Your estate is the property that you will be leaving behind after you die. To provide a very general definition, estate planning is the process of arranging for the distribution of this property.
In this blog post we will look at the anatomy of a basic estate plan.
Transferring Assets
You have to utilize some type of legally binding document or documents to state your final wishes regarding the distribution of your assets. You should be aware of the fact that you have a number of different choices.
Last Wills
The most commonly utilized vehicle of asset transfer is the last will. Most people are aware of what a last will accomplishes.
The will is going to name inheritors who will inherit your property after you die. Someone has to actually make this happen. This would be the executor of the estate. You should nominate an executor when you create your will.
Once you die, the executor or someone of your choosing who is close to you must admit the will to probate. The Surrogate’s Court supervises the administration of the estate. The heirs to the estate do not receive their inheritances until the estate has been probated and closed.
Revocable Living Trusts
A revocable living trust can be a very effective estate planning tool. There are those who would assume that trusts are only useful for very wealthy people. In fact, the revocable living trust is a trust that can be useful for people who are not rich.
These trusts are not intended to accomplish objectives that very wealthy people have, like asset protection and estate tax efficiency. Revocable living trusts are useful for those who want to arrange for the transfer of their assets to their loved ones in an efficient manner.
Another misconception that some people have about trusts is that you surrender all control of the assets that you convey into any type of trust. These individuals don’t consider trusts, because they want to make sure that they have the resources to take care of their own needs throughout their senior years.
In fact, you do not surrender control of assets that you convey into a revocable living trust. Think about the name of the vehicle. The trust is revocable. You can revoke the trust, and the money is once again directly in your pocket. All the terms that you set forth when you created the trust would be null and void.
Even if you do not revoke the trust, you can still maintain control while you are living. With any trust you have a trustee and a beneficiary or beneficiaries. The person creating the trust is called the grantor.
You as the grantor of a revocable living trust may act as both the trustee and the beneficiary initially. Because of this arrangement, you retain absolute control.
After your passing, the successor trustee that you name in the trust agreement would distribute assets to the successor beneficiaries in accordance with your wishes.
Incapacity Planning
Who would manage your financial affairs in the event of your incapacitation? If you use a revocable living trust, you could name a disability trustee. This person or entity would administer the trust if you become incapacitated at some point in time.
If you don’t use a trust, you can account for the possibility of incapacity by executing a durable power of attorney. The attorney-in-fact or agent that you choose would be empowered to handle your financial affairs if and when you become incapacitated.
We should point out the fact that you should have a durable power of attorney even if you do have a living trust with a disability trustee. You could give the trustee the power to manage assets that have never been conveyed into the trust.
Advanced Estate Planning Objectives
There are other types of trusts that can be used to accomplish more advanced objectives. People who are exposed to estate taxes can use wealth preservation trusts to ease the burden, and there are trusts that can be used to provide for people with special needs without jeopardizing government benefit eligibility.
These are a couple of potential scenarios, but there is an estate planning strategy that can be used to address any type of situation.
Core Responsibility of Adulthood
Estate planning is important for all responsible adults. Studies are conducted periodically, and they consistently find that the majority of American adults have not executed all of the appropriate estate planning documents.
This is perplexing, because passing away is one of the certainties of life.
Estate planning is not something that is only important for senior citizens. People of all ages die every day. In fact, a lot of younger adults have more responsibilities to others than senior citizens, because they are often the parents of minor children.
- Effective Planning for Single Seniors - October 1, 2023
- Your Guide to Navigating the Labyrinth of Trusts - September 28, 2023
- Paving the Way For the Future: An Estate Planning Guide for Millennials - September 24, 2023
