A comprehensive estate plan will include a number of different legally binding documents. While there are always those who are looking to prioritize, this is simply not necessary. You have estate planning objectives, and it takes certain documents to bring your wishes to fruition. There is no need to look for a pecking order.
Let’s look at some important estate planning documents that could be part of a well constructed estate plan.
Transferring Assets: The Last Will
The facilitation of future asset transfers is at the core of estate planning. There are a number of different ways that you can facilitate the distribution of your resources after you die.
Each situation is different. Some people choose to use a last will, and this is certainly an option. The downside with a will is the probate factor. The will must be admitted to probate before the heirs receive their inheritances. This can be a time-consuming and expensive process.
Revocable Living Trusts
Revocable living trusts are quite useful for those who want to avoid probate. With this type of trust you can retain control of the assets while you are living. After you die, the trustee that you name in the trust agreement distributes resources to the beneficiaries outside of probate.
Estate Tax Efficiency
If you are exposed to the federal estate tax, a revocable living trust would not be a good choice. There are other asset transfer vehicles that provide estate tax efficiency.
Right now, the estate tax exclusion is $5.34 million. If you are transferring more than this amount, estate tax efficiency should be a priority.
Some people are concerned about potential litigation. Certain legal structures would be very important for people who have asset protection concerns.
Life Situation of Inheritors
You should consider the life situation of each person on your inheritance list. If you have a spendthrift heir, you could take steps to protect this individual from his or her poor spending habits. The estate planning document that would be important for this type of person would not be necessary for another.
There is also the matter of special needs planning. A particular type of trust may be very important if you want to provide for a loved one with special needs who is receiving need-based government benefits.
Incapacity planning documents are also important if you want to be comprehensively prepared for the future. These would typically include durable powers of attorney and a living will.
Free Special Report on Estate Planning
If you would like to obtain more in-depth information about important estate planning documents, download our special report. This report is being offered free of charge, and you can obtain access through this link: Estate Planning Report.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.