What is estate planning?

59987598 - estate plan worksheet on vintage typewriterEstate planning is an important requirement for people who want to make sure their families or loved ones are provided for once they are gone. It is especially important for those who want to ensure that more control is exerted over their assets after their death. States and the federal government will tax an estate, so proper estate planning minimizes the extent to which families must pay the tax.

To put it simply, estate planning represents the process by which an individual’s current and projected assets are dispositioned in a manner that lowers the estate tax burden as much as possible. One example method of doing this would be using charitable trusts. Assets placed into charitable trusts can see the estate tax burden eliminated entirely.

These are complicated matters, however. When someone places their assets into a trust, they are transferring not just the wealth within the assets, but their control as well. Estate planning 101 tells us that credit-shelter trusts are simply all it takes to shelter assets. Simple trusts make complicated matters less so, but for clients with many different types of assets, simple trusts may not cut it.

Sophisticated estate planning

When a client holds many asset classes of varying amounts, their level of estate planning becomes more of a sophisticated wealth transfer. In those cases, you are dealing with transfer taxes, creditor-proof assets, and more. These situations call for more pinpointed, “bespoke” estate planning.

These structures take time and experience to build. To fully shield the assets, such creations as foreign grantor trusts, private placement life insurance, and dynasty trusts may be called upon. None of these are simple. Even more, there is a high level of legal maneuvering that must be done. If you are utilizing leveraged gifting, you want to make sure you are doing it within the bounds of the law.

Still, it is possible for these complicated structures to work, from both an income and transfer tax perspective, provided you are working with the right legal advisor. That’s where we come in.

Always keep the individual’s wishes in mind

When doing large wealth transfers and setting up trusts, it can be easy to get caught up in the wants and desires of the loved ones, yet it is the individual’s wishes that must be kept front and center. If anyone comes second in that equation, it is the state and federal government. Then the wishes of the loves ones can be considered.

While tax mitigation and familial wishes are important, it must be asked: What does the individual want the disposition of their assets to be? It should be the role of the professional advisor to help clients mitigate their tax burden while still meeting their wishes.

If an individual wants a charitable trust set up in the hopes that 100% of their estate goes to specific charities, regardless of any other factors, that is the final word. Nothing else supersedes that wish.

Estate planning is not easy. It is a recognition that a life will one day end. It does not mean that death is imminent; indeed, the wise estate planner will not wait until the imperative is upon them to plan how their estate will be handled upon their death. We never know what tomorrow may bring and being prepared is not a bad thing.

Secure the future for your family and loved ones by ensuring your estate is protected. Plan wisely how your assets will be handled tomorrow and take the stress out of wondering what will happen today. Contact us to learn more.

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