You have the ability to determine:

• Who will receive your assets upon your death
• When your assets will be distributed after your death
• How much government tax your estate will pay after your death

Estate planning is the devising of a strategy that allows you to distribute your assets in accordance with your wishes upon death. If you fail to plan, state law will determine who receives your assets. In addition, you may subject your estate to unnecessary estate tax liability and administration expenses.

Fortunately, you can easily pass your assets on to whom you want, when you want, and without unnecessary expense by engaging in sufficient estate planning. The level of estate planning necessary to achieve your goals and protect your estate against unnecessary expense or unintended results, depends on your particular situation.

Most people believe they will be able to achieve their estate planning goals by executing a Last Will and Testament. Certainly, a Will empowers you to direct how and to whom your assets will be distributed. Wills are also important in allowing a parent to nominate a legal guardian for minor children in the event both parents die. But the legal protections of a Will are not sufficient to avoid the costs of estate administration or reduce your estate’s potential estate tax exposure. Also, the provisions of your Will are triggered only at death, and cannot help your family if you become incapacitated.

By choosing to distribute your assets by a Will, you choose to have a probate administration of your estate upon your death. This means that the executor of your estate will have to report to the probate court and may have to provide an accounting of your assets before they may be distributed to your designated beneficiaries. This process can be lengthy and often costs estates several thousand dollars in court expenses and legal fees. Likewise, if you become incapacitated, your family will be forced to petition the probate court to serve as your legal guardian. Probate expenses can grow quickly since your legal guardian must report to the probate court for as long as you are incapacitated.

Perhaps more importantly, simple Wills executed by both husband and wife may eventually lead to an estate’s payment of more federal estate tax than necessary. A person’s estate consists of everything they own at death, including: real estate; death value of life insurance policies; retirement plans (IRA and 401(k), etc.); stocks; bank accounts; vehicles; and personal property. Federal estate tax may be assessed against your estate should the value of the estate be greater than the Unified Credit allows under federal law.

Both the cost of probate administration and the exposure to estate taxes can be either eliminated or greatly diminished through the use of revocable living trusts. (See Attached Exhibits). Revocable living trusts are legal entities used to hold assets during your life. You may serve as trustee of your own trust and still enjoy control over your assets. During your lifetime, you may revoke or amend the trust at any time. Any property held in trust at death is not considered part of your probate estate. Spouses should each create their own revocable living trust, and divide their assets between them so that each trust is fully funded. Each trust should be for the benefit of the other spouse and their children upon their death. By utilizing two separate trusts, spouses may either eliminate or reduce the amount of estate taxes their estates may have to pay.

To learn more about revocable living trusts and other estate planning techniques, please feel free to contact our office.

Please note the information above is for general educational purposes and is not intended to be legal advice. Consult with legal counsel to determine what estate plan is right for you.