Who Needs to do Estate Planning?

Estate Planning is for Everyone

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Financial Planning:

Many people have a belief that estate planning is something only the super wealthy need to be concerned about. While the wealthy may have estate tax issues many of us don’t have to be concerned about, avoiding taxes has never been the primary reason to have a well-constructed estate plan. The primary reason should be to make the estate distribution process as easy as possible for those we leave behind. In other words, don’t leave a huge mess behind for your heirs to have to sort out.

Basically, an estate plan is nothing more than instructions that should be followed by the person you specify as your estate settlor. These instructions should clearly specify how your assets are distributed to your heirs and, if you have minor children, who should be appointed to care for them until they become adults.

We are often asked if a person should have a will or a trust as their primary estate planning document. While only a qualified estate attorney can advise you on this, you should first consider how your assets can be distributed using neither a will nor a trust. Any qualified assets (IRA’s, 401k’s) and some non-qualified assets (Annuities, Life Insurance) pass by beneficiary designations. These designations supersede whatever a will or a trust says. You can also place a designation on bank and investment accounts called either a Transfer on Death (TOD) or a Payment on Death (POD). This works the same as beneficiary designations on IRA’s, etc. I have actually helped clients with substantial estates set things up so they didn’t need either a will or a trust and their estates were easily settled within a couple of weeks.

While nobody wants to consider their eventual passing, you should consider what your heirs will be facing once you are gone. We try to make this process as painless as possible. The starting point is to determine who you want to receive your assets and whether you want them to have full control of the assets. For minor children, you would certainly not want them to have control. Also, for minor children, you will need to decide who you want to be appointed to take care of them if something were to happen to you before they become adults. Finally, you need to decide who you would like to administer your estate. Only after these decisions are made should you consult with an attorney.

An estate attorney will help you determine whether your primary method of estate settlement should be through a will or a trust. If a trust is most appropriate, you will still need a will to go with it. Only a will can name a guardian for minor children and a will can also insure all of your assets are placed in the trust in case you neglected to re-title some of your assets.

Many people are intimidated by a trust. It seems complicated but it need not be. Typically a trust is set up as a Revocable Living Trust. This just means that it is a trust that can be changed at any time while you are living. The advantage of a trust is that having one, if properly constructed and used, avoids the probate process. Another advantage of a trust is the protection it can give your heirs. A trust can be constructed so that it will create trusts for some, or all, of your heirs. This will protect the assets you are leaving to them from creditors, provided your heirs leave the assets in the trust. This is key for minor children and special needs heirs.

Please feel free to reach out to us if you would like to schedule a consultation. Estate planning is a key component of the financial plans we create for our clients. Like many things in life, planning now can save a huge amount of work later. Don’t leave your loved ones with a mess to sort out, and that as one of the last memories they will have of you.

Bruce Larsen

Bruce Larsen, Senior Wealth Advisor