Good estate planning answers many questions. Here are a few to consider:
1. How much is enough? While most spouses choose to leave everything to their surviving spouses (either outright or in trust), there is always an exception to the norm. For example, more and more couples are questioning whether all of their wealth should pass to their children on the death of the surviving spouse. As an alternative, many are considering giving at least some property to more distant relatives, key employees, or charity.
2. Do any beneficiaries need protection? And if so, from whom? Trusts are often designed to protect beneficiaries from someone or something; identifying what those things are makes the drafting process clear. Consider the following examples:
- Minors, spendthrifts or those with substance abuse problems often need at least temporary protection from themselves.
- Beneficiaries from blended families sometimes need protection from each other, at least in the sense that second spouses and children from prior marriages often need clear rules about who is to receive inherited property and when.
- Any beneficiary could need protection from potential creditors, including those arising from divorce or bankruptcy.
- Beneficiaries from wealthier families need protection from transfer taxes, resulting in trusts designed to avoid those taxes.
In each of these cases, a trust can help provide that protection—provided it is drafted correctly.
3. Who will act for when you when you are no longer able to do so? In some ways, this is another protection issue, but it’s different because it deals with planning for your own incapacity, and not your heirs. The issues deal more clearly with intangibles, like where you will live, what level of care you will receive, and who will make those decisions for you if you become incapacitated.
Answering these questions in this order can lead to more effective planning. Start with how much each beneficiary is to receive and then look to the form in which each beneficiary is to receive property (for instance, what kind of protection does he or she need, given the amount of property he or she is to receive?). Finally, in light of these first two issues, determine who should be in charge of administering the property, either when you are incapacitated or following your death.
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