Effective Estate Planning

INTRODUCTION

WHAT MAKES AN "EFFECTIVE" ESTATE PLAN?

Estate planning is the arrangements of one's financial affairs through asset ownership and legal documents to provide for one's goals related to the management and disposition of one's estate^[1]. Your

estate planning goals might involve the desire to:

• Provide for your own care and benefit anytime you are incapacitated, without the need for

guardianship or conservatorship proceedings;

• Protect assets against lawsuits and other claims;

• Make sure that assets are transferred after your death to your intended beneficiaries;

• Reduce income taxes and reduce or eliminate gift, estate, and generation-skipping transfer

taxes;

• Reduce or eliminate the need for probate proceedings at death in order to reduce or eliminate

the related fees, costs, and delays;

• Coordinate business and retirement planning with other planning;

• Protect beneficiaries from mismanagement and from the claims of creditors and ex-spouses;

and/or

• Discourage or encourage certain types of conduct for family members. This memo outlines some of the tools that are available to accomplish your estate planning goals. Unfortunately, the accomplishment of some goals may make it more difficult to accomplish others. For example, sometimes the best planning for one's family objectives may actually increase transfer taxes or income taxes. Also, some of the best planning techniques can be complicated and even expensive to set up. Thus, estate planning is the art of balancing of competing objectives and the selection of estate planning tools that most effectively accomplish those goals.

1. BASIC ESTATE PLANNING GOALS AND TOOLS

1. Nontax Goals: A will or a living trust can accomplish many of your nontax objectives. First, you want to make sure that your assets are administered and distributed as you want. Second, you want to minimize the expenses and complications that can come with the administration of your estate.

(a) Will: A "last will and testament" is the document most frequently used to direct the disposition of one's estate at death. It is also used to designate a conservator or guardian for the testator (or person making the will) and for the testator's spouse and children. In most states, a will requires probate proceedings to be effective, and a will does little to provide for the management of one's estate during life. A will affects assets owned in the testator's name alone, and has no effect on property held in joint tenancy or on property for which there is a designated beneficiary.