Dealing with the death or disability of a
loved one is difficult for families under any circumstances. However, without adequate preparation and by not
clearly communicating your wishes in
advance, you could inadvertently make difficult times even more trying for those left
Probate proceedings, estate taxes, business succession planning, and decisions
regarding the care and education of minor
children are just a few of the issues that
family members might have to deal with,
devoid of your input, should you die or
become disabled without an estate plan.
Setting aside the time to discuss the subject with your family and then drafting a
written plan can provide peace of mind for
Individuals with a total net worth of
$100,000 or more should have an estate
plan, says Eric Lodge, partner and head of
the Trusts, Estates and Probate Practice
Group with Procopio, Cory, Hargreaves &
Savitch LLP. Life insurance and equity are
two great causes for advance planning.
“Without estate planning documents
such as wills and trusts, executives lose
control over the situation, as does their
family, because the legal system will step in
and presume what might have been intended,” says Lodge.
Smart Business spoke with Lodge about
what executives should know about estate
planning and the steps they should take to
put their affairs in order.
What is estate planning?
Estate planning is the process of working
with clients to make choices about how
their estate and personal affairs will be
administered in the event of their death or
disability. An estate planning attorney will
incorporate tax savings techniques and
help executives specify how they want
their assets distributed and even how they
would like their remains handled.
What are the essential elements of a coherent estate plan?
Usually, the centerpiece of the estate plan is the living trust document. It directs who
will manage the estate and how the assets
are to be utilized. Within the document,
you can provide for a spouse and include
specialized provisions for dealing with the
financial needs of those caring for your
minor children. Also, an estate planning
attorney usually prepares a will that provides for the disposition of any assets that
are outside of the trust and nominates
guardians for minor children. The process
itself has value because couples can decide
their children’s guardians and they can discuss the responsibility with prospective
guardians in advance of the need.
Powers of attorney over both financial
matters and directives for medical wishes
will allow a representative that you name
to act on your wishes if you are unable to
do that for yourself.
In the event that there might be significant estate tax issues, an estate planner
can employ more sophisticated techniques
such as irrevocable life insurance trusts,
qualified real property trusts and charitable giving.
What are the most frequently overlooked
items when developing an estate plan?
Retirement plans, including IRAs and ERISA-regulated pension plans, and life
insurance are not automatically governed
by the trust document. They have their
own beneficiaries, so it’s important to
update them to be consistent with the overall estate plan. Also, estate planners cannot
effectively do their job in a vacuum, so it’s
important to present the total picture of
your wealth when planning. We like to
send out a questionnaire in advance so the
clients can come to the initial estate planning session prepared with all of their
Business owners frequently overlook the
need for succession planning. This is an
important part of the estate plan, which
includes dealing with the continuance of
the business after your death or disability
and providing the necessary funds to
replace you or to make other siblings
‘whole’ if the business is left to just one
What is the status of estate tax law reform?
The law provides that the first $2 million
is exempt from estate tax and an unlimited
amount can be left to a surviving spouse.
In 2009 the threshold on non-spousal
inheritance increases to $3.5 million. In
2010 the estate tax is repealed altogether,
and then in 2011 it returns with a $1 million tax-free limit.
Most experts are fairly confident that
before 2010 the repeal will be eliminated,
which means that estate taxes are probably here to stay. My advice is to stay in
touch with your estate planning attorney
because the current federal estate tax rate
is 45 percent, and minimizing this tax consequence might require revising the language and provisions in your trust document, depending upon what happens.
ERIC LODGE is partner and head of the Trusts, Estates and
Probate Practice Group with Procopio, Cory, Hargreaves &
Savitch LLP. Reach him at [email protected] or (760) 931-9700.
For more information, visit www.procopio.com.