If you want to double your money within a few years, call your investment advisor.

If you want a return on investment of 10-20X or more, call your estate planning attorney!

The estates of most people do not pay federal estate taxes. However, if your estate is sizable and/or you reside in a state which imposes estate taxes, you might avoid hundreds of thousands of dollars in taxes with expert estate planning. IRAs and 401K accounts are subject to “Income with Respect of a Decedent”. In some instances, estate planning can help minimize this IRD tax. In addition to potential tax savings, estate planning can ensure the proper and efficient disposition of your estate, minimize the administrative burden when your family is grieving, and help cement your legacy. Do not think of the cost of estate planning as an expense, but rather as one of the best investments you can make.

Estate Planning Questions

Let’s focus on the first question to answer when undertaking estate planning:

Do you use a will or a trust to settle your estate? The most common argument for the use of a trust is that you can avoid the public, time-consuming process of probate and minimize administrative costs—which can easily be many thousands of dollars. For some estates, this is a compelling reason. For other estates, a will alone can be very effective. Probate is not required for:

• Property (real estate and autos) that transfers by title with “survivor” designations, e.g., joint tenants.
• Assets with beneficiary designations or “payable on death” registrations, e.g., IRAs and bank accounts.

The distribution of these non-probate assets will NOT be governed by the terms of a will or trust unless the beneficiary of a gift is a trust. (Avoid possible negative tax consequences if your estate is the beneficiary of your IRA or 401k—which can happen if you fail to name a beneficiary!) What other assets are left? Maybe only personal possessions with relatively low marketable value? Estates with small residual balances generally do not require probate or they qualify for an expedited, low-cost probate process. Keep in mind:

• Probate is not necessarily bad if there are outstanding debts and/or potential claims by third-parties against the decedent’s estate.
• The value of assets that transfer outside of probate are sƟll a part of the total value of an estate when estate tax liability is calculated.
• The estate must pay various expenses, legal and accounting costs, and taxes. Avoid transferring all money assets by beneficiary and account designations so some funds remain in the estate to pay these costs.

When is a trust most appropriate?

• Assuming you are married, you want to preserve federal or estate tax exclusions that otherwise might be lost when the first spouse dies to minimize taxes due upon the death of the surviving spouse. (If each spouse is the sole primary beneficiary, no estate taxes are generally due at the first death.)
• You or your spouse have children from a prior marriage.
• Your bequests are to be paid out over a number of years because of “special needs”, concerns about a child’s ability to manage a large inheritance, or minor children and grandchildren are beneficiaries.
• You want to employ sophisticated tax planning strategies to minimize estate tax liabilities, e.g., charitable remainder trusts and generation skipping trusts.
• You wish to keep your financial affairs private. Probate proceedings become public records!</li >

What can a trust do better than a simple will?

• Establishing a trust likely forces you to undertake comprehensive estate planning—a good thing!
• Wills only are operative upon your death, whereas a trust can help with the management of your assets during your lifetime.
• Trusts facilitate an easier process for having someone assist you in the management of your financial affairs should help become necessary due to illness or diminished capacity.
• Trusts can minimize significantly the delays in the settlement of your estate.

Is it difficult to manage your day-to-day finances with a trust?

• The most important logistic of operating a trust is to “fund” the trust by re-titling real estate and investment and bank accounts in the name of your trust—and to keep such registration when assets are newly bought or additional accounts opened.
• Except under certain circumstances, your trust is likely to be “revocable”. Its tax implications (and the filing of your tax return) are no different than if you did not have a trust.
• Being “revocable”, your trust can be easily dissolved or its various provisions modified during your lifetime.

Whether you only have a will or establish a trust, remember these things:

• Seek competent legal and tax advice in the planning of your financial affairs and estate. Get it wrong, and the consequences can be unwelcome and costly!
• Make your executor or successor trustees aware of the location of your estate documents.
• Maintain an accessible, up-to-date list of all your assets and investment/bank accounts.
• Keep login credentials to your online accounts secure with a Password Manager and use Multi-Factor Authentication or Passkeys—and be certain your executor and successor trustee will have access to your accounts.
• Most importantly, live believing you have less time than you think. Life is fragile. Create balance in your life. Allocate time and resources equally to enjoying life today and to pursuing plans for the future.

Topics 16 through 19 in A Guide to Navigating Retirement discuss the importance of your Legacy: how to establish or augment it, choosing executors and trustees, estate planning documents, and estate administration.