The goals of estate planning can involve honoring the asset holder’s wishes for the distribution of assets after death and preserving divided assets. If not, adequately planned estate assets can be depleted through the probate process or subjected to creditor claims and tax liability.
Further estate plans must be structured in a way that transfers assets to their intended beneficiaries. Unfortunately, there is not a one size fits all solution to estate planning; therefore, it is essential to consider the unique circumstances of the person requesting an estate plan.
As will be discussed later in this page, estate planners try to avoid probate to reduce costs and make the distribution of the estate proceed more quickly. The tools and strategies that allow an estate asset to be transferred without the involvement of a probate court, as will be discussed later in this material.
Of these goals, preserving estate assets is perhaps the most important and will be the area in which lawyers will be involved. Estate planning lawyers must understand how federal and state tax law impacts how assets are transferred to beneficiaries.
For example, an estate planning lawyer should have a basic understanding of how the IRS taxes estates upon their transfer and how the IRS taxes assets held in trust. In many ways, estate planners must engage in a game avoiding tax traps when establishing an estate plan.
What is Estate Planning?
When an individual dies, they leave an estate which consists of all real and personal property owned by an individual at the time of their death. Just as the old saying goes, “you can’t take money with you,” an individual’s estate is left behind and must be managed and distributed.
Estate planning refers to the process through which an individual plan for the transfer of assets upon their death. An estate plan’s goal is to preserve the maximum amount of the estate as possible for the intended beneficiaries and heirs after paying creditors and satisfying any tax liability. An estate plan generally employs wills and trusts to preserve and transfer estate assets to beneficiaries and heirs. State law governs the creation, administration, and disposition of wills, trusts, and estates.
Why Consider Estate Planning?
Estate planners do consider the implications of state and federal tax law when estate planning to minimize the tax liability of the estate and beneficiaries. The goal of estate planning is to preserve wealth so that it can be passed on to heirs and beneficiaries. Wills and trusts are the primary tools used in estate planning, although there are several other tools such as life insurance, advance directives and durable power of attorneys wills and trusts accomplish the bulk of the work. The strategies the estate planning lawyer uses depends on the individual preferences and circumstances of the person whose estate is being planned.
Many people do not have a plan regarding what should become of their estate when they die. The reason many do not prepare an estate plan rests on several factors. First, and perhaps most apparent, death and what should become of our worldly possessions are an uncomfortable topic most people who are among the living would rather not have.
A second reason most commonly found among individuals with children or other loved ones involves the sticky question of how to distribute their estate without starting a feud among those left behind.
Lastly, others who do not have an estate plan in place often point out the fact that estate planning is only for those with large estates. This misconception could not be further from the truth. Estate planning is valuable for estates of all sizes with many tools tailored explicitly for smaller estates.
What Services Does a Lexington Estate Planning Lawyer Offer?
Estate Planning provides a few simple goals which guide the entire process. The first goal of estate planning is to preserve wealth so that it can be passed on to heirs and beneficiaries. The second goal makes sure to honor the wishes of the estate planner after his or her death. To accomplish these goals, we rely on several tools that can achieve the purpose of preserving the estate and honoring the estate owner’s wishes.
There are four main tools used for estate planning:
A will is a legal document that provides instructions as to the division of a person’s property after death. Only a valid and final will can be legally binding. If a will is contested and found invalid, the author of the will is considered to have died intestate. When a person dies intestate, state law provides for intestate succession rules (the order of distribution in which an estate will distribute among heirs). In this case, a probate court will be required to oversee the process of allocating the estate.
Trusts provide a person with the option to place their property in the care of a third-party to be later given to a beneficiary. There are generally two types of trusts:
Inter Vivos Trust: A trust that the grantor creates to take effect while he or she is still alive.
Testamentary Trust: A trust grantor creates to take effect upon his or her death.
In the event of incapacity, the advanced directive includes a living will or a legal document that outlines a person’s wishes concerning medical treatments.
The type of estate planning tool used will depend on several circumstances that relate to a client’s preference and financial events. For example, a client who anticipates needing end of life care or long-term care would undoubtedly want to consider advance directives in their estate plan whereas individuals who have more complex estates involving multiple types of assets or complex family situations may benefit from a trust or other arrangement that can be modified easily.
Why Avoid Probate?
An important consideration in estate planning involves avoiding probate. Therefore, estate planners will try to plan an estate so that the probate court will administer none or as few as possible estate assets. Probate property includes all estate assets that pass through a will or intestacy. Non-probate property is anything not subject to a will or intestacy (property in joint tenancy, life insurance, payable at death accounts, Inter Vivos trusts, small estates (estates under a set valuation).
Call a Lexington Estate Planning Lawyer Today
Avoiding probate is a vital strategy to reduce the reduction of estate assets and avoid deviation from an estate planner’s wishes. An experienced estate planning lawyer can guide clients to determine if avoiding probate is an appropriate estate planning approach.
If you or your loved ones need estate planning, McCutchen McLean, LLC can offer experienced guidance for your estate. Call our Lexington office at (803) 271-0909.