Why You Need an Estate Plan Post 2013 Tax Act

by Poyner Spruill LLP

Estate planning is the process of designating, during your life, the disposition of your assets upon your death in a manner that attempts to eliminate administrative uncertainties, reduce taxes, and maximize asset protection. The process of estate planning typically includes preparation of legal documents such as a Will, but it also includes restructuring of assets and beneficiary designations, all in the context of minimizing taxes and maximizing asset preservation. As part of this process, it even may be advisable to make lifetime gifts to family or charity.

Failure to have an estate plan results in your assets being distributed according to the probate laws in your state, which typically provide that if you are married and have children, your spouse and children each will receive a share of your assets. As a result, your spouse could receive only a portion of your estate, which may not provide sufficient support, and any inheritance passing to minor children will be managed by the court during the children’s minority and distributed to them outright at age 18.  If you and your spouse are both deceased, the court will appoint a guardian for your minor children without input from you.

A typical estate plan provides for the disposition of your assets upon death through a Will and Revocable Trust. The Will designates the executor of your estate, a guardian for any minor children, and directs your probate assets into your Revocable Trust. Your Revocable Trust then provides for the ultimate disposition of your assets. Revocable Trusts avoid the publicity and fees of probate if assets are placed in them during your lifetime or are payable to them at your death by beneficiary designation.  A Revocable Trust can be drafted to take advantage of death tax credits and asset protection upon your death by establishing trusts for your spouse and children that will not be subject to death tax or claims of their creditors. Making provisions for managing your affairs upon your incapacity should also be part of your estate planning. A durable financial power of attorney will allow a designated individual or corporate fiduciary to manage your financial affairs should you become incapacitated without going through the process of having you declared incompetent and a guardian appointed for you by the court. A health care power of attorney allows a designated individual to make health care decisions for you if you are incapacitated. A “living will” can provide that you do not want to be put on life support or receive food or hydration if you are terminal, in a persistent vegetative state, or in the final stages of Alzheimer’s or other dementia.

Do you need tax and asset protection planning as part of your estate plan? Most assuredly you do.  Under current law, there is a credit against estate tax of $5,250,000 per person, so a married couple has a combined credit of $10,500,000. That credit will be indexed for inflation. While this seems like a large figure, if you combine the equity in your home(s) and the value of retirement accounts, other liquid assets, business interests, and life insurance proceeds, are you close? Do you anticipate an inheritance or the sale or your business? Even if currently you do not need extensive estate tax planning, you should consider the income tax implications of your assets upon death, such as what is the most tax-efficient designation for your retirement accounts. Most clients are interested in ensuring that the assets they have worked hard to accumulate are protected from creditors, including claimants, subsequent spouses, spendthrifts, and former spouses of children. By establishing trusts and carefully selecting the trusts’ terms and fiduciaries, clients can protect their estates from these exposures.

Another component of the estate planning process is evaluating your assets and considering whether they should be restructured. If you have an interest in a closely-held business, what happens to that interest upon your death and should a buy-out agreement be considered? Should you be investing in exempt assets such as retirement accounts, tenants by the entireties property, and life insurance? Under the North Carolina constitution, life insurance payable to a spouse and/or children (or a trust for their benefit) is exempt from the claims of creditors of the insured or his estate. If you own liability-generating assets such as rental property, you might consider moving that property into a limited liability entity such as a limited liability company or at least procuring a large liability policy. Are the methods of distribution for your retirement accounts formulated in such a way to maximize asset protection and minimize income and estate taxes? If you have a taxable estate, it might be prudent to make lifetime gifts of your property to others or to charities to reduce your estate by the value of that asset as well as all of its appreciation and future income.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Poyner Spruill LLP | Attorney Advertising

Written by:

Poyner Spruill LLP

Poyner Spruill LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.