Service Circular 230, we advise you that if this Website contains any tax advice, such tax advice was not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.