The phone rang, I answered, and the voice on the other end said, “Do I need a family limited partnership and a limited liability company? The other tax attorney said I did. What do you think?” I looked at the area code and answered, “Probably not.” “Okay, thanks,” replied my new friend, and hung up.

To save you a phone call, I’m going to share my rules of thumb.

College students don’t need wills; they just need to give their parents a medical power of attorney. See Glenn Karisch for free forms.

College grads need a will and business and medical powers of attorney. Use a real lawyer, one that explains beneficiary designations. The first day on the job, HR is going to have the new hire designate beneficiaries that may control life insurance and retirement benefits for the rest of the employee’s life. Get it right.

Newlyweds need new wills and powers of attorney. If children are even remotely possible, include contingent trusts. Update all beneficiaries according to the attorney’s instructions. Never designate minor children as contingent beneficiaries.

How much are you worth dead? If as much as $1 million per child, it’s time for new wills, with lifetime generation-skipping transfer tax planned trusts for descendants.

Are you married and worth $5 million? Add tax-planned trusts for the surviving spouse. If not, and one spouse is not a U.S. citizen, do it anyway.

Are you asset rich, but cash poor? This happens to entrepreneurs and real estate investors. Children cannot eat real estate. An irrevocable life insurance trust might be the ticket to add liquidity. For normal people, it’s overkill.

Do you have more money than you need? Give it away. This is where the family limited partnership comes in. If you own the general partner, typically a limited liability company, you can maintain control even while you give the kids the other 99%. Five million dollars in assets is a reasonable minimum to form a family limited partnership. My new friend called from a neighborhood where no one has $5 million to spare.

Finally, when disability is imminent, or at least feared, consider a revocable inter vivos trust, a so-called living trust. Asset management is easier than with powers of attorney.

This article was not intended or written to be used, and it cannot be used by the taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer.

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