Here are the 1-2-3's of estate planning with an overview of your critical choices.

1. Gifting - You could gift stock outright to family now, although it could change the ownership rights and voting arrangements in a closely held company (although your beneficiaries would be simply minority shareholders). The sale of the company by stock transfer would simply result in their cash out, a process set out in the shareholders agreement that they would sign and commit to. You can gift up to $12,000 each to various members of the family free of any gift tax.

2. Charitable Gifts - You can gift now or at the time of death and have that donation sum fully deducted for estate tax purposes to the extent of the donated property's fair market value on the date of death.

3. Establish Irrevocable Trusts - A portion of your assets (e.g., stock in its present form without the necessity of a sale) could be gifted into an irrevocable trust (or several trusts) for the benefit of your family. These shares could be voted under your control as Trustee, under your spouse's in the event of your death, or under subsequent member of the family. The sale of the company through stock transfer would simply result in cash to the trust in return for the stock to the new buyer.

4. Credit, Marital, and Descendants' Trusts - Your will could include testamentary provisions (which activate at the time of death) creating credit trusts, marital trusts (when married) and descendants trusts. These would absorb most if not all of your estate value from $625,000 up to $1.0 million, allowing the surviving spouse to run the trusts for the benefit of your family or children or other designated beneficiaries (e.g., education, medical, or general grants at specific ages), use trust funds for the surviving spouse's needs, and minimize or avoid estate taxes.

5. Family Limited Partnerships or LLC's - this type of entity is effective if you foresee operation of the business or at least oversight by members your family after your death. It can provide (a) central management of assets, (b) income tax benefits (classified for federal income tax purposes as a pass-through entity), (c) estate planning benefits (allows transfer of fractional interests to next generation family members yet keeping central control), (d) flexibility, (e) family control, and (f) protection from creditors. You can gift closely held stock in your company through an annual gifting program, control remains with you yet your family can receive income from the dividends of the stock and eventually the full ownership rights or cash out value.

6. Limited Liability Company - this type of limited liability "partnership" tax structure allows a company to hold ownership of assets such as appreciating stock, real estate, and intangibles, and make annual exclusion gifts to other members or "partners" in the company.

7. Foreign Trust - if the grantor possesses a certain degree of control over the trust, such as retaining a reversionary interest in the income, retained administrative powers, or had the power to distribute the income for the benefit of the grantor, then the grantor is treated as the owner of the trust for U.S. income tax purposes and the trust is disregarded by the government. Assets in such trusts which are sourced offshore, in non-controlled trusts, or irrevocably transferred to such trusts, stand a better chance of avoiding or minimizing U.S. taxation.

8. Grantor Retained Annuity Trust (GRAT) - you could transfer assets such as company stock into a trust which would pay an annual annuity to you for a specified period of time. At the end of the time, the property or stock would pass to the trust beneficiaries. This type of vehicle depends on what you might plan to do with the stock or options of any public or closely held company over time.

9. Qualified Terminable Interest Property Trust (QTIP) - you can delay the imposition of the transfer taxes by using this type of trust. It enables you to transfer an unlimited amount of property by lifetime gift or upon death. It can be effective if you decide to pay the transfer taxes, but need time for the stock to appreciate and/or the closely held company sold to generate funds to cover the taxes.

1. transfer some additional assets now (in whole or in part which you can do at the rate of $11,000 per year tax free),

2. rely on the testamentary trusts in a will to protect such transfers at the time of your death, or

3. add some additional trust protection through a combination of present life time trusts and testamentary trusts.

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