Estate planning basics last will and testament

Do you have an estate plan?  Don’t make the mistake of overlooking your assets because you think you don’t have any.  In fact, a basic estate plan is an important financial document for everyone to have.  If you are new at this, you need to understand some basic estate planning concepts.

Helping to Kindle Your Understanding of Estate Planning

At Henry V. Kaelber, CPA, CFP®, CGMA, we are committed to providing our clients and readers with every advantage when trying to preserve and grow their human, intellectual and financial wealth.  This article will cover some basic estate planning concepts to help you on your way.

Henry V. Kaelber, CPA, CFP®, CGMA is a CPA firm in Charlottesville, Virginia, providing quality accounting & tax services for individuals, business, trusts & estates. We also offer business consulting services and private equity structuring support.

What Is An Estate?

Legally, an estate is simply whatever a person leaves behind after death.  Some people might leave a lot, while others might leave behind less.  But everyone, no matter who they are, how much they own, or where they live, will leave behind an estate.

Estate Planning

Estate Planning decribes the process people go through to prepare for the legal, financial, and personal realities of their death.  And an Estate Plan describes the collection of tools specifically designed to address these kinds of issues.  Estate planning is not a single topic, but rather a collection of topics that all involve the practical realities surrounding death and mortality.

Probate

Because everyone leaves behind an estate, all states have adopted laws that determine what happens to all that left-behind stuff.  These laws differ slightly from state to state

In each state, Probate is the legal process to handle the affairs of a deceased person’s (decedent) estate.  It often includes, but is not limited to, the probating of a will, and the appointment of a person to handle the estate, also known as an executor or an administrator.  Additionally, probate  handles conservatorships and guardianships for people who are still alive but may need someone to handle their affairs or act in a fiduciary capacity for an incapacitated person or a minor.

The Will:  An Estate Planning Minimum

Regardless of the size of your estate, dying without a will can only cause your family frustration and expense in settling the affairs of your estate.  In most places, state law largely determines how your estate is distributed.  Yet, there are many issues that the law does not consider.  Most estate attorneys that I know counsel that the two most important reasons for executing a last will and testament are:

  • The right to select the executor of your estate, and
  • The right to select the guardian of your children.

Powers of Attorney and “Living Wills”

While a last will and testament provides for the management and ultimate distribution of your property after death, it does not become legally effective until your death.  As well, a will does not address the potential need for property management during one’s lifetime in the event of either physical or mental incapacity.  Thus, to make even the simplest estate plan complete, one should always discuss the uses and types of powers of attorney with a lawyer or other estate planning professional.

The Uses and Benefits of Trusts

A trust is a legal vehicle to which property may be transferred for any of a variety of reasons.  Depending on your personal situation and needs, a trust can prove even more fundamental or useful to an estate plan than a last will and testament.

The following are some of the most popular use of trusts:

  • To conserve and manage assets on behalf of young or incompetent beneficiaries.
  • To arrange for sophisticated and orderly management of investments.

An inter vivos or “living” trust (one made during your lifetime) has additional advantages:

  • To minimize probate costs and avoid required accountings after death.
  • Trust assets need not be probated with the court like a will, so one can assure privacy in the transfer of property at his or her death.

Perhaps the most common use of Trusts are to:

  • Hold and manage the assets of incompetent or institutionalized family members.
  • Save income and estate taxes.

You’ll Need an Attorney

All of the above require consulting an attorney trained and experienced in estate matters.  Henry V. Kaelber, CPA, CFP®, CGMA does not practice law.  However, we can help in the process in the following ways:

  • Discuss issues and help you understand the urgency of estate planning.
  • Help you with decisions you would need to make involving executors and trustees.
  • Work with your attorney to ensure coordination with your tax planning.
  • Work with your attorney to build incremental flexibility into the documents.
  • Most importantly, we help you understand your estate plan.

About the Author

Henry V. Kaelber, CPA, CFP®, CGMA