Estate planning arranges for the transfer of an individual's estate at the time of death. An estate consists of all property owned at death before it is distributed by will, trust, or intestacy laws. An estate may contain both real property (real estate, including houses and investment properties) and personal property (all other property, including bank accounts, securities, jewelry and automobiles). Typically, the process of estate planning involves extensive consultation with a number of professional advisors, including lawyers, financial counselors, accountants and life insurance representatives.
Purpose of Estate Planning
Estate planning benefits those with large estates, as well as those with modest assets. Creating an estate plan ensures that all property will be distributed according to the personal wishes of the deceased, and that those who are benefiting from the estate receive the largest distribution possible with a minimum amount of delay. Specifically, estate planning allows an individual to decide exactly who will benefit from their estate, and to what extent. Estate planning also ensures that the estate will not be destroyed by taxes imposed on the transfer of assets at death. In addition to providing financial security, estate planning encourages individuals to make important decisions, such as appointing a guardian for minor children, choosing healthcare preferences, and securing funeral arrangements.
Estate Planning Tools
An estate plan is created to reach the specific goals of the estate owner. A number of tools may be utilized to ensure the best possible distribution of assets. The basic instruments used in estate planning are listed below. However, individual estate plans depend on the size of the estate, the number of beneficiaries, and the purpose of distributions.
- The Will. The most common estate planning instrument is the will. A will sets forth who will inherit what property. Additionally, wills often appoint a guardian for minor children or specify what funeral arrangements should be made at the time of death. All wills must pass through probate, which may be a lengthy and expensive process. As a result, the will's beneficiaries may not receive the entire share specified in the will, and there may be a considerable delay in the distribution of assets. In the absence of a will or other testamentary instrument, the state will distribute an individual's estate according to the laws of intestacy. Generally, under the intestacy system, assets are divided in a particular order, to provide for a surviving spouse, issue, parents or siblings.
- The Trust. A trust is an arrangement by which a trustee distributes payments or property to a beneficiary according to the terms of the trust. A beneficiary may be a family member, a friend, a charity or a pet. A trust may be created during the individual's life, or it may be created by will. A trust created by will transfers property to the trustee at the time of the individual's death. By creating a trust, the beneficiaries to the estate bypass the probate process.
- Health Care Directives. Health care directives ensure that an individual's medical wishes will be carried out when they become unable to make their own health care decisions. Health care directives include a health care declaration and a power of attorney for health care. Health care directives, also known as "living wills," set forth an individual's personal decisions regarding healthcare at the end of their lives. A power of attorney for health care gives a family member or friend control of all health care decisions leading up to the person's death.
- Financial Power of Attorney. Finally, a financial power of attorney appoints a third party to handle an individual's finances when they can no longer take care of their own financial affairs. A financial power of attorney may designate a friend, family member, or a trusted professional to fulfill this position.
August 28, 2008: Signed by President.
July 29, 2008: Became Public Law No: 110-289.
July 14, 2008: Became Public Law No: 110-275.
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McKinnis Cleveland State University Date Posted: June 03, 2013 Working Paper Series 184 downloads Incomplete Wills Michigan Law Review, Vol. 111, No. 8, 2013, San Diego Legal Studies Paper No. 13-118 Adam J. Hirsch University of San Diego Date Posted: June 01, 2013 Accepted Paper Series 30 downloads Editor's Notebook: Jones v. Kernott (2010) EWCA Civ 578; (2010) 1 W.L.R. 2401 (CA (Civ Div)) and Stack v. Dowden (2007) UKHL 17; (2007) 2 A.C. 432 (HL) Conveyancer & Property Lawyer, 87, 2011 Date Posted: June 01, 2013 Accepted Paper Series 5 downloads Valuing Fractional Interests in Art for Estate Tax Purposes Tax Notes, Vol. 139, No. 9, 2013 Wendy C. Gerzog University of Baltimore - School of Law Date Posted: May 31, 2013 Accepted Paper Series 81 downloads Federal Income and Wealth Transfer Taxation: What Happened and What Might Happen Next Estate Planning Developments for Texas Professionals, May 2013 Gerry W. Beyer and Robert L. 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Alain-Laurent Verbeke University of Leuven, Faculty of Law, Department of Private Law Date Posted: May 24, 2013 Working Paper Series 98 downloads La successiÃ³ intestada dels parents colÂ·laterals al Codi civil de Catalunya (The Intestate Succession of Collateral Relatives in the Catalan Civil Code) InDret, Vol. 2, 2013 Jaume Tarabal University of Barcelona Date Posted: May 19, 2013 Accepted Paper Series 5 downloads La ley aplicable a las sucesiones mortis causa en el Reglamento (UE) 650/2012 (The Applicable Law to Succession Upon Death in the New Regulation (EU) No. 650/2012) InDret, Vol. 2, 2013 Isabel RodrÃguez-UrÃa SuÃ¡rez Universidad de Santiago de Compostela Date Posted: May 19, 2013 Accepted Paper Series 11 downloads All Out of Chewing Gum: A Case for a More Coherent Limitations Period for ERISA Breach of Fiduciary Duty Claims University of Chicago Law Review, Vol. 81, 2014, Forthcoming Raphael Janove University of Chicago Law Review Date Posted: May 18, 2013 Last Revised: May 19, 2013 Reid K. Weisbord Rutgers Law School - Newark Date Posted: April 22, 2013 Accepted Paper Series 43 downloads Digital Planning: The Future of Elder Law NAELA Journal, Vol. 9, p. 135, 2013 Gerry W. Beyer and Naomi Cahn Texas Tech University School of Law and George Washington University - Law School Date Posted: April 18, 2013 Last Revised: May 03, 2013