Books & Music
Food & Wine
Health & Fitness
Hobbies & Crafts
Home & Garden
News & Politics
Religion & Spirituality
Travel & Culture
TV & Movies
Estates and Wills
Despite the importance of having an estate plan, however, many people procrastinate and never get around to planning their estates; in fact, only two out of five Americans have a simple will. Unfortunately, many people who postpone planning for their deaths run the risk that their intended beneficiaries—the individuals they love most—may be forced to pay extra administration costs and taxes, will be burdened with unnecessary red tape and financial confusion, and may have to endure fighting among family members over assets.
No matter how big or small a person’s estate, however, it is important to plan ahead for the eventual distribution of one’s assets.
By developing an estate plan, a person can ensure that property will be distributed to family members and others in a way that is consistent with his or her tax and nontax objectives. Some of the most common goals when developing an estate plan include:
-ensuring that assets are transferred to the intended beneficiaries;
-reducing estate administration costs, including attorneys’ fees, executors’
fees, and probate costs;
-reducing or eliminating federal estate and gift taxes;
-formulating a succession strategy for family businesses;
-leaving a financial legacy for children and grandchildren;
-making charitable bequests;
-planning for illness or incapacity; and
-selecting guardians, personal representatives, and other fiduciaries
Wills and Trusts
No matter what the size of a person’s estate, a basic will and other estate planning tools can help ensure that property is distributed to the intended heirs, that an estate has sufficient liquidity to pay final expenses and taxes, and that the administrative burden on survivors is minimized.
While there are many estate planning tools and strategies that can be used to formulate an effective estate plan, perhaps none is more important than the will. Wills can generally be thought of as the foundation of a person’s estate plan.
Through a will, an estate owner can direct how his or her property is to be distributed after death. A will also recites the estate owner’s wishes with respect to the care of dependents and the administration of the estate.
Keep in mind that not all property passes via a will. Many types of property or forms of ownership pass by operation of law or by contract, such as:
-jointly owned property
-property held in trust
-life insurance payable to a named beneficiary
-retirement plans payable to a named beneficiary, including IRAs, Keogh
accounts, 401(k) plans, and pensions
-bank accounts payable to named beneficiaries upon the depositor’s death
-transfer-on-death stock accounts payable to a named beneficiary
Another common estate planning tool is the trust, which is a legal arrangement in which a person (the grantor) places assets that are for the ultimate benefit of a third party (the beneficiary) under the control of a trustee. The trustee holds title to the property, is bound by the grantor’s instructions, and is required by law to make decisions that are in the best interest of beneficiaries. The trustee can be a natural person or a legal person, such as a corporation or bank.
Because trusts are flexible and have so many applications, they can offer advantages to people in every income category. While the basic purpose of many trusts is protection, trusts can serve a variety of other purposes in an estate plan, including:
-minimizing probate costs by transferring property before death;
-holding property for the benefit of minors and other persons who may lack the
necessary judgment to manage investments;
-giving the estate owner control over how property is distributed and used
after his or her death;
-preserving estate assets through competent, professional management;
reducing or eliminating income taxes and estate taxes (when irrevocable
trusts are used); and
-keeping the estate owner’s financial affairs private. (The terms of a trust
do not become a matter of public record.)
Who will inherit a person’s property at death? What type of medical treatment is wanted—or not wanted—if a person becomes terminally or critically ill? Are there any family members who can manage a person’s legal and financial affairs if he or she is unable to do so? Addressing these and other issues before illness or death occurs is important to ensure that assets pass to the intended parties and to guarantee that a trustworthy person is appointed to make medical and financial decisions on behalf of an incapacitated individual. A simple will or trust, a durable power of attorney, and an advanced medical directive are just a few of the important estate planning tools that can be used to accomplish these goals.
| Related Articles | Editor's Picks Articles | Top Ten Articles | Previous Features | Site Map
Content copyright © 2015 by Denise M. Castille. All rights reserved.
This content was written by Denise M. Castille. If you wish to use this content in any manner, you need written permission. Contact Denise M. Castille for details.
Website copyright © 2016 Minerva WebWorks LLC. All rights reserved.