As a financial advisor, people often ask me whether they need a trust as part of their estate plan. Some people do need a trust, and some people don’t. Regardless of whether you need a trust, there are five estate planning moves you need to make before you consider a trust.
Proper Titling of Assets and Accounts
The titling of your assets–which is the way true ownership is determined–can affect how your assets transfer. For example, let’s say John Smith is married to Nancy Smith. If John has a bank account titled only in his name as an individual, it is likely that the account won’t go directly to Nancy when John dies, even if that’s what John intended. It may get to her eventually, but that process may be determined by John’s will, by state law, or other means.
On the other hand, if the account was titled “John Smith and Nancy Smith, Joint Tenants with Right to Survivorship,” Nancy would have access to the account upon John’s death (as well as while he is alive). Depending on the state you live in, other titling may include tenancy by the entirety or community property.
Designating Beneficiaries
If you designate beneficiaries of your bank accounts, investment accounts, etc., those accounts can be designated to transfer on death to your beneficiaries. Your will does not need to specify this, and the accounts will be transferred without regard to probate. This is a simple way to ensure that assets are transferred as you would like them to be transferred.
Power of Attorney
Most people think about estate planning in terms of what they want to happen after they die, but proper estate planning also includes planning for any time you may be incapacitated and unable to make decisions for yourself. A power of attorney grants your agent the authority to make decisions on your behalf. You can choose to give your agent limited or broad powers; you may choose to have the power of attorney become effective only once you are incapacitated; you may make many other choices about how and what your agent can do. BUT you must make these decisions and document them in a properly executed power of attorney document BEFORE you become disabled or incapacitated.
Healthcare Directive
Healthcare directives, living wills, and durable powers of attorney for healthcare are similar and related documents that help you govern what healthcare you will receive if you are unable to make decisions for yourself. Healthcare directives and living wills are essentially the same thing: this lets you outline the types and levels of care that you wish to receive or you wish not to receive. The durable power of attorney for healthcare designates someone to make healthcare decisions for you. Again, you must make these decisions and document them before you become disabled or incapacitated.
Last Will and Testament
Without a valid will, the laws of your state will determine how your estate is distributed after your death. If you have minor children, you can also use your will to designate guardianship. Without a will, guardianship will be decided by a judge. The only way you can ensure that your wishes are followed is to have a will in place.
For a wills, healthcare directives, and powers of attorney, you need a competent estate attorney to advise and assist you in the creation of these documents. On the financial planning side, we can help to coordinate with your attorney to make sure that the decisions you include in these documents match what you really intend, and that you are aware of the various financial and/or tax implications that arise from these decisions. We help to monitor and manage things so that your estate plan lines up with your financial plan–they are really two sides of one coin. And we can help you implement all five estate planning moves you need to make.
At Dominion Financial Advisors, we realize that everyone has different circumstances, goals, and priorities. We don’t believe in cookie-cutter financial planning. You are unique, and your financial plan should be unique to you. Your estate plan is a major part of your overall financial plan, and it should be unique to you as well. Schedule a complimentary consultation or contact us to find out how we can help you with financial planning and wealth management, including estate planning.