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About Estate Planning, Wills, and Trusts
What is estate planning?
Who needs estate planning?
What is involved in estate planning?
What property is included in your estate?
What is a last will and testament?
What is a revocable inter vivos trust?
To whom should I leave my property at my death?
Who should I designate as executor of my will or trustee of my trust?
What is a probate and how does it compare to a trust administration?
What is involved in a trust administration, and how does it compare with a probate?
What part of your estate is subject to estate taxes?
What other kinds of trusts are used in estate planning?
Does estate planning involve tax planning?
WHAT IS ESTATE PLANNING?
Estate planning is a process that you undertake in at least two steps.
The first step involves planning for the management and disposition
of your property both during your lifetime and after your death. The second
step involves planning for your own personal and health care in the event
that you are no longer able to care for yourself or manage your personal
and financial affairs.
Like many people, you may think that the process of planning your estate
means only the preparation of a last will and testament. But estate planning
is much more involved and encompasses the preparation of several documents.
Estate planning may involve financial, tax, medical, and business planning,
in addition to the preparation of a last will and testament.
The purpose of this document is to summarize the estate planning process
and what the process means to you.
WHO NEEDS ESTATE PLANNING?
Almost everyone, regardless of (1) the value of the property in
his or her estate, or (2) the variety of the property in his or
her estate, or (3) his or her marital status, or (4) his
or her parental status, needs estate planning. If your estate is small
and truly uncomplicated, your estate planning may only focus upon who
is to care for you upon your incapacity, who is to receive your property
after your death and, more importantly, who should be the guardian of
any of your children who are minors at your death. If your estate is larger,
you should be concerned not only with the foregoing, but also with the
different ways to preserve your property for your heirs. For example,
estate planning often involves planning to reduce or eliminate the amount
of estate taxes (also known as "death taxes" or “inheritance taxes”) which
otherwise might be payable on your death, and planning to protect property
for disabled beneficiaries.
Regardless of the size and complexity of your estate, or your marital
or parental status, you will want to designate who, in the event of
your incapacity, is to manage your affairs, to care for you, and to make
health care decisions for you or on your behalf. Therefore, in addition
to a last will and testament, you should also consider such options as
advance health care directives and durable powers of attorney for property/financial
affairs. BACK TO TOP
WHAT IS INVOLVED IN ESTATE PLANNING?
Generally, the form, variety, and complexity of the documents that comprise
your estate plan will depend upon your personal circumstances including
the nature, variety, value, and character of the assets you own along
with your particular needs and those of your beneficiaries. You will probably
want to minimize estate taxes and the costs involved in the administration
of your estate. During the estate planning process, you will need to address
a number of important questions, primary among which include (1)
the person(s) who will oversee the management and administration of your
estate should you become incapacitated, (2) the person(s) who will
receive your property upon your death, and (3) the manner in which
your property will be distributed to that/those person(s).
Depending upon
your particular circumstances, you should address the following issues:
- If you become unable to care for yourself, who will care of
you and make decisions regarding your medical needs?
- If you become unable to manage your business and financial affairs,
who will oversee and manage these affairs on your behalf during
your remaining lifetime?
- Who should be the guardian of any children who may be minors
at your death?
- How should you and your spouse hold legal title to your assets
(e.g., husband and wife, as joint tenants, or husband and wife as community
property with right of survivorship, or as the separate property of
one or the other of you)?
- Upon your death, who should administer your estate, i.e., who
should act as the Executor of your last will and testament or the Successor
Trustee of your trust?
- How can the federal estate and other taxes assessed against
the property of your estate be minimized or even eliminated while not
adversely affecting your other, non-tax objectives?
- How will your Executor or Successor Trustee pay estate taxes
and debts of your estate if any are due, i.e., from what sources will
your Executor or Successor Trustee have the liquidity with which to
pay your debts and taxes?
- How should your property be distributed to your beneficiaries
upon your death? Outright or in trust?
- Who should receive the proceeds of your life insurance or your
retirement benefits?
Is that person old enough to receive the proceeds outright, or will a guardianship be necessary for him or her? BACK TO TOP
WHAT PROPERTY IS INCLUDED IN YOUR ESTATE?
Your "estate" includes all of the property you own, including property that you may not use during your lifetime, such as the proceeds from an insurance policy that insures your life, or retirement plan proceeds remaining at your death. Your gross estate is the sum of the "fair market value" of each of the assets in your estate (before deducting for debts, mortgages, obligations, etc.).
Your gross estate includes all of the following assets:
Your tangible personal property (e.g., your tools, documents, papers, furniture, clothing, letters, photos, artwork, equipment, automobiles — generally anything that you can touch);
Your intangible personal property (e.g., cash held in bank accounts and other financial institutions, financial investments, retirement plans, insurance policies (except term policies), interests in family businesses, interests in general andlimited partnerships, royalties, copyrights, patents stock options — in short, anything of value that cannot be physically touched or held in your hands);
Your real property, or interests in real property that you own [i.e., your real property includes your right, title, and interest in your land, your home, and any rental real property (e.g., apartment building, commercial property, etc.) in which you hold an interest].
In general, "fair market value" of an asset may be thought of as its present value or the cost of purchasing that particular asset at the relevant time (i.e., the date of your death). As part of the estate planning process, you should create an inventory list of all of the property that you own (whether you hold title separately in your own name, or with another person or persons as joint tenants, or tenants in common, or in your trust, or as an interest in a partnership, etc.) and the approximate fair market value of the property. The value of your estate is important in determining whether, and to what extent, your estate will be taxed after your death and/or the resources or assets that you will have available to pay your medical and financial expenses in the event of your incapacity. The value of your estate is also important in determining what, if any, additional measures should be taken to minimize estate taxes upon your death. BACK TO TOP
WHAT IS A LAST WILL AND TESTAMENT?
A last will and testament is the legal document by which you identify those individuals (or charities) that are to receive your property and possessions on your death. These individuals and charities are commonly referred to as the beneficiaries under your last will and testament. In addition, within the provisions of your last will and testament, you nominate an Executor to be responsible for the proper administration of your estate and the disposition of your property to your intended beneficiaries. The Executor may be an individual or an institution. After your death, the person or entity you have nominated to be your Executor petitions the court to be appointed Executor of your estate. After being appointed, the Executor manages your estate’s financial affairs and ensures that your property is distributed in accordance with your wishes as indicated in the last will & testament.
Also, if you have young children, you may use the last will and testament to nominate a Guardian(s) for your children who are under 18 years at the time of your death and for whom a guardianship would be necessary (i.e., meaning that your children’s other parent is already deceased at
your death).
Warning! Great care must be taken when you execute (i.e., sign) your last will and testament. California law requires that you must follow certain steps to properly execute your will and testament. The failure to execute your last will and testament in the proper manner may invalidate the entire document — thereby frustrating your intentions with regard to the disposition of your property on your death! Indeed, the failure to execute one's last will and testament in the proper manner is one of the most common reasons for invalidating the last will and testament in its entirety. In addition, if you wish to make changes to your last will and testament — even changes that appear simple to you — you must do so in very precise ways else that particular change or even the entire document will be invalidated. BACK TO TOP
WHAT IS A REVOCABLE INTER VIVOS TRUST?
Generally, a revocable inter vivos trust (sometimes called a "revocable living trust") is a written agreement between the individual creating the trust (who is commonly known as a "Settlor," "Grantor," or "Trustor") and the person or institution that is to manage the assets held in trust (commonly known as the "Trustee"). The trust is established to provide that the assets held therein are to be for the lifetime benefit of the Settlor. The Trustee may be either an individual or a bank or trust company. Of course, you can serve as the Initial Trustee of a revocable living trust that you created. However, upon your incapacity or death, someone else "steps into the office of Trustee" and continues to manage your trust for your lifetime benefit (if you are still living) or the benefit of your beneficiaries (if you have died). Since the trust is revocable (i.e. amendable), you (in your capacity as the Settlor) can amend, modify, or revoke the provisions governing the trust at any time during your lifetime while you are competent. Moreover, during your lifetime, you are usually the sole beneficiary of the trust and are entitled to all of the income earned by the trust's assets. In addition, if needed, you are entitled to all of the trust assets themselves.
Under the terms of the trust agreement, the Trustee has the legal right to manage or control the property held in the trust. The Trustee has the responsibility to identify the persons or institutions ("beneficiaries") who are to receive income or principal. If you are the Initial Trustee, you have the power to manage the trust assets in the same manner and to the same degree that you would have been able to do before you established the trust (i.e., as Trustee, you can open and close bank/investment accounts, purchase real property, sell property, deal with the investment property, etc.). If the Trustee is someone other than the Settlor, the Trustee acts as a fiduciary and occupies a position of trust and confidence. The Trustee is subject to strict fiduciary responsibilities meaning that the Trustee is held to very high standards of performance in the management and control of the assets held in the trust. Usually, a Trustee (if s/he is not the person who established the trust) cannot use property for his/her own personal use, benefit, or self-interest. Instead, s/he must hold the trust property solely for the benefit of the beneficiaries of the trust.
A primary reason for establishing a revocable inter vivos trust is to avoid a probate of one's estate upon one's death. To the extent that one’s property is held in one’s trust, then those trust assets will not be subject to probate upon one’s death. But what does it mean to "hold one's property in trust"? With only a few exceptions, the legal titles to all of a Settlor's assets must be changed from the Settlor's name as an individual to the Trustee's name as Trustee of the revocable inter vivos trust before a probate of those assets can be avoided. For example, to change the ownership of real property from your name as an individual to yourself as Trustee, you must execute a grant deed with the following or substantially similar language:
GRANTOR: William Jones, a single man
HEREBY GRANTS TO:
GRANTOR: William Jones, Trustee of The William Jones 2006 Trust
Created UDT dated January 31, 2006
The legal title to other assets, such as those assets held in joint tenancy or which pass by a designation of a beneficiary (like the proceeds of a life insurance policy or a 401(k) plan), need not be transferred to the Trustee to avoid a probate of those assets. However, there may be very good reasons to sever the joint tenancy title to these assets and transfer one’s interest in that property to the Trustee. In addition, your trust could be the beneficiary of one’s life insurance policy or retirement plan, although with regard to retirement plans, great care is needed to avoid unintended income tax consequences when your trust is designated as the beneficiary thereunder.
Warning: A will and testament is still needed! It is important to remember that, even if you have a revocable living trust and even if most, if not all, of your property is to be held in your trust, you should still always execute a last will and testament that directs the Executor to transfer any property that is not in your trust at your death to the Trustee of your trust.
A will and testament that contains this direction is commonly referred to as a "pour-over" will because its primary purpose is to "pour-over" assets that are part of your probate estate into your trust so that all of your property is distributed in accordance with your wishes. However, if you have no will at the time of your death — even if your trust is in existence — you will be deemed to have died intestate (dying without a valid will and testament in effect). As a result, the assets that are not held in your trust at your death will be transferred to your heirs at law not to your trust and a probate of those assets may be necessary. The identities of your heirs at law are determined with reference to California law and not with reference to your trust. Therefore, it is quite likely that this occurrence will frustrate your goals and intentions regarding the distribution of your property at your death.
Another primary reason for establishing a revocable inter vivos trust is to avoid a conservatorship of your estate upon your incapacity. Upon your incapacity, the terms governing your trust provide that your assets will continued to be managed during your lifetime for your benefit by a Successor Trustee of your choosing, thereby avoiding a conservatorship of your estate. A conservatorship is a court-supervised proceeding in which the court appoints an individual to take care of your person and your property if you are unable to do so for yourself. A conservatorship is a very expensive, intrusive, and time-consuming process. However, there are advantages to a conservatorship. A conservatorship can prevent the abuse (financial or physical) of an incapacitated person. Sometimes, there is no other way to prevent such abuse other than to institute a conservatorship, especially when a person has no estate plan in place. While this is certainly useful, it is hoped that the need for a conservatorship can be avoided in the harmonious family by the use of a revocable inter vivos trust and accompanying documents, such as a durable power of attorney for property management and an advance health care directive. BACK TO TOP
TO WHOM SHOULD I LEAVE MY PROPERTY AT MY DEATH?
Regardless of whether you have executed only a last will and testament or a revocable inter vivos trust (and a "pour over" will), the primary purposes of your estate plan are to provide for the management of your property during your lifetime, to identify those persons or institutions who are to receive your property upon your death, and to determine how the property is to be distributed. The beneficiaries who are to receive your property must be clearly and accurately identified. Disputes often arise after an individual dies because the identities of the beneficiaries who are to receive his or her property, or the terms and conditions under which those beneficiaries are to receive property are unclear and ambiguous. Therefore, you must use great care to clearly indicate who is to receive your property upon your death, and the manner in which s/he is to receive such property (i.e. outright or in trust). Also, you should always keep in mind that your expectations regarding the natural order of deaths may not, in fact, occur (i.e., sometimes children die before their parents, etc.). Therefore, you should address those unpleasant, but reasonably foreseeable events to minimize disputes after your death. BACK TO TOP
WHO SHOULD I DESIGNATE AS EXECUTOR OF MY WILL OR TRUSTEE OF MY TRUST?
The Executor of a will and the Trustee of a revocable inter vivos trust serve almost identical functions. Both the Executor and the Trustee are responsible for paying the debts of the decedent, creating an inventory of the property s/he owned at death, and insuring that the decedent's wishes, as expressed in the will or revocable inter vivos trust, are fully implemented. Although the Executor is generally subject to direct court supervision, both the Executor and the Trustee have similar fiduciary responsibilities. For example, both a Trustee and an Executor must act for the benefit of the estate and beneficiaries named in the trust or will.
In most instances, the Settlor of his or her revocable inter vivos trust acts as the initial Trustee for as long as s/he is capable of doing so. Thus, the Settlor continues to manage and distribute trust assets for his or her own benefit. If you decide to establish a revocable inter vivos trust, the decision of whether to act as your own Trustee is your decision, made after consultation with your family and trusted advisors. However, if you become incapable of functioning as a Trustee (either due to your incapacity or death), your designated successor Trustee will assume the "office of Trustee" and act as Successor Trustee of your trust.
The persons who are often named as one’s Executors or successor Trustees include spouses, adult children, other trusted relatives, family friends, business associates, or financial institutions (banks or trust companies). When deciding on the person(s) to act as an Executor or a Trustee, take care to select someone who is responsible, well organized, and somewhat experienced in maintaining accounts and records. In addition, it is useful for an Executor or successor Trustee to have had business experience and to have acquired some basic knowledge about making investments. However, the most important requirement for this position is that the person has the ability to exercise good common sense. BACK TO TOP
WHAT IS A PROBATE AND HOW DOES IT COMPARE TO A TRUST ADMINISTRATION?
Many persons elect to use a revocable inter vivos trust instead of just a last will and testament primarily to avoid a probate of part or all of their estates upon their death. Probate is a court-supervised process that has as its ultimate goal the transfer of property from an individual who has died (the "decedent") to that individual's beneficiaries who are identified in his/her last will and testament or, if the decedent died without a last will and testament in place, to that decedent's heirs who are described and listed under California law. Administering a decedent's estate via the probate process does provide advantages over the administration of a revocable living trust upon one's death. However, most legal experts agree that administering a decedent's estate via the probate process is more problematic and costly than via the administration of a revocable living trust upon one's death. Generally, your "probate estate," which is a subset of your gross estate, consists of all of the following items of property:
a. All assets/accounts (either real property or personal property) held (by legal title) in your name alone (i.e., in your individual capacity);
b. An undivided one-half (?) interest in any property designated as your and your spouse’s community property;
c. Proceeds of insurance policies (owned by you and on which you are the insured) in which your estate is designated as the primary beneficiary or is the beneficiary by default;
d. Proceeds of annuity contracts (owned by you and on which you are the annuitant) in which your estate is designated as the primary beneficiary or is the beneficiary by default;
e. Proceeds of retirement plans (owned by you) in which your estate is designated as the primary beneficiary or is the beneficiary by default; and
f. Proceeds of any other "pay-on-death" asset that you own in which your estate is designated as the primary beneficiary or is the beneficiary by default.
Under current law, a formal probate of your estate is required if, upon your death, the cumulative fair market value of the property in your probate estate at the time of your death equals or exceeds $100,000. For purposes of this calculation, the gross fair market value of the property used to determine if a formal probate is necessary (i.e., you would not subtract your debts and mortgages from your property before determining if a formal probate of your estate would be necessary).
Your property may often be transferred without a probate proceeding. You may have owned a home, stock, and bank accounts in joint tenancy with another person(s) or in your trust, and owned life insurance insuring your life that entitled designated beneficiaries (other than your "estate") to the death benefits. None of these assets is subject to probate administration (i.e., probate of these assets is avoided). However, avoiding a probate of your estate does not mean that your property will automatically be transferred to your beneficiaries or heirs at no cost. Moreover, avoiding a probate of your estate does not mean that estate or other inheritance taxes will be avoided.
Avoiding probate: The advantages of a probate proceeding over the administration of a trust include quick resolution of disputes between beneficiaries. For example, if a dispute arises between beneficiaries or heirs of an estate regarding the distribution of a your property, the probate court is quite well-suited to resolve such disputes expeditiously and in accordance with well-defined rules. Another advantage of probate is the quick resolution of creditor’s claims. Creditors must file their claims against your estate (i.e., to collect on your debts that existed at the time of death) more quickly in the probate proceeding than when the estate passes via a trust administration or otherwise (i.e., Creditors generally have 4 months to file their claims versus one year or longer to file their claims when one’s estate passes via a trust).
The disadvantages of a probate proceeding over the administration of a trust upon one’s death include its public nature, its much higher cost, and the usually great delay in finalizing the administration of the decedent’s estate. Probate fees and expenses include (1) the cost of filing a Petition for Probate of your estate; (2) the compensation paid to the Executor of the estate, and (3) the compensation paid to the Attorney the Executor retains to assist him or her with the administration of the estate. Other expenses include fees paid to probate referees (a requirement of the court) to appraise the property in the probate estate.
Probate Filing Fees: Effective January 1, 2006, there is a uniform schedule of filing fees in proceedings related to probate matters, including the Petition for Probate. The Uniform Filing Fee for a Petition for Probate and related probate matters is as follows:
- $320 for a probate estate with property valued at less than $250,000
- $385 for a probate estate with property valued between $250,000 and $500,000
- $485 for a probate estate with property valued between $500,000 and $750,000
- $635 for a probate estate with property valued between $750,000 and $1,000,000
- $1,135 for a probate estate with property valued between $1,000,000 and $1,500,000
- $2,135 for a probate estate with property valued between $1,500,000 and $2,000,000
- $2,635 for a probate estate with property valued between $2,000,000 and $2,500,000
- $3,635 for a probate estate with property valued between $2,500,000 and $3,500,000
- $3,635 plus 0.2% of the amount in excess of $3,500,000
Fees to the Executor and Attorney for the Executor. The amount of compensation that is paid to the Executor of the Estate and his or her Attorney are governed by California law. In general, the probate fees paid to an Executor amount to about 2.5% of the gross value of the probate estate for ordinary services. The probate fees paid to the Executor’s Attorney amount to an additional 2.5% of the gross value of the probate estate for ordinary services.
For example, the Executor’s fees for his or her ordinary services to probate a decedent’s estate that consists of a home valued at $2,000,000, and cash, securities, and other property valued at 2,500,000 (for a total estate valued at $4,500,000), will amount to $58,000. The Attorney for the Executor will also receive an identical fee of $58,000 for his/her ordinary services. Therefore, the total probate fees for ordinary services to probate an estate of this size equal approximately $116,000.* Keep in mind that debts (including mortgages, consumer debt, taxes, etc.) are not considered when determining the size of the estate for the purpose of calculating compensation paid to the Executor and his/her Attorney. The example below illustrates how these fees are calculated.
Computation for fees to attorney for ordinary services:
(Same rate schedule applied to fees for Executor)
4% of the first $100,000 = $4,000
3% of the next $100,000 = $3,000
2% of the next $800,000 = $16,000
1% of the next $3,500,000 (1% of up to the next $9,000,000) = $35,000
Total statutory fee base estate of $4,500,000 = $58,000
Remember, the Executor of the Estate is entitled to the same payment, computed in the same manner. Probate Usually Takes Longer Than Trust Administration. Also, many probates are very lengthy, particularly when compared to the time required to administer the estate of a person who has created and funded a revocable inter vivos trust prior to his or her death. It is not unusual for a probate proceeding to last longer than 14 to 18 months after the death of the decedent! BACK TO TOP
WHAT IS INVOLVED IN A TRUST ADMINISTRATION,
AND HOW DOES IT COMPARE WITH A PROBATE?
As indicated above, many persons elect to use a revocable inter vivos trust instead of just a last will and testament so that they can avoid a probate of part or all of their estates upon their death. If the legal title to one's property is held by the Trustee of your trust, then the administration and distribution of that property upon your death is handled much more simply, much more quickly, and at much less expense than if that property had to be probated. A trust administration is NOT a court-supervised process. Yet its ultimate goal is also the transfer of property from an individual who has died (the "decedent") to that individual’s beneficiaries who are identified in his/her revocable living trust.
The advantages of a trust administration over a probate proceeding include a quicker distribution of the property to beneficiaries, its far more private nature due to no court supervision of the process (i.e., no proceedings in court), and a much less expensive manner of distributing property to beneficiaries.
The disadvantages of a trust administration over a probate proceeding include no court supervision of the process. If a dispute arises between beneficiaries regarding the distribution of your property, it is more difficult to resolve without resorting to the court for assistance. Another disadvantage is the longer period of time during which your creditors can file claims against the trust for payment of your debts. Generally, creditors have one year from your date of death to file claims against your trust (if there is no probate of your estate), whereas creditors have only 4 months to file a claim against an estate that is being probated.**
Costs to administer trust is much lower than probate. As indicated above, probate fees include the compensation paid to the Executor of the estate and the Attorney the Executor retains to assist him or her with the administration of the estate. Such compensation is fixed by law. By contrast, the fees to administer a trust, which include the fees paid to the Trustee and the Attorney the Trustee retains to assist with the trust administration are not set by law. Usually, these fees are paid with some reference to the actual amount of time needed to administer the trust. This often results in a much lower cost to the estate than if a probate were necessary.*** In addition, there are no court filing fees or fees paid to probate referees to appraise the property in the trust.
In general, the probate fees paid to an Executor amount to about 2.5% of the gross value of the probate estate for ordinary services. The probate fees paid to the Executor’s Attorney amount to an additional 2.5% of the gross value of the probate estate for ordinary services. Therefore, for ordinary services, up to 5.0% of the gross value of the probate estate may be paid in probate fees. By contrast, the fees to administer a trust with the same property at the same value are usually less than half as much as would be due were that property to be probated. BACK TO TOP]
WHAT PART OF YOUR ESTATE IS SUBJECT TO ESTATE TAXES?
Generally, your gross estate, is equal to the total fair market value of each asset that you own. Your taxable estate is equal to your gross estate less the total value of your debts at death. Your debts include a mortgage on a home, credit card debts, unsecured loans, income taxes, etc., and other deductions (e.g., administrative expenses, debts related to your last illness, etc.). Then, your net taxable estate is computed by subtracting from your taxable estate the value of all property that passes (at your death) to your spouse or to charity. Your net taxable estate is subject to estate taxes. BACK TO TOP
WHAT OTHER KINDS OF TRUSTS ARE USED IN ESTATE PLANNING?
Trusts serve a wide variety of needs in estate planning; they may be established for the benefit of a child, a disabled or incapacitated individual, a charity, or to minimize estate taxes upon death. Common examples of these types of trusts include special needs trusts, life insurance trusts, and charitable remainder trusts. All of these trusts are usually irrevocable trusts, which means that the provisions governing them cannot be changed nor can they be terminated at will. However, despite the requirement that these trusts must usually be irrevocable, there are often ways to provide some flexibility during the term of an irrevocable trust to deal with unexpected circumstances or changes
in law.
A life insurance trust allows for the organized management of the proceeds of a life insurance policy on the death of the insured. In addition, if a life insurance trust is properly created and operated, the proceeds of a life insurance policy that is held in the life insurance trust will not be included in the estate of the insured upon his/her death. Therefore, the proceeds will not be subject to any federal estate taxes. However, to avoid federal estate taxes, a life insurance trust must usually be irrevocable.
A special needs trust allows for property to be managed by a Trustee for the lifetime benefit of a disabled beneficiary. A primary advantage of this kind of trust is that the assets held in the trust will not prevent the disabled beneficiary from qualifying for benefits from various governmental benefits programs. Special needs trusts may be either irrevocable or revocable, depending on certain circumstances, especially the original ownership of the property held in the trust.
A charitable remainder trust allows for property to be managed for the lifetime benefit of a noncharitable beneficiary (spouse or children) with the assets remaining at the death of those beneficiaries being transferred to charity. A charitable remainder trust must almost always be irrevocable to avoid federal estate taxes. BACK TO TOP
DOES ESTATE PLANNING INVOLVE TAX PLANNING?
Often the creation of a will or a revocable inter vivos trust will involve substantial tax planning, particularly for larger estates. Estate planning generally focuses upon federal estate taxes, but also may encompass income, gift, generation-skipping, real property or qualified retirement plan taxes. Generally, federal estate taxes will be due when the total value of all the property in the estate equals or exceeds $2,000,000 (for the years 2006, 2007, and 2008). The surviving spouses of decedents who were married at the time of their deaths can elect to defer the estate taxes that would otherwise be due until their own deaths (i.e., this is the so-called “marital deduction"). Although proper planning can reduce or even eliminate these estate taxes, such planning usually must occur before death.
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