When was the last time you succeeded at anything without having a plan? Many people believe that estate planning is only for the wealthy, but people at all economic levels benefit from an estate plan. When you die, having an estate plan in place. Upon death, an estate plan protects and distributes property based on your wishes, which can include the needs of your family. They can also eliminate costly expenses such as inventory fees, attorney fees, and get your property into the hands of the beneficiaries sooner, or later, depending on your desires. and the needs of your family and/or survivors with as little tax as possible. This article will explain a little bit about wills and trusts, the foundations of estate planning.
Last Will & Testament
A will is the most practical first step in estate planning and is an important part of any estate plan, even if you choose to establish a trust. A will makes clear how you want your property to be distributed when you die. Having our office draft a will is one of the more simple options we offer to our clients. It can identify how you want your assets to be transferred to loved ones or charitable organizations after your death. If you die without a will (“intestate”) your estate will be handled in the probate court, and your property might be distributed in a way you did not want.
A will name a personal reprensetative (sometimes called an “executor”). A personal representative is the person responsible for administering the estate after your death. Duties of an personal representative includes:
- Taking inventory of property
- Appraising and distributing assets
- Paying taxes
- Settling debts
Most importantly, the personal representative is required to defend the actions of the deceased in carrying out the wishes identified in the will. A personal representative can be a trusted family member, friend, or a professional. Since the role of personal rerepsentative can be demanding, it’s important to think about who is most appropriate and can fulfill their obligations; it’s a good idea to ask the person if they are willing to serve.
In a will, you need identify the people or organizations you want to inherit your assets. Primary beneficiaries are your first choice to receive your assets. You should think about what happens if a primary beneficiary dies before your, or disclaims their interest. In that case, we recommend choosing secondary, tertiary, and planning for all contingencies.
You should also add primary and secondary beneficiaries on your individual bank accounts, the deeds to your homes and cars, contents of your safe deposit boxes, investments and insurance policies to make it easier to transfer the assets. Also, remember that establishing someone as a power of attorney does not automatically make this person a beneficiary of your assets. After you die, this person will not have the right to the money or to even access your account. If you want this person to be a beneficiary, you must state it in your will.
Like estate planning itself, trusts are not only for the wealthy. Trusts can be appropriate for people with minor children, special-needs children, or anyone who you care about or who could benefit from the protection a trust offers. Sometimes this means protecting children from their own poor decisions or the circumstances of life, such as creditors who would otherwise be able to reach their inheritance if they received it outright. Living or inter vivos trusts have the added benefit of avoiding probate, meaning that it will not have to be processed through the court system for the beneficiaries to get what you leave them.
A trust is a legal entity that holds property or assets for the person who created it. The person who creates the trust can be called a grantor, donor, trustmaker, or settlor. When the grantor creates the trust he or she appoints a person or entity (like a friend, family member, or even the trust department of a bank) to manage the trust. This is called a trustee. Like a will, the grantor also chooses someone who will ultimately benefit from the trust, called a beneficiary.
In the case of a revocable living trust, the grantor is usually the first trustee and also the beneficiary. When the grantor dies or becomes disabled a successor trustee takes charge, and cares for the trust property or distributes it to the ultimate beneficiaries.
Types of Trusts
Trusts can be living (inter vivos) or after-death (testamentary). A living trust is one that a grantor sets up while still alive and an after-death trust is usually established by a will after one’s death. Living trusts can be irrevocable (can’t be changed) or revocable (can be changed). If there’s a specific purpose in mind for the trust, dozens of different options exist. Some examples include special needs trusts, charitable trusts, bypass trusts, spendthrift trusts, pet trusts, and life insurance trusts.
Setting Up A Trust
Once you’ve decided to set up a trust it is important to remember that a trust, by design, can be very flexible and a grantor has the right – and should take advantage of this right – within the law, to tailor it to meet the anticipated the needs of the beneficiary.
Upon establishment of the trust the grantor must complete the process of setting up the trust by transferring his or her assets into the trust. Failure to do this properly can mean you still have to go through the probate court to distribute any assets not in the trust.