Think Strategically when Creating An Estate Plan

Mindful estate planning can create tax and investment efficiencies and help ensure your wishes are fulfilled, says a recent article titled “Estate planning basics: Tips for strategic preparation” from Atlanta Business Chronicle. Before creating a plan, it may be helpful to understand the components of a comprehensive plan, how assets should transfer, and how to get started.

Thinking strategically when creating an estate plan starts with critical documents. Your last will and testament details your wishes about property distribution and assets after death. The will creator names an executor who oversees and manages the estate until its final distribution, including payment of any outstanding debts or taxes.

The will does not impact insurance proceeds, retirement assets, or transfer-on-death investment accounts. You can amend your will during your lifetime. You should review it at least every three years to ensure it still aligns with your wishes.

Trusts are legal entities allowing a third party—the trustee—to manage assets on behalf of beneficiaries. Depending on the family’s needs, there are many kinds of trusts. The grantor, who creates the trust, can define how and when assets pass to beneficiaries. They can be revocable, meaning the grantor can amend the trust as long as they are living, or irrevocable, meaning the grantor cannot amend the trust after its creation.

A letter of intent can accompany a will and is published to the executor, trustees, and beneficiaries. This provides the decedent’s details on their wishes but is not legally enforceable.

Power of Attorney is used when the person creating it is physically or mentally disabled due to illness or injury. It allows an agent to manage financial and legal affairs, can be temporary or permanent, and is revoked upon the principal’s death.

Advance directives for health care provide detailed guidance to caretakers and medical professionals regarding wishes for healthcare when the person cannot communicate their wishes.

Transferring assets to beneficiaries occurs in several ways, including designations, jointly held accounts and property, probate, or trusts. Beneficiary designations are typically used with life insurance policies, annuity contracts, retirement, and investment accounts.

Some assets are owned through Joint Tenancy With Rights Of Survivorship (JTWROS). They pass by title or registration to a surviving co-owner. The asset automatically transfers to the surviving owner. This type of ownership is usually used with bank and investment accounts, real estate property, vehicles, or boats. Avoid conflicting instructions in wills or trusts when assets are owned with JTWROS.

Probate is the method through which the court approves the estate, and assets are distributed using the will as guidance. The court also authorizes the executor to manage the estate.

Assets held in trust are maintained by trustees who hold the assets on behalf of beneficiaries. They are passed on based on the trust agreement and don’t go through probate.

Once you have created an inventory of all assets and properties, meet with an experienced Austin estate planning attorney to draft the documents needed to carry out the plan. The attorney will help refine goals and clarify critical issues. Assets may need to be retitled, and trusts may need to be funded. Executors, trustees, and beneficiaries should be notified so they understand their role in your estate plan.

Reference: Atlanta Business Chronicle (March 1, 2023) “Estate planning basics: Tips for strategic preparation.”