Why You Need an Estate Plan: Making the Will and Revocable Living Trust Work for You

Today we conclude our discussion of the universal importance of estate planning whether you think yourself a prince or a pauper. In postings past we have reacquainted you with an old friend, the will, and introduced a new one, the revocable living trust. Now we’ll offer a caution of what else you need to do to ensure that these friends are able to fully carry out your wishes.

Wills and Living Trusts Are Not Cure-Alls

The benefits of a will or a revocable living trust are obvious. However, you won’t get the expected advantages without minding the details.

* If you are married, you and your spouse should have separate, but compatible, wills or a revocable living trust. That’s because the unfortunate truth is you never know who will die first.

* Your will or revocable living trust will not deliver the expected advantages unless you make it compatible with your beneficiary designations and the manner in which your assets are legally owned. For example, when you fill out forms to designate beneficiaries for your life insurance policies, retirement accounts, and brokerage firm accounts, the named beneficiaries will automatically receive the money upon your death without having to go through probate; ditto for bank accounts if you name a payable-on-death beneficiary. It makes no difference if your will or living trust document specifies to the contrary. So keep your beneficiary designations current to make sure the money goes where you intend it to go.

* When you co-own real estate jointly with right of survivorship , the other co-owner(s) will automatically inherit your share. It makes no difference if your will or living trust document says otherwise.

* If you set up a revocable living trust, you must transfer legal ownership of the assets for which you wish to avoid probate to the trust in order for it to perform its probate-avoidance magic. Many people fail to follow through by actually transferring ownership, and the probate-avoidance advantage is lost.

Your Estate Plan Is a Moving Target

Things change. You may acquire new assets, win the lottery, lose relatives to death, disown relatives, take them back, and gain children or grandchildren. Any of these events could require changes in your estate plan. In addition, the federal estate tax rules have been wildly unpredictable in recent years, and that trend may continue. (We are slated for the federal estate tax exemption to be slashed from $5 million to just $1 million in 2013 but even that is still up in the air.) For all these reasons, you should review your estate plan at least annually and update it as needed. Now is a good time to review your plan or to set one up if you don’t have one. If you need help finding someone to work with, give us a call. We’ll refer you to someone in your area.

As always, good luck and good hunting.

Learn more about why you need an estate plan with Part I and Part II.

(Originally posted March 25, 2011. Updated today.)

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If you have any questions about planning your estate, you can find out how to reach us at our website: TheFisherLawOffice.com. You can also find us at Facebook.com/FisherLawOffice, on Twitter @thefisherlawoffice, or at LinkedIn.com/in/FisherLawOffice.

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