If you're reading this and you are a Boomer, Millennial or Gen X'er, congratulations, you have officially arrived. Perhaps it took a few months or a few decades, but you've finally retired your cape and come to terms with your own mortality. Now you're wondering what fortune awaits you and your estate beyond the next horizon. Well, while you're in the throes of this existential crisis you may have a few more practical questions like are my assets protected, who will raise my children if I die, if I become incapacitated who will manage my estate, or will the value of my estate be gobbled up by an estate tax, probate court, or by a spendthrift beneficiary? No worries, we've got you covered.
You've scoured the internet and kicked the tires on a few local law firms and attorneys' offices in search of some free legal advice, am I right? Well, here you go, you should probably consider hiring an estate planner! Estate planners are futurists specializing in planning for the management and disposal of your estate in the event that you become incapacitated or die. For the uninitiated, estate planning is about much more than who you want to inherit your estate. For example, here are just a few things an estate attorney may want to know about your case during a consultation:
- How will your needs be met in the event you become disabled?
- Do you have children with special needs that may require long-term care?
- Do you foresee your children squandering their inheritance?
- How will your surviving spouse be provided for in the event of your death?
- Are your kids old enough, or mature enough, to receive an inheritance outright?
- Should you create a trust for your kids to protect their interests from future creditor claims?
- In the event that you become incapacitated who will make your medical decisions for you?
Your responses to these questions and others will determine what kind of plan is best suited for you. And given your estate planning goals it may be best to consider both a will and a trust(s).
What is a will? A will is a legal document outlining how you desire your property to be distributed at the time of your death. This might include items with monetary value, sentimental keepsakes, or even family heirlooms; this list is not an exhaustive one. A will names an executor to execute your wishes. An executor is generally charged with paying final debts, collecting money that may be owed to the estate, and carrying out the distribution of assets according to the terms of the will.
Wills do have their limitations. For example, you'll need to die first before a will can take effect. And if you become incapacitated a will has no legal effect, so any healthcare or durable powers of attorney you might have in place will guide any decisions made on your behalf. Also, things like retirement accounts and assets with named beneficiary designations may potentially pass outside the will.
If you fall ill, suffer a stroke, dementia, or Alzheimer's, a will cannot address your medical needs or the needs of your estate. Here a trust might be necessary to ensure that your resources are preserved, managed, and spent in line with your wishes while you are under the care of a loved one or health professional. Trusts can be arranged to accomplish a variety of goals. For example, you can use a trust to transfer property, help minimize estate taxes, preserve assets for minors until they are adults, or benefit a charity.
What is a trust? A trust is a method of estate transfer that allows the person you've named as trustee to handle your assets for the benefit of your beneficiaries. A trust provides a level of protection that goes beyond what a will can offer. Some of the benefits of a trust include:
- Increased privacy
- Reduction or the elimination of gift and estate taxes
- Protection of your assets from creditors and lawsuits
- Can limit how an inheritance can be used, such as dispersing money over time or requiring that payments be used for post-secondary education expenses
- Can make it more difficult to challenge the terms of estate distribution, which reduces the threat of litigation from heirs who are unhappy with the size of their inheritance
Many people are apprehensive about planning for their demise, but you should be mindful that estate planning is the best way to protect your assets, interests, and the interests of the one's you love. It's also a great pathway to building generational wealth by ensuring that your wealth is not squandered, or carelessly siphoned away from your estate at the time of your death. Drafting a will or trust however is not for the faint of heart, and it's always best to consult with legal and financial professionals before endeavoring to do so.
Written by Genghis X. Shakhan