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Estate Planning: Wills and Trusts

Estate Planning: Wills and Trusts

October 14, 2022


Estate planning is vitally important when creating a holistic financial plan. Our firm, along with an estate attorney, advises many of our clients when creating their estate plan to help determine what should happen to assets once they’re gone. 

Over the next couple of weeks we’ll explore the key features of an estate plan that include:

  1. Wills and Trusts – these documents include your wishes for asset distribution upon your passing, and typically incorporate powers of attorney and a living will.
  2. Asset Protection – ensure your assets are preserved for beneficiaries or heirs; specifically, safeguarding from creditors of your estate.
  3. Estate Tax Planning - having a plan to reduce estate taxes if your family is in an estate tax paying situation (currently just over $12M for an individual or $24M for married couples) can help maximize your gifts or transfers to heirs. Certain trusts or charitable giving strategies can significantly impact the amount owed on your estate.

This week, let’s discuss Wills and Trusts.

Wills are the cornerstone of any estate plan. These documents provide the foundation upon which your desires for the distribution of your assets upon death are established. Bequests herein can be made specifically (I leave the beach house to our son) or generally (the kids split the estate evenly). Powers of attorney (medical and financial) are usually included to name a trusted individual to act on your behalf upon an event leading to incapacity.

It is good to note that a Will does not necessarily determine how things pass along. If the property is owned Jointly with Rights of Survivorship, the property will pass to the joint owner regardless of what the Will says. Also, property placed in a trust follows the terms included in the trust agreement. Finally, beneficiary designations (on an IRA or 401k) determine who inherits these accounts and take precedence over the bequest in a Will. We recommend reviewing beneficiary designations on a yearly basis. If you pass away and do not have a beneficiary designated for your IRA or 401k, the accounts will be subject to probate and could negatively impact the beneficiary from a tax standpoint.

A Trust is an entity that outlives the grantor (person who creates the trust) and holds property for beneficiaries. The trust document governs the holding and distribution of property as described by the grantor and carried out by the trustee (a person or organization charged with managing the trust). Property ownership must be transferred to the trust as described in the Will. Living trusts are established prior to death and have flexibility in that terms can change. An irrevocable trust, on the other hand, has limited flexibility and comes with different tax impacts.

If you’re missing this piece of your financial plan or have had changes in your life that require updates to estate planning we’re happy to help review your options.


Matt and Andrew