Estate Planning

Estate planning sounds like a topic for someone older, but surprise! It’s for everyone.

Estate planning is more than just determining who gets your stuff when you die: it’s identifying beneficiaries, it’s setting guardianship for minor children, it’s avoiding excess taxes. It’s all of that and more.

Every person should have a will. Period. End of Story.

Wills

Your will is the only way that anyone knows what your intentions are. Without having it in writing, everything is left up to interpretation, and unfortunately, the government in the form of the probate court will make the final decisions – and that could take months, if not years.

A will doesn’t have to be complicated but should include the following – as a minimum –

  • Name the executor of your estate – this is the person you trust to handle things as you want them handled. It could be a family member, but it doesn’t have to be. Be sure to ask the person you are naming. Think about how organized they are, whether they have a knack for getting things done, are they trustworthy? Most people are flattered to be asked, but some may decline – that’s ok, pick someone else.
  • If you have minor children, name a guardian for your children. Families are funny when people die, be sure you have identified someone, so the kids don’t get put in a home where you disapprove of the parenting skills. Protect them by naming a guardian. Again, it doesn’t have to be a family member, but you do need to ask.
  • Identify where your assets go. If you don’t do it, the state will disperse your assets according to state law. It’s not enough to have tags on the assets in your home; put the list down in your will. While it is essential with the small stuff, it’s even more important with the big stuff. Real estate, cars, businesses, cash.  
  • Your will is also a great place to identify your assets and liabilities. If you’ve done your balance sheet already, those are easily identifiable. Just remember, your will needs to be updated regularly to account for those items.

A couple things to keep in mind. If you name a beneficiary on a bank account or life insurance policy, that will supersede your will. Keep your beneficiaries consistent, or name your estate as your beneficiary on all documents, that way, your will directs the distributions. If you fail to properly execute your will, it won’t do anyone any good. 

A properly executed will requires two adult witnesses to the signature of the party. Neither witness can be a beneficiary of the will. This matters. Without those signatures, a will can be considered null and void, and everything goes back to just as if you didn’t have a will. Don’t do that to your family. Write your will and get it executed.

Trusts

In addition to a will, you could have a trust. There are many forms of trusts – revocable, irrevocable, etc. They all have the same basic parameters. A trust is a legal entity with a trustee who acts as a fiduciary** to ensure that the trust assets are distributed as established by the trust. 

Assets of your estate are transferred into the name of the trust at execution, and then further assets are titled in the trust as you acquire them.

The advantage of a trust is that it avoids probate. The trustee is already established to follow the instructions of the trust. Two things matter here – that the trustee is someone you trust implicitly. Similar to naming the executor of your will, the trustee has the responsibility of distributing the assets according to your written instructions. Second, that you keep all of your assets in the trust; each time you buy something new, the trust should be the owner, not you personally. 

Trusts are different from state to state, so you should use an attorney within your state to establish your trust.

One of the advantages to a trust that many people like is that because it avoids probate, your finances are not subject to court records. The added privacy is nice.

Taxes

Taxes are often a consideration at the death of a loved one. A final tax return will be required for the deceased, plus estate taxes may be due on a large estate. Currently, your estate would need to own assets in excess of $11,700,000 to be subject to estate taxes. The amount exempt changes annually and is subject to the whims of the federal administrations – always keep an eye on this.

If you fall in that category, quit trying to DIY your estate and hire a good attorney. For the rest of you, you should be fine.

There is good software available to get a will written, it is inexpensive and will walk you through the steps. If you are going with a trust – hire an attorney in your state of residence to assist.

 

**Fiduciary – a fiduciary is someone entrusted with assets of another.  This is a hot topic to me!  If you are entrusted with assets that belong to someone else, you have a duty to ALWAYS do the right thing with them. Employment taxes withheld from employees are held in trust by you. Down payments made for the purchase of a home or boat or anything else are held in trust. You can not use the funds personally, even just temporarily – they aren’t yours.  Fiduciaries must act for the benefit of the estate or beneficiaries – never for their own benefit!