Estate Planning Basics
Estate planning is the preparation for the care of an individual's surviving family and friends,
This includes the management and distribution of a person's property at his or her passing. The most common estate planning tools are: wills, trusts, and non-probate assets. Of these, a will is the simplest and most common estate planning tool. It is an ambulatory document executed before witnesses and effective upon the death of the testator.
A trust is a slightly more complicated tool. A trust is a fiduciary relationship whereby a designated trustee holds legal title to assets for the benefit of one or more beneficiaries. Trusts allow for greater protection and control of the assets after the death of the testator, but they require conveyances of property to the trustee. They carry additional administrative costs and should be contemplated accordingly.
Finally, non-probate assets are relatively simple tools that govern the passing of property outside of a will, probate court, and the laws of intestacy. These include insurance policies, jointly owned assets with rights of survivorship, and retirement accounts with specifically designated death beneficiaries. Ownership of these assets pass directly to the beneficiaries, who gain outright ownership. Careful estate planning is important because anything that is not captured in the estate plan will pass according to the laws of intestacy.
The diagram below demonstrates how the estate planning tools work together to pass property between generations.
Care should also be taken in selecting your executor, ensuring your debts are paid prior to distributing your assets, and insulating your beneficiaries from liability due to mistakes in the final estate administration process.
Selecting the appropriate estate planning tools, drafting estate planning documents such that they conform with the most current developments in the law, and carefully selecting appropriate fiduciary agents to care for the testator in his or her last days, the assets passing between generations, and any minor children are all important aspects of the estate planning process. None should be completed during a 15-minute impulsive moment. Careful contemplation and planning with a licensed attorney is important.