WILLS, TRUSTS, & ESTATE PLANNING

What is estate planning?

Everyone does estate planning whether they know it or not.  Estate planning may be informal, such as when you set up joint tenancy bank accounts; or formal, such as when you draft a will.  Whether you are using joint tenancy accounts, payable on death accounts, wills, or trusts, these are all tools to make a gift of your property to someone and my goal is to help you make the gifts you want to make utilizing the appropriate tools for your needs.

No particular technique or estate planning tool is right for everyone.  Wills are particularly useful when some court supervision of the estate administration may be needed or when there may be creditor issues since the probate of a will outs off creditor claims after six months. They also tend to be less expensive that trusts.  Trusts such as Living or Revocable Trusts provide more privacy and save some court expenses such as filing fees and publishing costs.  Sometimes they can also provide for an earlier distribution.  However, administering an estate through a trust does not cut off creditors for two years.  An individual should explore the advantages and disadvantages of wills and trusts before deciding on using one or the other for his/her estate planning.

Estate planning requires a determination of your needs, the extent and nature of your resources, and an evaluation of the options you have to utilize those assets while your are alive and effectively transfer them to individuals or charities of your choice when you pass away.  For some people the choices may be easy and simple, but you can’t always rely on the simplest and most inexpensive choice as being the best.

One illustration of this problem which has frequently occurred is the parent who puts his house into joint tenancy with his children.  This involves the inexpensive use of a quit claim deed.  When the parent dies the children inherit the house without any legal procedures.  Unfortunately when the children wish to sell the home, they will have a basis in the house for their share of the home that is based on the parent’s basis.  If there has been substantial appreciation since the house was purchased by the deceased parent, there will be significant capital gain and thus significant income taxes owed on the sale.  Conveying the house through a proper will or trust at the time of death results in no income tax because of a special stepped up basis rule in the tax code.  Thus the “expensive” will or trust is in reality the more inexpensive alternative. 

One should view with caution estate planners whose advice limits your choices and the information your are given to make decisions about your estate plan.  You need to be provided choices to make an informed decision about your personal estate plan.  One of my goals in working with people doing this planning is to make sure they make an informed decision.  As an attorney my job is to help you put in place a plan that after informed evaluation, you feel is appropriate for you, not just sell you a particular product.

Estate planning can provide for a proper future for young children who loose their parents.  It can provide for the conveyance of property with protection to those who cannot control their spending.  Appropriate estate planning can protect spouses and provide gifts to deserving charities, or it can make a simple gift to family members.  Good planning with a discussion of all options is needed to accomplish this. 

The American Bar Association has published the following question and answer guide which you may find helpful in answering some of your questions when considering whether or not to seek an appointment on these matters:

                         ABA Family Legal Guide for estate planning.

                                     American Bar Association Family Legal Guide
                                                 Copyright © 2004 American Bar Association