ESTATE PLANNING FAQ'S
 

Q. What is the difference between a will and an estate plan?
 

A.   

 

 While a will can be simply described as a document through which an individual provides for the distribution of his or her property upon death, estate planning usually refers to the complex advice and document drafting associated with tax-advantageous vehicles for disposing of one’s assets in light of and/or upon one’s future demise.
 

Q.    

 When is an “estate plan” necessary as compared to simply drafting a will?
 

A.   

 

 Estate plans that utilize means other than a will to dispose of one’s assets are beneficial in circumstances where, because of the size of one’s estate, one may have to pay substantial taxes upon death.  Estate plans may also be necessary for a variety of other reasons, such as the need to provide for more than one family, concerns over an individual’s ability to manage money or other reasons.
   

Q.   

 Can I actually avoid paying estate taxes through the use of an estate plan?
 

A.   

 

 Absolutely.  Some or even a substantial portion of both federal estate taxes and state estate taxes may be able to be avoided through a properly drafted and implemented estate plan.
 

Q.   

 What are some examples of tools for avoiding the payment of estate taxes?
 

A.    

 

 One of the primary vehicles for avoiding estate taxes is the use of what are known as “trusts.”  A trust, which is effectively a legal document that conveys a property interest during one’s lifetime from one individual to one or more individuals, known as beneficiaries, enables the “settlor” of the trust to provide direction for the management and distribution of such property as specified by the trust document.  A trustee is appointed to independently manage the assets of the trust in accordance with the specified terms of the trust.
 

Q.   

 Does the establishment of a trust avoid all taxes?
 

A.   

 

 No.  Gifts provided through a trust are still subject to federal gift taxes to the extent that they aren’t exempted from gift tax in other ways.
 

Q.    

 

 You indicate that there are exemptions from federal estate and gift tax in some instances.  What are those exemptions?
 

A.    

 

 Under federal law, a portion of each individual’s estate is excluded from paying federal estate tax.  For the years 2004 and 2005, the applicable exclusion amount, including any lifetime gifts is $1.5 million.  This exclusion amount will increase to $3.5 million in 2009 and the estate tax will be repealed in 2010.  However, the law will expire at the end of 2010 and, unless Congress passes a new law, the estate tax (55%) and exclusion amounts ($1 million) in effect prior to 2001 will be reinstated if no new law is implemented before the end of 2010.
 

Q.   

 

 Are you saying that if my estate is worth less than $1.5 million in 2004 that I won’t have to pay any federal estate taxes if I die in 2004?
 

A.    

 

 To the extent that your non-excluded lifetime gifts and the balance of your estate amount to less than $1.5 million (known as the “applicable exclusion amount”), then you will not be subject to federal estate tax.
 

Q.    

 

 By the same token, are you saying that anything I own in excess of the applicable exclusion amount will be subject to federal estate tax?
 

A.   

 

 To the extent that your estate, including any lifetime gifts (in excess of applicable exclusion amounts), amounts to more than $1.5 million, if you die in 2004, that portion of your estate will be subject to federal estate tax.  However, the portion of your estate in excess of the applicable exclusion amount that passes to your spouse will not be subject to federal estate tax until your spouse dies as well, to the extent your spouse possesses assets in excess of his or her applicable exclusion amount at that time.  This is known as the federal marital deduction.  Similarly, any property passing to a spouse is not subject to Pennsylvania state estate taxes.
 

Q.   

 

 If my spouse and I hold all of our assets jointly and they pass at death as a matter of law and not through the estate, will I be able to take advantage of the applicable exclusion amount?
 

A.    

 

 No.  Where a couple has substantial assets exceeding the applicable exclusion amount, one of the most important aspects of estate planning is to create separate estates for each individual.  If all of the property passes to one spouse by operation of law and not through the estate, the applicable exclusion amount will be lost for the first spouse to die.
 

Q.   

 

 Can an attorney represent both my spouse and me in connection with either of our estate plans?
 

A.   

 

 While it is common and not inappropriate per se for attorneys to represent more than one party in connection with an estate plan, conflicts of interest may result from joint estate planning.  An attorney should determine, therefore, whether a consultation with two individuals may adversely affect his or her ability to represent one or the other client, and should refrain from the representation if representation of one spouse will “materially limit” representation of the other spouse.  If the attorney believes that conflicts can be avoided, parties seeking joint consultation with an attorney should agree in advance to the joint consultation and to full disclosure of all information gathered from any party during such joint consultation.  Under these circumstances, the attorney has a duty to apprise each client of the ramifications of each approach to estate planning.  A joint representation agreement should be signed which specifies each of these objects.
 

Q.    

 

 What information will an attorney need in preparation for drafting a will or an estate plan?
 

A.   

 

 Your attorney will need you to provide information about your assets and debts, life insurance, pension plans, and any other financial information, as well as specifics about your marriage or marriages, your children, and your intended beneficiaries.  All of this information is necessary to properly draft a will or plan your estate.
 

Q.   

 

 How much will it cost me to have a will drafted or prepare an estate plan?
 

A.   

 

 A simple will that has no tax or more complicated planning associated with it should cost a relatively small sum.  At Berger Law Firm, P.C., we charge $200 for a simple will, which includes the cost of an initial consultation with you to gather the necessary information, drafting of the will, a further meeting to explain the contents of the drafted will, one opportunity for modification if necessary, and a final meeting to execute the document.  Hours of work on your estate that are necessary above and beyond these limitations we charge at $70 per hour.