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Tax & Assurance Guidance

Estate Planning: What is it, and Why do you need it?

Posted on July 14, 2015 by

Margaret Amsden

Margaret Amsden

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Estate Planning, What is it?

Estate Planning, as defined by Black’s Law Dictionary, is “That branch of the law which, in arranging a person’s property and estate, takes into account the laws of wills, taxes, insurance, property, and trust so as to gain maximum benefit of all laws while carrying out the person’s own wishes for the disposition of his property upon his death.”

This is a very broad definition and quickly identifies that there are many disciplines that need to be considered to make sure that the plan addresses all the issues. It also helps to point out that preparing and implementing a plan will likely require the services of:

  • A lawyer,
  • An accountant, and
  • An insurance and/or financial advisor.

Why do I need Estate Planning?

This question is also, generally, answered in the definition of estate planning. Estate planning assures that your wishes are carried out upon your death. This includes making sure that whoever you designate can:

  • Access and manage your assets,
  • Distribute your assets to your beneficiaries,
  • Avoid probate, and
  • Hold assets for beneficiaries that are minors.

A tax perspective:

From a tax perspective, it is generally the estate you leave upon your death that is subject to tax. As a result, an important part of estate planning is to minimize the tax burden on the estate, and as a result maximize what is left to your heirs. During this process it is also important to consider the mix of assets that will be held in your estate and plan for liquidity in the event that taxes will be due.

Implications before and after death:

In the process of addressing your estate plan, many of the documents that are put in place address legal decisions, medical decisions, and management of your assets during your life if you become incapacitated, as well as addressing these issues after your death. As a result, some of the tools that may be included in your estate plan are:

  • Durable Power of Attorney for Property
  • Durable Power of Attorney for health care/living will/advanced directive
  • Last will and Testament
  • Revocable Living Trust
  • Irrevocable Life Insurance Trust
  • Marital and/or Family Trust

This is not a full listing of the potential estate planning vehicles, but rather a list of some of the more commonly used documents.

Implications for international clients:

The planning described above is also applicable to individuals who are non-resident citizens, non-citizen residents, or are married to someone who is either a non-resident or a non-citizen. The rules are just a bit more complicated, and tax minimization takes more planning.

In conclusion, estate planning is:

  • Something that you need to do to provide for your family.
  • To do it well, you should develop a team of professionals to work with.
  • Your plan is never “done” but rather, should be revisited periodically to make sure that changes in your life circumstances and/or the tax laws are addressed.

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Margaret Amsden

Shareholder, Private Client Services

Margaret leads the firm’s private client services group as the point person for individual, estate and succession planning tax strategies.

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