Estate Planning

Importance of Estate Planning

Estate planning is necessary to avoid dying “Intestate.” What does that mean? In layman’s terms it means dying without having created either a will or a trust which provides instructions on the passing of your estate on to your heirs. Unless you plan ahead, your estate is like taking your property and throwing it to your heirs into a deep black hole full of hazards such as creditors, lawsuits, death taxes, probate and even con-artists; all of which can damage much or most of the value of your estate.

One of the major reasons you want to consider pre-death estate planning is the ability to name your heirs, specify the share of your estate they will receive and determine the manner and timing your heirs will share in your assets.

Without a will or a trust the inheritance laws of your state (called laws of intestacy) will determine how your property will pass to your heirs. If you do not have heirs that fit your state’s formula, the assets (everything you own) will be taken by the state. Often, when the state’s formula regarding inheritance laws are applied, your assets will most likely not be passed on to your heirs the way you would have wanted them to be distributed if you had decided in advance of your death to work with a professional estate planner.

One of the best ways to safely get your estate over this black hole full of hazards is to build a bridge or a trust fund. A trust is a legal entity used to take care of property in special ways. It is formed by legal agreement or a contract between two parties known as the grantor (you) and the trustee. These two parties draft the agreement for the benefit of a third party known as the beneficiary. The grantor, trustee and beneficiary are individuals who own property which they wish to have managed and protected so it can be properly transferred to heirs in the form of a trust.

Once your property is in a trust, the beneficiaries such as your children and grand children will receive the benefits after the grantors die. Consult your financial planner for details on the different types of trusts available, how they work and what best fits your wishes for the disposition of your assets.

Here are some things to consider when planning your estate:

Will the heirs receive equal or unequal shares?
At what age will your heirs get their share?
Do you wish to leave specific assets to certain heirs?
Is it your wish to deliberately leave out or disinherit any potential heirs?
How to handle distribution of benefits when a couple has children from a previous marriage.
What to do if a couple for personal reasons has built separate estates?
How to handle or control an irresponsible heir.
How to deal with mentally or physically disabled heirs.
What to do to insure a designate error uses the inheritance for a specific purpose such as college tuition.
What plan is in place should the grantor outlive the beneficiary?
How to arrange for specific gifts to special heirs.

Trust vs. Wills, Which is Best for You?

General guidelines: There are cases where a will is the best choice and other situations where a trust is a better solution. This is a highly important area to discuss with your estate planner.

A trust is usually the best choice if:

The estate is small enough that formal probate will not be required.
When there are not large death tax liabilities
There is no need to hold a portion of the estate in some type of controlled payout
When there is no concern for mental issues that could cause problems with final disbursement

A will is best under the following situations:

The estate which can’t safely be transferred by beneficiary and the joint arrangements exceeds
There is some danger of challenge
When avoiding probate is a high priority
If there are large death taxes expected to be owed
When there is a need to insulate assets such as in a divorce
If there is a possibility the grantor (estate owner) will be incapacitated during any phase of the formal procedures

Estate Planning is a complex process. We do not recommend anyone try to do it without professional help. If it is important to you to be control of what happens to your assets after you pass on, estate planning puts you in control of the process. Estate planning also assures that more of your estate goes to your heirs and less to the state or government if the form of taxation. If you care about the ones you love, you will not leave estate planning for tomorrow. Let’s face it, anything can happen. Know that when you go to bed each night you have the peace of knowing that should something happen to you, there is a formal plan in place to legally take care of your heirs.

 

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