Many people think that estate planning is only for the wealthy. The fact is that everyone needs some form of planning, but the degree of sophistication of the planning is dependent upon wealth, family situations, and many other factors. As we go about our daily financial business, we all make estate planning decisions, although most of us never think of these decisions in the context of "estate planning." For example, when you open a savings account and make a decision that the title to the account should be held in joint tenancy form, you have made an estate planning decision because the manner of holding title to that account affects who has the right to withdraw funds from the account (any joint tenant) and who receives the proceeds of the account at death (the surviving joint tenant or joint tenants). There is no "definition" of estate planning. Most people think of estate planning as preparing a will. While preparation of a will often is a part of the estate planning process, it is only a part. Most professionals who work in the estate planning field consider estate planning to be planning for the disposition of wealth, both during lifetime and at death, in a manner which will achieve personal objectives and the minimization of taxes and expenses. Achieving your personal objectives may be very simple or very complex. A single individual with no family may be committed to a charitable organization such as The Leukemia & Lymphoma Society and may desire to leave all of his property to The Leukemia & Lymphoma Society. This individual need not be concerned with such concepts as who will act as the guardian for his minor children, who will manage his children's money during their minority, and at what ages should the children begin to receive funds. Because all transfers of property at death to recognized charitable organizations are free of estate tax, death taxes do not affect the estate plan, and estate planning for this individual may consist of nothing more than the preparation of a simple will leaving his entire estate to The Leukemia & Lymphoma Society. If the individual is a married woman with minor children, there are numerous considerations that enter the estate planning process. In addition to those mentioned above, she must consider how property should be left to her husband, how to pay for her children's private education, how to provide flexibility for unanticipated circumstances such as significant medical expenses for one member of the family, how to provide financial protection for aging parents, and how to deal with all of the other problems that she may encounter as part of a family unit whose personal and financial health is her responsibility. Two questions often asked are "How do I begin the estate planning process?" and "Who will help me accomplish my goals?" The way to begin the estate planning process is to make up your mind to do so. Because estate planning generally is associated with death, it is a distasteful subject for most of us to deal with without some external stimulant. For example, a close friend dies of a heart attack while playing tennis. A relative or close friend is afflicted with a lingering, fatal illness. You see the difficulties that the families have in dealing with making medical decisions, transacting business while the individual is not capable of doing so, and protecting the person's property from medical expenses. You suddenly realize that everyone is mortal and the same thing could happen to you. Stimuli such as these often prompt people to look at their own situations with a view toward trying to prevent some of the difficulties that they see others encountering. Surprisingly, the estate planning process is not painful, it generally is not complex, and it usually is not very expensive in relationship to the benefits obtained. So the first step is to make up your mind that you would like to begin. Getting the proper help to accomplish your estate planning goals is important. The typical "estate planning team" includes an attorney who specializes in estate planning matters, a certified public accountant, a life insurance professional, and perhaps a trust officer and an investment adviser. Not all of these individuals need to be involved in all cases. Again, the complexity of the situation dictates the degree of professional help that is needed. It is not a good idea to rely on real estate brokers, bank tellers, stockbrokers and other individuals who have not been trained to deal with estate planning matters. Although these individuals may be highly skilled in their respective professions, they often do not realize all of the ramifications of holding title to assets in particular ways, and certainly they have not been trained to deal with integrating the particular assets with which they deal in an overall plan that concerns you. It goes without saying that any estate planning tips that you may receive at the hairdresser or tennis club should be taken with a grain of salt. While these "tips" may be valid and may be based upon sound professional advice, you may not get all of the ramifications of the particular "tip", and you probably will not have the "tip" integrated into your particular situation. What is good for one individual may or may not be good for another. The easiest way to find estate planning professionals is to ask relatives, friends and business associates for referrals. Although most people procrastinate beginning the estate planning process, many do not, and almost everyone will know someone who has gone through the process and who can recommend a qualified professional. Often it is only necessary to get a recommendation for one professional, and if you feel comfortable with him or her, he or she may recommend other qualified professionals if it is appropriate to involve several professionals in your particular plan. If you do not know anyone who can recommend a professional, local bar associations will give you the names of several attorneys who specialize in the field. You can interview these attorneys, usually without charge, and you can choose the one with whom you feel the most comfortable. Although the estate planning process is concerned with such mundane concepts as saving estate taxes and minimizing income taxes, it is a very personal process because the heart of any good estate plan is the "people concerns." By this term I mean your concerns about whether leaving your children money will stifle their incentive to pursue their educations, whether it is appropriate to treat one child differently from another, and how to deal with certain societal problems such as drug and alcohol abuse as they affect the disposition of your property to one or more members of your family. All of these areas should be and are discussed during the estate planning process, and it is important that you believe that the professional with whom you are dealing sees these matters as important, and that you feel comfortable in discussing these matters with him or her so that he or she can advise you of the different methods for dealing with these problems. Ultimately, most of these decisions are so personal that you will have to make them yourself, but an experienced and knowledgeable professional can give you valuable input as to what choices are available, how others have dealt with the problems, and he or she can integrate the solutions to these problems into the entire plan. While you are finding the estate planning professionals, you can take some steps to minimize the cost of estate planning: 1. You should make a list of the names and birthdays of the members of your family for whom you wish to provide. You should list all of your assets and how title to the assets is held. For example, if you are married, the deed to your home probably is held in joint tenancy form or as community property. In addition to real property, be sure to list bank accounts, certificates of deposit, stocks and bonds, partnership interests, and furniture, furnishings and artwork of significant value, such as antiques. 2. List all of your life insurance policies, with the company and policy number, the owner of the policy, the beneficiary of the policy, the face amount of the policy (how much the proceeds will be at death), and the annual premiums. 3. List the amount of your interest in all qualified retirement benefits such as pension plans, profit sharing plans, individual retirement accounts (IRAs), 401(k) and Keogh plans. In addition, you should list the beneficiaries and any options that are available for payment of the benefits (i.e., lump sum, installments, an annuity, etc.). 4. If you are the beneficiary of a trust, you should indicate that fact and have a copy of the trust. If you expect to inherit funds from parents or other relatives, and the inheritance will be significant in relationship to your own assets, you should indicate from whom the property will be inherited and approximately how much the inheritance will be. 5. If you are married and have minor children (under age 18), you should give some thought as to who will be the guardian of the person of the minor children if both of you die. The guardian of the person is the individual or individuals who bring up the child, and in effect, act as the substitute parent. 6. If you believe that your children are too young to receive what you might leave to them outright, or if they are not responsible managers of money, you should consider who you would like to act as a trustee to manage the children's property. A trustee's function is to manage the property and make distributions to the beneficiaries in accordance with the terms of the will and trust. Although the guardian of the person of minor children may be the same as the trustee of the children's funds, they do not have to be the same. You should choose a guardian of the person for the individual's ability to raise your children, instill values in them, and generally to perform parental functions. The trustee is more concerned with the investment of the funds than with the personal aspects of raising children. Although you will have lengthy discussions with the estate planning professional about who to choose to fill these positions, you will save time and money if you begin thinking about the issues prior to the meeting. For more information or to receive our free fact-filled brochure "Planning Your Bequest," click here. |
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Paul N. Frimmer is a partner in the Los Angeles and Newport Beach, CA offices of the law firm of Irell & Manella, LLP. The head of the firm's Personal Planning workgroup, Mr. Frimmer specializes in estate planning, wills and trust, probate and trust administration, postmortem tax planning, probate litigation, charitable giving, and tax issues relating to these matters. 
