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"It's Not Just About Death and Taxes": Estate Planning as Lifetime Planning

When many people consider the concept of estate planning, two words generally leap to mind - death and taxes. While basic estate planning includes planning for the disposition of assets at death and minimizing estate taxes, a comprehensive estate plans takes a much broader approach, addressing a variety of personal and business issues along a time continuum beginning today and continuing well beyond one's lifetime. In other words, estate planning is not just about planning for death, but planning for the rest of one's life and for those who will survive you.

One way to view estate planning is that is an important piece in an individual's or family's "life puzzle". The other pieces in that puzzle include retirement planning, asset protection, college planning, financial/investment planning, life and disability insurance planning, business succession planning, tax planning, and long term care planning. In order to complete the puzzle, all of the pieces must be accounted for and, more importantly, they have to be coordinated with one another - they cannot just be thrown together. While different professionals provide expertise in each of these areas, it often falls to the estate planning attorney to put the pieces in the right places and ensure that they are all working together in sync. One cannot address each of these issues in isolation as each one impacts all of the others. Without someone keeping on the eye on the big picture, work done addressing one goal (for example, minimizing estate taxes) can have a negative impact on another goal (ensuring a steady retirement income). Does this mean that a client needs to hire an estate planning attorney who is an expert in all these other disciplines? No, but it does require an attorney who is knowledgeable in these other areas, who is good at spotting potential issues and conflicts, and who knows and works well with other professionals such as accountants, insurance advisors, financial planners, and other attorneys.

Another approach to estate planning is to view it over a long timeline, beginning during one's lifetime and continuing beyond one's lifetime. While one does need to make decisions about the disposition of assets at death, the transfer of assets during one lifetime is equally as important. The benefits to lifetime planning are both tangible and intangible. Tangible benefits might include from a tax perspective the ability to remove assets from one's estate at today's value (which in many cases can be discounted for tax purposes) and allow all future appreciation in the assets to occur outside the estate. This benefit is particularly beneficial for the balance of 2011 and for 2012 as the lifetime federal gift tax exemption is $5 million until the end of next year. Coupled with historically low interest rates which have a favorable impact on many types of gifts, there is no better time than right now to make lifetime gifts.

In terms of intangible benefits, many clients cite the warm feeling of sharing their assets with their children and grandchildren during their lifetimes. Whether it's purchasing a family vacation home that all can enjoy together, assisting with a grandchild's college tuition, transferring ownership in a family business to the next generation, or helping a child start a business or buy their first home, not waiting until one is not around anymore to share one's wealth can be very satisfying and meaningful to all involved.

The timeline for estate planning can also include elements that continue long after one's lifetime. Many clients set up trusts that benefit their children but that do not end until well after the children's lifetimes. These types of trusts, often referred to as generation skipping trusts or as dynasty trusts, can provide significant estate tax savings over multiple generations, as well as asset/creditor protection for children and grandchildren in the event of a divorce or a lawsuit. In addition, special needs trusts can be established during one's lifetime to address the current and future needs of children or grandchildren with disabilities. A comprehensive estate plan can also address a client's philanthropic goals by establishing trusts, private foundations, and other entities that can support charitable causes both during a donor's lifetime and long after the donor's death - creating a permanent legacy for the family.

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