What is an Estate and Estate Planning

Estate planning manages the financial assets, both real property and personal property, that comprise the net worth of an individual that will be passed onto beneficiaries following death. Estates can exist during the lifetime of the estate owner in the form of Trusts and other estate tools where the estate owner is the primary trustee until some future point in time. Estates are an aspect of financial planning that are most relevant in the post retirement years and often accompany end stage or end of life financial planning. Estates planning can be divided into 3 areas 1) estate tools, 2) estate planning goals, and 3) estate taxes.


Estate tools are the means by which estate planning can be implemented. These tools include legal and financial instruments that allow the estate owner to allocate assets, determine who will be able to make decisions on behalf of the estate, and how assets are owned.  Estate planning tools require advance preparation, often require notorization, may also need the signature of witnesses and should comply with state and federal estate law. When planning an estate’s legal management with an attorney, information that informs the attorney of the estate owners goals, heirs, and assets are likely to be obtained; an example of this is this linked to ‘Estate Planning Checklist’ from abanet.org

• Power of attorney
• Last Will and Testament and Living Will
• Financial Trusts
• Additional financial instruments ex-IRA’s, life insurance


Estate planning incorporates the goals of an estate and the wishes of the estate owner into a financially viable, documented and effective way. Estate planning can achieve a number of useful purposes to all relevant parties affected by the estate. Estate planning is a fundamental aspect of financial planning in later years and becomes more relevant when the estate becomes subject to heavy taxation. In other words estate planning is essential for protecting, growing, preserving and allocating financial assets.

•  Reduces or avoids potential estate taxes
•  Protects estate assets
•  May help ensure privacy of estate beneficiaries
•  Helps preserve family legacy
•  Facilitates transition of estate ownership
•  May directs asset allocation during probate


Estate tax law can be complex and varied across the states and is also subject to revision by changes to federal legislation. State estate laws should follow federal statutes but have latitude in the amount of estate tax and the estate value amounts at which the estate tax if any occur.  Estate taxes can lower the value of an estate considerably and do not include inheritance taxes that can further reduce the value of an estate. In order to lower an estates value so it does not qualify for estate tax a combinations of methods may be used. For example, charitable deductions, acquisition of non-qualifying assets, and jointly held assets. Some of the following IRS Estate Tax Forms and publications may be necessary or helpful in understanding how the government is informed of and records estate information.

•  There are both federal and state estate taxes
•  Non-existent federal estate tax for 2010 tax year
•  Taxation of an estate can reduce its value by over 50%
•  Estate tax does not include inheritance tax


When estate planning there may be a number of legal, financial and personal considerations to take into account. This may become complex and involve large amounts of capital, assets and financial obligations. In such cases, it may be prudent and advisable to seek the consultation of a financial professional familiar with estate planning practices. Effectively planning an estate can mean the difference of having a lot of one’s personal net worth pass onto the government or beneficiaries of choice. Several tips may be helpful when estate planning.

•  Identify estate planning goals in advance
•  Study and acclimate with both Federal and State estate laws
•  Seek the advice of a financial planner, estate attorney or accountant
•  Effective tax strategy can save a significant portion of the estate


Estate planning is an important aspect of financial planning that can assist retired persons or persons of high net worth in effectively managing their finances during later years in life. The implementation of an estate plan can vary based on the state(s) in which one’s estate is held, the time at which estate laws apply, the estate owner’s financial goals and objectives and the value of the estate itself. Estate planning involves tax planning, asset management, end of life preparations. And use of both legal and financial instruments. Without estate planning, estate owners would not be able to as effectively maintain the worth of their estate and pass on the value of the estate to heirs and beneficiaries while simultaneously carrying out the goals of the estate owner or primary trustee of the estate.


(1) Internal Revenue Service http://www.irs.gov/  (U.S. Internal Revenue Service)
(2) http://retirementliving.com/RLtaxes.html (RetirementLiving.com)