A brief overview of the two most common estate planning strategies

The current global health crisis has left many people uncertain about the future. Now more than ever, having a financial plan in place is crucial. Not only should you consider your immediate and short-term financial goals, but you should also look at long-term planning. Specifically, what plans do you have in place to make sure your wishes are carried out and your family is taken care of after you are gone?

We review the basics of Estate Planning and what to consider in light of COVID-19.

What is Estate Planning?

Uncertain times can undoubtedly make you think, or even worry, about the future. Making sure you have a plan for your financial investments and assets can help ease your concerns.

Estate planning is the process of planning and arranging for the distribution of an estate that you accrue during your life. Although many people don’t consider themselves to own an ‘estate,’ the reality is that nearly everyone does. Therefore, it is essential to understand what estate planning does to protect your family and how to establish one properly.

Estate planning ensures that your wishes are fulfilled, your family is protected, and your estate value is maximized during transfer to your beneficiaries. In addition to providing clear instructions of your wishes, estate planning can help you reduce estate taxes and other expenses by streamlining the distribution of your assets.

An effective estate plan will benefit and protect the next generation (multiple generations in Nevada) of your family and other beneficiaries. In addition to financial arrangements, an estate plan also covers your medical wishes, which can offer further peace of mind during a pandemic.

What are the benefits of Estate planning?

In the face of a global pandemic, having your affairs in order will provide peace of mind for you and your family. While peace of mind during a health crisis is one clear benefit, there are other tangible benefits as well.

  • Privacy for you and your loved ones
  • Clear directive on the division of assets
  • Direct charitable donations
  • Reduce or eliminate estate, transfer, and gift taxes
  • Protect your estate from mismanagement, creditor claims, and divorcing spouses

What to Include In an Estate Plan

An estate includes personal residences, insurance, retirement accounts, personal possessions, household goods, vehicles, intangible assets, and more. And while nearly everyone has an estate, there are different ways to approach estate planning.

Estate planning encompasses several different components, and you may have some of these documents and plans already in place. However, during the pandemic, it is crucial to confirm that you have a comprehensive and current plan in place and to review and update any outdated documents.

Basic Estate Planning Strategies

While wills and revocable trusts are the two most common estate planning solutions, Alliance Trust administers complex, modern, and personalized estate planning solutions as well.

Last Will and Testament

A last will and testament give instructions to the court of your final wishes, including who is in charge of implementing them, how the property is to be distributed, and who will care for any children under the age of 18. However, you may consider using a revocable trust instead of a will for several reasons. When you create a will, any documents filed with the probate court become a matter of public record, and you may want to avoid this for privacy reasons. The probate court process is also very time consuming and expensive, and the current health pandemic has slowed down probate courts even further.

Revocable Trust

A revocable trust means that all of the assets within it remain in your possession while you are alive. You may amend or revoke your revocable trust at any time.

Many people prefer to use a revocable trust instead of a will. A revocable trust will accomplish everything that a will accomplishes, but avoids the expense and time associated with the probate court process. During the pandemic, many courts are not accepting probate petitions. This may further delay setting up your will, and you will want to keep this in mind as you decide which is better for you.

Pour-Over Will

If you decide to go with a revocable trust, you may want to add a pour-over will to your estate planning. The pour-over will is a type of safety net to ensure that any assets not included in your revocable trust will “pour-over” into the trust upon your death.

Essential Estate Planning Roles

Grantor

The grantor is the person who creates or establishes a trust. The grantor will decide what property and assets to include in the trust, as well as who the beneficiaries will be. As the grantor of a revocable trust, you may change or terminate the trust at any point until you die.

Beneficiary

The person or persons who receive the benefit (often asset distribution) from a trust are the beneficiaries. The grantor decides who these individuals are, and the trustee works to make sure the interests of the beneficiaries are being protected throughout the maintenance and distribution of the trust.

Trustee

If you establish a trust as part of your estate planning, you may want to assign a corporate or third- party trustee to manage the execution and distribution of your trust.

A corporate or third-party trustee can offer many valuable benefits such as legal and financial expertise, but can also provide a consistent and unbiased perspective to uphold the trust’s integrity throughout all transactions and for multiple generations.

Click here to learn more about selecting a corporate trustee v. a family member trustee.

Conclusion

Having an estate plan in place can provide you and your family peace of mind during this time of uncertainty. Now is a great time to review your plans and to consider strategies that will further streamline your assets and maximize your wealth.

If you would like to establish a trust to minimize your estate transfer costs and potentially trim taxes, Alliance Trust Company of Nevada’s trust officers are here to help guide you through the process.

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