What is Estate Planning?
While this designation is very recent, the concept of Estate Planning itself is not.
“Estate planning is a process involving the counsel of professional advisors who are familiar with your goals and concerns, your assets and how they are owned, and your family structure. It can involve the services of a variety of professionals, including your lawyer, accountant, financial planner, life insurance advisor, banker, and broker. Estate planning covers the transfer of property at death and a variety of other personal matters and may or may not involve tax planning. The core document most often associated with this process is your will. Estate planning also ensures that the estate will not be destroyed by taxes imposed on the transfer of assets at death.”1
How Estate Planning and Federal Estate Tax are Intertwined
The United States’ early beginnings of Estate Tax began when The Stamp Act of 1797 was enacted to fund the undeclared Naval “Quasi-War” with France between 1798-1800. “Most documents associated with an inheritance required an embossed revenue stamp, the cost of which was graduated according to the size of the inherited sum.”2 Over the years, it has evolved to more of what we know of today with the passage of The Revenue Act of 1916 to help fund WWI. The Revenue Act of 1924 added a gift tax with the same rate schedule as the estate tax. After another round of these Acts was repealed and reinstated, they were consolidated within the 1976 Tax Reform Act with more modifications to follow with the Revenue Act of 1978. Today, the federal estate tax exemption (the amount you can have and not pay a tax) is $11,700,000 per person. Few people have federal estate tax problems as a result. However, state estate tax exemptions are often lower, and they vary from state to state, which can be a tax for the unwary.
Moreover, the estate tax exemption, which has always been in flux, may change dramatically before the end of 2021 if Congress and the President signed into law a bill that the House has passed. That bill also makes many other significant changes to tactics used by lawyers to assist their clients in reducing estate tax bills. So if there was ever a time to speak with your attorney or financial advisor about estate tax planning, that time is now.
Why is Estate Planning Important?
“Estate planning is important for everyone, no matter their age or wealth. Estate planning avoids taxes and legal tie-ups and ensures funds are bequeathed as you wish. An estate plan elects the right people to take care of your kids and even you if you’re incapacitated.”3 Estate planning often involves the creation of powers of attorney and healthcare-related documents that avoid costly conservators or guardianships. Every person over the age of 18 should, at a minimum, have a power of attorney and an Advance Health Care Directive/Proxy/Living Will. Estate planning is the process of planning for the transfer of everything you own to those persons you want it to go to after you die and so much more. Wills and trusts are some of the documents used in estate planning, and it is essential that all means by which assets transfer at death work together to achieve your desired result. It can also include planning for or dealing with a disability. That coordination is critical and frequently overlooked. We know that estate planning is new to most people. The language and concepts may all be novel to you, and that is okay. Let us be your guide.
For those on a fixed budget, we also offer the ability to pay over time.
Estate Planning Documents
Many document solutions to common estate planning concerns include probate avoidance, asset preservation, legacy planning, estate tax planning, privacy planning, and charitable giving. Initially, the focus should be on the goal rather than the means (the legal document).
- Who are you trying to benefit?
- What are you trying to achieve?
These questions are often more critical than how (the document solution). Identifying your goals makes determining how to achieve them much less complicated. By taking the following steps, you will achieve your estate planning goals:
- get the facts
- make informed decisions
- organize your thoughts
- put them into motion
Be proactive and get your affairs in order. Clients often mention how relieved they feel once their planning documents are in place and that they have a relationship with an attorney that they, or their loved ones, can depend on in the future.
2(John R. Luckey, “A History of Federal Estate, Gift, and Generation-Skipping Taxes,” Congressional Research Service, at 3 (2003))
This article is for informational purposes only and shall not be construed as legal advice. No attorney-client relationship between the reader and Brennan & Rogers, PLLC, or its attorneys is intended. This article should not be used as a substitute for legal advice. Laws may vary from state to state, and the educational materials found in this article may not apply in all jurisdictions.
Brennan & Rogers, PLLC | 279 York Street, York, ME 03909 | 207-361-4680 | email@example.com