Estate Planning

Estate planning is a process involving the counsel of professional advisors who are familiar with your goals and concerns, your assets and how they are owned, and your family structure. It can involve the services of a variety of professionals, including your lawyer, accountant, financial planner, life insurance advisor, banker and broker.

Estate planning covers the transfer of property at death as well as a variety of other personal matters and may or may not involve tax planning. The core document most often associated with this process is your will.

A will provides for the distribution of certain property owned by you at the time of your death, and generally you may dispose of such property in any manner you choose.  Your right to dispose of property as you choose, however, may be subject to forced heirship laws of most states that prevent you from disinheriting a spouse and, in some cases, children. Your will does not govern the disposition of your property that is controlled by beneficiary designations or by titling and so passes outside your probate estate.  Such assets include property titled in joint names with rights of survivorship, payable on death accounts, life insurance, retirement plans and accounts, and employee death benefits.  These assets pass automatically at death to another person, and your Will is not applicable to them unless they are payable to your estate by the terms of the beneficiary designations for them. Your probate estate consists only of the assets subject to your will, or to a state’s intestacy laws if you have no will, and over which the probate court (in some jurisdictions referred to as surrogate’s or orphan’s court) may have authority. Therefore, reviewing beneficiary designations, in addition to preparing a will, is a critical part of the estate planning process.  It is important to note that whether property is part of your probate estate has nothing to do with whether property is part of your taxable estate for estate tax purposes.

Wills can be of various degrees of complexity and can be utilized to achieve a wide range of family and tax objectives. If a will provides for the outright distribution of assets, it is sometimes characterized as a simple will. If the will creates one or more trusts upon your death, the will is often called a testamentary trust will. Alternatively, the will may leave probate assets to a preexisting inter vivos trust (created during your lifetime), in which case the will is called a pour over will. Such preexisting inter vivos trusts are often referred to as revocable living trusts. The use of such trusts or those created by a will generally is to ensure continued property management, divorce and creditor protection for the surviving family members, protection of an heir from his or her own irresponsibility, provisions for charities, or minimization of taxes.

Aside from providing for the intended disposition of your property upon your death, many other important objectives may be accomplished in your will.

You may designate a guardian for your minor child or children if you are the surviving parent and thereby minimize court involvement in the care of your child.  Also, by the judicious use of a trust and the appointment of a trustee to manage property funding that trust for the support of your children, you may eliminate the need for bonds (money posted to secure a trustee’s properly carrying out the trustee’s responsibilities) as well as avoid supervision by the court of the minor children’s inherited assets.

You may designate an executor (personal representative) of your estate in your will, and eliminate their need for a bond. In some states, the designation of an independent executor, or the waiver of otherwise applicable state statutes, will eliminate the need for court supervision of the settlement of your estate.

You may choose to provide for persons whom the state’s intestacy laws would not otherwise benefit, such as stepchildren, godchildren, friends or charities. 

If you are acting as the custodian of assets of a child or grandchild under the Uniform Gift (or Transfers) to Minors Act (often referred to by their acronyms, UGMA or UTMA), you may designate your successor custodian and avoid the expense of a court appointment.

Much has been written regarding the use of “living trusts” (also known as a “revocable trust,” “inter vivos trust,” or “loving trust”) as a solution for a wide variety of problems associated with estate planning that wills cannot address. Some attorneys regularly recommend the use of such trusts, while others believe that their value has been somewhat overstated. The choice of a living trust should be made after consideration of a number of factors.

The term “living trust” is generally used to describe a trust that you create during your lifetime.  A living trust can help you manage your assets or protect you should you become ill, disabled or simply challenged by the symptoms of aging. Most living trusts are written to permit you to revoke or amend them whenever you wish to do so.  These trusts do not help you avoid estate tax because your power to revoke or amend them causes them to continue to be includable in your estate.  These trusts do help you avoid probate, which may not always be necessary depending on the cost and complexity of probate in your estate.

A “living trust” is legally in existence during your lifetime, has a trustee who currently serves, and owns property which (generally) you have transferred to it during your lifetime. While you are living, the trustee (who may be you, although a co-trustee might also be named along with you) is generally responsible for managing the property as you direct for your benefit. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries, or to continue to hold it and manage it for the benefit of your beneficiaries. Like a will, a living trust can provide for the distribution of property upon your death. Unlike a will, it can also (a) provide you with a vehicle for managing your property during your lifetime, and (b) authorize the trustee to manage the property and use it for your benefit (and your family) if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.