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5 Things You Need to Know about Estate Planning


September 01, 2020

5 Things You Need to Know about Estate Planning

5 Tips For Estate Planning - Savings Account

Warren Buffet.

"I want to leave my children enough that they feel they can do anything, but not so much that they do nothing."

When was the last time you thought about estate planning? Even if you are familiar with the concepts and issues to consider, planning for your incompetency or death is one of those things most people would rather do “tomorrow.” For many of us, it is difficult to understand the basics and to know what questions to ask when seeking legal advice, so we will provide you with just enough information to be dangerous. We like to think of this as “Trust 101.” Perhaps this will be the push you need to create, or review, your own estate plan.

1. What is a trust? A trust is a legal document, such as a deed or agreement, written by an attorney. Typically, the standard estate planning documents are drafted by a trust and estate attorney (“T&E” attorney). This type of attorney can also provide legal advice and guidance for administering trusts and estates (which this article is not). A trust document can be very short and simple or very long and complex. It will depend on the individual and the type of assets to distribute and administer.

2. When is a trust established? A trust can be set up during your lifetime or upon your death. An “intervivos” trust is set up during someone’s lifetime and the document is called a deed or agreement. A “testamentary” trust is established at death through a will and operates upon the death of the creator.

3. Why would someone establish a trust? There are various reasons and motivations for creating a trust, including:

  • Protection: Assets within a trust are protected from creditors. You may also want to protect your assets from a potentially acrimonious marriage – language can be incorporated so the funds pass to the family line of heirs rather than to people who marry into a family—or a beneficiary who may be financially immature or a spendthrift.
  • Control: The grantor, or creator, of the trust determines how, when, and for what purpose distributions are made.
  • Tax Planning: Trusts can be used to reduce or eliminate estate taxes, gift taxes, and/or generation skipping transfer (GST) taxes.
  • Privacy: The assets within a revocable (alterable) trust will avoid probate and information about that trust will not be available to the general public.

4. Who are the parties to a trust? The person who creates and funds the trust by transferring assets into it is called a grantor, trustor, settler, or testator. The beneficiary is the recipient of its financial resources and security. The future recipient of the balance of the assets is known as the remainderman, or remainder men if there's more than one. Finally, the trustee or fiduciary is the person(s) or entity responsible for administering the trust and following the directions outlined in the document.

5. How long does a trust last? Every trust is different, but it will typically last for the lifetime of one or more individuals, for a set number of years, or will partially terminate as the beneficiary reaches specific ages (“age-terminating”).

Stay Tuned!

Estate Planning is of our areas of expertise and we enjoy helping people plan financially for their future and the future of their families.  Stay tuned for additional insights regarding this subject to help you understand what may seem like a complex task.

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