If you are over the age of 18 and of sound mind, you should have estate planning. You must have estate planning if you: (1) have minor or special needs children or a spouse with special needs; (2) are married and have a net worth (including the face value of life insurance) of more than $1 million; (3) have a blended family; or (4) own a business. For most people, estate planning involves the preparation of a will, durable power of attorney, health care power of attorney, and physician’s directive. For others, advanced planning is more appropriate. Advanced planning could involve the creation of a revocable trust, life insurance trust, limited partnership, or charitable trust.

A will is a document which creates a plan for the transfer of assets to another person or entity upon death. A simple will should answer the following questions:

Planning for minor or special needs children is especially important. If a couple with minor children dies without leaving wills, the court will usually create a special trust to manage the children’s inheritance. The trustees of these special trusts are usually banks. Each year the bank must report to the court via an annual accounting. Additionally, such banks charge an annual fee for the management of the assets and attorneys charge to prepare the annual accountings.

Creating a trust under a will is a less expensive, more flexible approach to the management and distribution of a minor child’s inheritance, as a trusted relative or friend may serve as the trustee. It is often a good idea to leave wealth to beneficiaries inside a trust, even when the beneficiaries are fully functional adults, as the assets in a trust can be protected from failed marriages, creditors, bankruptcy, and judgments.

When a married couple has a combined net worth over $1 million (including the face value of life insurance policies), tax planning via a tax planned will or tax planned revocable trust is often appropriate. The tax planned will or trust creates a trust, called a "bypass trust," "credit shelter trust," or "family trust" to hold the assets governed by the will of the first spouse to die to the extent the value of those assets do not exceed the exemption equivalent available to the deceased spouse’s estate. The exemption equivalent is currently $1,000,000. In 2004, it will jump to $1,500,000. The bypass trust will benefit the surviving spouse for his or her lifetime. Upon the surviving spouse’s death, the bypass trust passes to the beneficiaries free of estate tax.

For example, Mike and Carol Brady have a combined estate worth $2,000,000. If Mike dies in 2002 leaving Carol everything outright and then Carol later dies in 2002, her estate will pay $435,250 in estate and death taxes. If Mike and Carol Brady had a tax planned will or trust, no estate tax would have been due at Carol's death.

In addition to saving estate tax, trusts are often used with blended families. In the blended family situation, it is frequently important for the surviving spouse to have the use and enjoyment of the family assets, provided that upon the surviving spouse’s death, the family assets pass to the deceased spouse’s children.

Under Texas law, if a married person dies without leaving a will, and such person has children outside of the marriage, his one-half of the community estate passes to the children in equal shares. The surviving spouse retains only her one-half of the community estate and a life estate in the family home. Consequently, estate planning for the blended family may allow the surviving spouse to use and enjoy family assets while providing for children after the surviving spouse’s death.

Estate planning for a business owner is particularly important to insure: (1) the survival of the business; (2) the equitable transfer of interests in the business; and (3) that estate taxes do not cause a problem for the business. Frequently, life insurance can be used to provide the liquidity necessary to pay taxes, buy beneficiaries out of the business, or provide for a surviving spouse who is not interested in the business. Additionally, limited partnerships might be used to compress the estate tax value of the business, provide for the efficient transfer of the business, eliminate franchise tax, and protect the family business from the creditors of the business owners.

In conclusion, almost every adult needs estate planning. Before meeting with an attorney, gather information regarding your assets, evaluate your goals, and consider in whom you will place your trust to serve as fiduciaries. If you find the process difficult because you have a blended family or own your own business, remember that preparing an estate plan is more difficult for those who need planning the most.