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Estate Planning
Arun Misra has been working in the area of individual/group benefits, designing pension benefits for about 25 years now. He lives in Atlanta, and can be reached through e-mail :
and web site :

What is an Estate, and what is Estate Planning? Estate Planning is a part of Financial Planning, which takes care of things and finances after you are gone, and leave your estate for your heirs. Everything one owns: cash, investments, real estate, properties, businesses, royalties all together make up one’s estate. People set up wills and trusts to manage their estate after they leave for ‘heaven’. If you die without a will, you die ‘intestate’ and the State/Government will determine how to dispose of your estate.

A well documented Will (and trust) makes life easier for everyone, as specific instructions are provided in the Will to distribute assets to heirs and/or charity.

However, the State may still conduct a probate, to establish the validity of the will, and allow disposal of properties, afterwards. It is always a good idea to avoid probate.

Estate Planning is not only for super-rich. A person of modest means, with a house valued at $300K, and a life insurance policy of $1 million, and couple of hundred thousand in a pension plan, and a small business valued at $500K, will total to a estate of $2 million or so, and will trigger an estate tax of $800K, at 40% rate. Estate Planning, thus, helps in designing plans to minimize or eliminate this estate-tax after death, also called, ‘death tax’, or ‘success tax’, or ‘generation-transfer tax’ and is different from income tax.

This planning is done with the following objectives in mind :
1. Provide fair and biggest possible share of the estate to heirs, 2. Generate enough cash to pay for final expenses, taxes, and charity, 3. To save business or property for future generations 4. To avoid, eliminate and/or hasten the probate process, and , 5. To avoid any discord amongst surviving family members and business partners.

The Planning is done by a team of experts, generally an estate planning attorney, an accountant or CPA, and a financial/estate planner for the benefit of the client/prospect and their immediate family members.

The basic things one needs for a sound estate planning are:
1. Updated will, 2. Correct beneficiary designations, 3. Proper asset allocation, 4. Adequate insurance program, like policies inside a trust, 4. Powers of attorney for financial and health care issues, 5. A regular gifting program for heirs and charity, and, 6. Following the changes in tax rules.

A bigger and more complicated estate normally needs several things in addition to the
facts mentioned above, which could be: 1. Generation-skipping planning, 2. Planning for expected inheritance, 3. Transferring assets tax-free to children and grandchildren, 4. Survivorship or second-to-die life insurance plans, 5. Qualified personal and charitable trusts, 6. family limited partnerships, and, 7. private foundations.

However, the most common form of estate planning technique is the creation of an ILIT, irrevocable life insurance trust, and placing life insurance policies in the trust, so that the death proceeds, which are generally received income-tax free, can also stay out of one’s estate. This is designed based on the wishes of the owner of the estate, and their decision to leave funds for: Family, Charity and Government, after their demise. The grantor creates an irrevocable life insurance trust, trustee(s) purchase life insurance policies insuring grantor’s (and/or spouse’s) life, and become(s) the owner and beneficiary of the policy. At grantor’s death, trustee(s) receive insurance death benefit, and the Executor of the trust takes care of any probate, follows the spirit of the Will, and distributes funds amongst heirs, charity and the government (in the form of taxes), in the most efficient way (s) possible.



Defined Benefit Plan, 412(i)

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