Effective Estate Planning: A New Era

by Judith Harris

Truth be told, effective estate planning for individuals is not all about the Will, and in current times, rarely has been.

The variety of personal and business assets owned by individuals, advancements in medical science resulting in longer lives, the ease of global travel and ownership of multiple homes, and noteworthy changes in tax law, require greater attention to detail and more careful planning by the attorney and the client in the estate planning process.

An attentive and experienced estate planning attorney will rely on financial and other information provided by you in drafting appropriate estate planning documents for the client.  At a minimum, these documents should include a Will, Financial Power of Attorney, Health Care Power of Attorney, and Advance Directive/Living Will.  They might also include one or more desired trusts or other strategic tax planning or wealth transfer documents.  Everyone who seeks an estate plan that carries out his or her wishes and minimizes tax should focus on the following considerations.

  1. Income Tax Planning is the new Estate Planning.  The Tax Cuts and Jobs Act (TCAJA) effective this year includes not only a historic increase of the Federal Estate and Gift Tax exemption to $11.18 million per person in 2018 but also notable changes to the income treatment of certain business and personal income and limitations on the availability of longstanding deductions.  These changes warrant careful consideration of current and projected income tax planning opportunities in the course of planning for one’s estate.
  2. Complete and accurate financial and other information provided by you is the basis for your Estate Planning Attorney’s advice and documents.  An experienced Estate Planning Attorney will typically ask you to complete a comprehensive financial and personal questionnaire prior to your meeting and will carefully review your completed document with you.  Your information is both critical to the tax and legal advice rendered and forms the basis for the advice and estate planning and other documents that follow.
  3. View your Estate Planning Attorney, Accountant, and Financial Advisor as a team.  Certain issues arising in the estate planning process warrant communication and analysis among your trusted advisors.
  4. Pay careful attention to the beneficiary designations you have in place for your Qualified Retirement Plans, IRAs, and Annuities.  A common misconception in estate planning is that qualified retirement plans, IRAs, and annuities are governed by one’s Will, rather than by one’s signed beneficiary designation form filed with the account custodian.  There is no substitute for your scrupulous recordkeeping and careful tax and legal analysis with your Attorney when planning for tax-qualified retirement plans and IRAs.
  5. Similarly, pay careful attention to understanding and updating the ownership and beneficiary designations of your Life Insurance policies.   Understand the tax and other consequences of such planning.  Careful planning can prevent unintended tax or other consequences. 
  6. Consider your current and future gifting objectives as to your family and charitable organizations when planning your estate.  Your estate planning attorney can provide strategic and tax recommendations as to the timing of certain gifts during your lifetime as opposed to after your death.  Careful planning in light of the TCAJA is critical.
  7. Plan for the proper treatment of Digital Assets in your Estate Plan.  A good estate plan should clearly address your wishes as to your intended beneficiaries of assets such as the files of the hard drive on your computer, photographs stored in the cloud or posted to social media sites, cryptocurrencies, popular digital storefronts such as eBay™ pages, and valuable web domains, for example.
  8.  Devote appropriate attention to your and your beneficiaries’ citizenship and residency status and planning for your out-of-state and international assets.  These assets might include interests in real estate or other non-liquid investments and bank accounts.  Review these with your attorney to understand not only the tax implications and residency issues that might accompany these assets, but also the planning and any tax saving opportunities available to you.
  9. Plan for and communicate your wishes as to your funeral or other disposition of your remains, and other special arrangements that might include religious or other specific services, memorials, or celebrations.  Your estate planning attorney will advise you as to applicable law in this area and how to ensure that your wishes will be honored.
  10. Understand the best practices of recordkeeping for you, your family, and your business.  An adept estate planning attorney will guide you and your family with practical and useful information to maintain that information necessary to support your estate and tax planning objectives.

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