Estate Planning E-Book

William P. Streng

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 1778

Veröffentlichungsjahr: 2015

Beschreibung

Plan ahead: estate planning to secure your wishes Estate Planning is your overview of the estate planning concepts that are necessary to consider when advising your clients about the different facets of wealth transfer planning. This fundamental reference presents the basic estate, gift, and trust planning ideas in a descriptive and accessible manner--allowing you to easily and conveniently access the information you need when you need it. This essential text covers the development of estate planning strategies for your clients, the fundamentals of the federal transfer tax system, relevant federal income tax rules, lifetime donative asset transfers, gratuitous property transfers at death, generation-skipping transfers, special property transfer planning considerations, and post-mortem planning. When done effectively, estate planning enables your clients to make both lifetime and testamentary transfers of assets to beneficiaries of their choice. In the process, strategic, successful estate planning strategies conserve wealth for these beneficiaries, who are often family members of the client. Leveraging the right methods of estate planning can ensure that you achieve your client's objectives. * Explore the fundamentals of estate planning as they relate to wealth transfer planning * Dive into special property transfer planning considerations, including community property, life insurance, charitable transfers, closely held corporations, etc. * Better serve your clients by having access to relevant, easy to navigate information on estate planning best practices * Reinforce these new ideas with a comprehensive test bank Estate Planning is your guide to estate planning concepts that help you protect your assets during wealth transfer--and prepare for your assets to change hands as smoothly as possible.

Leseprobe

ESTATE PLANNING

William P. Streng, Esq.

Vinson & Elkins Professor of Law

University of Houston Law Center

Houston, Texas

Special Consultant to Tax Management

Cover images: Abstract gold background © strizh/iStockphoto; Business workplace © shironosov/iStockphoto Cover design: Wiley

Copyright © 2016 by The Bureau of National Affairs, Inc. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

This book first appeared in Portfolio 800-3d Estate Planning published by Bloomberg BNA.

Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Names: Streng, William P., author. Title: Estate planning / William P. Streng, Esq., Vinson & Elkins Professor of Law, University of Houston Law Center, Houston, Texas, special consultant to Tax Management. Description: Hoboken, New Jersey : John Wiley & Sons, Inc., 2016. | Includes bibliographical references. Identifiers: LCCN 2015030346 | ISBN 978-1-119-15712-0 (cloth) | ISBN 978-1-119-19174-2 (ePDF) | ISBN 978-1-119-19175-9 (epub) | Subjects: LCSH: Estate planning-United States. | Tax planning-United States. Classification: LCC KF6572 .S757 2016 | DDC 332.024/0160973-dc23 LC record available at http://lccn.loc.gov/2015030346

CONTENTS

About the Author

Introduction

Chapter 1 Estate Planning Objectives

Notes

Chapter 2 Inventory of the Client’s Assets and Objectives

A. Scope of Factual Analysis

B. Family

C. Assets and Liabilities

D. Cash Flow Analysis

E. Present Objectives for Estate Disposition

Notes

Chapter 3 Preliminary Estate Planning Considerations

A. Expanded Responsibilities of the Professional Tax Advisor

B. Facilitating Lifetime Capital Formation

C. Fundamental Federal Income Tax Planning

D. Managing and Structuring the Closely Held Business Ownership: Family Business Succession Planning

E. Additional Important Preliminary Planning Inquiries

F. Financial Adequacy of the Estate

G. Hypothetical Probate Administration

H. Lifetime Asset Management

Notes

Chapter 4 The Basic Federal Transfer Tax and Income Tax Structure

A. Estate, Gift, and Generation-Skipping Transfer Taxes

B. Related Federal Income Tax Considerations

Notes

Chapter 5 Fundamental Testamentary Planning

A. Basic Mechanisms for Transferring Property

B. Trusts

C. Credit Shelter Trust

D. Estate Tax Marital Deduction Transfers

E. Powers of Appointment

Notes

Chapter 6 Lifetime Asset Transfers

A. Lifetime Gifts—Arguments For and Against

B. Basic Federal Tax Considerations

C. Methods of Completing Gifts

D. Specific Types of Gifts

Notes

Chapter 7 Intrafamily Transfer Alternatives to Gifts

A. Intrafamily Sale/Leaseback or Gift/Leaseback

B. Intrafamily Installment Sales

C. Interest-Free Loans of Money

D. Loans of Property or Credit

E. Tax-Free Property Exchanges with Family Members

F. Private Annuities

G. Joint or Split Purchases

H. Sale of Remainder Interest in Property

I. Grantor Retained Annuity Trust and Unitrust

J. Personal Residence Trusts

K. Transfers of Family Properties Summarized

Notes

Chapter 8 Generation-Skipping Transfers

A. Purpose of the Generation-Skipping Transfer Tax

B. Definitional Provisions

C. Tax Computation

D. Exemptions

E. GST Tax Planning Considerations

Notes

Chapter 9 Special Nonprobate Planning Situations

A. Joint Property

B. Community Property

C. Life Insurance

D. Commercial Annuities

E. Charitable Transfers

F. Foreign Trusts

Notes

Chapter 10 Special Business Planning Situations

A. Family Business Planning Options

B. Closely Held Family Corporations

C. Closely Held Partnerships and Limited Liability Companies

D. Special Valuation for Family Farms and Real Property

E. Qualified Family-Owned Business Interests

Notes

Chapter 11 Special Executive Compensation/Deferred Benefits Estate Planning

A. Executive Compensation Planning

B. Qualified Pension and Profit-Sharing Plans

C. Self-Employed Individual

D. Individual Retirement Account

E. Business-Originated Life Insurance

Notes

Chapter 12 Post-Mortem Estate Planning

A. Planning Options

B. Income Tax Planning Opportunities

C. Renunciations and Disclaimers

D. Waiver of Fee by Fiduciary

E. Solving Estate Liquidity Problems

F. Alternate Valuation

Notes

Chapter 13 Estate Planner–Client Relationship

A. Professional’s Responsibility

B. Determining the Amount of the Estate Planner’s Fee

C. Income Tax Deduction of Estate Planning Fees

Notes

Appendix: Worksheets

Bibliography

EULA

Guide

Cover

Table of Contents

Chapter

Pages

ix

1

2

3

4

5

6

7

9

10

11

12

13

14

15

17

18

19

20

21

22

23

24

25

26

27

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

62

63

64

65

66

67

68

69

70

71

72

73

74

75

76

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

159

160

161

162

163

164

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

264

265

266

267

268

269

270

271

272

273

274

275

276

277

278

279

280

281

282

283

285

286

287

288

289

290

291

292

293

294

295

296

297

298

299

300

301

302

303

304

305

306

307

308

309

310

311

312

313

314

315

316

317

318

319

320

321

322

323

324

325

326

327

328

329

330

331

332

333

334

335

336

337

338

339

340

341

342

343

344

345

346

347

348

349

350

351

352

353

354

355

356

357

358

359

361

362

363

364

365

366

367

368

369

370

371

372

373

374

375

376

377

378

379

380

381

382

383

384

385

386

387

388

389

390

391

392

393

394

395

396

397

398

399

400

401

402

403

404

405

406

407

408

409

410

411

412

413

414

415

416

417

418

419

420

421

422

423

424

425

426

427

428

429

430

431

432

433

434

435

436

437

438

439

440

441

442

443

444

445

446

447

448

449

450

451

452

453

454

455

456

457

458

459

460

461

462

463

464

465

466

467

468

469

470

471

472

473

475

476

477

478

479

480

481

482

483

484

485

486

487

488

489

490

491

492

493

494

495

496

497

498

499

500

501

502

503

504

505

506

507

508

509

510

511

512

513

514

515

516

517

518

519

520

521

522

523

524

525

526

527

528

529

530

531

532

533

534

535

536

537

538

539

540

541

543

544

545

546

547

548

549

550

551

552

553

554

555

556

557

558

559

560

561

562

563

564

565

566

567

568

569

570

571

572

573

574

575

576

577

578

579

580

581

582

583

584

585

586

587

588

589

591

592

593

594

595

596

597

598

599

600

601

602

603

604

605

606

607

608

609

610

611

612

613

614

615

616

617

618

619

620

621

622

623

624

625

626

627

628

629

630

631

632

633

634

635

636

637

638

639

640

641

642

643

644

645

646

647

648

649

650

651

652

655

656

658

659

660

661

667

668

669

670

672

673

674

675

676

677

678

689

690

691

692

693

694

695

696

697

698

699

700

707

708

709

710

711

712

713

714

715

716

717

718

719

721

722

723

724

About the Author

William P. Streng

Wartburg College (B.A., 1959); Northwestern University School of Law (J.D., 1962); Law Clerk to Honorable Lester L. Cecil, Chief Judge, U.S. Court of Appeals for the Sixth Circuit, 1963–1964; associated with Taft, Stettinius & Hollister, Cincinnati, Ohio, 1964–1970; Attorney-Advisor, Office of Tax Legislative Counsel (Office of the Assistant Secretary for Tax Policy), U.S. Dept. of the Treasury, Washington, D.C., 1970–1971; Deputy General Counsel, Export-Import Bank of the United States, Washington, D.C., 1971–1973; Of Counsel, Haynes & Boone, Dallas, Texas (1977–1979); Professor of Law, School of Law, Southern Methodist University, Dallas, Texas (1973–1979); Bracewell & Patterson, Houston, Texas (Partner, 1980–1985; Consultant, 1985–2005); Bracewell & Giuliani LLP (Consultant, 2005–2011); Professor of Law, University of Houston Law Center (1985–present); Visiting Professor, The Ohio State University College of Law (1977), New York University School of Law (1990), and The University of Texas School of Law (2002); Lecturer, Rice University (1987–1989); Distinguished Lecturer, University of Hong Kong Law Faculty (1992); Fulbright Professor, University of Stockholm Law Faculty (1993); Visiting Fellow, Victoria University Law Faculty (1996); Visiting Professor, The University of Leiden (International Tax Center), the Netherlands, 1997, 1998, 2000, 2007, and 2009; Visiting Professor, Yokohama National University, Japan (2005); Member: American Law Institute (Tax Advisory Group); the International Fiscal Association (and Council Member, USA Branch); European Association of Tax Law Professors (EATLP); the American Bar Association’s Section of Taxation; the BNA Tax Management Advisory Board; and various other professional organizations; Author or co-author of books and Tax Management portfolios, including: 700 T.M., Choice of Entity (Bloomberg BNA, 2007); Tax Planning for Retirement, with M. Davis (ThomsonReuters/Checkpoint, 2015); “International Business Planning: Law and Taxation—United States,” with J. Salacuse (three volumes, 2015, Lexis-Nexis/Matthew Bender); Bittker, Emory, and Streng, “Federal Income Taxation of Corporations and Shareholders—Forms,” ThomsonReuters/Checkpoint, 4th ed. (1995, and chapter revisions and supplements to 2015); previously “U.S. International Estate Planning,” (RIAG-Warren, Gorham & Lamont, 1996, and updates on ThomsonReuters/Checkpoint).

Introduction

This book is derived from Bloomberg BNA Tax Management Portfolio, Estate Planning, No. 800–3rd, which is part of the Bloomberg BNA Tax Management Portfolio Library (for more information, visit www.bna.com/tax). It is designed as an authoritative and practical working tool for attorneys, accountants, and others involved in estate planning practice. The basic estate, gift, and trust planning concepts are presented in a descriptive and conveniently accessible form. The topics treated include: the development by the advisor of an estate planning strategy for the client; fundamentals of the federal transfer tax system and related federal income tax rules; lifetime donative asset transfers; gratuitous property transfers at death; generation-skipping transfers; special property transfer planning considerations (e.g., community property, life insurance, charitable transfers, closely held corporations); and post-mortem planning. Other books in the Tax Management Estates, Gifts, and Trusts series provide detailed coverage of the various specific planning topics surveyed in this book. These books are identified at appropriate locations in the text of this book.

Effective estate planning (particularly, the federal tax planning component) enables a person to make both lifetime and testamentary transfers of assets to that person’s beneficiaries of choice and, in the process, conserve wealth for those recipients (often family members). Various methods may be employed to both (1) achieve the estate planning client’s objectives regarding the completion of these transfers and the port-mortem management and disposition of the property, and (2) minimize income, gift, and estate tax liabilities on the asset transfers. Effective estate planning, however, requires a working knowledge of both the federal and state tax rules (income, estate, and gift) and the nontax reasons for using traditional wealth-shifting mechanisms such as wills, trusts, gifts, and powers of appointment. Therefore, a familiarity with various state property, trust, probate, and business laws is also essential for the estate planner. This book provides the practitioner with an overview of the estate planning concepts necessary in advising clients concerning these several elements of wealth transfer planning.

The federal transfer tax planning discussed in this book is primarily focused on the period beginning with the year 2013 and thereafter. After a decade of uncertainty, in 2013, Congress finally made permanent many of the estate, gift, and generation-skipping transfer tax changes that were enacted in 2001 and 2010.

CHAPTER 1Estate Planning Objectives

The primary objectives of estate planning are (1) to secure to the property owner (and his or her family members) during his or her lifetime the maximum economic benefits available from the possession and use of his or her property, and (2) to enable that property owner to transfer the property to the surviving members of his or her family (or other desired beneficiaries, including trusts) with minimal shrinkage from applicable death taxes and other property transfer costs. Estate planning is, therefore, concerned primarily with (1) minimizing federal and state income, estate, gift, and inheritance taxes; (2) reducing probate and associated property transfer costs and similar mechanical burdens; and (3) conserving and enhancing the client’s net worth both (i) currently for the benefit of the client and his or her family, and (ii) after the client’s death, for the eventual beneficiaries of the primary client’s property. Obviously, this estate planning must be consistent with the specific objectives of the client for both (1) the lifetime use of the property by the client, and (2) the testamentary disposition by the client of property to his or her surviving beneficiaries.

In developing a proposed arrangement for both the lifetime and the testamentary disposition of the client’s property, the “estate planner” often functions as much more than a legal technician. He or she is both (1) a property/tax planning lawyer and (2) a legal counselor. As a property/tax lawyer he or she must be conversant with the state and federal laws regarding the construction of wills and trusts; property ownership (including community and joint property) rules; asset transfer processes (including for future interests); individual and trust income taxation; inter vivos and death time transfer taxes (both federal and state); probate administration; corporate, partnership, and limited liability company laws and taxation; and rules resolving conflict of laws. As a “counselor,” however, he or she must also be skilled in dealing with the human elements of this property/tax planning.1 He must be able to explain the probate administration processes. Often this must be done on a multigenerational basis where each generation has different perspectives on these questions. Further, he or she must also be able to encourage the client toward appropriate investment strategies for the management and growth of the client’s assets during lifetime.

The estate planner must consider the unique objectives of his or her individual clients and attempt to mold a rational wealth accumulation and property transfer plan that is consistent with those clients’ specific objectives.2 In proceeding with this engagement, the attorney/estate planner often will be consulting with the client’s other advisors (including, possibly, an accountant, banker, insurance representative, securities broker or investment adviser, and certified financial planner). The estate planner may thereby benefit from a variety of perspectives as to how the estate plan for the individual client may best be formulated and implemented, but the estate planning advisors should be careful to avoid the clients being dominated by one of these other advisors.

Considering these basic objectives of the estate planning process, the function of this book entitled Estate Planning is:

to serve as a fundamental guide for the estate planner to analyze practical and recurring problems confronting clients in the estate planning context (particularly relating to federal tax planning);

to provide ideas for use in identifying any available options for the resolution of these estate planning issues; and

to enable the estate planner to formulate specific recommendations and suggestions for implementation by his or her clients.

Increasingly, clients with a reasonable amount of wealth are frustrated by the fluidity of the relevant tax rules in this context, particularly the changes in the estate, gift, and generation-skipping transfer tax rules. This necessitates regular review of the client’s estate planning and a continuing response to changing developments. This also suggests structuring substantial flexibility into the client’s estate planning documents—about which the client may not be comfortable.

More detailed discussions of many of these matters are included in the various Tax Management portfolios covering estate, gift, and trust income taxation.3 This book does not deal in depth with such matters as the implementation of (1) a durable power of attorney, (2) anatomical gift documents,4 (3) a “living will” or “directive to physicians” to evidence an individual’s direction to medical caregivers that he or she not be kept alive by life-sustaining procedures in the event of a terminal physical condition,5 (4) a “durable power of attorney for health care” or a “medical power of attorney,”6 (5) a declaration of guardianship for oneself,7 or (6) a burial power of attorney.8 A “durable power of attorney” is implemented to enable another person to deal with the principal’s assets without the requirement of first seeking approval through some type of incompetency or guardianship proceeding in a local court proceeding.9 Statutes authorizing living wills or advance directives have also been enacted in various states.10 These statutes generally specify how living will directives are to be implemented and revoked. The objective of legislation permitting a “durable power of attorney for health care” is to enable a person to delegate one’s health care decision-making capacity to another person.11 This document is often used to counteract perceived deficiencies in the use of a living will, including those situations not contemplated by the client when implementing the living will. Because of the occasional reluctance by physicians to recognize these instruments (whether for professional malpractice concerns or for other reasons), the use of both documents might sometimes be useful. In many jurisdictions the use of both documents is the preferred practice.

These matters involving the client’s asset management during incompetency and the making of health care determinations are beyond the scope of this book but are discussed in other Tax Management portfolios. These are important questions, however, which the estate planner should carefully examine with his or her clients under appropriate circumstances. In many instances the several types of powers of attorney should be strongly recommended to the estate planning client. The estate planner should be sufficiently organized so that these documents can be produced electronically with limited effort (and, therefore, on a cost-effective basis for both the estate planner and the client).

Much of the discussion in this book is structured to address the situation of the “traditional family.” However, demographic trends in the United States suggest that the traditional family is declining in percentage. Increasingly, the estate planner will need to consider a number of variables: (1) a reduction in the number of children and, therefore, a greater necessity to assure that a support network is available for older clients; (2) more second (third, fourth, etc.) marriages, with mixed families including multiple stepchildren12; (3) same-sex marriages, domestic partner relationships, and similar arrangements; (4) older heterosexual couples living together without being married and having children from prior marriages; (5) grandparents as heads of households including their grandchildren without the intermediate generation present; (6) more balanced income sources for both spouses contributing to the support of the household; (7) a desire for long-term protection (from various creditors and divorced spouses) for family assets through the use of trusts that continue for extended periods; and (8) children produced using new biological techniques. All these situations can present factual and psychological “wrinkles” in the estate planning that must be carefully addressed in the individualized situation.

Notes

1

. The estate planner may determine that the emotional issues, rather than property planning issues, are paramount in the early stages of the estate planning. These might include: (1) determining who should succeed to the property ownership (particularly as to items of tangible personal property), (2) whether this inheritance will change the future behavior of the beneficiary, and (3) contemplation by the client of his or her death (final arrangements for disposition of one’s physical remains). Certain of these issues may be even more psychologically complicated in situations involving second marriages and children of previous marriages.

2

. Because of the commoditization of estate planning, the advisor must be able to demonstrate that he/she brings added value to this endeavor. Otherwise, the client may conclude that his estate planning can more easily (and more cost-effectively) be accomplished by using documents available through less expensive websites.

See

Goffe & Haller,

From Zoom to Doom? Risks of Do-It-Yourself Estate Planning

, 38 Est. Plan. 27 (Apr. 2011).

3

. Throughout this book reference is made to Tax Management portfolios, where appropriate. For a listing of the portfolios useful in specific estate planning contexts,

see

(1) the Tax Management Estates, Gifts and Trusts Portfolio Classification Guide; and (2) the online BNATAX Management Library (available from Bloomberg BNA Tax Management, telephone [phone] or its website:

www.bnatax.com

).

4

. All states have enacted some form of the Uniform Anatomical Gift Act. This act exists in several versions, being most recently revised in 2006, revising the 1968 and 1987 versions. The 2006 Act indicates how anatomical gift documents can be made, amended, or revoked by an individual. The Act specifies how such gifts can be made by others such as family members. This gift can be accomplished by a testamentary document. The Uniform Act provides that an anatomical gift by last will takes effect upon death of the testator, whether or not the will is probated. If, after death, the will is declared invalid for testamentary purposes, the validity of the anatomical gift is unaffected. Because often a will is not located until after the funeral, many states permit this gift to be evidenced by a separate document designed to be carried by the donor. In some jurisdictions this includes an appropriate designation on a driver’s license. This state legislation also often specifies the permissible donees of a person’s body or body parts.

See

www.uniformlaws.org

for this Act, summaries of this Act, and the status of its adoption in the several states.

5

. See

Cruzan v. Dir., Mo. Dep’t of Health

, 497 U.S. 261 (1990), where the Supreme Court effectively indicated that quite specific instructions must be provided by an individual to authorize the termination of life support systems.

6

. For further discussion of durable powers of attorney for health care and/or medical powers of attorney, see 816 T.M.,

Planning for Disability

(Bloomberg BNA).

7

. Under state law, an individual may have the capacity to designate a guardian for oneself to manage one’s physical care and welfare. This would be different than the designation of a representative to manage one’s physical and financial assets. Even though other documents, such as a durable power of attorney and a funded revocable living trust, may be adequate for the management of one’s assets, this document may be useful to supplement a health care power of attorney. Further, this document might be used to disqualify an individual who might otherwise have a priority under local law to serve as that person’s guardian for physical care and welfare purposes.

8

. Under state law, authority may be able to be delegated to a specified agent to control the disposition of the client’s physical remains. This may be important where (1) the individual does not want the members of his biological family to control burial arrangements, or (2) prepaid funeral arrangements have not been implemented.

9

. See the Uniform Durable Power of Attorney Act, included as Article V of the Uniform Probate Code, for an example of legislation intended to facilitate the implementation of a durable power of attorney. An important objective is to assure that the power granted to the agent to act on behalf of the principal does not terminate as of the time that the principal becomes disabled or mentally incompetent. This matter of validity of this document is dependent upon state law. State laws as enacted may differ, notwithstanding the Uniform Act. Consequently, if the client has property in several jurisdictions, the estate planner should assure that the durable power of attorney will be effective in each of those jurisdictions to enable the attorney-in-fact designated under that power of attorney to conveniently deal with the property located in each of those jurisdictions. For further information on durable powers of attorney, see 859 T.M.,

Durable Powers of Attorney

(Bloomberg BNA)

,

and 816 T.M.,

Planning for Disability

(Bloomberg BNA).

10

. In some jurisdictions this legislation is identified as a “Natural Death Act.” This state legislation specifies such matters as the form of the written directive and the required witnesses.

11

. In many jurisdictions a form is prescribed by statute for implementing this authorization. Often an agent under a durable power of attorney for health care may exercise this authority only if the principal’s attending physician certifies that the principal lacks the capacity to understand and appreciate the nature and consequences of a health care decision.

12

. For example, in this situation the estate planner might need to be concerned about any intended (or unintended) disinheritance of a client’s natural children for the benefit of the second spouse.

CHAPTER 2Inventory of the Client’s Assets and Objectives

A. Scope of Factual Analysis

The development of an appropriate estate plan for a client depends on a full and complete understanding of the client’s (1) family situation; (2) assets, liabilities, and personal net worth position; and (3) fundamental estate planning objectives. Often the most important, and sometimes the most difficult, element of this process is developing a comprehensive summary of the important and relevant facts applicable to the particular client’s situation. If fundamental facts are not made available or are misunderstood by the estate planner, the basic premises for implementing the estate planning may be irrelevant. As a result, in this type of situation the assistance provided by the estate planning professional may be of limited value and, perhaps, counterproductive.

B. Family

The estate planner must initially identify who are the probable beneficiaries of the client’s property transfers (i.e., the “objects of the testator’s bounty” in probate litigation terminology). A proper inventory of family members (perhaps including an abbreviated family genealogical chart) should be developed for the estate planning professional to show the names, locations, ages, health status, and any mental incompetency issues for the client’s spouse, children, parents, and other close relatives. In addition, the estate planner should attempt to identify the personal family relationships and the net worth situation of each individual who may be an anticipated beneficiary of the client’s wealth. This analysis might include each person’s present and anticipated financial needs and any special factors that should be considered.