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Estate Planning: From Basic to More Complex and In Between

Candise Holmlund, CFA, CFP®, TEP, Senior Consultant, Partner | Brett Sampiere, Wealth Management Associate | July 28, 2016


Estate planning isn’t glamorous but it is necessary for everyone to think about – not just the wealthy. From protecting your loved ones in the face of unexpected illness or death to efficiently and effectively implementing a multi-generational wealth transfer plan; designing, executing, and monitoring an overall strategy with a financial professional is an important goal for everyone.

So, that being said, let’s look at an overview from those just starting out through those with substantial assets and everything in between. First, what are the most basic, necessary estate planning documents that everyone needs?

Estate Planning Necessities

Everyone, including young adults heading off to college and those just starting out, need at least a few simple documents. The most basic of these is a will. A will does a variety of things but in short is a legal document that ensures your assets are passed down as you wish without having to go through probate. You will need to make sure you have beneficiary designations on your bank or brokerage accounts and that the assets remaining without those designations that are directed by your will do not exceed $150,000. In your will, you need to name an executor who will oversee the distribution of your assets, and if you have minor children name a guardian. A will is sufficient for those with “simple” financial situations and no complicated wishes about how their assets are passed. For those with moderate assets and more complex wishes about how these assets are distributed, a trust may be beneficial. For those with relatively simple situations, but who own a home, a third option is available. A TOD Grant Deed is used when you own a property but have relatively few other assets. The TOD designation on the deed allows the property to transfer on the death of the owner without going through probate. Certain restrictions and requirements apply which have to be carefully followed in order to make sure the TOD is valid. To read more about TOD Grant Deed and other common trusts click here.

With a will in place the next step is durable powers of attorney for both medical and financial situations. A “power of attorney” is a legal document that gives the person you choose the power to act in your place. The word “durable” means that this document stays in effect if you become incapacitated. By instituting a durable power of attorney for both finances and healthcare, you will have a designated person in place to take care of financial and medical issues that need to be attended to if you are unable to do so yourself. You will need a HIPAA waiver in addition to the healthcare power of attorney in order to allow the designated person to view otherwise confidential medical records.

Links for further reading:

Many professionals exist that will do a “college package” at a reduced rate for their clients. Please contact Weatherly if you would like a referral to one of these professionals.

Moderate Wealth and Planning

What about those that have accumulated some assets or moderate wealth? Remember estate planning is about really two things; control and tax savings. Control over the disposition of your assets; how, when, and to whom at the forefront of most concerns.  If you have children or special circumstances in your family, more than likely you would benefit from the use of a trust to outline your wishes.   Tax savings, specifically estate tax savings, comes into play for those above the lifetime gift tax exemption, currently set at $5,450,000 per person for 2016. This amount can however be changed by the legislature at any time. As an illustration, Hillary Clinton has proposed a reduction to $1,000,000 or potentially less per person.

Additionally, if you do not have a plan for your assets, the state and federal governments do. It’s called probate. Not only is probate time consuming and expensive, it is publicly available information.

Some issues to further address specific to those currently under the lifetime gift tax exemption in their total net worth are the use of portability, the risk of potential future changes to the exemption amount, strategies related to income tax planning or utilizing a step-up in basis at death particularly for low cost basis or high capital gain items, strategies for passing on real property or business succession, and maintaining some flexibility of options for the future. Additional considerations are asset protection usually related to creditors, high risk professions, and spendthrift beneficiaries.  This is the first in a series and future articles will address several of these topics in greater detail.

Links for further reading:

Portability example:
Basis Planning:

High Net Worth Planning

For those with estates over the lifetime gift tax exemption amount, currently $5,450,000 per person or $10,900,000 for a couple, planning becomes even more critical. In addition to the above strategies more specialized options come into play and the analysis focusing on the client’s lifetime need for funds, the state of residence (death tax issues), Generation Skipping Tax (GST), the differential between estate tax vs. income tax rates, and the desire to maintain flexibility dictate which strategies to utilize. Strategies involve the use of specific trusts or entities such as Family Limited Partnerships (FLP), Irrevocable Life Insurance Trusts (ILIT), and Charitable Remainder or Charitable Lead Trusts (CRT, CLT) for those charitably inclined.  Qualified Personal Residence Trusts (QPRT) can be utilized for primary or vacation homes.  Given current interest rates are still low; Grantor Retained Annuity Trusts (GRAT), Family Loans, or loans to a trust, if structured properly can be advantageous. Irrevocable Trusts can be used to gift assets during your lifetime and can allow continued control, protection from spendthrifts or divorce of beneficiaries, as well as some tax advantages.  In each of these options trust administrative burdens should be considered.

Moreover circumstances that would call for additional provisions in planning would be: dynamics related to blended families, a second marriage later in life where each has prior assets (QTIP), addiction or spendthrift concerns of beneficiaries. Each of these areas can be complex and require professionals that are well versed in the issues and options available. Weatherly has expertise in each of these and works with a network of estate planning professionals in executing these strategies for our clients.

Links for further reading:

State death tax:
Overview of Trust Types: 

** The information provided should not be interpreted as a recommendation, no aspects of your individual financial situation were considered. Always consult a financial professional before implementing any strategies derived from the information above.