Not long ago, I was speaking with a friend who recently lost his father. His father had been successful and left an estate in excess of $4 million. His estate goes to his two sons. Now they are faced with paying the estate taxes, which are more than a million dollars, and deciding what to do with the holdings. The estate is mostly rental properties. You may be thinking this is a nice problem. It is a common problem for many in the Napa Valley even with the recent fall in real estate prices.

Those who have accumulated more than they need for retirement face some unique challenges that can arise when your money will outlive you. Estate planning is an essential tool for dealing with the money and property you leave when you pass away. Estate planning is a complex process, and you will need to consult additional resources to ensure yours is done properly.

Having more money than you need for retirement is not a problem, but it does mean you’ll have to do some estate planning to make sure everything goes smoothly when you pass away.

First, you’ll want to make sure all your hard-earned money doesn’t end up in the hands of the federal government when you die. You may also want to be sure that your heirs are provided for and that whatever is left at the end of your life is distributed according to your wishes.

Federal estate and income taxes can eat up a substantial portion of your estate. And the more you have when you die, the greater the potential tax liability. You worked hard throughout your life to earn that money — do you really want to hand it over to the government when you die? Estate planning can minimize this tax bite and leave more of your estate for your heirs.

If you have money and property left when you die, it will pass to someone. However, it may not be distributed according to your wishes unless you plan ahead. Maybe you have specific ideas about how much you want your heirs to receive. Perhaps you want specific property to go to your children, your grandchildren, or certain charitable organizations. You may even need to provide for the continuing operation of the family business. Comprehensive estate planning can ensure that your money and property are distributed according to your wishes.

If you have more money than you could possibly need for retirement, you are in an enviable position. You won’t need to worry about saving or minimizing your expenses. I have always been a big advocate of enjoying your money while you can. Old age has a way of catching up with us. Then we may not feel like doing too much. Go ahead — take that trip around the world. Buy the sports car or retirement home you’ve always dreamed of. You deserve to reap the rewards of a lifetime of hard work.

You might begin distributing your property during your lifetime. This will allow you to reduce the size of your estate and, at the same time, to experience the joy of giving your heirs things they truly want or need.

You might also consider making gifts to your favorite charities. Keep in mind, however, that the federal gift tax may be imposed if you give more than $12,000 to any one individual in a given year. However, gift tax owed may be offset by your $1 million gift tax applicable exclusion amount.

Most of your property is probably owned by you alone or jointly with your spouse. There are many forms of property ownership, and the form of ownership may dictate how your property is distributed when you die. Proper ownership may simplify the process of distributing your estate at death, so you may want to consult an attorney.

Trusts are another way to transfer ownership and control of your property. There are many types of trusts that can be used for many purposes. You will generally need an experienced attorney’s help to properly set up a trust.

You can choose a beneficiary for many of your assets, such as life insurance, IRAs, and other retirement plans. The beneficiary typically receives the proceeds directly from these vehicles when you die, subject to special situations (e.g., estate taxes or other estate obligations). Thus, it is important that you choose these beneficiaries carefully.

Regardless of how much or how little you own, it is wise to have a will. Your will controls the distribution of any property that is not distributed through other avenues, such as form of ownership or designation of beneficiary. You can change or revoke your will at any time before your death. Anyone can draft a will, but only a qualified attorney should be trusted with this important task.

Notable quote: “Death is not the end. There remains the litigation over the estate.” — Ambrose Bierce

Tom Mills is an investment adviser and financial planner. If you have questions or topics, call or write him at 1030 Seminary St. Suite D, Napa, CA 94559, 254-0155 or e-mail suntrm@aol.com.