Thomas H. Sullivan

Attorney at Law

Learning Center

Estate planning. What's it all about? Effective estate planning involves a variety of tools and terms. Because education is an important part of estate planning services you receive from Sullivan Estate Law, here's information to help you.

Beneficiary Designation

The beneficiary designation indicates who will receive proceeds from life insurance policies and pensions as well as from qualified money such as IRAs, Roth IRAs, Sep-IRAs, 401(k)s, and so forth. Although designating beneficiaries is an important part of estate planning, beneficiary designation alone is not estate planning.

  • It does not allow you to leave instructions for the beneficiary.
  • The designation usually forces the beneficiary to take the disbursement in a lump sum that may create a large tax payment.
  • It won't protect your beneficiaries from dishonest people or creditors.
  • A beneficiary designation does not allow for tax planning. Neither does it provide for any changed circumstances the beneficiary might experience.
  • A beneficiary designation allows no flexibility. By contrast, a trust might allow the beneficiary to receive estate assets in a more advantageous way.

Estate Tax

Estate tax is levied on the estate and not on the beneficiary. If you don't make arrangements for estate tax, however, it will be deducted from the value of the beneficiary's inheritance. Married couples receive an unlimited, one-time deduction for estate tax involving the surviving spouse; single people and non-traditional couples do not.

Even though a spouse can pass unlimited assets to the surviving spouse, estate tax will be levied on the entire estate at the death of the second spouse. Proper estate planning can reduce the effect of this crippling tax, but planning must be done before the first death.

Although single people and non-traditional couples do not enjoy the unlimited pass-through feature under current IRS law, they can reduce estate tax through other estate planning techniques. One of these techniques might include giving gifts.

Gift Tax

Gift tax is levied against gifts you give during your lifetime, and rates range from 37 percent to 45 percent. Under current IRS law, every person can gift up to $12,000 to any other person whether related or not. Gifts of more than $12,000 are taxed at the same rate as estate tax.

Unlike estate tax, the IRS does not differentiate between married or single taxpayers for gift tax. Every taxpayer can give at the current limit to an unlimited number of people.

Additionally, taxpayers may use their $1 million estate tax exemption while they are living to give more than $12,000 anyway. By doing that, they use up the estate tax exemption before they die. Never use this estate planning technique without the counsel of an estate planning professional.

Joint Tenancy with Right of Survivorship

Property owned as joint tenancy with right of survivorship is not subject to instructions in your will. That raises issues.
  • Your property could go to someone you don't want it to.
  • The property must go through probate.
  • There could be gift and estate taxes for people who receive the property.
  • There are no provisions for tax planning.
  • If your joint tenant owner is a child, you could create a major tax issue for the joint owner and deny the child the benefit of what is known as "stepped-up basis."

Payable-On-Death (POD)

With a payable-on-death account, you officially designate a beneficiary for your monetary accounts (savings, checking, etc.). At your death, the beneficiary can receive the assets by providing the bank with a copy of your death certificate and the beneficiary's personal identification.

POD can have only one beneficiary and is not part of the trust or will, which can cause problems. For example, if a parent divides her or his estate equally between two children but lists one child on a POD account, that child will receive both the POD account and half of the estate. Also, any fees for the estate cannot be taken from the POD account.

Powers of Attorney

A power of attorney (POA) authorizes another person to act for you and is an important part of estate planning. You must create the POA while you are competent and you should update POAs every two to three years.

A general or durable power of attorney designates another person to make decisions about everyday activities and investments for you when you are unable to make them yourself. This person can access your bank accounts, buy and sell property in your name, pay your bills, and carry out other financial matters for you.

A medical power of attorney, also known as a living will or advanced health care directive, gives instructions about whether or not you want your life to be medically prolonged when you have a terminal illness or are in a persistent vegetative state.

Revocable Living Trust

This estate planning tool gives assets to a legal entity called a trust that is administered by a trustee. The person who owns the trust (the grantor) is the primary trustee. The grantor names successor trustees to act on her or his behalf.

While ownership of assets is transferred to the trust, the grantor (who is generally the first trustee) has exclusive control of the trust. This reduces potential legal challenges that a simple will often incurs and provides unlimited options for disbursing assets.

Trusts offer distinct advantages.
  • Fully funded trusts are not subject to probate, which saves time and money.
  • The person who owns the trust can change or end it at any time.
  • Trusts are not open to public inspection.
  • A will within the trust designates who will receive the assets and how.
It is important that a trust be fully funded. That means all of the owner's assets – real estate, vehicles, investments, bank accounts, etc. – are titled in the name of the trust. If the trust is not fully funded, assets outside the trust will likely go through probate.

Most attorneys include a document called a "pour-over will" that sweeps assets not in the trust at the grantor's death into the trust. Without the pour-over will, all assets not held in the trust must go through probate, a process that can take years to complete.

While trusts initially cost more to create than wills, they are also generally easier and less expensive to administer.

Transfer-On-Death (TOD)

Transfer-on-death allows you to name a beneficiary to inherit stocks, bonds, brokerage accounts, property, and other assets at your death. TOD accounts are not subject to probate.
Transfer-on-death, however, can cause problems similar to POD accounts.


The will names a personal representative for the estate and gives instructions for distributing assets after death. It must go through probate, which involves court and legal fees and can take several months or years before assets can be distributed.

Although a will is an important aspect of estate planning, a will alone can cause problems.
  • Wills must go through probate, which means delays for those named to receive assets. And probate costs can often be 7 to 10 percent of the estate's value. In contrast, trusts do not go through probate, thus saving substantial costs.
  • Wills are public documents, which means anyone can inspect them.
  • Wills can be challenged easily.
  • Wills usually don't include life insurance, retirement benefits, or jointly-owned property.
  • Wills typically must be rewritten when the person moves to another state or owns property in another state.
  • Wills should be updated every five years to allow for changes in estate planning law.


The Health Insurance Portability and Accountability Act (HIPAA) imposes criminal penalties for any healthcare provider who makes an unauthorized distribution of a person's medical information.

Most healthcare professionals are not familiar with the details of this Act, and therefore out of an abundance of caution, many healthcare providers simply refuse to provide any healthcare information about a family member without a written authorization. If any family member, including your spouse, is taken to the hospital when he/she is unable to sign a HIPAA release form, the hospital may not provide family members any information about the patient's condition. Often, this means that that an ambulance service may not tell you what hospital your loved one has been taken to, and hospitals may sometimes refuse to reveal if your loved one is a patient.

To avoid these problems, we recommend that everyone sign a HIPAA release form, naming the family members or other loved ones that they would want to have this information, and provide a copy of this form to those family members and loved ones. When a copy of this HIPAA release form is provided to the healthcare provider, they should release pertinent information about the patient to any or all of the persons listed on the HIPAA release form.

Living Will and Advance Directives

A Living Will is a statement of your wish not to be on life support if you were terminally ill and there is no treatment that will save your life and if being on life support will merely prolong the dying process.

An Advance Directive goes further and sets forth your wishes about your care in the event that you have a condition which is irreversible, although not necessarily life threatening, when there is no reasonably expectation that you'll ever regain a meaningful quality of life. This would include conditions such as an irreversible coma or a persistent, vegetative state. An Advance Directive, typically, lists numerous procedures, which you would not want to have if there was no reasonable expectation that the procedure would cause you to regain a meaningful quality of life. A Living Will and Advance Directive are often combined into one document.