We Care

Basic estate planning can benefit everybody, P.2

In a previous post, we began discussing the importance of estate planning, noting that everyone can benefit from at least some basic estate planning. Basic estate planning can include a number of aspects, but it commonly includes setting up a will and a trust, as well as an advance healthcare directive and possibly a power of attorney. More can be done, of course, depending on the needs of the individual and his or her family and financial situation.

Picking up where we left off last time on the issue of trusts and taxes, it is important to realize that there is no income tax benefit to setting up a living trust. The assets placed in a living trust are still considered part of your estate, so income generated by those assets must still be reported. Living trusts do, however, allow the assets they hold to bypass probate. 

Probate is a nice thing to avoid where possible, because of the time and hassle involved, and the fact that it is a public proceeding.

Wills and living trusts are very good tools for ensuring your final wishes are carried out, but there must be proper planning surrounding their use. This is a big issue, and could be tackled from a number of angles. This includes the importance of:

  • Married couples coordinating their estate planning
  • Ensuring that your will and trust are compatible with your beneficiary designations
  • Following through on transferring ownership of assets to your trust
  • Doing additional planning for estate tax avoidance

A final word about wills, trusts, and estate planning is this: estate planning is not a one-time thing, or a task to be completed and checked off your list. It is an ongoing process that must be reviewed from time to time to ensure the plan is still appropriate for your situation.


Source: MarketWatch, “Estate planning for the rest of us,” Bill Bischoff, May 21, 2013.