Estate planning

With families huddled together, many memorable moments are being shared. Among the laughs and pleasant recollections, the topic of family estate and legacy planning may inevitably come up. It shouldn't be unpleasant or neglected--all families go through transition, and it's best to address these issues honestly and coherently. Here are a few FAQs on estate planning.

1) Why is an estate plan important?
Your estate could potentially dissipate due to taxes and other transfer costs. An effective estate plan reduces estate taxes and probate costs, and enables you to leave a legacy to those important to you.

2) What are the benefits of an effective estate plan?
- Competent asset management in the event of disability.
- Efficient distribution of estate to beneficiaries.
- Reduction of transfer costs and probate costs.
- Asset preservation.
- Maximize tax exemptions.
- Gifting.

3) What transfer costs will your heirs incur?
- Estate tax.
- Gift tax.
- Inheritance tax.
- Income taxes on annuities and qualified retirement accounts.
- Generation-skipping transfer tax.
- Probate costs.
- Professional legal and accounting fees.

4) What are the components of a basic estate plan?
- Unlimited marital deduction.
- Will.
- Credit shelter trust (exclusion amount).
- Living will.
- Durable power of attorney.

5) What can be done to reduce an estate tax liability?
A lifetime gifting program can reduce the size of your estate.

6) What is an ILIT, and what are the benefits?
An irrevocable living insurance trust is created to establish ownership of a life insurance policy such that the proceeds received by the trust are not subject to estate or income taxes upon death of the insured. An ILIT takes advantage of the gifting exclusion and generation-skipping transfer tax exemption, and provides the beneficiaries protection from creditors.

7) What is a Dynasty Trust?
A dynasty trust is an ILIT that can provide protection from estate, gift, and generation-skipping transfer taxes when children and grandchildren die.

8) What other types of ILITs are there?
Spousal ILIT, Single-life spousal ILIT, Survivorship spousal ILIT, Sale to a grantor trust.

9) What options do you have for charitable giving?
Gifts to charity, a charitable remainder trust, wealth replacement trust, charitable lead trust, private foundation.

10) What options are there for estate planning for a family business?
A limited partnership and limited liability company can be integrated into an estate plan to reduce gift and estate taxes, while enabling a successful transition to the next generation. A grantor retained annuity trust can be used to transfer stock, while a qualified personal residence trust can be used to transfer a home into the trust.

11) Who should be part of your team of advisors for effective estate planning?
- Estate attorney
- CPA accountant
- Financial advisor
- Life insurance agent
- Trust officer

Please consult with your team of professional advisors when setting up an estate plan.