Overview to Estate Planning
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Overview to Estate Planning
During one’s lifetime, one has a right to own private property. This right does not disappear at death. Rather, the right to transfer property to one’s heirs is a way of extending this right to own property. Two theories exist as to the nature of this right: “natural right” and a right granted by the state.
The “natural right” is said to be inherent in the people. See, e.g.,
The U.S. Constitution prohibits the federal government from enacting laws that completely eliminate passing land by intestate succession. (In other words, the government cannot pass laws which state that in order to pass land, one is required to have a will). This is in keeping with the rule that, under the Fifth Amendment, the federal government cannot take private property without just compensation. See, e.g.,
Carrying out Testator’s Dispositive Wishes
An estate plan, which can encompass numerous documents, is a way to ensure that a property owner’s assets are distributed based on the decedent’s wishes. If someone fails to plan for disposing of assets, state statutes, called intestate succession rules, will step in and dictate how the property should be dispersed.
More importantly, if someone fails to leave an estate plan that clearly articulates his or her wishes, there could be dissension among family members who may fight over who is entitled to inherit what property. As a result, families can be torn apart permanently because of this bickering, which is certainly not the goal of the testator.
Minimizing Estate Taxes on the Family Unit
As in life, the government may tax transfers of property at death. In the next chapter we will study in more detail the different types of taxes an estate might be subject to. Accordingly, an estate plan can be used to minimize taxes not only for the first person to die but also for the entire family unit. If the estate is taxable, the amount left over for the heirs would be reduced, since tax liabilities must be paid before distributing money to the beneficiaries.