A good estate plan is designed to help you ensure that your assets are transferred:

• According to your wishes, to the people, charities or institutions you choose
• Minimizing estate transfer taxes and costs which can reduce the financial legacy for your chosen heirs
• With as little delay and paperwork as possible for your family, at a time that will be difficult for them in many ways
• Without the involvement of probate court proceedings 

Estate planning can be complex or relatively simple, depending on your age, your state of health, the wealth you have accumulated, your goals and many other factors. Therefore, it is wise to start with a needs evaluation and a checklist that can help you organize your thoughts and start formulating a plan.

A Brief Word About Estate Taxes

Congress has changed the Federal estate tax laws many times over the years, with higher or lower taxes being levied at different times in our history. Key to the current Federal estate tax laws is a legal term referred to as the applicable exclusion amount, which defines the amount that can be passed by individuals to heirs without taxation, while amounts in excess will be taxed substantially.

While the current applicable exclusion amount is relatively high, it is important to know that the tax act governing federal estate tax rates is set to expire in 2011. Unless Congress passes a new tax act, estate taxes could return to the levels in effect prior to 2001. At that time, no gift tax or estate taxes were imposed on the first $675,000 of combined transfers – both those made during life and at death.

In part because of the uncertainty about whether Congress will raise or lower the estate tax in 2011, good estate planning remains as important as ever for most people.

Your Will

Wills may be your most important estate planning tool. Even if you are young or your estate is on the modest side, you should have a will. That way, you – instead of the state – determine who will inherit your property.

Dying without a will is called "intestacy." While intestate succession laws may vary depending on your location, in many states your property is then distributed to your closest blood relatives in proportions decided by the state – which may not agree with your wishes. Also, intestacy carries with it the possibility of a bigger tax impact on your assets, as well as lengthy probated court proceedings for your family and heirs.

If you have minor children, a will also is the only legal way you can designate a guardian for them. While a will does not need to be drafted by an attorney to be valid, it is strongly advised that you use an attorney to help ensure that your will accomplishes your true intentions.

Trusts

Trusts are extremely versatile estate planning tools that help you:

• Manage your own assets
• Control how your assets are distributed after your death, or
• Plan for possible incapacity.

There are many types of trusts and each is designed for a specific purpose.

Fundamentally, trusts hold assets for the benefit of another person. You can place almost any type of asset into a trust – cash, stocks, bonds, insurance policies, real estate, and artwork, to name the most common. What you put in trust depends on your goals.

For example, a trust can generate income with income-producing securities such as bonds. Or, if you fund your trust with a life insurance policy, it can create a pool of cash that could pay estate taxes at your death, or provide for your family.

To sum up the main advantages, trusts can help you:

• Minimize estate taxes
• Shield your assets from potential creditors
• Bypass the expense and delay of probating your will
• Preserve assets for your children (if you should pass away while they are minors)
• Create a pool of investments for professional money management
• Set up a fund for your own support in case you become incapacitated
• Shift some of your income tax burden to beneficiaries in lower tax brackets<
• Provide benefits to charities

Trust law is complex. Be sure to seek the services of an experienced attorney to set up your trust.

Other Types of Asset Protection

Whether you are concerned about your personal assets or your business, there are a number of other ways beside trusts to potentially keep your property off limits to tax collectors, accident victims, health-care providers, credit card issuers, businesses and other creditors.

• Liability insurance: Consider purchasing or increasing umbrella coverage on your homeowners policy. For business-related liability, do the same under your business insurance policy.
• Declaration of Homestead: Can protect your primary residence. State law determines the creditor and judgment protection. It may provide a complete exemption, a limited exemption, or an exemption under certain circumstances (e.g. a judgment for medical bills). It is easy to file a Declaration of Homestead. You pay a small fee, fill out a form, and file it at the registry where your deed is recorded.
• Dividing Assets: Dividing assets between husband and wife can limit exposure to liability. If one spouse has a job that exposes him or her to greater potential liability, that spouse might keep only the income and assets from the job. Then the other spouse would take sole ownership of the couple’s investments and other valuable assets. However, in this way, creditors can lay claim only those assets in the first spouse’s name.

Life Insurance Beneficiaries

The beneficiary that you name to receive the death benefits of your life insurance policy can be either revocable or irrevocable.

• A revocable beneficiary can be changed by you at any time.
• An irrevocable beneficiary, once named, cannot be changed without his or her consent.

The beneficiary to whom the proceeds go first is called the primary beneficiary. Secondary, or contingent beneficiaries, receive proceeds only if the primary beneficiary is deceased. You may also name multiple beneficiaries, but you must specify the percentage of the death benefit proceeds each one will receive.

It is vital to name primary and contingent beneficiaries. Otherwise, proceeds from your policy will automatically pass to your estate upon your death. They may then be subject to probate, incurring all the expenses and delays that accompany estate settlement. Also, proceeds that pass to your estate are subject to creditors’ claims. Named beneficiaries, on the other hand, receive proceeds almost immediately after your death and avoid probate. In most states life insurance proceeds are exempt from creditors if there’s a named beneficiary.

Business Succession

Transferring your family business brings with it a host of issues – for instance, when will you step away from day-to-day control of the company and how exactly will you do it? Some of your options include:

• A systematic gifting program
• Selling the business outright
• Transferring your business interest with a buy-sell agreement
• A grantor retained annuity trust or a grantor retained unitrust

Proper business succession planning should include ways to make the transfer with the smallest possible tax impact. A financial professional experienced in business succession can help your tax professional and your estate planning attorney with funding options for a business transfer, as well as other estate planning issues. Always consult with an attorney and tax professional in building your succession plan. While our financial professionals do not provide tax and legal advice, they can help you choose appropriate products to fund and transfer assets.

Charitable Gifts

Leaving money to charity is rewarding on many levels. It not only benefits those in need, but it can help fulfill a personal desire to make a real difference in the world.

Altruism also has potential estate tax advantages. By leaving money to charity, the total amount of your gift may be deducted from the value of your taxable estate.

The simplest way to leave a charitable gift is through an outright bequest of cash in your will. One short paragraph that names the beneficiary and specifies the amount of your gift is all that is needed. This is an appropriate method when the amount is relatively small, or you want the gift to be free of conditions.

You also can make a charity the beneficiary of an IRA or retirement plan. This gift is not only deductible for estate tax purposes – but the charity will not have pay income tax on the gift.

Incapacity

Incapacity is defined as being either mentally or physically unable to care for yourself, or your day-to-day affairs. It is wise to plan ahead for the possibility of incapacity; otherwise, a relative or friend would have to ask a court to appoint a guardian for you. Subsequent decisions might be contrary to your wishes.

An attorney can help prepare documents that give persons you trust the authority to manage your affairs, such as medical decisions and property management.

There are three tools used to plan ahead for medical decisions:

• A living will allows you to approve or decline certain types of medical care, even if you will die as a result of the choice
• A durable power of attorney for health care, also known as a health-care proxy, allows an appointed representative to make medical decisions for you
• A Do Not Resuscitate Order (DNR) is a doctor’s order that tells all other medical personnel not to perform CPR if you go into cardiac arrest. There are two types of DNRs: one for in-hospital only, and one for outside the hospital.

There are several ways you can prepare for an unforeseen incapacity in order to protect and manage your assets:

• Revocable Living Trust: Transferring ownership of your property to a revocable living trust lets you retain control until you become incapacitated, at which point your successor trustee (appointed by you) takes over the management. This trust can survive your death, but it can be expensive to maintain and administer.
• Durable Power of Attorney (DPOA): A DPOA authorizes someone else to act on your behalf. The "standby" DPOA is effective immediately while a "springing" DPOA is not effective until you become incapacitated. DPOAs are inexpensive to implement and end at your death.
• Joint ownership: Holding property jointly allows someone else to have immediate access to the property and use it to meet your needs. There are disadvantages, including immediate access by the co-owner(s), and your inability to direct the co-owner(s) on how to use the property. Consult with your attorney for all the ramifications of this arrangement.

Having a comprehensive estate plan in place can give you confidence that your assets will be distributed to your loved ones according to your desires. It can be a complex process, and you should consult an attorney to help ensure it is done correctly.

AXA Equitable does not issue liability insurance policies.