Why Estate Planning Is Important
Wills and Trusts
What does a Will accomplish?
A will is a document that tells the court system or legal authorities what happens to your possessions – home, car, pets, and more – when you pass on.
If children are under the age of 18 and in your care, it designates a new legal guardian. After death, the probate court will determine if a will is valid and begin proceedings to fulfill the will. Who should have a will?
Do I need a Trust?
There are different types of trusts and each one has a different purpose.
Trusts can allow you to control the transfer of your assets that would otherwise pass through probate, saving your loved ones time and money during their period of grief.
Trusts can also be useful tax-planning tools which can help to reduce your taxable estate upon your death. Trusts are not only reserved for the wealthy and have many benefits that should be explored for your unique situation.
3 Types Of Wills
Oral (Nuncupative) Will
This is a will that is spoken, not written. It is valid in very few states and only under specific circumstances.
Simple (Statutory) Will
This is a written will that is typically drafted by an attorney to be compliant with the state in which the testator resides. It is very efficient in directing the transfer of probate assets.
A holographic will is similar to a simple will and is as largely recognized by the state once validated. The primary difference is that a holographic will is entirely handwritten by the testator and does not require a legal witness.
2 Types Of Trusts
A revocable trust is typically used to control the transfer of assets outside of probate that would typically pass through the probate process. A revocable trust can be changed at any point in the testator’s lifetime.
This offers protection against creditor claims to your estate and provides a more efficient method to transfer assets when compared to the lengthy and expensive probate process.
An irrevocable trust is often used to reduce the testator’s taxable estate upon death, or to achieve charitable gifting goals in a tax-efficient manner. Once drafted, the trust is “irrevocable” and cannot be changed.
Commonly, at the inception of the trust, assets are retitled into the name of the trust and the testator is not able to materially benefit from any of the trust assets (there are exceptions).
These trusts are typically used to benefit someone other than the testator but do have their own benefits to the testator in the form of a reduced taxable estate in many cases.
We’ll guide you through the estate
Your needs identified
Your plan design reviewed
HFG has a trusted network of reputable estate planning attorneys who have the expertise to implement various estate planning strategies. HFG will regularly monitor your plan proactively alongside these attorneys to make sure your estate plan is up-to-date as your goals change over time.
Your estate plan kept up to date
Estate planning is an essential part of financial planning, so every recommendation our CFP® professional advisors provide have been carefully presented with your legacy goals in mind.
1. If you have an existing estate plan, our team will review your current plan and prepare a summary of the basic provisions.
2. During the financial planning process, your advisor will ask questions to discover what your estate planning goals are.
1. Your advisor will work with you to identify which estate planning goals are most important to you, and then to prioritize them accordingly.
2. Our team can assist with identifying and collecting the documents which will likely be requested by your estate planning attorney to facilitate the drafting of your plan.
1. We provide you referrals to our trusted network of reputable estate planning attorneys for you to engage about estate planning document recommendations provided by your HFG advisor.
2. We follow up with your attorney and you to monitor the progress of your plan and to provide assistance when needed.
3. Once your estate plan has been executed, HFG obtains digital copies of your documents and stores them securely for accurate recordkeeping and regulatory compliance.
1. We review your estate plan regularly to ensure it is still reflective of your current goals at any given time. If HFG views any inconsistencies, we will make you aware of them promptly.
2. Upon your death, Harding Financial Group will serve on your behalf to initiate all required transactions and transfers of assets in accordance with your estate plan. We will see the whole process through from start to finish and proactively work with your beneficiaries to help them understand their inheritance options.
Estate Planning Case
Sharon, a widow in her 60s, has $500,000 in her savings account as well as an antique collection of plateware, cutlery, and jewelry valued at $100,000 that has been passed down for the last two generations. She has three children – two daughters in their 30s who are married with children and with whom she has regular contact, and one estranged son in his 40s who has a history of drug abuse.
She does not have a will or a trust. She wants to divide everything equally between her three children upon her death but fears her son will burn through his inheritance quickly. If she were to die today without a will or trust, her savings account and family heirlooms pass through the probate court where:
- The state will appoint an executor of their choice to administer the estate
- The state will determine how her assets are divided and to whom they should pass to since there is no clear direction through a will
The probate process will:
- Require an exorbitant amount of time
- Incur additional tax and legal expenses, reducing the size of her estate
- Take control of asset distribution away from Sharon
- Most likely give her estranged son 1/3 of the inheritance without limitation
- Create an environment that could cause fighting and dispute among Sharon’s surviving family members
If Sharon had implemented the following estate planning recommendations, her estate would’ve realized an entirely different outcome.
- Draft a will explicitly stating which family heirlooms should be inherited by which child, as well as what should be done with her other tangible assets
- Create a trust that names how much of her retirement assets should be allocated to each child. Create a provision that limits her estranged son’s inheritance to a certain amount per year. She will appoint a trustee – This could be a family member, an attorney, or anyone she deems fit to enforce the trust fairly.
- Name the trust as the sole beneficiary of her $500,000 savings account.
- Drafting a will gives the probate court clear direction on how to distribute assets that pass outside of the trust, which will mitigate family disputes.
- Creation of a trust that is named the beneficiary of Sharon’s $500,000 savings account allows that money to flow through the trust where it’s given clear direction on how it’s to be divided among her surviving children. This reduces tax/legal expenses which would’ve otherwise been spent on the probate process, and legally allows Sharon to place restrictions on the amount her estranged son is able to receive.
By having done appropriate estate planning, it saves the family dozens of hours, thousands of dollars, and maybe most importantly, prevents family members from arguing and fighting over the loved one’s assets. This allows the family to grieve peacefully, knowing the parent’s wishes were carried out as they wanted, AND it’s the most efficient way to transfer their family’s legacy on to the next generation.
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Get a one-one consultation with our estate planning advisors to begin the conversation about your estate planning goals, needs, and current financial situation.
See our Frequently Asked Questions below for commonly asked questions about Estate Planning.
Frequently Asked Questions
Wills, trusts, powers of attorney, appropriate titling of assets, and appropriate beneficiary designations on investment/retirement accounts & insurance policies all play a role in effective estate planning.
There is no law requiring individuals to complete a will. However, it is highly recommended to have a legally drafted will as it provides the court direction on how to allocate your assets to the heirs of your estate. If beneficiary designations have been made appropriately on your bank accounts, investment accounts, retirement accounts, life insurance policies and annuities, then those assets will pass directly to those beneficiaries by “operation of contract” outside of probate and are not directed by the will. If personal property such as real estate & cars are titled appropriately, they may transfer directly to the person who has legal “right of survivorship”, effectively bypassing probate. For all other assets you own that do not pass to someone through a contract or right of survivorship (e.g. family heirlooms, jewelry, etc.), the court allocates them to your heirs through a process called “probate”. If you die without a will, you are considered dying “intestate”, and each state has their own intestacy laws that direct the allocation of your assets. In order to make sure specific assets are passed on in the manner you desire, a living will is the best tool to help the court carry out your wishes.
A power of attorney is a legal document that authorizes a certain person to act as the grantor’s decision-making agent in the event of the grantor’s incapacity. In this document the “Grantor” is the person giving permission to the “Agent” to make decisions on their behalf. Powers of Attorney come in many shapes and sizes. Limited POAs allow you to act as an agent in decision making of only select tasks outlined in the POA. General POAs typically give the agent total decision-making ability over every aspect of the grantor’s life. Some POAs are implemented immediately upon establishment of the agreement while others are “Springing” where some specific event at a future date will trigger the agent’s ability to serve as POA. State laws differ on the creation of powers of attorney and the extent of the designated person’s authority. If you or a loved one believe you have the need for a POA, Harding Financial Group has a trusted network of estate planning attorneys to which we can refer you. Reach out to us today for a complimentary consultation.
Without an estate plan, a person’s entire estate in Ohio will be divided through the probate process when they pass away. If there is no documentation specifying how estate assets should be dispersed, the assets must be distributed in accordance with Ohio’s “intestate succession” laws which specify which members of your family should receive which of your assets. One of the main reasons why everyone should have at least a simple estate plan is because these laws rarely accurately represent anyone’s true final desires.
Yes. Regarding how your estate is allocated, only the assets that you hold at the time of your death are covered by your estate plan. If you are sued, you can be required to utilize assets that would have otherwise gone to your heirs or beneficiaries to satisfy a judgment. An effective asset protection strategy may help you achieve the outcome you want.