21^st Century Estate Planning Is Like a Three-Legged Stool

The three legs are: (1) Zeroing Out Estate Taxes; (2) Perpetuating Family Values and Relationships; and (3) Charitable Planning (we call this "Planned Philanthropy").

Zeroing Out Estate Taxes: There are a multitude of planning tools that can be used to accomplish this result, all of which require the services of highly qualified advisors (you, of course, plus a highly qualified estate planning attorney and other high-level advisors). An interesting idea to implement when FLPs and/or LLCs are part of the planning package (both of these can be excellent asset protection vehicles when used creatively), involves the use of special planning techniques that call for first-to-Die (i.e., single life) policies rather than the usual approach that favors 2^ND-to-Die policies; the details of this idea are highly technical and complex and beyond the scope of this summary.

Perpetuating Family Values and Relationships: Since most inherited wealth disappears in two to three generations, often because the parents inadvertently fail to pass along their work ethic and family values, "Heir Conditioning" becomes an important component of effective estate planning. Family counseling has thus become common with wealthy families, and multi-generational trusts have become an extremely valuable planning tool for providing asset protection and protection against divorcing spouses, and for avoiding estate taxes in succeeding generations.

Charitable Planning ("Planned Philanthropy"). Most of us are at least somewhat familiar with the variety of tools that can be used here — Charitable Remainder Trusts, Pooled Income Funds, Charitable Gift Annuities, Charitable Lead Trusts (both Inter Vivos and Testamentary), Charitable Bailout Trusts, Family Charitable Foundations — not many of us are very effective in motivating our clients to incorporate these techniques into their estate plans. Perhaps by emphasizing Voluntary Philanthropy vs. the Involuntary Philanthropy automatically involved when paying estate taxes, and by performing appropriate financial modeling, we can overcome this shortcoming.

By the way, the seat of our three-legged stool is made up of the legal documents, accounting practices, and life insurance funding that holds it all in place.