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Estate Planning: Protecting You and Your Family

No matter your age or the size of your estate, it is important to have an estate plan in place to help protect your family’s financial future, as well as your own. Here are a few general things to know about creating an estate plan.


There is more than one way to transfer your wealth to your heirs. A will is often the first thing that pops into people’s minds when they consider how to transfer their assets to their heirs. And although a will is an important part of an estate plan, there are additional ways to transfer your assets.

  • A will is used to transfer assets that are not transferred by other means.
  • Beneficiary designations. Financial accounts and life insurance policies typically allow you to name one or more beneficiaries to receive the assets in the accounts and the insurance payouts after you are gone.
  • Certain types of joint ownership. Assets that you own jointly with another person, such as your spouse, can become the property of the surviving owner, depending on how the assets are titled.
  • A trust is a legal arrangement that specifies how and when the assets you place in the trust are to be distributed to your beneficiaries.

Gifts to your heirs during your lifetime are an option. As long as your own financial future is secure, transferring wealth to your heirs during your lifetime can be a smart move in some circumstances. For example, individuals whose estates will be subject to estate tax may want to make gifts to their heirs during their lifetimes in order to take advantage of the annual gift tax exclusion or to remove appreciating assets from their estates so that any future appreciation is not part of their estates.

Whether lifetime gifts are a smart move for you depends on your situation. Please consult your estate planning professional who can review the pros and cons of lifetime gifts with you and provide advice on how to tax-efficiently transfer your wealth to your heirs.


A will is where you name a guardian for your young children. Your choice of guardian will have a profound impact on your children’s lives if the unthinkable happens, so it’s important to choose the person you think will do the best job—and to make your choice legally known by naming the guardian in your will.

The court will appoint a guardian if you do not name one. If you do not name a guardian for your young children in your will and both parents die, the court will appoint someone to care for your children. And without any input from you, it may be someone you’d prefer not to raise your children.

The guardian you choose is not obligated to serve. For this reason, it’s a good idea to get their agreement before naming them in your will. It’s also a good idea to name an alternate guardian in case your first choice changes their mind or becomes unable to serve.


What is probate? Probate is the court-supervised process for distributing a deceased person’s assets to their heirs. It typically involves: (1) validating the will, (2) collecting the assets, (3) paying any debts, expenses, or taxes that are owed, and (4) distributing the remaining assets according to the instructions in the will. If there is no will, assets not left by other legal means are distributed according to state law.

Probate can be time-consuming and costly—but not always. Many states offer a simplified process for small estates. Check with your estate planning professional about the potential time and costs in your state.

Probate is public. A will becomes a matter of public record when it is filed with the probate court. If you want the details of your estate to remain private, transfer your estate by means other than a will.

Some types of assets do not go through probate. They include:

  • Assets with beneficiary designations, such as retirement and investment accounts, generally do not go through probate as long as you designate a person or an entity other than your estate as the beneficiary.
  • Some jointly owned property. Property held as “joint tenancy with right of survivorship”, “community property with right of survivorship”, or “tenancy by the entirety” does not go through probate.
  • Assets held in trusts created and funded during your lifetime, such as a revocable living trust, generally avoid probate.

If you use these methods, keep in mind you’ll still need a will to provide direction for any assets not covered by them.


You can generally designate one or more beneficiaries for your financial accounts. Your beneficiaries have no rights to the account while you are alive, but after your death, they can claim the account balance directly from the financial institution without the account having to go through probate.

Banks typically call accounts with beneficiary designations payable-on-death (POD) accounts or in-trust-for (ITF) accounts. Brokerages typically call them transfer-on-death (TOD) accounts.

You can name a beneficiary for your vehicle or home in some states. If you name a transfer-on-death beneficiary on your vehicle’s title or your home’s deed, those assets can transfer to your named beneficiary upon your death without going through probate. While you are alive, your beneficiaries have no rights to your vehicle or home.

Beneficiary designations trump a will. The people you name as beneficiaries on your financial accounts, retirement accounts, titles, deeds, and life insurance policies will generally inherit those assets regardless of any instructions to the contrary that you put in your will or other estate planning documents.

It’s a good idea to also name secondary beneficiaries. A secondary beneficiary, also known as a contingent beneficiary, is the person you want to inherit your assets if your primary beneficiary dies before you do.

It is important to review your beneficiary designations regularly. Because your beneficiaries will inherit your assets, it is important to review your beneficiary designations every year or so to make certain that they still reflect your wishes. It is also a good idea to review them when major changes, such as marriages, divorces, births, and deaths, occur in your life.

You may need your spouse’s consent to name someone other than your spouse as the beneficiary of your retirement account. With 401(k) plans and other types of qualified retirement plans, you will need your spouse’s written consent to name someone else as your primary beneficiary. And if you live in a community property state, you may also need your spouse’s consent to name someone other than your spouse as the beneficiary of your IRA.


What is a trust? A trust is a legal arrangement for managing and transferring assets. It typically works like this: You create and fund the trust, either during or after your lifetime. You choose a trustee to manage the assets in the trust. The trustee manages the assets and distributes them to your beneficiaries, according to the terms of the trust.

There are many types of trusts, each designed to help meet a specific objective, such as:

  • Avoid probate.
  • Minimize estate taxes.
  • Control when the beneficiary receives distributions from the trust.
  • Shield the trust assets from creditors.
  • Preserve a special needs individual’s eligibility for government benefits.
  • Protect the inheritance of children from an earlier marriage while providing an income to a spouse from a later marriage.

To sum it up: Trusts are used to meet a wide variety of objectives that may not be met if your assets are transferred using a will.

What is a revocable living trust? This popular type of trust is used to direct how the assets you put in it are to be managed during your lifetime and distributed after your death.

You can serve as the trustee of your revocable living trust and retain full control of the assets in the trust. You can invest, sell, or spend them, just as you would any of your other possessions. After your death, your successor trustee manages and distributes the trust assets according to your directions.

Why consider a revocable living trust? A revocable living trust can accomplish things that a will cannot. For example, the assets in a revocable living trust avoid probate, the details of the trust remain private, and the trust helps protect you financially if you become incapacitated by allowing the successor trustee you choose to quickly step in and manage the assets in the trust.


There are three types of federal transfer taxes. Federal transfer taxes may apply to the taxable gifts you make during or after your lifetime that exceed the lifetime exclusion amount.

  • The gift tax applies to assets transferred during your lifetime.
  • The estate tax applies to assets transferred after death.
  • The generation-skipping transfer tax applies to transfers that skip a generation, such as a gift to your grandchild or to an unrelated person who is more than 37½ years younger than you. This tax applies in addition to the gift or estate tax.

Most people will not owe any federal gift or estate taxes. Thanks to the lifetime exclusion, you can currently give away $13.61 million during or after your lifetime without owing any federal gift or estate tax on the transfers. Married couples can generally use both spouses’ exclusions to shelter $27.22 million from those taxes. The exclusion is scheduled to decrease to its pre-2018 level ($5 million, adjusted for inflation) in 2026.

Asset transfers between spouses are generally exempt from federal gift and estate taxes. As long as your spouse is a U.S. citizen, you can generally give your spouse an unlimited amount of assets without owing any gift or estate tax on the transfer and without using up any of your lifetime exclusion. However, if the combination of your two estates is sizable, be sure to plan for the possibility that the surviving spouse’s estate may eventually be subject to transfer taxes.

Any unused exclusion amount is portable between spouses. This means that widows and widowers can use the unused portion of their deceased spouse’s exclusion to shelter their own gifts and bequests from federal gift and estate taxes. But be aware that the portability, or transfer, of the unused exclusion amount between spouses is not automatic. The executor of the deceased spouse’s estate must file a federal estate tax return to elect portability.

Even if your estate does not owe federal estate tax, it may owe state estate tax. Some states impose an estate tax, and the amount that states will allow you to exempt from taxes may be significantly lower than the federal exclusion amount.


Certain assets inherited at death get a step-up in basis. Assets, such as stocks and real estate, that your heirs inherit from you will generally receive a step-up in basis to their fair market value on the date of your death. This adjustment in basis may benefit your heirs if the assets have appreciated in value since you purchased them.

For example, let’s say you leave shares of stock to your heir that you purchased years ago for $10,000 and that are valued at $50,000 on the date of your death. If your heir later sells the shares for, let’s say, $53,000, only the $3,000 of appreciation that occurred since your heir inherited the shares will be taxable as a capital gain.

Please note that some assets, such as IRAs and retirement plans, do not receive a step-up in basis at death.


Planning for your own incapacity is an important part of estate planning. At some point in your life, you may be unable to manage your finances and make decisions regarding your medical care on your own. It is important to plan for this possibility now, while you are still healthy. Without the right legal documents in place, the courts may end up choosing someone to handle your finances and medical decisions for you if you become incapacitated.

A health care proxy is used to name someone to make medical decisions for you when you are incapacitated. This document is sometimes called a durable power of attorney for healthcare.

A living will is where you state the types of medical treatment you want. This document makes your wishes known regarding the treatments (mechanical respiration, tube feeding, etc.) that you want to receive, or not receive, in an end-of-life or permanently unconscious situation.

A durable power of attorney for finances lets you name someone to manage your finances. The “durable” nature of this type of power of attorney allows the document to remain in effect even if you are incapacitated so that the person you name on the document can manage your financial affairs (e.g., pay your bills and handle your banking) when you are incapacitated.

Your successor trustee can manage the assets in your revocable living trust. One of the most important benefits of a revocable living trust is that the person you name as your successor trustee can manage the assets you put in the trust if you become incapacitated.


Consulting an estate planning professional is a smart move. Planning an estate is a complex task, and we’ve only scratched the surface of your options and planning considerations here. Your best move is to work with an estate planning professional who can review your financial situation, listen to your goals, and tailor an estate plan for you.

This article is based on the federal tax laws in effect on January 1, 2024.

Please contact your TBC Advisor for advice regarding estate planning.

Copyright 2024 Quinn Communications Inc.