Estate Planning I


Imagine this: John and Jack were two friends who owned a lucrative corporation together 50/50% which supported both their families lavishly. John became gravely ill and prior to his death, Jack, his friend and partner promised to always take care of John’s family. John died two and a half years ago. John’s family never saw a penny from the business and is seeking legal advice.

This scenario is not a TV movie, it is real life. The hardest thing to consider and imagine is the death of a loved one, let alone your own individual death. Death, unlike winning the lottery or earning enough points on your American-Express to travel the world, is part of a life cycle that we cannot change. Nevertheless, although inevitable, people just like you and me refuse to think about it or even plan what would happen upon their own death ultimately hurting the life that continues after death. Therefore, much thought and consideration should be put to Estate Planning.

An estate plan is an arrangement for the use, conservation, and transfer of one’s wealth. This process involves much more than merely preparing the estate owner’s will. A well thought-out estate plan concerns itself with the creation of an estate where none would otherwise exist, the increase of an existing estate to meet the needs of the owner and his or her family, and the preservation and protection of the estate from unnecessary taxes and costs.

A good estate plan should provide for the best utilization of assets during the owner’s lifetime. With this in mind, the estate plan should anticipate and, after the owner’s objectives are ascertained, provide for such lifetime needs as funds for children’s education, income for retirement, replacement of income in the event of disability, and management of the estate in the event of incapacity. These and similar objectives may be accomplished by the use of utilizing a funded revocable living trust, making gifts during a lifetime, utilizing life insurance for retirement, etc.

A good estate plan should provide for the disposition of assets on death in such a way that the estate being passed on is maximized and is left in accordance with the wishes of the decedent and the needs of the family. In carrying out this goal of estate planning, we must first ascertain, in a very careful manner, the estate owner’s objectives. Only after this is done, can an attorney suggest and tailor the proper estate planning from manners in which to avoid probate, using a revocable living trust or handling the transfer of a business interest.

Tax-saving methods can frequently be employed to achieve many estate planning objectives. By minimizing taxes, the estate owner will have not only a larger estate to enjoy during his or her own lifetime, but also a larger one to satisfy the needs of the family after the owner’s death. The fact that a good estate plan will frequently save taxes is also useful in itself because it awakens the estate owner to the need for planning. However, it is important to remember that tax saving is only one aspect of estate planning. It should always remain secondary to the carrying out of the underlying objectives of the estate owner.

In the true story that I touched on in the beginning of the article, had John taken the advise of his attorney, he would have created an Estate Plan that specifically dealt with the proper transfer of the business interest by either having created life insurance between the partners in the event of death of one partner; or if that was not an option, create a mechanism for the sale of the shares. Since there was no estate plan in place, a probate action had to be established to allow the Estate of John to file suit against Jack to recover John’s interest in the business.

Life does continue after death; don’t wait until it’s too late to ensure the security of your loved ones. Meet with an experienced attorney to interpret the law and apply it to your specific financial situation.

This column is produced by Mary Der-Parseghian, Esq. For questions or comments, please send your message to 4727 Wilshire blvd., Suite 301, Los Angeles, CA 90010; E-mail: or call at 323-937-2727. For additional articles please visit our webpage at

© 2011. Der-Parseghian Law Group

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