What is Estate Planning?

Estate planning is the process of accumulating and disposing of an estate to
maximize the goals of the estate owner. The various goals of estate planning
include making sure the greatest amount of the estate passes to the estate
owner's intended beneficiaries, often including paying the least amount of
taxes. Additional goals typically include providing for and designating
guardians for minor children and planning for incapacity.

Estate planning tools

The tools involved in estate planning include the will, various types of trusts,
powers of appointment, various forms of property ownership (Joint tenancy
with rights of survivorship, tenancy in common, tenancy by the entirety, etc),
gifting, and powers of attorney, specifically the durable financial power of
attorney and the durable medical power of attorney which is also commonly
known as a living will.

Trusts and Estate.

The law of trusts and estates is generally considered the body of law which
governs the management of personal affairs and the disposition of property of
an individual in anticipation and the event of such person's incapacity or
death, also known as the law of successions in civil law. Its techniques are
also used to fulfill the wishes of philanthropic bequests or gifts through the
creation, maintenance and supervision of charitable trusts. In some
jurisdictions, such as the United States, it overlaps with the area that has been
come to be known as elder law that deals not only with estate planning but
other issues that face the elderly, such as home care, long term care
insurance or social security or disability benefits.

What is an estate?

At common law, an estate was comprised of the tangible assets of real and
personal property which belong to a natural person. More recently, the
concept of an estate has been expanded to encompass any thing of value to
which the deceased person was or might have been entitled to claim during
his or her lifetime. The property of the estate must either be bequeathed
through a will or transferred through the laws of intestacy if there is no will. A
will is the most commonly used legal instrument for the distribution of the
tangible assets of a deceased person. Before property can be disposed of
pursuant to the terms of a will, the will must be submitted to a probate court
having jurisdiction of the estate of the deceased. Probate is often considered a
relatively lengthy and expensive process, albeit one which may provide
greater safeguards with regard to the rights of a deceased person's
beneficiaries, though probate often is contested by creditors or disgruntled
members of the family of the deceased who feel they have not received their
fair share of the decease's property

Uses of trusts

In order to expedite the process of transferring assets to intended
beneficiaries, some people choose to arrange their property so that it can
bypass the probate process upon their deaths. For example, placing property
into a trust before death (as opposed to a testamentary trust) will often allow
the accomplishment of the objectives of property distribution without coming
under the jurisdiction of a court and the possible redistribution after a lengthy
contested probate process and trial. Similarly, jointly held property (in
common law systems), life insurance, annuities, US Tax Code section 401(k)
Retirement Plans or Individual Retirement Accounts (also known as RRSPs in
Canada) will also avoid probate as these devices allow property to transfer to
beneficiaries outside the probate process.

Use of estates and trusts

Another major factor in trusts and estates law may be to minimize one's tax
exposure. After an applicable exempt amount, the United States federal estate
tax very quickly approaches 50% of one's taxable estate. The proper use of
trusts may reduce one's tax burden. The applicable exempt amount is
currently one million dollars in 2003, and is scheduled to increase each year
until the estate tax is temporarily repealed for one year in 2010. The year
after, the estate tax is scheduled to be reinstated, with the previous exemption
of one million dollars.

Trusts may also allow people a certain limited amount of control of how the
amount held by the trust is handled. For example, one could leave money for
somebody who may not be mature enough to handle money, and state that the
money can only be used for health, education, support and maintenance of
that person until the age of 35, upon which time the remaining income and
principal will be distributed. One can also distribute one's assets to charitable
purposes by creating an irrevocable charitable trust that may distribute the
principal or the income of the trust much in the same manner as a private

Special Needs Trusts

Special Needs Trusts are created to ensure that beneficiaries who are
developmentally disabled or mentally ill can receive inheritances without
losing access to essential government benefits.
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