In Chapter 3 of Introduction to Estate Planning: A Course for Consumers, we discussed identifying estate planning goals and objectives. The client's (your) goals are analyzed by the estate planning attorney and client to set the direction of the client's estate plan.
Here in Chapter 4 we review the basic components of every estate plan. These components are considered in every client's plan in some form. As you read the components, ask whether these have been considered in your existing plan and how you know that. Making sure these are all covered in critical in having a current estate plan.
To preview future chapters, in Chapter 5, we will cover the specific steps to follow to identify and locate a qualified estate planning specialist to work with, so stay tuned.Also, in future chapters we will cover estate planning details and specific strategies.
1. The Testamentary Component:
The testamentary component addresses where property or assets go and how they are handled upon the death of the client. There are numerous ways to address this component using wills and/or trusts which we will cover in future chapters.
2. The Disability Component:
This component addresses who will make decisions (both financial and health care) for the client after the client's incapacity. In this component there is also focus on the client's specific wishes about care at the end of life.
3. The Titling Component:
The titling component focuses on how the client's property and assets are titled and how beneficiary designations are structured. This is critical because the estate plan can be defeated if property is improperly titled or if beneficiary designations have money going contrary to the estate plan.
4. The Probate Component:
This component analyzes the probate impact to the client, family and property of various estate planning and titling options. For example, if the client owns a vacation home in a different state, failing to address that could result in a two state probate process.
5. The Tax Component:
The tax component focuses on the income, gift and estate tax impact of the estate plan and titling options the client is considering. For example, as we will see in future chapters, since the estate tax exemption is $5,340,000 for 2014, clients have greater freedom to plan their estates without worrying about the federal estate tax. However, since Congress frequently changes these exemptions, this component requires a continuing look by every client.
Since every client situation is unique, how these five components are addressed will vary between clients. Still, every client will review all five of these components in the design and implementation of their estate plan.
In Chapter 5 of Introduction to Estate Planning: A Course for Consumers, we will focus on how to choose a qualified estate planning specialist. Picking the right estate planning attorney is another fundamental building block of each client's estate plan.
As always, thank you for your questions and comments which are welcome.
