Where theres a will, there are relatives
A local attorney answers questions about trusts, your children and more
Where there's a will . . . there are relatives. This truth, proved time and again in probate proceedings and will contests, holds a clear lesson: Good estate planning is about more than taxes. It requires careful consideration of who should receive your assets, and how and when they should receive them, as well as a clear statement of your wishes and expectations.
The following are some of the important non-tax issues that may face a person planning his or her estate:
• Should I have a revocable trust? Placing your assets in a trust during your lifetime can preserve your privacy and spare estate expense by avoiding a court-supervised probate proceeding. This step also allows you to name a successor trustee to serve in case you become incapacitated, thus avoiding a court-monitored guardianship or conservatorship proceeding.
• Whom should I name to serve as my successor trustee or my personal representative? Naming of a trustee (or personal representative) to serve after your death is a key decision, particularly if you leave assets requiring investment or management expertise. Does your spouse, child, or trusted relative have the necessary skill? If a trust company or capable non-family trustee is named, should a family member serve as a co-trustee to help ensure that family members' needs and circumstances are given consideration?
• Should I leave assets outright or in trust? Before leaving assets outright, consider problems that could arise in the event of divorce, remarriage, creditors, profligacy, and partners new to the scene. Leaving assets in trust can help ensure that they will be held and distributed according to your wishes and will not be wasted. In the case of children or grandchildren, provision can be made for distributions for special purposes, such as education or purchase of a home or business. Principal can be distributed in stages as the beneficiary reaches specified ages.
• Should I treat my children equally? Should a child who has done well be treated the same as one who has chosen a less remunerative occupation? If children have produced varying numbers of grandchildren, should each child's family be treated equally, or should each grandchild be equally provided for?
• How do I provide for the children of a prior marriage? Assets can be placed in trust for the life of a second spouse, with provision for children to share at the spouse's death. If the spouse is significantly younger, would this potentially postpone the children's benefit from at least some of their parent's wealth? In a blended family, should children of the spouse's first marriage eventually share as well?
• How about IRAs, retirement accounts, and life insurance? These assets normally pass to beneficiaries you designate directly with the account or policy provider, and your will or trust does not override this designation. The assets can be placed in trust through a proper beneficiary designation. However beneficiaries are designated, it is important to be sure that these assets are integrated into your overall estate plan.
• Who gets the fine china and the coin collection? A will or trust can include specific instructions about personal property items having real or sentimental value. Discussions with family members can help ensure that the distribution you make does not cause hurt feelings.
Because no two families share the same dynamic, every individual or couple planning how their wealth should eventually be distributed may have different answers to these and similar questions. The key point is to recognize that, while minimizing taxes is an important element of an estate plan, other elements must be kept in mind if your heirs are to receive the full benefit of your planning.