20 August 2012 0 Comments

What’s An Estate Plan?

Most people think of Estate Planning as a process intended only for the very wealthy.  It’s true that the more assets an individual has to pass on at death, the more complex the planning tends to be.  However, regardless of the size of one’s estate, the general definition of Estate Planning remains unchanged:  A planning process entered into prior to death to assure that assets are passed at death to those for whom they are intended in the manner that was intended with minimum shrinkage due to taxes and administrative costs.

If you have more than the cash in your wallet and own more than the suit in which you will be buried, you will probably want to give this topic some attention.  Whatever you have to pass on at your death, you should do something while you are still among the living to see that your wishes are known and documented.  I’ll start with the simplest estate and progress to the more complex.

Do you have a Will?  Actually, the question should probably be, “Do you have a Will and a Living Trust?”  A Will is a document that instructs the Probate Court to whom your assets should be directed.  If you die without a Will your assets will be distributed in accordance with the line of decadency in your state; typically spouse followed by children.  A Living Trust does the same thing as a Will, but during your lifetime you transfer ownership of your major assets to the trust, so when you die, there is no public court record.  The trustee manages assets in accordance with the trust document and there is no public record involved.  This Living Trust also designates the trustee and guardian of minor children.  The Will is still needed to pour over any assets into the trust not held by the trust at your death.

Can you avoid paying attorney fees by obtaining a Will and Living Trust from the internet?  Yes, that’s possible, but unless you have a very simple and small estate, I strongly advise seeking  an attorney experienced in this field and paying a one-time drafting charge.

Life insurance can make up a large portion of your assets at death.  When you purchase a policy you designate a Primary Beneficiary and a Contingent Beneficiary in case the Primary Beneficiary dies before you do.  That designation supersedes any Will or Living Trust designations, so make sure you coordinate with your overall plan.  Do not name your Estate as the beneficiary.  When you do, proceeds pass through Probate, subject to fees and could get tied up, especially if you die without a Will (intestate).

Next I’ll be going more into the topic of Life Insurance Beneficiary and Ownership planning.

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