Secure Your Legacy

Personal Planning Goals: The Key to an Effective Estate Plan

Imagine building a new home without a set of blueprints–sounds absurd, doesn’t it? Well, it’s no different than creating an estate plan without establishing planning goals; such goal-setting is the “blueprint” of the estate plan.

Unfortunately, experience shows that far too often people actually engage in estate planning without the benefit of real goal-setting. If they had, we likely would not see so many wills and trusts that lead to what are unintended consequences. For example, how many people, if asked, would want their assets to pass to their child’s former spouse if a child divorced after the parent’s death? Or, would many people be pleased if they predeceased their spouse, only to have their spouse remarry and leave most if not all of the couple’s assets to a new spouse and his or her family?

These are not questions that need only be asked by the “wealthy.” For a person with $500,000 in assets or less, it may even be more critical to prevent a dissipation of those precious and hard-earned resources.

Here are some of the most common estate planning goals:

Planning for lifetime disability and avoiding court guardianship
Preventing a child’s ex-spouse from taking the child’s inheritance
Planning for grandchildren directly
Planning for the transfer and survival of the family business
Disinheriting a child
Providing for a pet trust for one or more pets
Reducing estate and gift taxes
Appointing an appropriate health care agent and expressing your wishes for end-of-life treatment
Protecting your children’s inheritance if your spouse remarries after your death
Planning for children from a previous marriage
Leaving an endowment or gift for a favorite charity
Protecting your spouse’s and children’s inheritance from their creditors
Protecting your assets from your own creditors
Passing on your values and your assets
Protecting assets if you need long-term care

When working with an attorney to create your overall estate plan, you address must these questions, and many more. A counseling-oriented estate planning attorney will take the time and will have the training to delve into the client’s goals and objectives, and will help the client understand which types of estate planning documents and techniques can help accomplish those goals.

Attaining Your Goals—Unlocking the Estate Planner’s Tool Box

There are many estate planning vehicles that an individual may use to pass assets to his or her heirs. When determining which “tool” is right for an individual, there are many factors to consider, including the size of the estate, who will receive what property and how, and the circumstances and special needs of those beneficiaries.

The first tool is the will. A will is a legal document governed by statute that sets forth a person’s wishes as to who is to receive the probate assets included in the persons estate. Probate assets are those that are owned solely by the deceased person (the “decedent”) and that have no designated beneficiaries. If a bequest is made to a minor, a typical will requires that gift be held in trust for the minor child until a certain age. In addition, a will designates guardians for minor children, and can include the person’s wishes for his or her final arrangements.

A revocable living trust (“RLT”) is another commonly used estate planning tool. Trusts are in their essence contracts that create a formal agreement between one or more persons or parties to hold and administer assets under instructions in the agreement. An RLT is established during the lifetime of the trust creator (sometimes called a grantor, settlor, or trustmaker), and is administered by one or more trustees, who in an RLT is typically the trustmaker, along with the spouse if the trustmaker is married. An RLT is most effective if all the trustmaker’s assets (excluding retirement assets) are retitled, or “funded,” in the trust name. Fully funding an RLT ensures that those assets—since they are no longer owned in the trustmaker’s individual name—avoid probate and instead are controlled by the RLT’s terms.

The RLT provides an additional benefit that a will cannot, namely the ability to designate one or more disability trustees who can step-in to administer the trust if the trustmaker becomes incapacitated or significantly mentally disabled.

Upon the death of a married trustmaker, the remaining trust assets can pass directly to a surviving spouse. However, to ensure further protection of the trust assets against “creditors and predators” of the surviving spouse, and to protect the deceased spouse’s assets for the children if the surviving spouse remarries, the RLT’s provisions will often specify that the assets owned in the trust will be retained in a marital trust, to be used for the benefit of the surviving spouse, and/or into a family trust for the benefit of the surviving spouse or other family members. Under present law, the marital trust / family trust structure is most relevant if you live in a state with a low state estate tax exemption amount.