More Than Just the Basics: 3 Levels of Estate Planning

Apr 24, 2023 | Blogs/Articles, Estate Planning

By John Rogers, President & COO

Estate planning is a critical component of any wealth plan. Not only can it shield your assets from unnecessary taxes and fees, but it can also protect your beneficiaries after your passing. But not all estate plans are created equal. Some may only contain a will and a power of attorney, while others may require a complicated offshore asset protection trust. At Veracity Capital, we go beyond just the basics. We walk our clients through the three levels of estate planning and create a custom plan for each client, built with their needs in mind. Here is an overview of the types of estate planning strategies we review with our clients.

Level 1: Must-Haves

No matter how big or small your estate is, there are a few important estate planning documents everyone should have in place. These will help you transfer your assets smoothly, minimizing probate and taxes, and they should be reviewed periodically whenever a major life change occurs (marriage, divorce, birth, adoption).


A will is the most familiar of the estate planning documents. It spells out your final wishes and names a person or entity to handle your financial affairs upon death. A will is especially important if you have minor children. If you don’t specifically name a guardian in your will, the choice will be made by the court with no consideration for your preferences.

Living Trusts

A living trust is also called a revocable trust. It is a separate legal entity created during your life and used to hold some or all of your assets. Upon passing, the trust’s assets will be distributed to your beneficiaries in accordance with the terms of your trust document. 

One of the biggest benefits of a living trust is that you will continue to have full access and use of those assets while you are alive and you can update the beneficiaries or terms of the trust as much as you want (unlike an irrevocable trust, which cannot be modified). This gives you maximum flexibility over your estate planning in case circumstances change.

At death, the trust becomes irrevocable, and the assets will be distributed according to your wishes. Not only do living trusts provide privacy in how your assets are passed on, but they are also legally stronger than a will. Since they avoid probate entirely, living trusts are much more difficult to contest by heirs or creditors as long as the trust documents are properly drafted.

Healthcare Power of Attorney

The last thing you want is to leave your family in the dark regarding important medical information and how you want to be treated in the event of a medical emergency. If there are no documents in place, conflict can arise over who should make the decisions and what course of action should be taken. This document identifies a specific person who is authorized to make medical decisions on your behalf. It can be used in conjunction with a medical directive, or it can be used on its own.

Financial/Property Power of Attorney

Covering everything else outside of medical rights, this document allows an authorized individual to make decisions on your behalf, including financial and business decisions. There are several types of POAs, and the choice of which one to use is highly personal. Make sure to involve whomever you choose to act as your designated agent; they should be well aware of the responsibility and willing to take on the role.

Review Asset Titling

Utilizing a trust is not the only option when it comes to avoiding probate and passing your assets on in a tax-efficient manner. The way your assets are titled can make a big difference in your overall estate plan. For instance, solely owned assets that are only listed in your name will go through probate and need to be accounted for in a will in order to pass to the rightful heir. 

Assets titled as joint tenancy with rights of survivorship, on the other hand, will automatically pass to the remaining tenant(s) upon the first tenant’s passing. This will avoid the hassle and expense of probate and ensure a smooth transition of property.

Update Beneficiary Designations

Beneficiary designations exist for many different assets, including qualified retirement accounts, life insurance policies, and checking and savings accounts. Any asset that has a beneficiary listed will transfer automatically upon death without having to go through probate. 

Many people often forget to assign beneficiaries to these accounts and the funds wind up as part of their estate. Be sure to double-check that all of your accounts have up-to-date designations so your beneficiaries are not left struggling through the probate process.

Level 2: Considerations

The next level of estate planning adds a layer of complexity—and protection—to your plan. These considerations can enhance the direction of assets, minimize estate taxes, or increase asset protection, but not all these options will make sense for every person. It’s important to work with a professional who can help you sort through the details.

Spousal Lifetime Access Trust (SLAT)

A SLAT is an irrevocable trust established by one spouse (the grantor spouse) for the benefit of the other spouse (the beneficiary spouse) and perhaps children. It has become particularly popular in recent years as a way to take advantage of the higher lifetime estate tax exemption amount ($12.92 million per person in 2023). 

The trust is usually funded with a life insurance policy on the life of the grantor spouse. While both spouses are alive, the SLAT may make distributions to the beneficiary spouse and their children for their health, education, maintenance, and support or another ascertainable standard. The trustee may use withdrawals and/or loans from the life insurance policy or other trust assets to make the distributions that would be free of any taxes to the trust or beneficiaries.

Upon the death of the grantor spouse, life insurance death benefits will be paid to the trust. The trust may continue to provide income to the beneficiaries or may terminate and distribute the remaining income and principal to the beneficiaries.

SLATs will remove the trust assets from the grantor’s taxable estate, but the grantor retains indirect access to trust income through the beneficiary spouse.

Grantor Retained Annuity Trust (GRAT)

A GRAT provides the grantor a right to trust income. However, the income is only payable to the grantor for a specific period of time. The grantor will receive fixed annuity payments from the trust which are determined by the current IRC Section 7520 rate, a figure set by the IRS. 

Any growth that’s higher than the Section 7520 rate is transferred to your beneficiary outside of your estate, thereby avoiding estate taxes. As long as you outlive the term of the trust, the assets will be removed from your taxable estate and your beneficiaries will receive the remaining assets free of tax.

Charitable Remainder Trust (CRT)

A CRT is another type of trust in which you, as the grantor, retain an income interest in the property placed into the trust. In this case, you can receive income for a certain period of time or until you pass away. Once the income term expires, the remaining property in the trust is passed to the charity of your choice. 

Because the beneficiary of the trust is a charity and the trust is irrevocable, you will receive an immediate charitable deduction to assist with your income taxes. For this reason, it’s best to transfer highly appreciated assets to the CRT in order to maximize your deduction.

Donor-Advised Funds (DAFs)

Donor-advised funds (DAF) are charitable giving programs that allow you to combine the tax and estate planning benefits of giving with the flexibility to support your favorite charities. 

Contributions to your DAF can provide a current year’s tax deduction and help minimize your transfer taxes by reducing your taxable estate. The contributions are then invested by the DAF and grow tax-free. DAFs accept many types of contributions, including cash, appreciated securities, real estate, and life insurance. If you donate cash, you typically receive an income tax deduction of up to 60% of your adjusted gross income (AGI). If you donate appreciated securities, you save on the capital gains tax, reduce your taxable estate, and your current year tax deduction will be the full fair market value, up to 30% of your AGI.

Irrevocable Life Insurance Trust (ILIT)

An ILIT is a separate entity designed to own a life insurance policy and receive the death benefits. A trustee is given control over the policy and will be responsible for carrying out the terms of the ILIT for the benefit of named beneficiaries (typically the insured’s spouse, children, or other family members).

An ILIT is useful because it allows the policy’s death benefits to be excluded from the insured’s taxable estate. The insured may gift (or loan) money to the trustee, who will then use those funds to pay the premiums. When properly designed and administered, a gift to the ILIT may escape the federal gift tax as well.

Qualified Personal Residence Trust (QPRT)

A QPRT allows you to remove a personal home from your estate in order to reduce the amount of gift and transfer taxes incurred when it transfers to your beneficiary. A QPRT is an irrevocable trust similar to a GRAT. The grantor transfers the residence to the trust while retaining an interest in the property for a specified period of time. During that time, the grantor is allowed to continue living on the property. 

Once the time period has expired, the house will pass to the remainder beneficiary, and if the grantor is still alive at that time, it will be removed from the grantor’s taxable estate.

Intra-Family Loan

An intra-family loan is exactly what it sounds like: a loan between family members. It can help you transfer assets that are expected to grow substantially to family members before that growth occurs. This way the appreciation is removed from your estate and passed to someone who is most likely in a lower tax bracket. It also allows you to structure the loan at lower borrowing rates than most traditional financing options, though some interest must be charged in order to avoid the IRS’s imputed interest rules.

Special Needs Trust (SNT)

A special needs trust is a trust used specifically for families with loved ones with special needs. Assets can be transferred to this trust for use by the child with special needs without interfering with their eligibility to receive government benefits. Since eligibility rules are extremely strict and most individuals with special needs rely heavily on government assistance for day-to-day expenses, SNTs can be a crucial tool. Not only that but assets transferred to these trusts will be removed from your estate since SNTs are irrevocable.

Level 3: Advanced Planning

Those who have more complex estate tax issues or liability concerns may have to take their estate planning strategies a step further. For these special cases, you may need to consider the following:

Domestic and Offshore Asset Protection Trusts

These trusts offer those in high-liability fields of work and those with high estate tax brackets options to reduce liability by shielding assets from creditors, lawsuits, and judgments against the estate. They can also help you avoid costly litigation and influence settlement negotiations.

Self-Canceling Notes

Similar to an intra-family loan, self-canceling notes allow you to transfer assets (usually a business) to a family member or third party while minimizing your estate tax liability. The asset is sold to the other person for a set price plus interest that is paid over time in installment payments. These are typically used when the person selling the property is not expected to live much longer because once the seller passes away, the buyer is relieved of all future payments. This strategy helps delay capital gains tax on the sale and reduce estate tax upon death.

Family Limited Partnerships

A family limited partnership (FLP) is a type of partnership created under state law. The general partner(s) (the older generation) will manage the FLP and have liability for its debts. The limited partners (the younger generation) are not liable for the debts of the FLP beyond their investment, and they do not participate in management.

An FLP can be used to pass on wealth to the next generation while reducing gift and estate taxes. When done correctly, an FLP can also help guard your assets from creditors. If you’re considering creating an FLP, it’s important to consult an experienced attorney who can help you navigate the laws in your state and ensure your FLP is properly structured. 

Creating an FLP is a complex process, but with the right guidance, it can be a valuable tool for passing on your wealth to the next generation. 

What Level Do You Need?

Do you know what level of estate planning you need to safeguard your assets, your beneficiaries, and your long-term financial confidence? Let the Veracity Capital team guide you on your estate planning journey. Call us at (972) 695-3820 or email us at You can also visit to learn more about our firm.

About John

John Rogers is president and COO of Veracity Capital and has been in the financial planning and investment field for more than 20 years. He is responsible for developing, organizing, implementing, and evaluating the Veracity Capital’s fiscal function and performance and also ensures the company has all operational controls, reporting procedures, and talent in place to support its business. John is passionate about building teams that work with clients to achieve their financial goals through education and consistent and timely service. Prior to founding Veracity Capital, John was the Director of Private Wealth in the Southeast Region and a wealth advisor at AYCO. Before that, John was a vice president and financial advisor at AXA Equitable in New York. 

John attended State University of New York College at Plattsburgh and holds the Series 7, Series, 24, and Series 66 licenses. Outside of the office, John enjoys spending time with family, boating, and is an avid football and baseball fan. To learn more about John, connect with him on LinkedIn.

Advisory services offered through Veracity Capital, LLC, a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.