A lot of my clients either are starting to have children, or are thinking about having children. As you might expect, this means that I am fielding a lot of questions about wills and trusts. These conversations inevitably start with wills, because this is the estate planning instrument that most people are familiar with (e.g. “if you don’t attend University of Iowa, I am removing you from my will”). However, wills are just one component of a healthy estate plan–and not even the most important component.In following articles, I will explain in detail the different components of a proper estate plan.
In this article, I will first explain the importance of having an estate plan. I will then briefly explain why I recommend a Revocable Living Trust as the primary instrument for most estate plans, as opposed to a will. Your estate plan is an investment. A proper estate plan will ensure:
1. That your assets are allocated according to your desires;
2. That your heirs (and/or spouse) will have immediate access to the assets you leave for them (as opposed to having to wait as long as a year for the resolution of probate on your estate);
3. That a large portion of your estate will not be expended on probate attorney fees;
4. That your assets will avoid both federal and state estate taxes to the greatest extent possible;
5. That if you become incapacitated, your partner (or the individual of your choice) will have the ability to immediately make financial decisions on your behalf and for your benefit without the need for a lengthy and expensive guardianship proceeding;
6. That if you become incapacitated, your desires as to medical treatment will either be made clear to your doctor in advance, or placed within the authority of the individual of your choice (without the need for a guardianship proceeding);
7. That the guardian(s) of your choice will be named for your children;
8. That, should both you and your partner pass, a person you trust will be named to administer your assets for the benefit of your children until they reach the age of your choosing;
9. That, as time passes, disbursements from your estate are made to the estate’s beneficiaries according to your wishes.
When most people think of an estate plan, they think: “I have kids now–I should probably have a will.” However, the estate plan system we generally recommend focuses on an instrument called a Revocable Living Trust instead of a will. A Revocable Living Trust is preferable to a will for many reasons.
First, if a will is the primary instrument of your estate plan, your estate must go through probate before your heirs have access to your estate’s assets. Probate is a legal proceeding for the purpose of ensuring that an estate’s assets are distributed correctly. It takes from six months to a year. In probate, the estate’s executor typically hires an attorney to handle the probate case, which will cost your estate (and your heirs) thousands of dollars. Unlike a will, a proper Revocable Living Trust will avoid probate and the associated attorney fees, providing your heirs immediate access to the assets to which they are entitled.
Second, a Revocable Living Trust allows you to have greater control over how your assets are handled after your death, allowing you to ensure that your heirs are properly cared for. A Revocable Living Trust also allows you to maintain complete control over your assets during your lifetime.
Third, a Revocable Living Trust can be used to minimize taxes on your estate.That being said, the optimal estate plan can and should vary from individual to individual.
We offer free consultations to explain your options, answer any questions you may have, and discuss the type of estate plan that is right for you and your family.
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