Estate Planning
Estate planning is the careful consideration of a variety of usually complex legal and tax issues that affect the distribution of your estate after your death. The result may be a written plan that includes the potential valuation of your property, estate tax estimates and recommendations that may help protect the distribution of your estate. An estate plan also may recommend the establishment of trusts and a plan for charitable giving.
How does an Estate Plan Work?
Estate planning lets you know how much there is to leave your heirs. You decide how your estate is to be distributed and who is to be the executor of your estate. Proper estate planning helps keep the state or others from distributing your estate.
- You decide who receives shares of your assets.
- You decide how and when your beneficiaries will receive their inheritance.
- You decide who will manage your estate.
- You can reduce estate taxes and administrative expenses.
- You select a guardian for your children.
- You can provide for the orderly continuance or sale of a family business.
At the heart of implementing your estate planning is the will, a document written by an attorney that transfers the real estate and personal property you own at the time of your death to your heirs or those you designate. In addition you can create a trust, a written document that distributes your assets to your beneficiaries and helps to avoid probate at the time of your death. It also can help to reduce taxes.
It is also possible to reduce the size of your estate, and subsequently the tax liability of your estate, through gifting.
When should you consider estate planning?
A good rule of thumb is when you approach amassing real estate and personal property worth more than $2 million in 2006. A well-crafted estate plan is one way to help reduce federal taxes on estates of this size. Estates valued at $2 million or less in 2006 ($1.5 million or less for 2005) (with future increases) are free of federal estate taxation.