12 Things We Usually Talk About in Estate Planning Meetings

Note: Reviewing this list in order before the first estate planning meeting will be terrific preparation for the meeting, regardless of how far you get !

  1. Wills and Revocable Trusts: together, these two documents direct the distribution of assets at your death, appoint the personal representative (formerly known as “executor”) and trustee who will administer your estate at death, appoint a guardian for any minor children, permit the personal representative to sell real estate without court oversight and more.

  2. The probate process at death:  what is it, how to avoid it by funding your revocable trust with your assets during your lifetime, and whether avoiding probate is worthwhile.

  3. Establishing a trust to receive a beneficiary’s inheritance, in order to protect the funds from the beneficiary’s creditors and from loss of funds in any divorce of the beneficiary.

  4. Empowering the beneficiary where a trust is used.

  5. Trust Administration:

  • Choice of Trustees

  • Financial planning and investments of trust assets.

  • How distributions are made.

  • How Trustees account to beneficiaries.

 6. Impact of federal and Massachusetts estate taxes on inheritance:

  • For a married couple, commonly estate tax is deferred until both spouses have died.

  • The federal estate tax exemption is now $11.2 million per person, and federal estate tax applies only to amounts that exceed that exemption.  But the exemption is scheduled to drop to $5.6 million (increased for inflation) starting in 2026.  The tax rate is 40% on amounts in excess of the exemption.

  • There is no Massachusetts estate tax on an estate of $1 million or less, and this includes larger estates where the amount over $1 million passes to a surviving spouse or marital trust.  But for estates above $1 million not passing to a surviving spouse or marital trust, the tax applies to the entire estate—there is no exemption. Tax rates range from 3.6% on $1 million to 8% on $5 million, to 11% on $10 million and 16% on amounts above $10 million.

  • Estate taxes do not apply to assets passing to charitable organizations.

7. Establish a marital trust for the benefit of the surviving spouse:

  • The Personal Representatives and the Trustees will have flexibility to decide whether to claim the federal and/or state marital deduction on all or part of the trust, and will consider your overall wealth, the tax rates, and the types of assets you own and whether they are appreciated.   This flexibility will allow them to balance the Massachusetts estate tax against the capital gains tax, and to take steps to minimize overall taxes.

  • Discuss whether each spouse has sufficient assets in his or her own estate to be able to fund a marital trust with up to $1 million, so that the option exists of using the exemption from Massachusetts estate tax at the death of the first deceased spouse. Consider transfers of assets or division of joint assets in order to achieve sufficient separate assets.

8. Additional Estate Planning Documents:

  • Power of Attorney that names one or more agents to handle your financial matters—generally intended to be used if you are not competent to handle such matters;

  • Health Care Proxy that names one or more agents to handle your health care matters if you are not competent to handle such matters.

  • Living Will, providing direction to your health care agent regarding your wishes with respect to life support.

  • Federal Health Privacy Rights Waiver in favor of your health care agent.

9. Income taxation of trusts and beneficiaries.

10. Additional techniques for reducing exposure of the estate to estate tax.

  • Lifetime gifts:

    • Consider making gifts to reduce exposure to Massachusetts estate tax, but only when you no longer need the assets for your own support.   

    • For estates with potential exposure to federal estate tax, consider making use of the annual exclusion from federal gift tax of $15,000 per donee.  Also consider making use of the federal estate tax exemption during life, in order to remove from the estate the future income and appreciation of the assets given away. 

11. Charitable techniques for reducing exposure of the estate to estate tax.

  • Consider donating retirement benefits and IRAs, which are burdened by both estate tax and income tax exposure.

  • Charitable bequests at death and/or during lifetime

12. Reducing exposure of assets to the Estate Tax and Generation-Skipping Transfer Tax at the time of the death of a child, so that more funds can pass to grandchildren.

LIz Drake