Death and Taxes: Estate Planning Considerations

Death and taxes. It is said that those are the only two certainties in life, yet people rarely want to discuss either. In the estate planning world, however, death and taxes are often the most common topics of conversation. Since death is one of the certainties in life, everyone can benefit from an estate planning conversation.

At a high level, estate planning involves arranging the transfer of your assets upon your death, in line with your goals and wishes. Common goals and wishes include reducing taxes and other expenses, maximizing wealth flow to junior generations and providing for charity. Determining your personal goals is one of the first steps in the process, and typically involves a thought-provoking discovery process driven by you and facilitated by your team of advisors.

Once you have your estate planning goals determined, it is important to have the proper documents in place to carry out your plan. What are some of the basic documents that every person should consider?

Estate Planning Considerations

Estate Planning Documents

Will:  A Will can do a number of things. First, it directs who receives your assets upon your death, how much they’ll receive and how they’ll receive it. The legal capacity to name a guardian for minor children is one of the most important things that a Will can do for younger couples. Many people also use a fully-funded Revocable Living Trust (which I’ll talk more about later) to largely replace the Will.

Financial Power of Attorney:  This document names another person to be able to make financial decisions, manage bank accounts and pay your bills on your behalf if you become unable to do so. They often include “springing powers,” which means that it only springs into action should you become incapacitated.

Healthcare Power of Attorney:  This document names another person to be able to make healthcare decisions on your behalf if you are unable to do so for yourself, including treatment decisions, admittance to nursing homes and organ donation.

Declaration to Physicians (Living Will):  This document declares your preferences for handling terminal conditions and being in a permanent vegetative state.

Beneficiary Designations:  This is one of the easiest, most important and most overlooked parts of an estate plan. Certain accounts, policies and contracts have named beneficiaries specific to those assets. Examples include Individual Retirement Accounts (IRAs), qualified plans such as 401(k)s and 403(b)s, life insurance policies, annuities and pension plans.

You’re often required to name beneficiaries when the account is set up, though your choice may change in time. It is important to confirm that the correct beneficiaries are named and on file with the custodians, since the beneficiary designations control the disposition of those assets, even if the Will or Revocable Trust says something different. Naming appropriate beneficiaries can help with estate tax planning, income tax deferral and creditor protection. It is also important to review beneficiary designations after life changes such as marital status, family dynamics, or charitable intentions.

“The importance of periodically reviewing the named beneficiaries, both primary and contingent, simply cannot be overstated,” adds estate planning attorney Evan Y. Lin, managing member of the law firm Lin.Liebmann.Wied LLC in Green Bay, Wisconsin. “I have seen too many instances where beneficiary designations have not been properly updated to be consistent with an individual’s estate plan, which has resulted in distributions to beneficiaries inconsistent with an individual’s desire and, in some instances, even litigation,” says Lin.

Revocable Living Trust: As mentioned above, a Revocable Trust is often used in place of a Will. A Will would still be created in that situation as a backup, but the Revocable Trust would be the document that controls the asset distribution. While Revocable Trusts are commonly used by people that meet certain Federal estate tax thresholds (e.g. a married couple with a combined estate of over $10,680,000 in 2014), there are other reasons to use a Revocable Trust as well. In short, using a Revocable Trust can bypass the probate court system, which can allow for additional privacy, quicker administration and lower fees.

Requirements regarding the creation, execution and scope of all of the estate planning documents mentioned above may substantially vary based on applicable state laws. While templates for some of the documents can be obtained at no cost through various states’ websites, the complexities and nuances associated with the legal requirements of estate planning strongly suggest that it is best to consult with your attorney and team of advisors to make sure your whole estate plan is working together and can be executed as you envision.

What does this process look like?

Consult with an estate planning attorney to discuss the legal considerations of your desired estate plan, draft the estate planning documents and make sure all of them are properly executed;

Consult with a CPA for advice on the tax implications of your estate plan, and file any necessary returns;

Consult with a financial advisor to create and title the necessary accounts and ensure that asset management aligns with your goals; and

Consult with an insurance specialist to ensure proper coverage is obtained and maintained if insurance is a component of the plan.

Advanced Planning Considerations

There are often situations that arise where advanced planning beyond the basic documents is needed. Below is a non-exhaustive list of additional trusts that may be considered in certain cases:

Grantor Retained Annuity Trust (GRAT) or Intentionally Defective Grantor Trust (IDGT): These trusts are used to create “estate freezes.” People in an estate tax situation are able to transfer highly appreciating assets into a trust for future generations in exchange for a promissory note, thereby “freezing” the growth of their estate to the interest rate on the note.

Qualified Personal Residence Trust (QPRT):  A trust used to transfer ownership in a personal residence expected to appreciate in value to another person, often kids or grandkids.

Irrevocable Life Insurance Trust (ILIT):  If life insurance is part of the estate plan for estate liquidity or equalization purposes (equitable distribution of assets), one may consider holding that insurance in an ILIT to potentially remove it from a taxable estate.

Charitable Lead Trust (CLT) or Charitable Remainder Trust (CRT):  For charitably-inclined people, these split-interest trusts provide for an income stream for a period of time to one beneficiary and then the balance at the end of that period to a different beneficiary. The charity receives the income stream in the case of a CLT and the remainder in a CRT, with the other portion often going to adult children. Each trust type works better in different interest rate environments, with the CLT generally being more beneficial in the current low interest rate environment.

All of the above trusts are very complicated legal documents and should at a minimum be discussed with and reviewed by an estate planning attorney prior to their implementation.

Estate Planning Considerations 2

Implement, Monitor, Update

Even the best estate plan can be foiled without the proper implementation and monitoring. Once the documents are signed, things such as re-titling accounts and deeds, updating beneficiary information and funding trusts all need to be completed on an ongoing basis. Your documents should also be kept in a safe place where people know how to access them in the event of your passing. Finally, the estate plan should also be regularly reviewed. Changes in tax law, family structure or net worth are all things that could require updates to your plan.

While the certainty of death and taxes will remain, you can also be certain of your preparedness for both by creating and maintaining a proper estate plan.


Wipfli Financial Advisors, LLC (“Wipfli Financial”) is an investment advisor registered with the U.S. Securities and Exchange Commission (SEC); however, such registration does not imply a certain level of skill or training and no inference to the contrary should be made. Wipfli Financial is a proud affiliate of Wipfli LLP, a national accounting and consulting firm. Information pertaining to Wipfli Financial’s management, operations, services, fees and conflicts of interest is set forth in Wipfli Financial’s current Form ADV Part 2A brochure and Form CRS, copies of which are available from Wipfli Financial upon request at no cost or at Wipfli Financial does not provide tax, accounting or legal services. The views expressed by the author are the author’s alone and do not necessarily represent the views of Wipfli Financial or its affiliates. The information contained in any third-party resource cited herein is not owned or controlled by Wipfli Financial, and Wipfli Financial does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Wipfli Financial of the third party or any of its content or use of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner, investment advisor, attorney or other professional.
OneBite Editorial Staff

OneBite® is a Top 50 Financial Advisor Blog powered by Wipfli Financial Advisors. Founded in 2011, the digital magazine is dedicated to providing intelligent, in-depth coverage and analysis of the top financial and economic issues facing investors today.

No Comments Yet

Comments are closed

Death and Taxes: Estate Planning Considerations

time to read: 5 min