What should I bring to our first estate planning meeting?
Full name and date of birth of husband and wife
Date of marriage
Mailing address
Telephone numbers
Email addresses
Name, age, and marital status of your children
Name, address, and telephone number of your accountant
Name, address, and telephone number of your financial advisor
List of assets and debts by category and estimated value
For example, “Stocks and bonds – $____”
Another example, “Life insurance on husband – $____”
Another example, “20 acres of land in Wood County – $____”
Be sure to include life insurance, annuities, and retirement accounts
List long-term debts but not monthly expenses
Identify any assets that are your separate property
List of your questions, concerns, and goals regarding estate planning
How much does estate planning cost?
The legal fee for consultation and planning is hourly. The fee for preparing estate planning documents is fixed, depending on the type of document. After our meeting, I will summarize our discussion and my recommendations in a letter that includes a list of the applicable document fees.
What are some important estate planning documents?
Will: Acts as a "deed to property". Recorded ("probated") at death.
Durable General Power of Attorney (During The Life): Authority to sign business documents. Includes a disability provision. Record or deliver to the agent.
Medical Power of Attorney: Authority to sign medical consents. Deliver to doctor or children.
Directive to Physicians (Living Will): Authority to withdraw life support. Deliver to doctor or children.
Life Insurance: Consider amount, type, owner, and beneficiary.
Retirement Account and IRA: Spouse as primary beneficiary for rollover. Children as contingent beneficiaries for deferred payout. Perhaps charity as contingent beneficiary for tax-free payout.
Trusts: Useful for reducing estate tax, protecting from creditors, maintaining separate property, and providing professional management.
Nonprobate Property: Passes outside of the will (perhaps contrary to will). Examples are life insurance, retirement account, living trust, joint tenants with right of survivorship, payable on death accounts.
Property Agreement: Identifies separate vs. community property. Covers principal, income, and personal compensation.
Buy-Sell Agreement: Terminates co-ownership. Specifies a specific dollar amount and triggering event.
Inventory of Property, List of Advisors, and Letter to Family
What are some popular techniques for avoiding estate tax?
Caution: Tax exemptions may be reduced substantially in 2026.
Annual Gift Exclusion
Amount: $18,000/year/spouse/descendant
Simple Will
All assets to spouse
Defers all tax until death of the second spouse
Avoids tax on up to $27 million per family
Basic Trust Will
All assets to "income" trust for spouse
Assets then pass outright to children
Defers all tax until death of second spouse
Avoids tax on up to $27 million per family
Super Tax-Planned Will
"Bypass" trust for spouse
Remaining property to "QTIP" trust for spouse
Then to lifetime trusts for children
Avoids tax at death of second spouse on $27 million
Also avoids tax at death of children on $27 million
Life Insurance
Irrevocable trust as owner and beneficiary
Avoids tax on unlimited amount of life insurance
Family Limited Partnership
Includes land, marketable securities, and other investments
Gifts of limited partnership interests while retaining personal control over investments
Results in a substantial discount in value for estate tax purposes
Split Charitable Gift
Income to family and remainder to charity, or vice versa
Yields substantial tax benefits
Charity replaces IRS as partial recipient of the estate, further reducing tax burden
Caution: Tax exemptions may be reduced substantially in 2026
How did the Tax Act of 2017 affect estate planning?
Estate tax: $13.6 million exemption / 40% tax
Generation-skipping tax: $13.6 million exemption / 40% tax
Gift tax: $13.6 million exemption / 40% tax
Portability of spouse's unused estate tax exemption
No portability of spouse's unused generation-skipping tax exemption
Continued full step-up in basis at death
Continued FLP and other valuation discounts
Caution: Tax exemptions may be reduced substantially in 2026
What is a living trust?
Revocable trust: Property transferred to trust during lifetime.
Trustee and beneficiary: self during lifetime, then family or bank.
Administration: Trustee rather than executor - little or no further transfer necessary at death.
Advantages: Avoids or minimizes probate, protects against incapacity, provides greater confidentiality, probably less expensive overall.
Disadvantages: Burden and expense prior to death, still need will for omitted property, still need transfers at death, no more tax benefits than testamentary trust.
What is a family-limited partnership?
A family limited partnership is simply a limited partnership composed of members of your family. This type of partnership is often formed to own and manage valuable investments such as land, closely held stock, or marketable securities. Each spouse typically contributes his or her interest in those investments to the partnership, and gifts of limited partnership interests are then made to children or trusts for children. Both spouses may be general partners, and the children or trusts for the children are limited partners. The partnership usually provides substantial restrictions on removal of the general partner, withdrawal of any partner, transfer of any interest in the partnership, irregular or non-pro-rata distributions from the partnership, and dissolution of the partnership. A family limited partnership can serve as a substantial, but not complete, shield of assets inside the partnership from liabilities incurred outside the partnership. A family limited partnership can also serve to simplify or avoid probate of assets owned by the partnership. Furthermore, a family limited partnership can claim a substantial discount in value for gift and estate tax purposes. This valuation discount can significantly reduce estate tax, although the IRS often challenges the amount of discount.
How can assets be protected from potential creditors?
Homestead: Urban (10 acres) or rural (200 acres).
Personal effects: $100,000 per married couple.
Spouse's separate property: Partition of community property.
Retirement plan and IRA.
Life insurance and annuities.
Education accounts: Section 529 plans.
Spendthrift trust: Irrevocable - not for the benefit of the grantor.
Family limited partnership (FLP) or limited liability company (LLC) - protects “inside” assets from “outside” liabilities.
Corporation - protects “outside” assets from “inside” liabilities.
Caution – These steps must be taken well prior to the claims of creditors.
What are some ways to make charitable gifts other than cash?
Stocks And Bonds
Avoid capital
Deduction of FMV
Especially attractive during bull market
Closely Held Corporate Stock
Avoid capital gain
Deduction of FMV Tax free redemption of stock
Use of corporate funds for personal charitable gift
Real Estate
Avoid capital gain
Deduction of FMV All or undivided percentage
Outright gift or bargain sale
Tangible Personal Property
Artworks, collections, equipment, etc.
Avoid capital gain Deduction of FMV if related use
Permanent or time-sharing
IRA Or Other Retirement Plan
Beneficiary upon death
Avoid devastating combination of estate tax and income tax
Minimum cost to family
Life Insurance
Owner or beneficiary
Deduction of CSV plus future premiums
Small current cost, large future benefit
Bequest In Will
Maximum personal flexibility during lifetime
Specific property or percentage of estate
Estate tax free
Remainder Interest In Residence Or Farm
Reserved personal use for life
Deduction of remainder interest
No current out-of-pocket cost
Gift Annuity
Smaller payments than commercial annuity
Deduction of difference in value
Reduce capital gain
Income partially tax free
Charitable Remainder Trust
Fixed income to family for life, then remainder passes to charity
Deduction of remainder interest
Avoid capital gain and achieve tax free sale of property
Income fully taxable
Charitable Lead Trust
Fixed income to charity for years, then remainder returns to family
No income tax deduction, but large gift and estate tax deduction
Longer the term of years, larger the deduction
Gift of philanthropy to children and gift of estate to grandchildren
Private Foundation
Charity controlled by family
Contributions tax deductible
Income tax exempt
Numerous administrative burdens and restrictions
Community Foundation – Donor Advised Fund
Similar to a private foundation
Qualifies as public charity
No administrative burdens
Effective control, but no legally binding control
Contact John G. Payne To Talk About Estate Planning