Estate Planning FAQ

What should I bring to our first estate planning meeting?

• Full name and date of birth of husband and wife
  • Date of marriage
  • Mailing address
  • Telephone numbers
  • Email addresses
  • Name, age, and marital status of your children
  • List of each child's descendants
  • Name, address, and telephone number of your accountant
  • Name, address, and telephone number of your financial advisor
• List of assets and debts by category and estimated valueName, address, and telephone number of your financial advisor
  • For example, “Stocks and bonds - $____”
  • Another example, “Life insurance on husband - $____”
  • Another example, “20 acres of land in Wood County - $____”
  • Be sure to include life insurance, annuities, and retirement accounts
  • List long-term debts but not monthly expenses
  • Identify any assets that are your separate property
• List of your questions, concerns, and goals regarding estate planning
• Copy of your existing wills, trusts, and powers of attorney

How much does estate planning cost?

• The legal fee for consultation and planning is hourly. The fee for preparing estate planning documents is fixed, depending on the type of document. After our meeting, I will summarize our discussion and my recommendations in a letter that includes a list of the applicable document fees.

What are some important estate planning documents?

• Will: Acts as a "deed to property". Recorded ("probated") at death.
• Durable General Power of Attorney (During The Life): Authority to sign business documents. Includes a disability provision. Record or deliver to the agent.
• Medical Power of Attorney: Authority to sign medical consents. Deliver to doctor or children.
• Directive to Physicians (Living Will): Authority to withdraw life support. Deliver to doctor or children.
• Life Insurance: Consider amount, type, owner, and beneficiary. 
• Retirement Account and IRA: Spouse as primary beneficiary for rollover. Children as contingent beneficiaries for deferred payout. Perhaps charity as contingent beneficiary for tax-free payout. 
• Trusts: Useful for reducing estate tax, protecting from creditors, maintaining separate property, and providing professional management. 
• Nonprobate Property: Passes outside of the will (perhaps contrary to will). Examples are life insurance, retirement account, living trust, joint tenants with right of survivorship, payable on death accounts. 
• Property Agreement: Identifies separate vs. community property. Covers principal, income, and personal compensation. 
• Buy-Sell Agreement: Terminates co-ownership. Specifies a specific dollar amount and triggering event.
• Inventory of Property, List of Advisors, and Letter to Family

What are some popular techniques for avoiding estate tax?

Caution: Tax exemptions may be reduced substantially in 2026.

• Annual Gift Exclusion
  • Amount: $18,000/year/spouse/descendant
• Simple Will
  • All assets to spouse
  • Defers all tax until death of the second spouse
  • Avoids tax on up to $27 million per family
• Basic Trust Will
  • All assets to "income" trust for spouse
  • Assets then pass outright to children
  • Defers all tax until death of second spouse
  • Avoids tax on up to $27 million per family
• Super Tax-Planned Will
  • "Bypass" trust for spouse
  • Remaining property to "QTIP" trust for spouse
  • Then to lifetime trusts for children
  • Avoids tax at death of second spouse on $27 million
  • Also avoids tax at death of children on $27 million
• Life Insurance
  • Irrevocable trust as owner and beneficiary
  • Avoids tax on unlimited amount of life insurance
• Family Limited Partnership
  • Includes land, marketable securities, and other investments
  • Gifts of limited partnership interests while retaining personal control over investments
  • Results in a substantial discount in value for estate tax purposes
• Split Charitable Gift
  • Income to family and remainder to charity, or vice versa
  • Yields substantial tax benefits
  • Charity replaces IRS as partial recipient of the estate, further reducing tax burden
  • Caution: Tax exemptions may be reduced substantially in 2026

How did the Tax Act of 2017 affect estate planning?

• Estate tax: $13.6 million exemption / 40% tax
• Generation-skipping tax: $13.6 million exemption / 40% tax
• Gift tax: $13.6 million exemption / 40% tax
• Portability of spouse's unused estate tax exemption
• No portability of spouse's unused generation-skipping tax exemption
• Continued full step-up in basis at death
• Continued FLP and other valuation discounts
• Caution: Tax exemptions may be reduced substantially in 2026

What is a living trust?

• Revocable trust: Property transferred to trust during lifetime.
• Trustee and beneficiary: self during lifetime, then family or bank.
• Administration: Trustee rather than executor - little or no further transfer necessary at death.
• Advantages: Avoids or minimizes probate, protects against incapacity, provides greater confidentiality, probably less expensive overall.
• Disadvantages: Burden and expense prior to death, still need will for omitted property, still need transfers at death, no more tax benefits than testamentary trust.

What is a family-limited partnership?

• A family limited partnership is simply a limited partnership composed of members of your family. This type of partnership is often formed to own and manage valuable investments such as land, closely held stock, or marketable securities. Each spouse typically contributes his or her interest in those investments to the partnership, and gifts of limited partnership interests are then made to children or trusts for children. Both spouses may be general partners, and the children or trusts for the children are limited partners. The partnership usually provides substantial restrictions on removal of the general partner, withdrawal of any partner, transfer of any interest in the partnership, irregular or non-pro-rata distributions from the partnership, and dissolution of the partnership. A family limited partnership can serve as a substantial, but not complete, shield of assets inside the partnership from liabilities incurred outside the partnership. A family limited partnership can also serve to simplify or avoid probate of assets owned by the partnership. Furthermore, a family limited partnership can claim a substantial discount in value for gift and estate tax purposes. This valuation discount can significantly reduce estate tax, although the IRS often challenges the amount of discount.

How can assets be protected from potential creditors?

• Homestead: Urban (10 acres) or rural (200 acres).
• Personal effects: $100,000 per married couple.
• Spouse's separate property: Partition of community property.
• Retirement plan and IRA.
• Life insurance and annuities.
• Education accounts: Section 529 plans.
• Spendthrift trust: Irrevocable - not for the benefit of the grantor.
• Family limited partnership (FLP) or limited liability company (LLC) - protects “inside” assets from “outside” liabilities.
• Corporation - protects “outside” assets from “inside” liabilities.

Caution – These steps must be taken well prior to the claims of creditors.

What are some ways to make charitable gifts other than cash?

• Stocks And Bonds
  • Avoid capital
  • Deduction of FMV
  • Especially attractive during bull market
• Closely Held Corporate Stock
  • Avoid capital gain
  • Deduction of FMV Tax free redemption of stock
  • Use of corporate funds for personal charitable gift
• Real Estate
  • Avoid capital gain
  • Deduction of FMV All or undivided percentage
  • Outright gift or bargain sale
• Tangible Personal Property
  • Artworks, collections, equipment, etc.
  • Avoid capital gain Deduction of FMV if related use
  • Permanent or time-sharing
• IRA Or Other Retirement Plan
  • Beneficiary upon death
  • Avoid devastating combination of estate tax and income tax
  • Minimum cost to family
• Life Insurance
  • Owner or beneficiary
  • Deduction of CSV plus future premiums
  • Small current cost, large future benefit
• Bequest In Will
  • Maximum personal flexibility during lifetime
  • Specific property or percentage of estate
  • Estate tax free
• Remainder Interest In Residence Or Farm
  • Reserved personal use for life
  • Deduction of remainder interest
  • No current out-of-pocket cost
• Gift Annuity
  • Smaller payments than commercial annuity
  • Deduction of difference in value
  • Reduce capital gain
  • Income partially tax free
• Charitable Remainder Trust
  • Fixed income to family for life, then remainder passes to charity
  • Deduction of remainder interest
  • Avoid capital gain and achieve tax free sale of property
  • Income fully taxable
• Charitable Lead Trust
  • Fixed income to charity for years, then remainder returns to family
  • No income tax deduction, but large gift and estate tax deduction
  • Longer the term of years, larger the deduction
  • Gift of philanthropy to children and gift of estate to grandchildren
• Private Foundation
  • Charity controlled by family
  • Contributions tax deductible
  • Income tax exempt
  • Numerous administrative burdens and restrictions
• Community Foundation - Donor Advised Fund
  • Similar to a private foundation
  • Qualifies as public charity
  • No administrative burdens
  • Effective control, but no legally binding control