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Estate Planning


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May 1, 2023

A Comprehensive Guide on Estate Planning

Estate planning is an essential but frequently disregarded element of personal finance. 

An effectively structured estate plan can safeguard family members, reduce taxes, and avoid unintended outcomes. From the perspective of the top Charleston financial planners, this article will delve into the basics of estate planning and offer advice on formulating a successful plan for your individual circumstances.

Before we start, it's important to realize the information in this post is purely informational and should not be considered legal advice. Consulting with an attorney is recommended.

Definition and purpose of estate planning

Estate planning involves making preparations for the management and dispersal of assets in the event of one's incapacitation or death.

The fundamental aims of estate planning include guaranteeing one's assets are allocated according to their wishes, reducing estate and gift taxes, and securing financial stability for the family.

Importance of estate planning for family well-being

A well-rounded estate plan can help preserve family unity by preventing potential conflicts, guaranteeing loved ones are taken care of, and offering clear directives for asset management.

Failing to have an estate plan in place means state intestate law will dictate the dispersement of one's assets. This could result in unwanted expenses, delays, and disagreements among family members, and might not align with the individual's preferences.

Assessing your financial situation

Creating an inventory of assets and liabilities

Beginning the estate planning process requires creating an inventory of all of one's possessions and debts, encompassing items such as bank accounts, investments, real estate, and business holdings. This provides a basis for the attorney to work from when determining how best to structure the estate plan and retitle assets, if needed. 

Estimating future financial needs

When constructing an estate plan, it is crucial to contemplate the future financial requirements of one's family.

These may consist of funding for education expenses for children, continuing financial support for a surviving spouse, and the costs that may arise regarding long-term healthcare or special needs. While this exercise may also unveil a need for increased life insurance coverage, it will also help the attorney decide if any restrictions need to be written into the estate plan around how and when your beneficiaries can access the money left to them.

Wills: The Cornerstone of Your Estate Plan

A will is an official document detailing how an individual desires their assets to be distributed after their death. It is a cornerstone of an estate plan and can play a significant role in averting disagreements among family members while ensuring the individual's wishes are held in high regard.

Types of wills

There are multiple varieties of wills. The best-suited option for one's needs will depend on their specific objectives and the intricacies of their estate.

Key components of a will

A will comprises these key components:

  • Executor: responsible for carrying out the will's instructions. Choosing a qualified and trustworthy executor is crucial for a successful estate plan.
  • Beneficiaries: those who will receive assets as per the will. Clearly identifying beneficiaries helps to prevent conflicts and ensures assets distribute as desired.
  • Specific bequests and residuary estate: a will can designate certain gifts and also distribute the remaining assets, known as the residuary estate, according to its terms.
  • Guardianship provisions: for individuals with underage children, selecting a guardian is vital. Legal advice is recommended to guarantee the chosen guardians meet any state-specific eligibility criteria. One of the most common restrictions applies to out-of-state non-family guardians.

Updating and amending your will

It is crucial to review and modify a will periodically to reflect changes in one's life, such as marriage, divorce, the birth of children, or after acquiring new assets.

Alterations to a will can be carried out through a document called a codicil, which necessitates the same formalities as the original will. Sometimes, creating a new will rather than editing an existing one may be more appropriate.

Trusts: A Comprehensive Estate Planning Tool

A trust is a legal agreement in which assets are held and managed by a trustee for the benefit of one or several beneficiaries. Trusts can either be created during one's lifetime or established by a will in the event of their passing.

Trusts offer a highly adaptable and effective strategy for managing and distributing assets in accordance with one's established desires.

Types of trusts

Trusts can be classified as follows:

  • Revocable trusts: alternatively known as living trusts, they allow for amendments or revocation during one's lifetime. Assets held in them skip the probate process, potentially reducing costs and delays while providing privacy.
  • Irrevocable trusts: after being established, they offer better protection for assets and more estate tax benefits than a revocable trust, but entail the transfer of asset control to the trustee.
  • Testamentary trusts: these trusts are formed by a will and are created at the time of an individual's passing. They might be employed for adult beneficiaries or managing assets for minors or the disabled.
  • Special needs trusts: designed to provide financial assistance for persons with disabilities, these trusts let beneficiaries receive support without compromising eligibility for government benefits.

Advantages and disadvantages of using trusts

Trusts present numerous benefits, including more control over asset distribution, avoidance of the probate process, enhanced privacy, and potential tax advantages.

Nonetheless, trusts may be more expensive and intricate than other estate planning options to establish and maintain.

Designating Beneficiaries for Retirement Accounts and Life Insurance Policies

Correctly designating beneficiaries for retirement accounts and life insurance policies is critical to ensuring the dispersal of these assets in accordance with one's preferences, and avoiding unforeseen consequences such as heightened taxation or delays in asset distribution.

Primary and contingent beneficiaries

Primary beneficiaries are given priority to receive assets, while contingent beneficiaries would acquire assets if primary beneficiaries are unable to receive them.

Assigning both primary and contingent beneficiaries is essential to have a concrete plan for the succession of assets.

Special considerations for minor beneficiaries

For minor beneficiaries, the establishment of a trust or custodial account to manage the assets is significant. Otherwise, a court-appointed guardian might be necessary, leading to additional expenditures and delays.

Power of Attorney and Health Care Proxy

A power of attorney is a legal arrangement authorizing another person, referred to as an agent, to act on your behalf in legal and financial matters. This document can be crucial, particularly in the event of your unavailability or incapacity. 

Types of powers of attorney

Various types of powers of attorney offer different durations and extents of authority to the agent, based on an individual's requirements and preferences. These types include general, limited, and durable powers of attorney.

Health care proxy and living wills

A healthcare proxy is a written agreement assigning an agent to act as your representative in medical-related decisions, should you be unable to do so.

On the other hand, a living will specifies individualized directives about medical care and end-of-life preferences aiding the agent in making decisions that adhere to your wishes.

Choosing the right agents

It is essential to choose reliable and competent agents for both power of attorney and healthcare proxy arrangements to guarantee individual wishes are followed, and personal affairs are managed efficiently.

Estate and Gift Tax Considerations

Federal estate and gift tax overview

The federal estate tax applies to the transfer of assets following death, while the gift tax applies to assets transferred during the lifetime. Both taxes are evaluated based on asset value, and a unified exemption amount is available to reduce tax liability or eliminate it.

Unfortunately, the federal estate and gift tax exemption level is set to decline at the end of 2025, due to the Tax Cuts and Jobs Act expiration under current legislation. A Charleston financial advisor like those at Twenty Fifty Capital can help here.

State-specific estate and inheritance taxes

Apart from federal estate and gift taxes, some states may impose estate and/or inheritance taxes of their own. These vary by state and could be due regardless of whether the federal estate tax is in effect. Therefore, it is important to plan for any potential state tax liabilities when planning your estate.

Strategies for minimizing estate and gift tax liability

There are various strategies for minimizing estate and gift tax liability, such as giving assets during a lifetime, using trusts, or taking advantage of charity donations.

If you suspect your estate may be subject to taxes, it is paramount to consult with a professional like Twenty Fifty Capital to develop an efficient plan from a tax perspective.

Gifting Strategies for Asset Transfer

Annual exclusion gifts

The annual gift tax exclusion is a great way to give to loved ones without having to worry about taxes.

This strategy allows you to transfer wealth each year without using your lifetime exemption limit and reduces the size of your taxable estate. It is an effective way to share your resources with those who matter most while reducing the potential burden of taxes on your estate.

Charitable giving

Charitable giving is a great way to support the causes you care about while enjoying potential tax benefits. Charitable trusts and donor-advised funds are two examples of vehicles that can help facilitate efficient gifting.

With these options, you can make donations throughout your lifetime or through an estate plan, making it easier and more cost-effective to give back.

Education and medical expense gifts

Direct payments for educational or medical expenses on behalf of a recipient are not subject to gift tax and don't count toward the annual exclusion limit. 

This is a great way to provide support without worrying about gift tax implications. By making these direct payments, you can support your loved ones while minimizing the impact on your potential estate tax.

Family limited partnerships and other advanced gifting techniques

Family limited partnerships and other advanced gifting strategies, such as grantor-retained annuity trusts and intentionally defective grantor trusts, can help you transfer assets to family members while minimizing gift and estate taxes.

These techniques often require complex legal and tax considerations, so it is important to consult with experienced professionals to ensure you are utilizing the best approach for your specific situation.

Planning for Business Succession 

Importance of a succession plan for business owners

Business succession planning is essential for business owners to ensure the ongoing success and longevity of their enterprise. It also helps protect the value of their business and provides financial security for themselves and their families.

Having a succession plan in place can help reduce stress during a major transition while ensuring the company continues to thrive after its founders have retired or passed away.

Types of succession plans

Common types of succession plans include family succession, management buyouts, employee stock ownership plans (ESOPs), and third-party sales.

The best plan for a business owner depends on their personal objectives and the size, structure, culture and resources of their business.

Key steps in creating a business succession plan

Creating a business succession plan involves identifying potential successors, assessing their capabilities, and developing an effective transition strategy.

This could involve training and mentoring of successors, addressing any relevant tax and legal issues, and establishing a timeline for the transition. It's important to ensure all stakeholders are kept informed throughout this process in order to make a smooth transition for everyone involved.


Creating an effective estate plan requires help from knowledgeable professionals, such as attorneys and financial advisors in Charleston, SC.

Working with these experts allows you to create a tailored plan meeting your needs and objectives. It's important to review and update the plan regularly and communicate your intentions clearly with family members to ensure understanding.

Contact Twenty Fifty Capital for assistance in creating or updating your estate plan today!

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