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Estate Planning


What is Estate Planning?

Estate Planning creates a master plan for the management of your property during life and the distribution of that property at death. For most people, Estate Planning will give you more control over your assets during your life, provide care when you are disabled, and allow for the transfer of wealth to whom you want, when you want, at the lowest possible cost.

Common Estate Planning issues addressed in the wealth management process include the transfer of wealth, the minimization of transfer taxes, asset protection, and charitable giving.

Transferring Wealth

Wealth transfer planning involves the smooth transition of wealth to the next generation, or to charities, according to your wishes. With proper estate planning, you decide to whom, how, how and when your assets will be distributed, as well as who will manage your estate or business. Special issues you may deal with are providing financial security for family and friends, planning for children of a previous marriage, equalizing inheritances fairly, and retiring from your business. Wealth transfer planning also involves the management of assets during disability or incapacity.

Minimizing Transfer Taxes

A major goal of estate planning is to minimize potential taxes without interfering with your other financial goals. If you give away wealth, during life or at death, you may incur federal taxes- and possibly additional state taxes. The taxes include gift, estate, income, and inheritance taxes. You can help protect the assets you transfer from excessive depletion by understanding these taxes and the various strategies you can use to minimize them.

Asset Protection

If you own substantial assets, creditor protection can be a concern. Creditors can come in the form of the IRS, accident victims, Medicaid, business creditors, or an ex-spouse. An asset protection plan first identifies potential exposure and then identifies preventive tools and strategies to reduce exposure. Asset protection planning deals with ownership issues, liability insurance, statutory protections, special needs trusts, offshore and domestic trusts, prenuptial agreements, divorce, and business dissolutions.

Charitable Gifting

Charitable giving is motive by both personal and tax incentives. Most people donate to favorite charities because they believe in the charity's mission and they gain a sense of personal satisfaction by contributing to that mission. Congress encourages charitable giving through tax legislation that can minimize your income and estate taxes. Charitable planning involves selecting the gifted property and charitable structure that will target your income estate planning, and donative needs.

Basic Estate Planning Package

Our basic plan includes a Will, Revocable Living Trust, General Power of Attorney, Advance Healthcare Directive, Authorization for Request of Protected Medical Records, Assignment of Personal Property into Trust Document, a Deed and Preliminary Change of Ownership, Funding Instructions & Memorial Instructions.

Estate Planning Benefits

  • Avoids Probate - Probate is a very expensive process which often occurs if a Trust is not set up prior to death. Probate can take years to resolve and it is not private, so the terms of your estate could be open to the public via court records.
  • Establishes Successor Fiduciaries – With a solid estate plan, executors are established, as are Trustees, attorneys-in-fact, and healthcare attorneys-in-fact. These fiduciaries will immediately step into your shoes in the event of death or incapacity.
  • Asset Protection – Optional Provisions can be added to provide asset protection for beneficiaries.
  • Proper Distribution to Beneficiaries – With an estate plan, assets can be distributed to your beneficiaries the way you designate. Specific cash distributions can be made to certain beneficiaries and the residue of your estate can be distributed outright or at certain ages and for specific percentage amounts. Undesirable beneficiaries can be specifically excluded. Optional provisions for special needs beneficiaries can be added as well.

Estate Planning Resources

A Seven Point Checklist for Your Estate Plan

When it comes to estate planning, executing your will and other estate documents is only the first step. To help ensure that your estate plan stays in tune with your goals and needs, it’s important to review and update it on an ongoing basis. Working with your financial advisor and attorney, use this checklist as a starting point to keep your estate plan in good shape.

View the Estate Planning checklist

1. Check trust funding.

Trusts are often used to preserve privacy, minimize estate taxes or administration expenses, or transfer assets to beneficiaries according to specific wishes. If you have executed a trust, consult with your attorney and financial advisor to determine which assets should be owned by your trust or should have the trust named as a beneficiary. Keep in mind that assets not owned by the trust will not be subject to its provisions.

2. Account for any life changes.

Have you experienced personal or financial changes since you executed your estate documents—for instance, the arrival of a new family member or a significant increase in assets? If so, be sure to update your documents to reflect those changes and take advantage of asset protection measures, if necessary.

3. Update beneficiary designations.

Outdated beneficiary designations can derail an estate plan. Review your designations to ensure that the correct people are named, rather than a deceased family member or ex-spouse. If your children were minors when you last reviewed your beneficiary designations, they may now be ready to receive the assets directly.

4. Review trustee and agent appointments.

While reviewing your beneficiary designations, also reevaluate who you have appointed as executor of your estate, trustee of your trust, or as your agent under your powers of attorney for health care and finances. Are the people you named still ready to carry out your wishes? Will they be capable of administering your assets in an appropriate manner?

5. Review provisions of powers of attorney and health care directives.

Ongoing changes to federal and state laws won’t necessarily invalidate a document that’s already been executed; however, such changes may limit your agent’s ability to carry out his or her duties. For example, changes to privacy laws may prevent your agent from accessing pertinent medical information. To accomplish your planning goals, it may be necessary to expand your agent’s authority.

6. Prepare for the distribution of personal effects.

If your will includes directions for the distribution of your personal effects, consider informing your executor or administrator ahead of time and providing him or her with a copy of the list. Or you may wish to leave a separate list, if permitted under your state’s law. In short, the person handling your estate should be aware of your wishes so that your personal items don’t disappear on a first come, first served basis before the formal probate process begins.

7. Understand your documents.

Ask your attorney and financial advisor as many questions as necessary to ensure that you have a clear understanding of each document in your estate plan. If it’s been some time since you executed your estate plan and you can’t remember something, ask again. Estate planning can be complex, but it’s essential that you understand the whole process.

Basic Estate Planning Documents

Although many of us don'’t like to think about planning for a future that we won’t be around to experience, a well-thought-out estate plan helps to manage and preserve assets during life and conserve and direct the distribution of assets at death.

Basic estate planning is for everyone. Through an estate plan, you have a say in the "how, when, and to whom" your assets are transferred, in addition to achieving your own specific tax and non-tax planning goals.

View Basic Document List

Core estate planning documents generally include:

  • •Durable power of attorney (POA) for financial matters
  • •Health care POA (and/or a living will)
  • •Will
  • •Trust agreement (depending on your specific situation)

Durable POA:

This document allows you to authorize someone, called an agent, to handle your financial matters if you were to become incapacitated. Without a durable POA, your family members would have to institute legal proceedings and request a probate court to appoint a guardian to carry out these responsibilities. By addressing the possibility of incapacity in advance through a durable POA, you and your family can avoid the expense and potential hassle of the probate process.

Health care documents:

With a heath care POA, you authorize an agent to handle your health care needs in a manner consistent with your intentions in the event of your incapacity. This includes permission for the agent to authorize actions regarding the continuation of life support, nutrition, and hydration, as well as to deal with general health care decisions that may arise.

Some states authorize a secondary health care document, typically called a living will. It works in conjunction with a health care POA, authorizing your health care providers to take specific action in the event that there is no reasonable hope of your recovery. It also serves an important function when the agent or other individuals you named in your health care POA are unable to make a decision on your behalf relative to continuing life-sustaining treatment.


A will allows you to direct who will receive your property upon your death and under what circumstances. It also enables you to direct the payment of estate administration expenses and taxes and nominate an executor to handle these matters. Even more important, it allows you to designate a guardian for your minor children.


With a trust, you can plan for the management of assets during your life, if you become incapacitated, and upon your death. A trust can also help minimize potential federal or state estate taxes.

Trusts come in two general forms:

  • testamentary trusts, which are funded at death,
  • and living trusts, which are funded during your lifetime.

Generally revocable, a living trust is the centerpiece of a well-rounded estate plan. When a living trust is established, the process of distributing assets at the time of death will not be subject to the jurisdiction and oversight of the probate court.

Reviewing Your Beneficiary Designations

Reviewing your beneficiary designations is one of the most important—and often overlooked—aspects of maintaining an estate plan.

Why it's essential?
Here are a few reasons why you should review your beneficiary designations on a regular basis:

  • A will doesn't cover everything. Even if you have a will or a trust, it may not govern who will receive certain assets when you die. Assets that permit you to designate a beneficiary—such as IRAs, life insurance policies, stocks, and retirement plans—do not pass through your trust or estate unless you name your trust or estate as the beneficiary. In other words, if you want an asset to be distributed via your trust, your trust must be the named beneficiary of the asset. (For tax reasons, some assets are not appropriate to be held by trusts or pass through your estate.)
  • Life is uncertain. Life events often necessitate a review of beneficiary designations. For example, failing to review beneficiary designations after a divorce can be a costly mistake. Federal and state law may require the spouse to be the beneficiary of certain assets. A divorce—or, in many states, remarriage—may not invalidate this designation unless the spouse waives the right in writing. Another event that should prompt a review of your designations is a named beneficiary's death. Do you know where the asset would pass if a beneficiary predeceases you—to that person's estate, a member of his or her family, or another beneficiary?
  • Mistakes happen. Providers sometimes make mistakes, so it's important to verify the information they have on file.

Beneficiary designation worksheet
Use this worksheet to review and keep a record of your beneficiary designations.

Download the Checklist

Choosing Your Executor or Trustee

Your estate plan is not complete until you appoint someone to carry out your wishes. Your choice of executor or trustee is important. Before selecting an obvious choice, such as a spouse or child, consider the time involved in assuming either role, the scope of duties, and the burden that both roles may impose.

Read our Quick Tips

Choosing Your Executor
Under the supervision of the probate court, an executor manages and distributes the estate according to the decedent’'s will or, in the absence of a will, according to state laws of intestacy. If there is no will, the court appoints an executor.

A will gives you the ability to control who serves as your executor, as well as how your assets will be managed and distributed. An executor is responsible for paying the expenses of your estate and the debts you leave behind. He or she may have to oversee the running of your business, arrange for the care of your dependents, and prudently invest your assets. An executor must also file tax returns and probate court reports. If you own property in several states, your executor will have to deal with additional probate court systems. Settling an estate typically takes less than one year, but it can take longer and become time consuming.

Ideally, the individual you choose as executor will be responsible, competent, organized, and trustworthy. An executor does not have to be an attorney but should be someone known for getting things done.

When deciding on an executor, keep in mind the potential conflicts of interest that could disrupt family harmony. For example, a spouse is a common choice, but children from a previous marriage could view a current spouse as biased. Also, when choosing one sibling over another, consider their relationship and history. Your heirs should regard your choice as someone who has common sense and is fair. These attributes go a long way when managing family dynamics and handling squabbles that can erupt during the settlement of your estate. If you can’not find someone in the immediate family who has the necessary qualities, appoint a third party.

Be sure that the individual you choose is willing to serve. Settling an estate is time consuming. In addition, in some cases, the executor may incur out-of-pocket costs such as the cost of a surety bond. Further, an executor will be liable for his or her actions, and there can be repercussions for failing to act properly. Even if your choice is willing and able to take on the job today, he or she may not be able to continue in the future. Always name a successor executor in your will.

Choosing Your Trustee
You might also consider a revocable trust if your goals include factors such as controlling distributions of assets to heirs, professional management, or creditor protection. When you establish a trust, you will also appoint a trustee.

A trustee manages the assets left to your trust for the benefit of your beneficiaries according to the instructions you provide in the trust document. A trustee has duties similar to those of an executor; however, a trustee'’s decisions can have long-lasting consequences because, unlike an estate, a trust can last for decades, sometimes even over several generations. For this reason, many people rely on the professional services of a trust company.

If you have created a revocable trust, you probably serve as your own trustee and have named a successor trustee to take over if you incur a disability or when you pass away. When choosing a successor, look for someone with the following qualities:

  • Competence. A good trustee understands the trust document and his or her duties. He or she will also know his or her limitations and seek expert advice on legal, tax, or investment issues when needed.
  • Willing and able. Lack of time is the principal reason why personal friends and family members resign trustee positions. It is always wise to name several alternatives if your first choice cannot fulfill the role.
  • Insight. A good trustee understands what you, the grantor, had in mind and is close enough to beneficiaries to understand their needs. For this reason, you may name a friend or family member to serve as co-trustee with a trust company. The trust company can perform all administrative duties so that your personal trustee can be relieved of day-to-day management. Meanwhile, the trust company can benefit from the insight provided by the personal trustee.
  • Impartial. Your trustee understands that he or she has an obligation to consider the needs of all beneficiaries and not favor one over another.
  • Maturity. The ideal trustee would have the family’'s respect. An individual who has trouble communicating or who is indecisive is not the best choice for this role. A trustee may have to deal with difficult beneficiaries or make unpopular decisions.
  • Astute. Your choice should have a history of making good financial and personal decisions.

Although your business partner, attorney, CPA, investment advisor, or insurance agent might seem like a natural choice, these individuals could face conflicts of interest by serving as successor trustee because they may likely be simultaneously providing professional services to the trust or its beneficiaries.

An alternative is a professional trustee such as the trust department of a bank. A professional trustee (also called a corporate trustee) will have extensive experience in trust management and will be accountable to banking authorities, as well as to internal and outside auditors. Using a professional trustee may also be the best way to preserve family harmony.

This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.


To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.

© 2013 Commonwealth Financial Network®

Selecting a Durable Power of Attorney for Healthcare

When designating a durable power of attorney for health care (or health care agent), it is important to choose someone you trust to make the best medical decisions on your behalf. While your instinct might be to choose your spouse or your children, it’'s wise to step back and carefully evaluate whether the person you plan to appoint will be capable of following through with his or her responsibilities. Keep in mind that your agent may need to address unforeseen health care issues and potentially make difficult decisions on your behalf.

Generally, it’s advisable to appoint one person to serve as your agent and make alternate appointments in the event that he or she is unwilling or unable to accept the responsibility. If you appoint several people to share the responsibility, it may be difficult for them to achieve consensus.

We've designed a tool to help you evaluate potential candidates and decide on the person best suited to serve as your health care agent.

View the Candidate Evaluation Tool

Understanding Advanced Health Directives

If you became seriously ill and could no longer communicate your wishes, how would you want to be cared for? Which treatments would you want, and which would you want to avoid? Advance directives allow you to convey your decisions for end-of-life care to family, friends, and health care professionals, helping prevent confusion down the road.

Learn More About Health Directives

What are advance directives?
Advance directives are legal documents that make your preferences for medical care known before you become ill. Through an advance directive, you can appoint someone to make decisions for you if you’re unable to do so, as well as tell your health care providers how to manage your treatment. For example, in the case of a terminal illness, you might request that your health care professionals keep you comfortable and pain-free without resorting to extraordinary and costly measures. Or, you might state that you want a certain treatment no matter how ill you are.

Important considerations
An advance directive becomes effective only if your doctor verifies that you have a terminal or irreversible condition and you cannot communicate. Advance directives are not set in stone; they can always be amended or revoked. (They cannot, however, be changed by a relative or well-meaning friend.) If you do decide to amend or revoke an advance directive, it’s important to let your family, doctor, and other health care professionals know. In the absence of an advance directive or other legal document created by you, your family can ask the courts to appoint a proxy to make medical decisions for you. Usually, courts will only grant a proxy limited authority, which may not fully address the needs of the patient and family. By drafting an advance directive, you can appoint your own proxy and provide him or her as broad or as narrow an authority as you wish. Keep in mind that your proxy has the legal right to make decisions for you, even if family members disagree.

Types of advance directives
Advance directives can take several forms, but the three documents described below are the most common. You may need all three to provide comprehensive directions about your wishes. It’s important to note that laws for advance directives vary from state to state, so be sure to understand the laws where you live. Also, while a legally valid document executed in one state will generally be honored in another, it’s wise to have your documents prepared in any states you frequently visit.

Health care proxy or durable medical power of attorney.
Through a health care proxy or durable medical power of attorney, you designate who can act as your advocate and make medical decisions on your behalf.

Living will.
A living will is often confused with a durable medical power of attorney or health care proxy, but its scope is more limited. It describes the medical treatments you would want if you were seriously ill, but it doesn’t allow you to appoint someone to make decisions for you. Typically, a living will clarifies your wishes in regard to feeding and hydration tubes, breathing apparatus, permanent dialysis, or other life support systems.

Do not resuscitate (DNR) directive.
In the event you stop breathing or your heart stops, a DNR directive instructs paramedics and other response teams not to perform CPR. You can decide where this directive takes effect: while you are in the hospital, in non-hospital emergencies, or both.

Another option: Five Wishes
Created by the nonprofit organization Aging With Dignity, Five Wishes is an advance directive that focuses on the patient’s values about terminal care rather than specific medical treatments. Written in everyday language, the document covers:

  • Who you want to make your health care decisions when you are not able to
  • What kind of treatment you want or don’t want
  • How comfortable you want to be
  • How you want people to treat you
  • What you want your loved ones to know

Five Wishes meets the legal criteria for advance directives in 42 states. Health care professionals will accept it in the remaining states, but it may not be honored if there are conflicting wishes among your family members.

Giving your family peace of mind.
By defining the type and extent of care you want to receive, you can give your family peace of mind if a painful decision has to be made. The more clear you are about your wishes, the easier it will be for the person you appoint to make medical decisions on your behalf. Once you have drafted an advance directive, don’t forget to provide a copy to your family and health care providers, and be sure to discuss your wishes with those close to you.

Commonwealth Financial Network ® does not offer tax or legal advice. Please consult a tax or legal professional regarding your individual situation.