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Estate Planning

The Fundamentals for Responsible Estate Planning

Estate Planning
April 16, 2018

Apr 16, 2018

1:48 PM America/Chicago

As we get older, planning for the security of our loved ones after we die becomes more of a priority. The truth is there’s nothing simple or easy about planning an estate. Thinking about a time beyond our own is challenging enough. Trying to plan for it strategically can be downright scary.

All that said, having an after-life plan is important and should be part of any long-term financial strategy, working with your financial advisor and attorney. This starts with looking at the two major tools for planning an estate: a Last Will and Testament and a Revocable Living Trust.

Keep Your Will Up to Date

Do you have a will? We have to ask, because some studies say nearly half of all US adults don’t. Others say even less. Simply put, if you’re an adult, you should have a will. Once you do, you should stay on top of it. Keeping your will up-to-date is just as important as writing it in the first place. A will should change with your priorities, and life changes, such as marriage, having children, moving to a new home or starting a business, will all have an impact on your after-life plans.  

If you die without a will, your death is considered “intestate,” and your property will be distributed according to your states intestacy laws. These can vary greatly for each individual and depend on several factors, notably whether the decedent was single, married or had children. Ultimately, these rules may not reflect yours, your loved ones’ or your family’s wishes. That’s why it’s important to have your own up-to-date will, so you can be sure your property is distributed in the way you intended.

Name Your Beneficiaries

Property distributed through your will usually has to go through probate, although there are exceptions which vary from state to state. Probate is a court process, and it can be time-consuming and stressful for family and loved ones to navigate in the months after a death.

However, some assets can be named to a specific beneficiary or beneficiaries if you pass away. If you name a beneficiary to those assets, they generally won’t have to go through probate. This is true for property registered in a transfer-on-death form, pension plan distributions, life insurance proceeds, retirement funds including 401(k) accounts, IRAs and Roth Retirement funds, and others.

The takeaway: don’t forget to declare beneficiaries properly to streamline the distribution process. Not only that, it’s critical to take a look at retirement and pension funds and check the named beneficiaries from time to time – do they still reflect your wishes or your estate planning?

Consider Trust Arrangements

Another popular tool for estate planning is a Revocable Living Trust. These are legal entities created to possess ownership over assets and property. Part of the trust agreement allows the trustmaker to designate beneficiaries and detail how they’d like the trust’s assets distributed upon their death. These arrangements are “revocable” because the trust details can be adjusted throughout the maker’s life.

Assets held in a trust generally don’t have to go through probate, which again means your beneficiaries can enjoy those assets without a drawn-out process. In addition proceedings around a living trust are not decided in public court. In this way, a trust is more private than other estate planning options.

So, is it a choice of one or the other, trusts vs. wills? Not quite. While Living Trusts can be an effective standalone tool for estate planning, they can also be held in tandem with a will. There are several reasons someone may do this. Trusts do not, for example, allow a trustmaker to name the personal guardian of minor children, or instruct how to pay debts or taxes. Both of these must be detailed in a will.

A trust will also need to be funded once being established. For this reason, many trust-holders may also have a Pour Over Will, which transfers property to a trust if a trust-owner dies before fully funding a trust. Those assets from a Pour Over Will do have to go through probate, but you get peace of mind they’ll be distributed the way you want. 

See Your Plans Through

The right plan for you should be chosen after carefully examining all your options. You’re an individual and your estate plan should reflect your unique life and wishes. And when your life, preferences, or finances change, so should your estate plan. This is why routinely reviewing and updating after-life plans matters so much.

When preparing an estate plan, having a financial advisor by your side can be a great advantage. Here at Baird Retirement Management, we’ve spent years guiding members of the oil, gas and chemical industries as they plan for their future and beyond. We’re ready to help you.

Click HERE to explore more key terms and definitions regarding Estate Planning.


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