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The Basics of Estate Planning
Farm Management Update, December 1996 - January 1997
By Frank Smith
of the Department of Agricultural and Applied Economics, Virginia Tech
Estate planning is both a right and responsibility: a right granted by state
and federal laws and a responsibility imposed by society, family
relationships, and ownership of property. For those who do not exercise
the right and fulfill the responsibility, the state in which they live has
developed an estate plan for them. The state plan may or may not be
acceptable in fulfilling family objectives. If not, then positive action is
needed to develop a plan that does.
Steps of Estate Planning
- Take Stock of the Present Situation. This involves the listing and
valuation of all assets and liabilities, but should include, as well, a
realistic projection of asset and liability growth and income needs to
aid the estate owner in planning for his or her future. In addition, it
should include an inventory of the family situation and consider the
possibility of changes in that family situation over time.
- Decide upon objectives. The development of objectives is perhaps the
most difficult step of all. They will not be the same for all people.
They need to be developed with great care and clarity, and then put in
order of importance. The support of a spouse, special educational or
physical needs of children, adequate income for retirement,
intergenerational transfer of a farm or business enterprise, charitable
gifts, and minimization of tax liability constitute the list of possible
- Choose professional help. The attorney is a very important person in
the estate planning process and should be chosen with care. He or she
should be knowledgeable in estate planning techniques, estate tax
laws, other state laws that bear upon the particular estate situation,
and tax implications of these laws and techniques. Other professionals
could include CPA's, bank trust officers, certified financial planners,
and insurance representatives.
- Evaluate alternatives. The estate owner, in consultation with his or
her attorney and other professional counselors, should examine the
various estate planning tools with a view toward accomplishing his or
her objectives. Such tools include, but are not limited to, wills, trusts,
gifts, life insurance, and sale of property.
- Select the "best" program. The careful evaluation of several
alternatives will result in a plan that most nearly meets your objectives.
The features that constitute this optimal plan then should be reduced
to writing, signed and attested as required, and kept in a safe place.
- Review the plan periodically. A change in law, family situation,
income needs, or net worth of the estate can modify or alter objectives
and create a need to revise the plan.
- Be prepared to accept less than a perfect plan.
- DO IT NOW!!
Virginia Cooperative Extension