What is estate planning? I am often asked by clients what is meant by “estate planning.” The term “estate” conjures up images of large mansions and lavish lifestyles; but that is not what “estate planning” means. When you have assets, such as a home, small business, savings account, retirement plan, life insurance policy, jewelry, baseball card collection, or all of the above, you have what attorneys call an estate. If you have certain family members, loved ones, or charities that you want to make sure benefit from your estate when you pass away, then you should have an estate plan.
There is no “one size fits all” estate plan. What is appropriate for you depends on your family circumstances, your intended beneficiaries, and your assets. Some questions to consider: (1) Do you have minor children? (2) Do you have a family member with special needs? (3) Do you have a closely-held business interest? (4) Do you and your spouse have children from prior marriages, i.e. a blended family? (5) Did you and your spouse sign a prenuptial agreement? (6) Do you anticipate that there will be disagreements among family members about how your property should be divided after your death? (7) Are you concerned about estate taxes? (8) Are you concerned about keeping your estate plan private? (9) Are there relatives whose whereabouts are unknown? (10) Are there family members with substance abuse issues? (11) Are there family members who would not be able to manage large sums of money if they received it outright at too young an age? (12) Do you want to leave some or all of your estate to one or more charities?
Wills and Trusts are the tools commonly used to establish an estate plan. Depending on your circumstances and your assets, you may want a Will, a Trust, or both. Trusts can be revocable or irrevocable and can be structured in different ways depending on the income, estate, and gift tax results you are trying to accomplish. A trust is not necessarily appropriate for every client. It is very important to sit down with an attorney to discuss all of your options thoroughly before deciding on the plan of action which best suits your needs.