For the purposes of estate planning, an estate can be considered all property, real and personal, owned by an individual at the time of of death and prior to any distribution through a trust or will. Real property is real estate and personal property includes everything else, for example cars, household items, and bank accounts.
Estate planning is the process of legally organizing how a individual's real and personal property will be distributed to that individual's heirs. Generally, an estate plan will aim to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death. A major concern for drafters of estate plans is federal and state tax law.
Wills and trusts are common ways in which individuals dispose of their wealth. ( See Wills and Trusts) Trusts have the benefit of avoiding probate, a lengthy and costly legal process that oversees the transfer of assets. ( See Probate) It is also often useful to make gifts during the donors lifetime in order to minimize taxes but the effect of the federal gift tax must be considered.