Goals are important. Having a roadmap to achieve them is even more important.
Estate planning professionals often spend most of their time assisting clients with forming goals and developing structures to facilitate the achievement of them.
Estate planning goals typically fall into the following categories: legacy planning, decision making planning, and tax planning. All three categories are often interrelated, yet each has its own nuances which, as a whole, weave together to create a comprehensive estate plan.
General Goal: to provide for loved ones or charitable organizations after death.
Legacy creation begins through the investment of time, talent and treasure in the people, causes and institutions for which a person has developed an affinity during life. Legacy planning defines how this investment will survive the test of time. Estate planning tools, such as living trusts and irrevocable trusts, are often used to solidify a person’s concept of legacy when it comes to managing and distributing assets after death.
Decision Making Planning
General Goal: to appoint a trusted individual or organization to manage financial assets and make decisions during incapacity or after death.
Choosing a trusted individual or organization to serve as an agent during incapacity or as a fiduciary after death is a fundamental goal in the estate planning process. Individuals or organizations who are appointed as agents under powers of attorney or as fiduciaries in a will or trust should be chosen carefully and fully apprised of the principal’s goals.
General Goal: to minimize the impact of income and estate tax after death.
Individuals who have a net worth in excess of the applicable federal (and state) estate tax exemption amounts often set goals to minimize the impact of the estate tax at death through lifetime gifting and the use of value planning techniques.
Furthermore, goals pertaining to the minimization of income tax at death typically involve the utilization of the step-up in basis for highly appreciated assets and the proper structuring of income and capital gain distributions in trusts.
Establishing clear and personalized goals under each of the categories mentioned above provides the foundation for a comprehensive estate plan.