Ask persons with too much wealth, the worries they carry on their head and it is likely that the foremost reply will be what to do with the wealth. Easiest solution will be to give it away, however many would prefer passing it on to their heirs. This is where, the estate planning starts for estates above $1.2 (rising to $2M by 2010) Million and above.

Why Plan your Estate First and foremost reason to plan your estate is to avoid probate. At the time of your death, all assets go to the state, if there is no will or trust left giving details of the asset distribution. A wealthy person's estate can often be a target of a claim from a previous relationship one may have had, known or unknown to the surviving spouse and heirs. Multiple marriages and divorces further complicate matters, if a clear cut will or a trust does not designate the beneficiaries. If assets go into probate, this could mean a long legal struggle and delayed access to the wealth for legitimate heirs. Also, probate costs can run up to 6-10% of the estate's value. The second reason to do estate planning is to avoid estate taxes, which can take between 37% and 60% of the total estate in taxes. It beats me as why the heirs should pay taxes on money on which income tax has already been paid. We may not like this law, but have to face it and proper estate planning can avoid all estate taxes. It is possible that estate taxes may get abolished in 2010, if they are not re-enacted by the legislature. Most industry experts are of the opinion that they will continue to exist after 2010. The limits above which they start are being raised gradually from current $1.2M to $2 Million by 2010. Elvis Presley, Rockefeller, Carnegie and many others did not plan their estates and as a result their heirs paid over 50% to Uncle Sam. Additional risks may come into play, if the estate is illiquid and gets sold at very low prices in a rushed sale to pay estate taxes. As a matter of fact, income tax and capital gains tax can be brought to zero, if estate planning is done early and properly. The scope of this article does not permit us to write details on this strategy but we will mention it in our next article. The last reason to do estate planning, is asset protection. In order to avoid all liability, related to business or personal lawsuits, long term medical care (Medicaid), court ordered judgements and liens, business malpractice and accidents caused by any family members. In addition, divorces, environmental hazards, employees, creditors, bankruptcy, tax agencies and authorities, business customers, business competitors, business regulatory agencies, rental property accidents, lead paint hazards on home or rental property (not covered by most insurance policies), guest accidents at home, even trespasser having an accident on your property, joint ownership of real estate, involvement in a partnership, corporate officer and director positions, advisory board positions and leadership positions in civic organizations are all a source of possible lawsuits and hence, the need for asset protection. The most shocking in the list above is trespassers suing you if they fall and get hurt on your property.

There are several tools available, which will be discussed in greater detail in the subsequent series of this article. A simple will can avoid probate. A trust (the type of trust is a decision based on several factors) can avoid estate and income taxes. A family Limited Partnership can provide asset protection. A combination of some of these tools can achieve several objectives, but each case is individualistic and possible unique, so these tools need to be used in consultation with an attorney, estate planner, accountant and a financial planner. Several considerations like, tax implications, liabilities, charitable decisions, insurance needs, reduction of taxes, reduction of estate are all too be considered before deciding which tools are suitable. It is also advisable, for a wealthy couple to give $22000 each year to each child and grand child (and to anyone they feel like giving) to reduce estate over a number of years.

The movement of Wealth Wealth needs to be kept in circulation, otherwise like static water it starts to stink. So if one has wealth, one has to circulate it for some cause, be it business, charity or passing on to next generation. Most people postpone the decision to do estate planning till the last day of their lives but they forget death does not give a notice in advance. Several estates have been lost up to 50-80% to Uncle Sam and state governments due to inadequate estate planning. It is imperative, that one pays attention to these needs before departure to the heavens.

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