Estate Planning

Do You Think Your Estate Plan Is in Order?

Many people think that because they have an attorney and an accountant/CPA/EA they work with, the answer is yes. That may not be the case.

Many people know their estate plans are not in order but believe they are too busy and that they will get to their estate plan "when they have the time." If you have been saying that to yourself, please act now to put an estate plan in order.

Estate planning itself is a very broad topic and cannot be covered in full on a single page. Below are a few of the more important topics that may not be dealt with properly in many estate plans — including life insurance, long-term care insurance, and charitable planning. We're confident this will help you learn more about estate planning, and we hope you'll contact us to help put together a complete plan that covers not only your estate plan but also your asset protection and financial plan.

5 Essential Estate Planning Tools

There are millions of Americans who do not have their estate plans in order. Some think that a simple will is an estate plan — it isn't. If you have any amount of wealth (especially with a spouse and/or children), you really need each of the following:

Tool	Why You Want This
Will	Without it, the state decides who gets your assets at death, and the state decides who gets custody of your minor children.
Marital Trusts	Maximize estate tax exemptions, avoid costly probate (up to 4-10% of the entire estate), and protect certain assets from being counted against you for long-term care costs.
Irrevocable Life Insurance Trust (ILIT)	Life insurance proceeds pass to beneficiaries free of income tax and free of estate tax.
Durable Power of Attorney (DPA)	Legal powers let someone act on your behalf if you become incapacitated (pay bills, manage IRAs, sell stocks); medical powers let someone make healthcare decisions on your behalf.
Family Limited Partnership (FLP)	Helps protect assets from creditors and reduce gift and estate taxes when transferring assets to family members.

Family Limited Partnerships

It's remarkable how few people who could benefit from an FLP actually have one. FLPs aren't a primary estate planning tool — that's your will and marital trusts — but they can nicely supplement an estate plan and save your heirs sometimes millions of dollars in estate taxes when done correctly. FLPs are also a vital tool for protecting wealth from creditors: assets owned in your own name are subject to creditors, while assets owned by a properly set-up FLP generally are not.

If you have an estate of $1,000,000 or more, you're probably a candidate to use an FLP for asset protection purposes. If you have an estate of $10,000,000 or more (including proceeds from life insurance contracts not owned by an ILIT), you're a candidate to use an FLP for both asset protection and estate planning purposes.

Advanced Estate Planning Tools

There are a number of other estate planning tools used in larger estate plans. The list below isn't exhaustive, but it's meant to introduce the topics and lingo so you know they exist when talking with our firm about your estate plan.

Intentionally Defective Grantor Trust (IDGT). Like a GRAT (below), an IDGT is used to pass wealth to your heirs and avoid estate taxes. It freezes the value of an appreciating asset for estate tax purposes — important for a closely held business appreciating quickly. For many affluent clients, an IDGT is a common way to shift wealth outside of the estate, often paired with discounted FLP or LLC structures to amplify the benefit. If your estate is worth more than $10 million, an IDGT is likely worth exploring.

"Freeze" Partnerships. Not a well-known tool, but one of our favorites. A freeze partnership seeks the same benefits as a GRAT with more flexibility — shifting the appreciation of a highly appreciating asset (stocks or real estate) to the next generation without gift or estate taxes. It can also significantly increase the discounts on a limited partnership, and when done properly, the total discount on certain structures can reach as high as 90% — powerful when shifting millions of dollars out of an estate in a short period.

Grantor Retained Annuity Trust (GRAT). An irrevocable trust where the grantor gifts money to the GRAT but retains the right to receive an annuity payment for a specified period. It relies on discounts in the value of the asset in the GRAT and several other factors. It can be a viable way to shift highly appreciating assets out of an estate at a discount, though the structure is complex.

Qualified Personal Residence Trust (QPRT). Another freeze technique — a parent transfers a personal residence into a QPRT for the benefit of the children, while retaining the right to use the home for a specified term of years. This lets a parent substantially discount the value of the gift made to the children and removes all post-gift appreciation in the value of the residence from the parents' estate.

Information provided is not intended as tax or legal advice and should not be relied on as such. You are encouraged to seek tax or legal advice from an independent professional.

Charitable Planning

Charitable giving can be a terrific estate planning tool — and it doesn't have to be purely charity-focused. Done well, it can increase your discretionary income, reduce or eliminate income, capital gains, and estate taxes, provide a tax-free inheritance for your heirs, and leave a lasting family and social legacy. See the Tax Planning page for how a Charitable Gift Annuity puts these pieces together.

What Actually Happens Without a Plan

When someone dies without a will, state law — not their own wishes — decides who inherits what. That process is called intestate succession, and it follows a fixed formula that has nothing to do with your actual relationships or intentions. A blended family, an estranged relative, a close friend who was never legally family, a charity you cared about — none of that is accounted for. The state's formula also determines who gets custody of minor children if both parents are gone, which is reason enough on its own for any parent to have at least a basic will in place.

Even with a will, an estate without powers of attorney or a living trust in place typically has to go through probate — a public, court-supervised process for validating the will and distributing assets. Probate takes time (often many months, sometimes longer), costs money (a meaningful percentage of the estate, paid to attorneys and court fees), and is a matter of public record — anyone can look up what you owned and who inherited it. A properly structured trust is one of the primary tools used to avoid probate entirely.

How Often Should an Estate Plan Be Reviewed?

An estate plan isn't a document you sign once and forget about. I recommend revisiting it after any major life event — a marriage, divorce, birth, death in the family, a significant change in net worth, or a move to a different state, since estate laws vary meaningfully from state to state. Even without a major life event, a periodic review every few years is worth doing simply because tax laws change, and a plan built around the rules from a decade ago may no longer be structured in the most effective way.

Frequently Asked Questions