Estate planning is a term used to describe the plans you create with the help of your attorney to distribute your things (cash, furniture, family heirlooms and real estate) when you die or to gift them to someone while you are alive.
At your death, if you have not created your own estate plan, the state in which you live has one already set up for you. This default plan is called “dying intestate” and it will probably distribute your property to people you might not chose yourself. To avoid the default plan, you simply need to provide direction as to where your property goes through a will, a trust, or by correctly titling the assets.
Seven out of ten people die with no estate plan. Everyone needs one if they want to direct who will inherit. Under the new tax law, couples with total assets in excess of $5 million should consider using the tax benefits of trusts to protect assets from the Federal estate tax. Since no Federal estate tax is currently due on estates with less than $5 million, a will might, in those cases, be sufficient.
A will directs how assets, other than those that pass according to title, will be distributed upon your death. A will is monitored by the Probate Court, which makes sure that the executor follows your intentions. Some typical issues that are resolved through a will include:
- Who will inherit my furniture?
- Who will be the guardian for my children?
- Who will take care of my pets when I am gone?
- Who will inherit my money?
- Who will inherit the family beach house?
There are many kinds of trusts, which can be effective tools in determining how your assets will be distributed upon your death, and many offer significant tax savings.
Some typical issues that are addressed through a trust can include:
- How can I protect my children from their spend thrift spouses?
- How can I protect my children from their spouse’s creditors?
- How can I avoid Federal Estate tax on a large estate?
- How can I leave a lasting legacy for the future?
- Who will pay for keeping the beach house in the family?
The advisors at Aurora work as part of your team, which will include your attorney and accountant, where you have one, to create the initial plan that meets your stated goals. If you are unsure how you want the plan to be structured, we can help you refine your goals and coordinate with your attorney and accountant to implement a plan.
If you have an existing plan but cannot understand what is does, we can translate the plan back into English so you can consider if it is still effective and if not, we will work with your professional team to update it. As a rule of thumb, you should review your existing estate plan every five years, or whenever you experience a significant life event such as marriage, the birth of a child, or receiving an inheritance.