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Wealth Planning

Fundamental estate planning considerations

As your circumstances change, it’s a good idea to revisit your wills, trusts and other estate planning documents.

Planning for your estate is an important part of a successful financial strategy. But even with a solid plan in place, it’s important to check in every so often to ensure that your plan and documents continue to reflect your wishes—especially if your family and financial circumstances have changed.

Here is what to think about before seeing your lawyer that can make your conversations more productive. 

What are the basic estate planning documents?

Basic documents include:

  • Will
  • revocable (“living”) trust
  • power of attorney
  • health care proxy 
  • living will

For many high-net-worth individuals, the standard estate planning package may also include an irrevocable life insurance trust.

What do these documents do?

Your Will primarily controls who will receive your assets upon your death and under what conditions These could include certain age considerations, milestones, specific purposes and more. 

Importantly, if you have minor children, your Will is the only document in which you can name guardians for them in case anything were to happen to you and your spouse.

You can also name fiduciaries to act on your behalf after your death. These include an executor or personal representative to carry out the instructions in your Will, and a trustee or trustees to manage any trusts you might create under your Will.

Some people use a funded revocable trust to ensure that someone (a trustee) can act on their behalf should they be unable to do so themselves.  Another benefit of creating and funding a revocable trust during your lifetime is that it avoids probate—the process by which your executors submit your Will to court so that your assets can be transferred to your beneficiaries. In many states, the probate process can be expensive, time consuming, or both. And the probate process is public; a trust is generally private.

power of attorney gives the person you name—your “attorney-in-fact”—the right to sign documents on your behalf, most often for financial purposes. It’s typically intended to allow someone to act should you become incapacitated, or if you are traveling or otherwise are unavailable to act yourself. Even if you have a revocable trust to facilitate investment management, you may still want to have a power of attorney for other functions, including authority over assets held outside of your revocable trust.

A health care proxy or health care power of attorney gives someone the power to make health care decisions on your behalf if you are unable to do so yourself. A living will expresses your wishes to your health care proxy—and your medical caregivers—with respect to actions on your behalf in specific health-related circumstances.

Finally, an irrevocable life insurance trust allows insurance proceeds to be available for a surviving spouse and children without being included in either your or your spouse’s taxable estate. This kind of trust can be helpful should your beneficiaries need immediate liquidity upon your death to pay estate taxes or other day-to-day expenses. There are certain nuances to owning life insurance in a trust, so it is important for you to work with your attorney to make sure the trust operates properly.

What should you be thinking about for your Will?

You should think about who should receive your assets upon your death, and when. Do you want to have an age trigger (for instance, 1/3 at age 30, 1/3 at 35, the balance at 40), or an event trigger (20% upon graduating from college, for example)? Or do you want to have no trigger at all, so assets remain in trust for the beneficiary’s lifetime?

In addition, you should consider whom you wish to act as your fiduciaries—executors, trustees and guardians. These decisions can be the hardest, but often most important, because these individuals will be executing your wishes, sometimes for many years after your death.  For this reason, many people create a letter of wishes to accompany a Will—this letter outlines your goals for your wealth and for your heirs, and explains how you would have made decisions.

What are some other planning considerations?

Beyond these basic estate planning documents, more aggressive planning generally involves giving assets away during your lifetime to remove them (and any appreciation) from your taxable estate. 

Questions to ask include: 

  • How much do you (and your spouse) need to live—both before and after you retire? Do you have enough income to fund your lifestyle?
  • If you have excess capital that you can give away during your lifetime in order to save transfer taxes upon your death, how comfortable are you giving it away? Keep in mind that you generally cannot keep the income from the asset or have the ability to get it back if you want to keep the asset out of your taxable estate.
  • If you aren’t comfortable giving away assets, would you be comfortable giving away the future growth of your assets while keeping what you currently have?
  • If you own a business, do you have a succession plan or exit strategy? If, for instance, one child is involved in the business and another is not, consider how you would divide both control and economic benefit to be fair to all your children. There is no right way to do this; what is fair for your family is a personal decision.
  • Are you concerned about giving your children too much money at too young an age? Do you want to limit or postpone their access to money you give them?
  • Do you want to provide primarily for your spouse and children, or do you want to provide for others—including grandchildren, siblings, nieces and nephews, or charity?
  • If you decide to make gifts to beneficiaries in trust rather than outright, who will act as your trustee?

While this list is not exhaustive, and the questions are complex, thinking about them now—and discussing with your tax attorney or advisor—could help you ensure that your wishes are honored long after your lifetime.

Your advisor can help you articulate your estate planning goals and can help facilitate these discussions with your outside advisors.





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