Estate Planning Basics

Estate planning is often only considered essential for wealthy or older individuals. If you have loved ones, however, you should have some form of estate plan regardless of your level of wealth.

The Basics

Estate planning means providing for your family after you are gone. It allows you, not the court, to make important decisions about caring for your loved ones and the disposition of your property.

With a proper estate plan you can address these major issues:

  1. Who do you want as the executor to settle your estate? That person should be someone who is qualified, trustworthy and understands your wishes.
  2. How will any minor children be protected? This includes naming a guardian on the death of both parents and making decisions about the future financial security of the children.
  3. How will your assets be distributed? Wills are used to designating who will receive your assets. Trusts may be useful for the ongoing management and distribution of your assets.
  4. How can the costs of administrating your estate be minimized? Proper planning can reduce probate fees and any estate taxes.

Federal Estate Taxes

The tax treatment of estates has been changing almost yearly for several years.  The American Taxpayer Relief Act of 2012 clarified many of the rules and has made many provisions permanent.  These changes should prompt everyone to have their estate plan reviewed.

How does an estate get taxed?

The federal government levies a tax, payable by your estate, with rates up to 40% on the largest estates. The tax is charged against the value of the estate after allowable deductions are taken. Deductions include burial expenses, existing debts, charitable contributions, and accrued taxes. In addition, any assets left to a surviving spouse are not included in the taxable estate. After the estate tax is calculated, there is a credit against that tax. The result is that many estates pay no tax. The amount of the credit is increasing and below is a chart indicating the size of taxable estates that will be subject to tax after the credit.


Estate Size Where Taxation Starts

Top estate tax rate













Future years

Indexed for inflation


You should note that the tax is levied on the fair market value of your assets and not the cost basis. For many individuals, the values of their stock portfolios or small business interests have grown significantly over the past few years.

Issues For Younger People

Choosing a guardian for your children is critical. If both parents die and no guardian is named, the court will decide on someone to care for your children. That is probably a choice you want to make yourself. Life insurance may be appropriate to ensure there are funds for the ongoing care and support of family members.

Issues For Older People

As people age and accumulate wealth, the need for life insurance may dwindle. The nature of their estate plans becomes more focused on the financial aspects - minimizing any estate taxes, establishing trusts for surviving family members, considering charitable giving, and deciding who receives financial assets and other personal items.

Use an Expert to Create and Update Your Estate Plan

Estate planning is not a task to be taken lightly. Rules are complex and may differ by state. A qualified attorney can ensure that your estate plan accomplishes your objectives.

An estate plan should be reviewed periodically (generally every 3 or 4 years) as your situation or the rules change. Births of children, changes in marital status, increases in income or wealth, or moving to another state should also trigger a review of your estate plan.

The new (and confusing) rules should prompt almost everyone to review their estate plan.  It is important that your will and other documents take the new laws fully into account.

Not sure where to begin? Our Trust professionals are a great resource to help you get started. Our experts will work with you and your professional advisors to help you create and manage your estate plan…your legacy!  Call, stop by, or email us today to get started.