Estate planning is not only for the rich, for those whose assets exceed the estate tax threshold. Almost everybody can benefit from some amount of estate planning. The simple reason is that, without specifying your wishes for your property, guardians for your children, your health care goals, and other basic matters, somebody else will decide for you, whether a state law, or a judge or a family member. What other people decide for you in these matters is probably not going to be what you want. Better to specify your wishes when you are able to do so.
A will, obviously, is an important estate planning document. In your will, you can name guardians for any minor children; an executor for your estate; and which beneficiaries receive which assets. Another important estate planning approach is the living trust.
A living trust is an arrangement in which a trustee is given legal title to your assets for the benefit of one or more beneficiaries. Living trusts can help you avoid probate and can function as a means of long-term management of property., but they cannot reduce estate taxes. This is because they are revocable, meaning the terms of the trust can be changed any time.
You can be the trustee of your own living trust, or you can designate your attorney, a CPA, an adult child, a financial institution, or a trusted friend. The decision of a trustee will be unique for everyone.
In a future post, we’ll take a brief look at some of the tax implications of living trusts, as well as some of the limitations of wills and trusts in general.
Source: MarketWatch, “Estate planning for the rest of us,” Bill Bischoff, May 21, 2013.