This month we’re concluding our two-part series on the benefits of having an estate plan.  If you missed the initial discussion in July where steps one through four were described, bring yourself up to speed here.

Today, we’ll consider the importance of correctly titling assets, planning for incapacity, structuring gifts and inheritances appropriately, and properly administering & funding trusts. These steps are essential to take into consideration when establishing and administering an estate plan.

Correctly Titling Assets | Getting them to the Desired Beneficiary/Legatee
Failing to title your assets properly can have disastrous outcomes.   For example, jointly held properties between a husband and wife, MAY, BUT WILL NOT AUTOMATICALLY, pass from one spouse to the next upon the first spouse’s death.  In order for jointly held properties to pass to the other joint owners, there must be “rights of survivorship” or “rights in the entirety”.  Otherwise, the joint ownership is severed at the first death and the tenancy of the deceased passes to WHOMEVER the decedent leaves the asset in the decedent’s will or trust, or if no written devise exists, then whomever the law determines is the devisee gets the asset.  All the more reason that proper titling of assets, AND HAVING A WILL OR TRUST, is of paramount importance.

Correctly Titling Assets | Avoiding Probate
Titling assets properly and in accordance with your family’s wishes and desires can also help to avoid probate upon your death. For many high net worth families, this is particularly appropriate when you hold and own real estate outside of your home state. It becomes very helpful titling the assets properly to avoid a multiple probate situation.

Correctly Titling Assets | Minimizing Estate Taxes
Another advantage of titling assets properly is to minimize estate taxes; by doing so, you can take advantage of both state and federal estate tax exemptions that may be available to you, while providing benefits and reduced costs to your desired beneficiaries.

Planning for Incapacity
When we think about estate planning, we typically think about what happens at death; however, estate planning also involves everything about your assets during your lifetime. One thing we all need to plan for that can deal a serious blow to our wealth is incapacity to any key stakeholder in our plan. Be it your spouse, your child, or your fiduciary, having a contingency plan is critical for you to carry out your estate goals.

Should incapacity strike you or your spouse, having a durable Power of Attorney (“POA”) is critical to assure that someone else can make the appropriate financial decisions for you. Additionally, having a health care or medical POA is ultimately necessary in the event you cannot articulate your intentions about your health care. Having a living will as part of your estate plan allows you to outline your choices regarding your medical care, ongoing care, or end of life decisions that may become necessary.

Without the appropriate documents in place, all your hard work could go awry, not because of anyone’s bad intentions, but because not being prepared leaves you exposed. Much like running a business, standard operating procedures in your estate plan are necessary.

Structuring Gifts and Inheritances Appropriately
Regardless of the size of your estate… what it is today or what you project it to be 20 years from now, we all have beneficiaries in our lives to whom we wish to provide additional support. Each of those beneficiaries is different with different needs.  Therefore, how you structure an inheritance plan at the end of your life is very important. Structuring your inheritance plan needs to list not only who will receive your assets and when that will occur, but also the manner in which they will receive your assets.

In some circumstances, “gifting” using different forms of trusts, may be more beneficial rather than an outright gift of an asset.

This is most commonly used if you have minor children or grandchildren when you want their gifts of inheritance to be held until they reach a certain age. Or, if you have a special needs beneficiary – those assets would have specific instructions on addressing medical care, for example.

Additional use of trusts is important to provide further levels of protection from creditors, a divorce, or situations where beneficiaries may want to disclaim their inheritances. Whatever your desire for gift and inheritance strategies, these also require a well-stated plan that should be executed when the time comes.

While there continues to be a significant amount of talk about changing or repealing the Estate Tax, ultimately you want your assets to go to those you have designated in the most efficient manner possible.

Properly Administering & Funding Trusts
Something we discuss frequently is life insurance. While in most cases life insurance is purchased to provide liquidity when it is most needed, the proper ownership of it is also necessary to avoid an unexpected estate tax consequence that could occur.

One example to consider is using an irrevocable life insurance trust.

This has the effect of providing the necessary liquidity without being added back to your estate. However, like any trusts that are established for specific planning purposes, it’s not just establishing the trust that is important. Most families do get the necessary trust established, but challenges exist where funding is concerned as well as re-titling assets into that trust.

Establishing the trust but failing to fund it is like going out and buying an umbrella, and leaving the umbrella at home when you’re out walking in the rain. Once again, outlining and executing your estate plan along with the necessary strategies is the only way your desires and wishes will be carried out.

With whatever trust(s) you may currently have in your estate plan, have you properly titled and transferred assets to it/them? If you’re not sure or if your circumstances have changed since you established it/them, now may be a good time to conduct a review of the trust(s).

Keep in mind that 94% of family wealth is gone by the end of the third generation.  Having an adequately outlined estate plan is a significant measure that can be taken to avoid the destruction of the wealth you have been so diligent to create.  Regularly reviewing your estate plan is a key strategy to not only maintaining your wealth but allowing it to thrive for generations to come.

Happy Travels,


P.S. I’ve certainly enjoyed seeing everyone so far out on the road during this summer’s Motorhome and Money Tour. We still have a lot of upcoming stops to make, so I’ll look forward to seeing you on the road at some point before the summer concludes.