All you ever wanted to know about estate plans

Do you want to ensure your loved ones are taken care of and your hard-earned assets are managed according to your wishes? An estate plan is the answer, but where do you start? This comprehensive guide will walk you through the essential aspects of estate planning, from understanding the process to creating crucial documents, and how to avoid common pitfalls. Let’s secure your legacy and protect your family’s future together!

Short Summary

  • Estate planning is essential to ensure your wishes are honored and assets protected.
  • Create an estate plan with experienced professionals to secure a future for loved ones & minimize taxes.
  • Invest in estate planning now for financial stability & peace of mind later!

Understanding Estate Planning

Estate planning is a vital process that helps secure your assets and guarantees they are distributed according to your wishes after death or incapacity. But estate planning is more than just creating a will; it encompasses a wide range of aspects, including appointing executors or trustees, creating essential documents, and understanding tax laws. By working with experienced estate planning attorneys, you can ensure all aspects of your plan are properly addressed and avoid common estate planning mistakes.

To embark on this journey, we will dive into the estate planning basics and the estate planning process, along with its goals. By understanding these fundamentals, you can confidently create a valid estate plan that aligns with your wishes and secures the future for your loved ones.

Estate Planning Process

The estate planning process begins with a comprehensive review of your assets, including bank accounts, real estate, and other real and personal property. To ensure all assets are accounted for, consider creating a detailed inventory, which will serve as the foundation of your estate plan.

Next, think about the well-being of any minor children and appoint a guardian to care for them in the event of your death. This step ensures your children are taken care of by someone you trust.

Once you have a clear picture of your assets and your loved ones’ needs, it’s time to create the essential estate planning documents, such as wills, trusts, powers of attorney, and advance healthcare directives. Adequate estate planning, guided by an experienced estate planning attorney, can ensure these documents are tailored to your unique situation and in compliance with all legal requirements.

Goals of Estate Planning

Estate planning serves several essential goals, such as providing for your loved ones, minimizing taxes, protecting your assets, and maintaining privacy. By designating beneficiaries in your will or trust and providing for the care of minor or disabled family members, you can ensure your loved ones are taken care of. Additionally, estate planning can help minimize taxes by taking advantage of tax deductions, credits, and exemptions.

Another critical aspect of estate planning is managing your assets during life and after death. By setting up a will or trust, appointing an executor or trustee, and establishing powers of attorney, you can ensure your assets are managed according to your wishes and your loved ones are supported during difficult times. Working closely with estate planning attorneys can provide invaluable guidance in achieving these goals effectively.

Essential Estate Planning Documents


Estate planning documents, which are a type of legal document, are the building blocks of a successful plan, providing a roadmap for your wishes and protecting your loved ones. These essential documents include wills, trusts, powers of attorney, and advance healthcare directives. Each document serves a unique purpose, addressing various situations and ensuring your assets are managed and distributed according to your wishes. It’s important to consider other estate planning documents that may be relevant to your specific needs.

Let’s delve deeper into the roles and benefits of these essential estate planning documents, including wills and trusts, powers of attorney, and advance healthcare directives. By understanding their significance, you can create a comprehensive estate plan that covers all your bases.

Wills and Trusts

Wills and trusts are legal documents that outline how your assets will be distributed and managed after your death. A will ensures your wishes are respected and appoints a guardian for minor children, while a trust offers additional benefits, such as avoiding probate and protecting assets for beneficiaries who are not yet ready to manage them.

Establishing a trust can save time and money for your loved ones, as property within the trust does not have to go through probate court. Trusts are also useful for holding property when beneficiaries are minor children or when you want to distribute assets faster and more efficiently.

By understanding the advantages of wills and trusts, you can make informed decisions about which estate planning tools best suit your needs.

Powers of Attorney

Powers of attorney are legal documents that grant authority to an agent to make financial and healthcare decisions on your behalf in case of incapacity. There are various types of powers of attorney, including durable, limited, and financial, each serving a unique purpose in managing your legal and financial affairs. By designating a trusted individual as your agent, you ensure that your financial and healthcare decisions are made according to your wishes.

A health care proxy, also known as a medical power of attorney, is a specific type of power of attorney that allows your agent to make medical treatment decisions on your behalf. This document is particularly crucial in situations where you are unable to communicate your medical preferences. By establishing powers of attorney, you gain peace of mind knowing that your financial and healthcare matters will be handled by someone you trust.

Advance Healthcare Directives

Advance healthcare directives combine living wills and medical powers of attorney to specify your medical preferences and designate decision-makers in case of incapacity. A living will outlines your medical wishes, while a medical power of attorney allows you to appoint someone to make healthcare decisions for you if you are unable to do so.

An advance healthcare directive provides the opportunity to not only give instructions for your care, but also designate someone else to make decisions for you if needed. By creating an advance healthcare directive, you can ensure that your wishes for end-of-life care are respected and that your designated decision-maker is aware of your preferences.

Role of Executors and Trustees


Executors and trustees play crucial roles in managing and distributing assets according to your wishes. Executors are responsible for handling wills and distributing assets, while trustees manage all assets or property within a trust. These individuals are entrusted with the critical responsibility of ensuring that your estate is managed and distributed according to your desires.

Choosing the right executor and understanding the duties and responsibilities of trustees are essential aspects of estate planning. By selecting trustworthy individuals and providing them with clear guidance, you can ensure that your assets are managed effectively and your wishes are honored.

Choosing the Right Executor

Choosing the right executor involves considering factors such as trustworthiness, financial knowledge, and willingness to take on the responsibility. Family members, friends, or professional executors such as lawyers or accountants can all help you manage your estate effectively. However, it is essential to have a thorough discussion with potential executors, assess their qualifications, and confirm that they are eager and capable of taking on the responsibility.

By selecting an executor who understands your wishes and has the necessary skills to manage your estate, you can ensure that your assets are distributed according to your desires and that any potential legal issues are addressed promptly.

Trustee Duties and Responsibilities

Trustee duties include managing trust assets, distributing them according to the trust terms, and maintaining records and communication with beneficiaries. As a trustee, you have the opportunity to make a lasting impact by ensuring that assets are managed efficiently and distributed in line with the grantor’s wishes.

By understanding the duties and responsibilities of trustees, you can ensure that your trust is managed effectively and that your beneficiaries receive the support they need. This knowledge is crucial for protecting your legacy and providing for your loved ones after your passing.

Tax Considerations in Estate Planning


Tax considerations play a significant role in estate planning and can impact the distribution of your assets to your beneficiaries. By understanding the federal estate tax threshold, state inheritance taxes, and tax reduction strategies, you can minimize your tax liability and preserve your assets for your loved ones.

Let’s explore these tax considerations in detail, including the federal estate tax threshold, state inheritance taxes, and various strategies to reduce your tax burden. By gaining a comprehensive understanding of these tax implications, you can plan your estate more effectively and ensure that your loved ones receive the maximum benefits.

Federal Estate Tax Threshold

The federal estate tax threshold is an impressive $12.92 million, which determines whether your estate is subject to federal estate taxes. Most estates fall below this threshold, meaning they do not owe any federal estate taxes. By understanding the federal estate tax threshold, you can plan your estate more effectively and minimize your tax liability.

To ensure you are taking full advantage of the federal estate tax threshold, consider consulting with an estate attorney, tax advisor, or financial planner for legal or tax advice. These professionals can help you navigate the complexities of tax laws and maximize the benefits for your estate and your beneficiaries.

State Inheritance Taxes

State estate and inheritance taxes vary by state and can have a significant impact on your estate planning. These taxes are separate from the federal estate tax and may apply to the transfer of assets from a deceased person to their beneficiaries. Some states have both an estate tax and an inheritance tax, while others have one or the other, with rates and exemptions differing among states.

To gain insight into potential tax liabilities related to state inheritance taxes, consult with an estate planning professional. They can help you understand the specific tax laws in your state and ensure your estate plan is tailored to minimize your tax liability and protect your assets.

Tax Reduction Strategies

Tax reduction strategies in estate planning can help you minimize your tax liability and maximize the assets you leave for your beneficiaries. These strategies include charitable giving, education funding, and estate freezing, which can provide tax deductions and protect your assets from unnecessary taxes.

Charitable giving allows you to donate money or assets to a charitable organization, reducing your taxable estate and providing tax deductions. Education funding sets aside money for a beneficiary’s education, potentially reducing your taxable estate and providing additional tax deductions. Estate freezing is a powerful strategy that transfers assets to a trust or other estate planning vehicle, reducing your taxable estate and providing tax deductions.

By employing these tax reduction strategies, you can preserve more of your assets for your loved ones.

Life Insurance and Estate Planning


Life insurance can play a significant role in estate planning by providing funds for your beneficiaries, covering estate taxes and expenses, and funding business agreements or retirement plans. A properly structured life insurance policy can help ensure your loved ones are financially secure and your estate is managed effectively.

By incorporating life insurance into your estate plan, you can provide a financial safety net for your family and protect your assets from unnecessary taxes and expenses. Consult with an experienced estate planning attorney or financial planner to determine the best life insurance policy for your unique needs and goals.

Common Estate Planning Mistakes to Avoid


Estate planning is a complex process, and it’s easy to make mistakes that can have serious consequences for your loved ones and your assets. Some common estate planning mistakes to avoid include not having a plan, failing to update documents, improper asset ownership, and underestimating tax implications.

By being mindful of these common mistakes and taking the necessary steps to avoid them, you can ensure that your estate plan is comprehensive, up-to-date, and in line with your wishes. Working with experienced estate planning attorneys can help you navigate the complexities of estate planning and avoid costly mistakes that could impact your loved ones.

The Cost of Estate Planning


The cost of estate planning varies depending on the complexity of your estate, the chosen method, and professional fees. Options range from affordable online services to hiring experienced attorneys to guide you through the process. On average, costs may range from $1,000 to $3,000, with additional fees for creating trusts or other documents.

While the cost of estate planning may seem daunting, it is a worthwhile investment in your family’s future. By ensuring your assets are managed and distributed according to your wishes, you can provide financial stability for your loved ones and protect your legacy for generations to come.

Digital Assets in Estate Planning


In today’s digital age, it’s essential to consider digital assets in your estate planning. Digital assets include online accounts, passwords, and digital files like images, videos, and documents. To ensure your digital assets are managed effectively, it’s crucial to list these assets and grant access to a trusted individual who can manage them in the event of your death or incapacity.

By incorporating digital assets into your estate plan, you can ensure that these valuable assets are protected and managed according to your wishes. This comprehensive approach to estate planning can provide peace of mind and security for your family’s digital future.

Estate Planning for Different Life Stages


Estate planning should be tailored to different life stages to ensure proper asset management and distribution throughout your life. Young families should consider designating guardians for minor children and establishing trusts for their care. Middle-aged individuals may need to update beneficiary designations on existing accounts and establish powers of attorney. Retirees should review and update their estate plan periodically and consider establishing healthcare directives.

By adapting your estate plan to suit your unique circumstances at each stage of life, you can ensure that your assets are protected and your wishes are respected, providing peace of mind and security for your loved ones.


In conclusion, estate planning is an essential process that allows you to secure your assets, provide for your loved ones, and ensure your wishes are respected. By understanding the estate planning process, creating essential documents, and avoiding common pitfalls, you can create a comprehensive and effective estate plan that protects your family’s future. Embrace the journey of estate planning and leave a lasting legacy for the ones you love.

Frequently Asked Questions

How does an estate plan differ from a will?

An estate plan is a collection of legal documents which often include a will, trusts, an advance directive and various types of powers of attorney. It goes beyond what a will can do and can cover other estate planning matters.

What are three elements of an estate plan?

Creating an effective estate plan requires having a Last Will & Testament, Durable Power of Attorney, and an Advance Health Care Directive. These three documents ensure that your wishes are followed should something happen to you.

Having these documents in place is essential for protecting your assets and ensuring that your wishes are respected. They provide a clear plan for how your estate should be handled and who should be responsible for carrying out your wishes.

What is the purpose of making an estate plan?

Estate planning is an important process to protect your assets and plan for their distribution after you die. It can also help minimize income, gift and estate taxes, and ensure that your wishes are followed regarding the management of your property and financial obligations in the event of incapacity.

What is another word for estate planning?

Legacy planning is a synonym of estate planning, gaining popularity among financial advisors in recent years.

What are the 7 steps in the estate planning process?

Start your estate planning process with these 7 simple steps – gather your financial information, meet with a lawyer, review your beneficiaries, choose an executor, create a will, draft a living trust, and consider incapacity planning.

It’s never too early to begin this important task!

90 90 90 Rule

the 90 90 90 rule

This is the final series with Ed Cotney as he concludes with an in-depth discussion of the IRA rules to consider other approaches to address required minimum distributions.

If you have an IRA or 401k and live to be age 90, and if all you do is take the required minimum distributions out once you turn 72, chances are you’re still going to have 90% of your IRA intact. So if you have a million-dollar IRA today and you’re 72 years old, chances are when you die, about $900,000 will still be in your IRA.  Hence the 90 90 90 rule.

2020 Inherited IRA Distribution Rules and Risks of the 10-year rule

Giving It All At Once

2020 inherited ira distribution rules

Proceeds will be distributed all at once when you die. This will go on top of your children’s earned income resulting in a higher tax bracket.

10 Year Rule

The kids can let the money stay in the IRA for up to 10 years, and they just have to fully take out the inherited IRA after you die within ten years. There’s some risk exposure with this. The Kids have the right to take out their portion at any given time within the ten years after you die, and they will need to file a 1099r form.

If we do this ten-year rule, while the money is in the 10-year stretch rule; you need to ensure your kids don’t get enough bankruptcy or judgment. If one child does, they could lose the inherited IRA and could even pay a tax bill. You can check the Clark V. Ramaker Case as an example.

A Story Of How Converting IRA To CRUT Helps A Widowed Spouse

family smith scenario

Tim and Susan want to transfer their wealth when they’re dying, their children free from tax, safe from lawsuits, and safe from creditors and predators. Tim passed away, and Susan’s age now is 80.

They have four kids, Susan has a house worth four hundred thousand dollars, and they have cash of $400,000, and Susan and Tim’s combined IRAs are $800,000.

The 1st kid, Mike, is a successful doctor and has a wonderful job. The 2nd daughter, Mary, didn’t marry very well. In fact, after Tim dies, his husband says, “I can’t wait for your mom to croak. This way, we can go buy a new truck and a bass boat”.

The 3rd son, Ed, is in a rocky third marriage, but he’s good with money. He’s good-looking too. The last son, Dan, is not good with money, is divorced, and looking for work.

Susan’s concerned that Dan will just waste his inheritance money and have to borrow from his siblings.

Taxes Issues Upon Death Of Susan

  1. House – No tax, because of Step up in basis
  2. Cash – No tax, because of Step up in basis
  3. IRA/401K – Will have an Ordinary Income Tax

How The Charitable Trust Come In-Play

ira to charitable remainder unitrust tax benefits

Calculating the total value of the asset, we got $1,600,000. We know that the non-ira assets, the house, and the cash will go to the children with zero tax, and the estate plan says that when Tim and Susan die, the $800,000 IRA goes in four equal distributions to the kids.

When Susan dies, the $800,000 will go to a charitable trust. This trust is designed to be a 20-year income payout to the four children using a very conservative number of 5.3%. We’re going to distribute $42,000 divided by four, so each child will get about $10,000 to $11,000 for the next 20 years. In total, we’re going to distribute out $896,000 of taxable income to the kids.

Now, here’s what’s cool about this strategy. This $800,000 has a high degree of asset protection from judgment, creditors, and predators. So, for example, in year 4, after Susan dies, Brother Dan gets into a divorce. He is receiving an income stream from the charitable trust but can’t take any money from it—that way, protecting himself.

And for Mike, the doctor, this is a smart deal too. It’s not a question of will Mike be in a lawsuit as a doctor. It’s a question of how many lawsuits he will be in during the rest of his life. So the last thing he needs to get is something that doesn’t have some form of creditor protection.

The last benefit from this is at the end of 20 years, after this charitable trust has paid out nearly $900,000 to the kids, almost $900,000 will go to her designated church.


This is not a multi-million dollar Warren Buffett strategy. This strategy works for anybody with at least $500,000 in qualified money, like a traditional IRA or 401k. This is a strategy where using a charitable trust provides a beautiful income stream to the kids and a beautiful gift to your designated charity.

There’s nothing severely advanced or complex here. You may have to spend a little bit of money for the lawyers to draft this, but this blows the doors of leaving an inherited IRA to a child so that they can take the money out over ten years at some point. By using charitable trust, we are making money off the IRS.


Charitable Tax Harvesting

putting coins in a piggy bank

The next video is part two of advanced tax planning options as this topic covers how to use charitable deductions to minimize capital gains.  Please feel free to watch the video or read the transcript.


The Government Confiscatory Tax System

We all know that we live in a confiscatory tax system. We make money from income capital gains, and we know that we get the keep a part of it and that we get to be mandatory donors to the IRS and franchise tax board charities.

We live in a philanthropic confiscatory tax system where depending on how much money you make, you may pay more or less, but a portion of whatever you’re doing will support the IRS.

What We Don’t Know

reactive tax planning and proactive tax planning

  • 60% of our income tax is optional
  • 100% of long-term capital gains tax can be optional
  • 100% of estate tax is optional

How Do You Pay Less Tax?

No tool makes it work for everybody and everything. But generally, the three main things that can help you pay less tax are insurance, business or trust, and a charity. Effective tax planning usually involves these three different things working together to create optimized opportunities.

Question: What is the maximum amount of money or assets a person can donate to a charity each year?

Answer: No Limit!

Maximum Charitable Adjusted Gross Income Deduction Rules

Schedule A, Line 11 –  Cash= 60% (Can be 100% as of 2022 because of the Secure Act)

Schedule A, Line 12 – Appreciated Assets(Eg. Stocks and Real Estate) = 30%

If your adjusted income this year is $100,000, the most you can claim as a charitable deduction for cash under most circumstances usually is sixty percent or sixty thousand dollars.

If you give up to 60,000 to charity and claim it as a gift, you have reduced your adjusted gross income from 100,000 down to a 40,000 tax event. In doing so, you have probably not only reduced your taxable AGI, but you may have a lower tax rate. You can drop down one or two thresholds to get you into a more favorable income tax deduction

Example of using charity for people in 50% tax Bracket

If you have a $1,000,000 AGI, normally, you will be in a 50% tax bracket and have to pay 50% tax to the IRS. That means $500,000 goes to your tax, and you take home $500,000. But if you decide to gift $50,000 in cash to your IRS-approved charity, you can save $25,000.

This is how it works. Now that you gift $50,000 to a charity, you can include that in your Schedule A, Line 11. By doing so, you can get a $25,000 tax deduction. Your current AGI now becomes $950,000; you only have to pay $475,000 of your tax and used the $25,000 tax deduction.

Income and Captain Gains Tax Rescue Play

income and capital gains tax rescue play

Now, let’s make this more interesting. What if five years ago, you had $40,000 burning a hole in your pocket. You went out to your financial planner to buy four positions for $10,000 a piece. That will be your basis, after-tax money.

Two of those positions did really well, and we call them racehorses. One of these positions started out pretty good, and then about two years down the road becomes flatlined. It grew to $50,000 in value, but for the last three years, it’s been doing nothing. Technically, you have lost an opportunity cost in this case. We call that one a donkey. The last position that you bought is hanging on for his dear life. It’s still worth $10,000, but you lost on opportunity cost.

What if you gave the $50,000 donkey to a charity? If you tried to sell the $50,000 stock and gain $40,000, you’re going to pay tax. Well, let’s think a little bit differently. So if you give the $50,000 as a block of stock that has a basis of $10,000 to a charity, technically, the charity’s going to turn it around and sell it. The charity has the same net effect.

If your charity doesn’t have a brokerage account, tell them to open up one. They’re not making it easy for donors to donate by not having one. So you better ask them to have one.

So you tell your financial planner to give the $50,000 value of the stock to the charity. The Charity converted that stock into cash. You get rid of the donkeys that are going to cost you money if you sell them, and you get $15,000 of money off the IRS. You may be confused, but let’s check out the image below.

giving cash or stock to charity comparison

On the left side, it shows you gave $50,000 of cash and bought you $25,000 off the tax statement. On the right side, you gave a charity $50,000 of stock that had a basis of $10,000. Now you’re in a 50% tax bracket on the tax form.

On the tax form, it’s the same. It’s the same deduction on the tax form except for one thing. Notice the basis here. In this case, $10,000 of basis bought you $25,000 of tax savings. Now, that’s $15,000 money you made off the IRS.


Overall, first, determine if you have highly appreciated poorly performing assets. You may want to consider making money off the IRS while still accomplishing your philanthropic objective.

At an early age, most of us were taught just to give cash to charity, and that’s all we’ve ever been doing. If you like making money off the IRS and still want to help your chosen charity, you may want to look at this concept.


Charitable Trust Tax Planning

building and operating business tax exit play

This is part one of a video series discussing various advanced tax planning concepts.  The majority of this discussion covers charitable remainder trusts. Feel feel to watch the video or read the transcript.

John And Mary Smith likes to sell their 11 million dollar business. The total value of the assets (Business and Commercial Building) is around 11 Million Dollars. If they do nothing, their tax with the business will cost them around $1,650,000.000 and $2,000,000 for the commercial building. They go home with 7.35 Million, and the IRS goes home with 3.65 Million.

Using Charitable Trust

building and operating business tax exit play

A charitable trust is an irrevocable trust. A charitable trust is a tool that has two jobs. One, to give you an income stream normally for life, and when you and your spouse die, whatever is left in that trust goes to the charitable structures you like. This could be Red Cross, Salvation Army, or whatever charity comes to mind.

We put the building in this charitable trust. This charitable trust is a tax-exempt irrevocable trust.  By doing this, we bypass all the capital gains and recapture tax. So, in this case, if they put a 5.5 million dollar highly appreciated building into a charitable trust, there’s no tax. Another benefit is that the IRS is going to give them a charitable income tax deduction, in this case, 1.65 Million Dollars.

john and mary smith transaction

So if they sell the business and donate that building into the charitable trust, they’re almost going to be zero tax. It may take them a couple of years as far as tax returns to enjoy all these benefits, but it boils down to higher annual income.

Now you may say, that their kids aren’t getting the value of that building when they die. Then, let’s just use some money to buy a life insurance policy to replace that value. In effect, the IRS just paid for the life insurance policy.

john and mary smith annual income comparison

This strategy is not new. It’s just new to some people or even you. So when you hear people talking about charitable tax planning, those are the people who have figured out that there’s a way that we can do more good for everybody involved and put a lot of money in the hands of a charitable organization.

We’ve done several strategies now on the death of John and Mary. We’ve done seven million dollars going to charity.  We replace the value going to the charity using life insurance.  The life insurance all goes tax-free, assuming the law doesn’t change in respect to step up in basis rules. We’ve increased the income to 159,000 a year for the rest of their life.

tax savings upon death