Estate Planning FAQs

1. What is Estate Planning?
2. What Documents Are Part of an estate?
3. What Are Some Estate Planning Tools and Techniques? (part 1) (part 2)
4. What About A Revocable Trust?
5. I’ve Heard of an AB Trust, What Does That Do?
6. What are my Options if I Want an Irrevocable Trust?
7. What About Estate Taxes?
8. What About Other Fees and Costs?
9. My estate is Really Pretty Small Must I Still go Through Formal Probate?
10. What Does Estate Planning Cost?
Estate Planning Package

D. MARITAL DEDUCTION
The unlimited marital deduction is one of the most important deductions from the gross estate allowed in determining a decedent's taxable estate. This deduction is allowed for property that passes or has passed from the decedent to the surviving spouse and is part of the decedent's gross estate. The Internal Revenue Code gives married couples the opportunity to defer tax liability on the decedent's estate until the death of the surviving spouse. The statutory requirements for qualifying a transfer for the marital deduction are designed to ensure that the transferred property will be treated as owned by the surviving spouse for purposes of future imposition of estate and gift taxes when the property is later transferred by the surviving spouse.

An unconditional, outright transfer of property to a surviving spouse qualifies for the marital deduction, and is subject to relatively few requirements. Transfers to trusts, however, are restricted to ensure that the assets are included in the survivor's estate for tax purposes, even though the survivor is not the actual owner of the trust property. To qualify for the marital deduction, the transfer, whether outright or in trust, must meet specific requirements.

The law provides a statutory exception to the terminable interest rule for a qualified terminable interest property (QTIP) trust and the legal life estate equivalent. Under the exception, the surviving spouse must receive a life income interest, and the deceased spouse's executor must make an election causing the trust corpus to be included in the survivor's estate.

E. PENSIONS, RETIREMENT ACCOUNTS & INSURANCE POLICIES
These are estate assets that normally provide designated beneficiaries. Assets such as insurance policies, employee pensions, and retirement accounts all offer opportunities to designate beneficiaries to receive benefits or assets on the death of the asset holder. If you do not complete a beneficiary designation, the plan document or the policy will provide for a default beneficiary, which is usually either the client's estate or closest living relative. It is extremely important to review the client's beneficiary designations as part of the estate planning process. In some cases the beneficiary designations need to be changed, creating a coordinated estate plan.

F. ROTH IRA's
While Roth IRAs are "retirement plans," they are different from other retirement plans because post-tax dollars are contributed to the Roth IRA. IRC §408A(a). Neither the funds in the Roth IRA nor the distributions from it are subject to income tax.

G. JOINT TENANCY
Property held in joint tenancy is property that is owned in undivided equal shares by two or more persons. Both real and personal property may be held in joint tenancy. The most important feature of joint tenancy is the right of survivorship. The property passes immediately on death to the surviving joint tenant(s) by operation of law, thus avoiding probate proceedings and the attendant costs and delays in distribution inherent in probate administration. Even if probate administration is required to distribute other assets, joint tenancy property passes outside the provisions of a will.

The disadvantages of having property in joint tenancy are that property held in joint tenancy cannot be transferred by will or trust, and the intentions of a testator who does not understand this may be thwarted if the joint tenancy conflicts with the testamentary provisions in a will or trust.