Estate planning involves a process of determining where the assets of an individual go when they die. It involves an individual’s family, entrusted friends, and preferred charitable organizations. It secures the beneficiaries and successor trustees, in case the owner of the estate becomes unable to manage it before they pass. Estate planning enables individuals to determine who will manage their assets during the end of their lifetime. It dictates the circumstances of when their assets may be distributed in their lifetime, outlines the distribution of assets after their death, and determines how and by whom personal health care decisions will be made, if the estate owner ever becomes unable to take care of him or herself. Estate planning involves all facets of securing one’s financial future. It goes beyond writing a will or trust and involves all aspects of financial planning to ensure the future distribution of the estate in question.
A will is a legal document that contains the names of individuals or charitable organizations that will receive the assets of the recently departed, either by an outright gift or in a trust. A will nominates an executor who will manage the estate, debts, expenses, and taxes of the deceased. The executor distributes the estate under the supervision of a probate court in accordance with the will’s instructions. A will also names the legal guardians of minor children.
Wills safeguard the majority of an individual’s assets at the time or his or her death, barring certain exceptions, such as accounts and policies with designated beneficiaries. The aforementioned assets would pass along to the beneficiaries directly. In addition, co-owning assets would pass along to the surviving co-owner regardless of any instructions stating otherwise in the deceased’s will. Lastly, a will does not include assets transferred to a revocable living trust.
- An Introduction to Wills
- Do I Need Estate Planning?: What is a Will?
- Ultimate Guide to Retirement: What is a Will?
- How Estate Planning Works: Wills and Estate Planning
- Do I Even Need a Will?
- Estate Planning: Wills and Trusts
- Wills/Estate Planning: Answering Your Legal Questions
- Your Will
An estate consists of all existing assets owned solely by an individual or jointly with other people. Assets include all property owned by the individual, including:
- Bank accounts
- Real estate
- Retirement accounts
- Life insurance distributions
- Tax refund payments
- Outstanding loan repayments
- Inheritance windfalls
The value of an estate equals the fair market value of all types of assets owned by an individual minus any outstanding debts. Calculating the value of an estate enables an individual to determine whether the estate will be subject to estate taxes, or if any beneficiaries will be subject to pay capital gain taxes. The importance of this information enables individuals to secure the appropriate resources to cover all taxes applied to the estate.
- Organizing Your Assets: Estate Planning (PDF)
- Estate Planning Basics
- Exploring Your Personal Net Worth
- Transferring Assets: The How of Estate Planning (Part Two)
- Estate Planning: What Do We Need to Know Now? (PDF)
- The Importance of Asset Titling in Estate Planning
- Implementing the Estate Plan: Asset Ownership Structure (PDF)
- Estate Planning Series #1: Estate Planning Principles (PDF)
A trust is a legal document that partially substitutes for a will. In general, a trust grants the power for one party to hold property until the owner of the estate, also known as the settlor, passes away. In a living trust, most people assign themselves as the trustee in order to remain in control of their assets until they die. A successor trustee manages the trust’s assets if the settlor ever becomes unable or unwilling to manage their assets before they die.
In a revocable living trust, the settlor has the authority to amend or revoke the trust for as long as he or she remains alive and competent. With this type of trust, the settlor cannot amend or revoke the trust once created. Alternatively, a testamentary trust is based on the instructions outlined in a will, it does not address the management of the settlor’s assets during his or her lifetime; however, it does provide young children and others the need for someone to manage their assets after the settlor’s death. Most people opt for a living trust.
- An Overview of Estates and Trusts
- Estate Planning with Living Trusts (PDF)
- The Role of Irrevocable Trusts
- What is a Trust?
- Estate Planning: Introduction To Trusts
- Trusts as an Estate Planning Tool
- Trusts: Common Law and IRC501(c)(3)and 4947 (PDF)
- Understanding Trusts