An expanded version of this article originally appeared in the November 2007 Issue of The Florida Bar Journal
Pretty much everyone intends to arrange for appropriate gifting of assets during life and the smooth transmission of
assets on death. It is commonly understood that a lack of such planning can cause significant burdens for loved ones.
Yet many fail to create, or appropriately update, comprehensive estate plans. Often this failure can be traced to
inattention to those transactions and events in the one’s life that are particularly significant from an estate planning
perspective.
While it is never a bad time to create, or update, an estate plan, the following transactions and life events are ideal
occasions to consider estate planning opportunities.
Marriage
Even those with relatively modest wealth should update their estate plans when getting married. Pre-marriage estate
planning documents (including beneficiary designations on retirement accounts and life insurance) usually do not reflect
post-marriage intentions. The amount passing to a surviving spouse will vary, with little regard for the deceased spouse’
s actual intentions, depending on the presence and parentage of descendants, the terms of any existing will, and the title
of existing assets.
Individuals with more substantial wealth will want to consider a prenuptial or postnuptial agreement to clarify rights upon
divorce or death, especially if one spouse has children by a prior marriage or if either spouse has family wealth
earmarked for future generations. Special provisions should be made to plan for homestead real property, and planning
to take advantage of breaks given to married couples to minimize or avoid estate taxation should be considered. Solid
estate planning may be the best gift a newly married couple can give each other.
Birth of a Child or Grandchild
The birth of a child – especially the first child – is probably the most obvious time to update an estate plan. The new
parents will want to name a guardian in the event of both parents’ demise during minority, create a testamentary or
lifetime trust to avoid appointment of a guardian of the property of the minor, and revise wills to avoid pretermitted child
treatment. The parents should also consider homestead issues. Life insurance coverage should be reviewed for
sufficiency. Wealthier new parents may begin a gifting program (perhaps including a 529 plan or other education
planning) for the benefit of the child. New grandparents would also be well advised to update estate planning
documents to provide a generation-skipping component, including a current gifting program.
Divorce
Anyone contemplating divorce should consult an estate planning attorney. As part of the divorce process beneficiary
designations will need to be updated, jointly owned assets will need to be retitled, and wills and trusts will need to be
revised or replaced. In addition, the special skills of an estate planning attorney may prove useful in drafting a marital
settlement agreement that provides for ex-spouse or children on death, particularly where estate taxes may be an issue.
Purchase of Life Insurance
Life insurance often represents the single largest asset passing on death, but life insurance is often purchased, and
beneficiary designations are often completed, without the assistance of an estate planning attorney familiar with the
client’s goals and likely tax situation. Even sophisticated individuals may not be aware that estate tax on an insurance
policy may be avoided by use of an irrevocable trust, and few have considered that cumbersome guardianship
proceedings for minors may be avoided by naming a trust for a child as a beneficiary. For best results an individual
should consult with an estate planner before any insurance purchase is finalized.
Wealth Transfer or Liquidity Event
While most clients who have recently realized significant wealth (whether through sale of a business, inheritance,
settlement of a personal injury claim, or in some other manner) eventually find their way to an estate planner, few seem
to realize that the most effective estate planning opportunities may be available only before or immediately after the
wealth transfer or realization occurs. For example, wealth received by inheritance may be asset protected if the recipient
asks to receive the assets in trust. Wealth realized upon the sale of a business or other liquidity event may be leveraged
for transfer tax purposes by the prior use of lifetime gifts (which may be eligible for valuation discounts). Many times
income tax can be postponed and charitable gifts leveraged through appropriate planning prior to a liquidity event.
Illness
Even though an appropriate estate plan may have been in place long before illness strikes, a serious medical challenge
will often crystallize priorities in the way no other event can. Whether an estate plan review sparked by illness involves
minor revisions or a completely new plan, the process often comforts the patient with the assurance that his or her loved
ones will be taken care of in the event that he or she does not survive the illness. Families that avoid the topic of estate
planning during illness to spare the feelings of the patient may come to regret the decision if the patient dies without
making crucial updates to his or her estate plan.
Purchase of Real Property
While purchase of real property may appear at first blush to be a relatively inconsequential event from an estate planning
perspective, upon closer inspection it is apparent that real property purchases often have significant – and often
unintended – estate planning consequences.
Homestead rules should be taken into consideration whenever title to a residence is taken. A homeowner who may be
survived by a spouse or a minor child has limited options for devise of a homestead. Without proper planning these
limitations can create an unpleasant surprise for the family of a deceased homeowner.
Appropriate consideration should also be given to the form of ownership of commercial real property to take into account
creditor protection issues and the possibility of discounted gifting. Outright ownership of such properties can expose the
owner to liability for lawsuits relating to the property and make eventual transfer of the properties to younger generations
difficult and inefficient.
Change in Domicile
Anyone who has moved from one state to another should update his or her estate planning documents to reflect the new
domicile. This planning not only legally confirms the new domicile, it allows the client to excise provisions in current
documents that may not be effective in the new domicile (such as no-contest clauses) and take advantage of provisions
not previously available (such as a separate list to dispose of tangible property on death). Large differences in state law
in such areas as spousal elective share, state estate tax, and homestead disposition of property on death make it
possible, if not likely, that estate planning documents prepared out of state are no longer appropriate.
Significant Charitable or Personal Giving
A person contemplating significant charitable giving (either during life or upon death) may be surprised to learn that
such gifts may be leveraged through use of a charitable trust to include a component benefiting his or her family. Others
may benefit from the charitable legacy inherent in the creation of a private foundation or donor advised fund. All
substantial charitable givers should seek professional guidance to determine the income and estate tax consequences
of their plans. Those planning significant personal gifts may benefit from advice regarding the benefits of gifts in trust,
filing of gift tax returns, how to avoid using unified credit, tax efficient funding of education planning, and many other
issues.
International Travel
Individuals frequently request revisions to estate planning documents before traveling internationally. As long as such
planning is done well in advance of the planned trip (to leave plenty of time for planning and review of documents), an
elevated level of concern about safety may serve as an excellent opportunity to catch up on long intended (and long
delayed) changes to an estate plan. All too often, however, changes will be requested immediately prior to travel,
creating a patchwork plan that may not be corrected once the trip has been completed. A timely inquiry sufficiently prior to
the planned activity, or appropriate follow up after the trip, can make all the difference in the world.
Retirement
Retirement is an ideal time for a review of an estate plan because by retirement much of the uncertainty about the nature
and extent of the likely estate will have been removed. With a good financial plan to estimate future income and
expenses an individual may better assess exactly what assets he or she would like to pass to what beneficiaries. Some
may wish to scale back on gifting programs once the reality of a “fixed income” sets in; others may realize that an excess
exists from which to begin a gifting program.
Conclusion
While estate planning is a lifelong endeavor that should not be neglected at any time, a review of the potentially
significant events listed above indicates a few easily recognizable opportunities to create or update an estate plan.
While not every person will need estate planning at each potentially critical juncture, there are great potential savings
(both emotional and financial) for the families and friends of those that do.
Patrick J. Lannon is Of Counsel with the law firm of Goldman Felcoski & Stone P.A. in the Coral Gables office and is
Board Certified in Wills, Trusts and Estates. His practice principally involves all aspects of estate planning and
administration, including tax-advantaged transfers of assets, multi-generational planning, federal and state taxation of
trusts and estates, charitable giving, pre-nuptial and post-nuptial planning, the creation and administration of charitable
entities, and issues relating to change of residence. He received his J.D. from Harvard Law School and is a member of
the Florida and New York Bars. The information in this article is for educational purposes only; it should not be construed
as legal advice.
_____________________
1 See Patrick J. Lannon, Planning Opportunities With Irrevocable Life Insurance Trusts, Estate Planning May 2007.
2 See Patrick J. Lannon, Domicile Planning – Don’t Take it for Granted, The Florida Bar Journal January 2006.
Pretty much everyone intends to arrange for appropriate gifting of assets during life and the smooth transmission of
assets on death. It is commonly understood that a lack of such planning can cause significant burdens for loved ones.
Yet many fail to create, or appropriately update, comprehensive estate plans. Often this failure can be traced to
inattention to those transactions and events in the one’s life that are particularly significant from an estate planning
perspective.
While it is never a bad time to create, or update, an estate plan, the following transactions and life events are ideal
occasions to consider estate planning opportunities.
Marriage
Even those with relatively modest wealth should update their estate plans when getting married. Pre-marriage estate
planning documents (including beneficiary designations on retirement accounts and life insurance) usually do not reflect
post-marriage intentions. The amount passing to a surviving spouse will vary, with little regard for the deceased spouse’
s actual intentions, depending on the presence and parentage of descendants, the terms of any existing will, and the title
of existing assets.
Individuals with more substantial wealth will want to consider a prenuptial or postnuptial agreement to clarify rights upon
divorce or death, especially if one spouse has children by a prior marriage or if either spouse has family wealth
earmarked for future generations. Special provisions should be made to plan for homestead real property, and planning
to take advantage of breaks given to married couples to minimize or avoid estate taxation should be considered. Solid
estate planning may be the best gift a newly married couple can give each other.
Birth of a Child or Grandchild
The birth of a child – especially the first child – is probably the most obvious time to update an estate plan. The new
parents will want to name a guardian in the event of both parents’ demise during minority, create a testamentary or
lifetime trust to avoid appointment of a guardian of the property of the minor, and revise wills to avoid pretermitted child
treatment. The parents should also consider homestead issues. Life insurance coverage should be reviewed for
sufficiency. Wealthier new parents may begin a gifting program (perhaps including a 529 plan or other education
planning) for the benefit of the child. New grandparents would also be well advised to update estate planning
documents to provide a generation-skipping component, including a current gifting program.
Divorce
Anyone contemplating divorce should consult an estate planning attorney. As part of the divorce process beneficiary
designations will need to be updated, jointly owned assets will need to be retitled, and wills and trusts will need to be
revised or replaced. In addition, the special skills of an estate planning attorney may prove useful in drafting a marital
settlement agreement that provides for ex-spouse or children on death, particularly where estate taxes may be an issue.
Purchase of Life Insurance
Life insurance often represents the single largest asset passing on death, but life insurance is often purchased, and
beneficiary designations are often completed, without the assistance of an estate planning attorney familiar with the
client’s goals and likely tax situation. Even sophisticated individuals may not be aware that estate tax on an insurance
policy may be avoided by use of an irrevocable trust, and few have considered that cumbersome guardianship
proceedings for minors may be avoided by naming a trust for a child as a beneficiary. For best results an individual
should consult with an estate planner before any insurance purchase is finalized.
Wealth Transfer or Liquidity Event
While most clients who have recently realized significant wealth (whether through sale of a business, inheritance,
settlement of a personal injury claim, or in some other manner) eventually find their way to an estate planner, few seem
to realize that the most effective estate planning opportunities may be available only before or immediately after the
wealth transfer or realization occurs. For example, wealth received by inheritance may be asset protected if the recipient
asks to receive the assets in trust. Wealth realized upon the sale of a business or other liquidity event may be leveraged
for transfer tax purposes by the prior use of lifetime gifts (which may be eligible for valuation discounts). Many times
income tax can be postponed and charitable gifts leveraged through appropriate planning prior to a liquidity event.
Illness
Even though an appropriate estate plan may have been in place long before illness strikes, a serious medical challenge
will often crystallize priorities in the way no other event can. Whether an estate plan review sparked by illness involves
minor revisions or a completely new plan, the process often comforts the patient with the assurance that his or her loved
ones will be taken care of in the event that he or she does not survive the illness. Families that avoid the topic of estate
planning during illness to spare the feelings of the patient may come to regret the decision if the patient dies without
making crucial updates to his or her estate plan.
Purchase of Real Property
While purchase of real property may appear at first blush to be a relatively inconsequential event from an estate planning
perspective, upon closer inspection it is apparent that real property purchases often have significant – and often
unintended – estate planning consequences.
Homestead rules should be taken into consideration whenever title to a residence is taken. A homeowner who may be
survived by a spouse or a minor child has limited options for devise of a homestead. Without proper planning these
limitations can create an unpleasant surprise for the family of a deceased homeowner.
Appropriate consideration should also be given to the form of ownership of commercial real property to take into account
creditor protection issues and the possibility of discounted gifting. Outright ownership of such properties can expose the
owner to liability for lawsuits relating to the property and make eventual transfer of the properties to younger generations
difficult and inefficient.
Change in Domicile
Anyone who has moved from one state to another should update his or her estate planning documents to reflect the new
domicile. This planning not only legally confirms the new domicile, it allows the client to excise provisions in current
documents that may not be effective in the new domicile (such as no-contest clauses) and take advantage of provisions
not previously available (such as a separate list to dispose of tangible property on death). Large differences in state law
in such areas as spousal elective share, state estate tax, and homestead disposition of property on death make it
possible, if not likely, that estate planning documents prepared out of state are no longer appropriate.
Significant Charitable or Personal Giving
A person contemplating significant charitable giving (either during life or upon death) may be surprised to learn that
such gifts may be leveraged through use of a charitable trust to include a component benefiting his or her family. Others
may benefit from the charitable legacy inherent in the creation of a private foundation or donor advised fund. All
substantial charitable givers should seek professional guidance to determine the income and estate tax consequences
of their plans. Those planning significant personal gifts may benefit from advice regarding the benefits of gifts in trust,
filing of gift tax returns, how to avoid using unified credit, tax efficient funding of education planning, and many other
issues.
International Travel
Individuals frequently request revisions to estate planning documents before traveling internationally. As long as such
planning is done well in advance of the planned trip (to leave plenty of time for planning and review of documents), an
elevated level of concern about safety may serve as an excellent opportunity to catch up on long intended (and long
delayed) changes to an estate plan. All too often, however, changes will be requested immediately prior to travel,
creating a patchwork plan that may not be corrected once the trip has been completed. A timely inquiry sufficiently prior to
the planned activity, or appropriate follow up after the trip, can make all the difference in the world.
Retirement
Retirement is an ideal time for a review of an estate plan because by retirement much of the uncertainty about the nature
and extent of the likely estate will have been removed. With a good financial plan to estimate future income and
expenses an individual may better assess exactly what assets he or she would like to pass to what beneficiaries. Some
may wish to scale back on gifting programs once the reality of a “fixed income” sets in; others may realize that an excess
exists from which to begin a gifting program.
Conclusion
While estate planning is a lifelong endeavor that should not be neglected at any time, a review of the potentially
significant events listed above indicates a few easily recognizable opportunities to create or update an estate plan.
While not every person will need estate planning at each potentially critical juncture, there are great potential savings
(both emotional and financial) for the families and friends of those that do.
Patrick J. Lannon is Of Counsel with the law firm of Goldman Felcoski & Stone P.A. in the Coral Gables office and is
Board Certified in Wills, Trusts and Estates. His practice principally involves all aspects of estate planning and
administration, including tax-advantaged transfers of assets, multi-generational planning, federal and state taxation of
trusts and estates, charitable giving, pre-nuptial and post-nuptial planning, the creation and administration of charitable
entities, and issues relating to change of residence. He received his J.D. from Harvard Law School and is a member of
the Florida and New York Bars. The information in this article is for educational purposes only; it should not be construed
as legal advice.
_____________________
1 See Patrick J. Lannon, Planning Opportunities With Irrevocable Life Insurance Trusts, Estate Planning May 2007.
2 See Patrick J. Lannon, Domicile Planning – Don’t Take it for Granted, The Florida Bar Journal January 2006.
When Should I Consider Estate Planning?
by Patrick Lannon, Esquire from Goldman Felcoski & Stone P.A. (Guest Columnist)
by Patrick Lannon, Esquire from Goldman Felcoski & Stone P.A. (Guest Columnist)
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