Jordan S. Simon

An estate plan, including a last will and testament, protects your family and finances after you die. Your first step in estate planning is to write a comprehensive will that moves smoothly through the probate process.Make sure you're aware of current estate taxes that may influence your planning and how insurance factors into your estate plan.

Probate is the method by which your estate is legally transferred after you die. When estate planning and writing your last will and testament, keep these tips in mind to help the probate process run smoothly. You can be both specific and general in your last will and testament — it's up to you. You can parcel out individual items to people by name and also let your beneficiaries decide how to divide up your worldly goods.

A trust agreement is a document that spells out the rules that you want to be followed for property held in trust for your beneficiaries. Common objectives for trusts are to reduce the estate tax liability, protect property in your estate, and avoid probate. Think of a trust as a special place in which ordinary property from your estate goes in and, as the result of some type of transformation that occurs, takes on a sort of new identity and often is bestowed with superpowers: immunity from estate taxes, resistance to probate, and so on.

Estate planning often involves setting up a revocable trust or irrevocable trust. Each one of those trusts begins with an intervivos trust — a trust you set up that goes into effect while you're still alive. You then decide if the intervivos trust is revocable, meaning that you can change your mind, or irrevocable, meaning sorry, what's done is done.

Trusts can be a great help in your estate planning — they can protect your property, save on estate taxes, and help you avoid probate. Sounds great, right? Well, before seriously considering a trust, you need to understand the basics of trusts and make a well-informed decision about setting up trusts right for you.

Most marriage-oriented trusts postpone payment of estate taxes until both spouses in a marriage have died. A marital deduction trust allows you to put property in trust with your spouse as the beneficiary. Upon your death, your spouse has the right to use the property in the trust. No matter how valuable the property in the trust is even if it exceeds that year’s federal estate tax exemption amount, your spouse won’t owe any federal estate taxes.

Joint tenancy means that you share ownership of property. Property held in joint tenancy isn’t part of the probate process; creditors don’t have access to property held as joint tenants. If the court can prove that you transferred title of property to joint tenants to hide from creditors, your creditors may still make a claim against part of your joint tenancy property.

The federal tax system includes a gift tax, generation skipping transfer tax (GSTT), and estate (death) tax that work together to make as much of your estate as possible disappear. The laws and rules for these three federal taxes created some confusing relationships among them. Your estate-planning team — particularly your accountant and your attorney — can help you make sense of the odd relationships among these taxes: The gift tax: The federal gift tax is imposed on taxable gifts that you give to others.

Before you can plan how to distribute your assets after your death, you need to understand what your estate is. In the most casual sense, your estate is your stuff or all your possessions. In addition to understanding what your estate is, you also need to know what your estate is worth. First you make a list of positive balance items such as: Cash, checking and savings accounts Certificates of deposit (CDs) Stocks, bonds, and mutual funds Retirement savings in your Individual Retirement Account (IRA), 401(k), and other special accounts Household furniture (including antiques) Clothes Vehicles Life insurance Annuities Business interests Jewelry, baseball card collection, autographed first edition of Catcher in the Rye You calculate your estate’s value as follows: Add up the value of all of the positive balance items in your estate.