The Basics of Estate Planning
Updated: Apr 14
The basics of Estate Planning can be far from basic and frequently raise many key questions:
Who will own my belongings after I pass away?
Who will take care of my kids and how are they supported?
Can I protect my business and help my employees if I become incapacitated?
These are just a handful of the questions that are constantly thought about by people when it comes to the basics of estate planning. This past week, I had the pleasure of interviewing Drew Alliston Esq. on the specifics of estate planning. The whole interview can be found on here, however, there are a few highlights we can cover here today.
The main question that we discuss is what is estate planning and how can people use the law to execute their wishes?
Estate Planning in Simple Terms: Three Core Elements
1) When you pass away, an estate plan allows you to say where your money and assets will go, and who will be responsible for taking care of your kids.
2) Estate plans support your wishes should you become incapacitated, they allow someone else to make decisions on your behalf.
3) If you ever have creditors coming after your money, your estate plan determines what is protected from a lawsuit and what would be subject to losses.
Estate Planning in Simple Terms
Estate planning is simply making your wishes known for what you would like to happen to yourself, people who you are responsible for, and your assets should something happen and you become incapacitated or pass away.
3 Common Estate Planning Documents
1. Last Will and Testament - Your Basic Will
To start, the cornerstone of estate planning is typically is your last will and testament or just called a basic will. This document is good at announcing your wishes, but we need to keep in mind that a will has to go through probate in front of a judge and they will oversee the transition and assignment of guardianship.
The downside of a will is that it only covers how children are to be supported until they are 18, but then after that age they receive everything due to them at once.
2. Revocable Living Trusts
The next vehicle that is often talked about in regards to estate planning is a trust – specially a revocable living trust. These trusts are often considered in situations where people do not want their children to have everything at 18, or if they want to have their wishes carried out for a longer period of time.
Another benefit of a trust is in regards to real property like real estate. If that property is in a trust, then the property doesn’t have to be probated in front of a judge to change over the title.
3. Incapacited-based Estate Planning
The last vehicle that is often used and talked about in estate planning are documents that allow someone control in the event they are incapacitated. These are things like a financial power of attorney, medical power of attorney, advanced directive, medical release, and declaration of guardianship. Incapacited-based estate planning allows for your estate and your person to be cared for and looked after by another person in the event that you can’t do that for yourself.
Probate Avoidance - Positioning your assets
Clients frequently ask us about probate avoidance, especially with regard to their assets. To start, all of your retirement accounts, investment accounts, bank accounts, life insurance, and annuities can have direct beneficiaries set up. In these cases, the accounts will automatically be titled in the beneficiaries names when you pass away and they will receive immediate control as long as they are over age 18.
Basics of Estate Planning FAQs
What is Probate and Why Do People Want to Avoid It?
In short, probate is the process of a judge reviewing all of the assets of a deceased individual and seeing where everything should go and who should be responsible for any children or dependent individuals.
Probate is a necessary process, especially in guardianship appointment; however, many times people will want to try to avoid probating their assets because:
A)There is a cost to probate, and B) Probate is a public record so anyone can look up what your family is inheriting.
How can Estate Planning Help with the distribution of Estate Assets to Beneficiaries
With proper estate planning, you can make sure your beneficiaries receive the assets you intended with the least amount of friction.
Asset Protection For Real Estate Texas
When it comes to real estate, Drew mentions two options in the interview – 1) Texas has a Ladybird Deed option that can work sometimes, or 2) A trust would be a sure way to make sure the property stays outside of probate and the person you set up as a successor would be able to take over immediately.
Will I Need A Financial Advisor & An Attorney?
You could very well need both a financial advisor and an attorney because they do unique things. A financial advisor works on the overall financial plan, while the attorney focuses on a part of that plan that requires legal documents to be drawn up.
Do I Need A Trustee - What Do They Do & Can I Have More Than One?
If you have a trust, then that trust will require a trustee to be named. The trustee is the person (or entity) that is responsible for managing the trust and the assets within and following the guidelines set forth in the trust document. You can have more than one as well as successor trustees that take over after the primary trustee.
How Can A Financial Planner Help Me With Estate Planning?
A financial planner can help with estate planning by walking you through your goals for how you’d like things to go after death or incapacitation, and then helping to put a plan together that accomplishes those goals while involving additional professionals as needed. As seen in Estate Planning Financial Advisors: Why You Need One, the Cremé Wealth Team helps our clients with long-term estate planning and legacy planning. Call us or click here to schedule your complimentary assessment.
The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material, and does not constitute a recommendation. Any opinions are those of the author, and not necessarily those of Raymond James. Raymond James is not affiliated with and does not endorse the services of Drew Alliston. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional.
Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.