An estate consists of the personal or real property, possessions, and financial holdings that a person has accumulated during his or her lifetime. Estates do not apply only to the wealthy. One’s estate simply consists of the personal property owned by that individual, regardless of the amount of property. An estate can consist of a modest home and vehicle, bank accounts, business assets, land or any type of property that has monetary value. Most people want to ensure that property remaining after death passes to the heirs of their choosing, and that as little as possible becomes absorbed by estate taxes, fees, and mismanagement. The following are three essential tools for making that happen.
The Last Will and Testament
When a Last Will and Testament (will) is prepared, it contains instructions pertaining to the disbursement of assets by the executor. The will should name who will administer the estate (executor) and should include an alternate. Wills properly prepared by an estate planner will be legal in the state in which they were written and legally binding in a court of law. For families with young children, young people establishing careers, and people with moderate incomes, a will provides sufficient protection. For people with larger holdings and multiple heirs a trust may be more appropriate.
Trusts
A trust does not replace a Last Will and Testament. The difference in a will and a trust is that the guidelines set out in the trust can take immediate effect while the person is still living. The trustee of the trust has the authority to handle the assets as outlined and this authority remains until all of the assets are distributed. A successor trustee serves in the event of the death of the original trustee so that the directives under the trust are still enforced. Because trusts are private, they are not public record. The trustee has full discretionary control. A properly executed trust can save families significant fees expense and provide peace of mind, as the assets are not open to public consumption. It is important to remember to title all assets possible into the name of the trust so that the disbursements go through it as opposed to an estate when the executor dies. Any assets left outside of the trust may be subject to probate.
Insurance
Insurance is one of the most simple and cost effective ways to protect assets. Life insurance names certain beneficiaries that will have direct disbursement at the time of the loved one’s death. These funds do not pass through the probate estate unless the estate is a beneficiary. Life insurance proceeds protect assets by giving the remaining family members a means to pay for burial expenses, unexpected costs, and current living expenses.
The previous estate planning tools will protect assets gained by diligence and achievement, making sure that hard-earned legacies remain protected for generations to come.
Sources:
http://money.cnn.com/retirement/guide/estateplanning_trusts.moneymag/index.htm
http://www.bankrate.com/finance/personal-finance/9-key-estate-planning-tools-1.aspx
http://www.fpanet.org/LifeGoals/PlanningMyEstate/AdditionalEstatePlanningTools/
Andrew Lamkin is principal in the law firm of Andrew M. Lamkin, P.C., where he focuses his practice in the areas of elder law, estate planning and special needs planning, including Wills and Trusts, Medicaid planning, estate administration and residential real estate transactions. He is admitted to practice law in New York and New Jersey.
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