Estate planning is the creation of a definite plan for managing your wealth while you are alive, and distributing your assets after your death. An estate means all assets of any value that you own, including real property, business interests, investments, insurance proceeds, personal property, and personal effects. These assets may be owned separately, or jointly with others. Below are some examples of how married couples often hold title to property: What am I attempting to avoid with estate planning? There are three principal obstacles in planning our estates: What are my estate planning options? There are four basic methods you can use to plan your estate: What happens if I do nothing? Unfortunately, a majority of Americans choose to do nothing. Experts report that 70% of all Americans have no written estate plan. Of those who have planned, most have created a simple will or rely on joint tenancy ownership of their assets to distribute their estate. For the majority of people who do not have an estate plan in place, state law will dictate how their estates are to be distributed at the time of their deaths. As you might imagine, the government's plan of distribution has no particular concern for the best interests of the family. Doing nothing can result in probate costs, attorney's fees, and higher death taxes. Most people do not realize that there can be major problems as a result of creating a simple will or holding title to their assets in joint tenancy. This Estate Planning seminar will discuss each of the estate planning complications and explain what happens if you plan your estate with a joint tenancy, a simple will, or a Living Trust. What is Joint Tenancy and why do so many people use it? Joint tenancy ownership is where two or more people hold title to an asset together. Unlike other forms of joint ownership, upon the death of one of the owners, the entire interest in the property passes automatically to the surviving joint tenant(s). The legal term for holding property in a joint tenancy is Joint Tenancy With a Right of Survivorship. Right of Survivorship means that whoever dies last owns the whole property. A joint tenant's interest passes to the surviving joint tenant immediately at death. Therefore, the distribution of such property is not controlled by the joint owner's will. For example, two good friends, Joe and John, own a piece of real property as joint tenants. Joe dies leaving a will that says upon his death, all of Joe's estate shall go to his wife, Mary. What happens to Joe's interest in the real property he owns with John? Because title passes automatically at death to the surviving joint tenant, John will own the entire property and Mary will get nothing. This is only one example of the unforeseen problems that joint tenancy ownership can create. Is creating a Will a good idea? Many people plan their estates by creating a document called a Last Will and Testament. A Will is basically a legal document that states out how you want your assets distributed at death. As previously discussed, a Will does not control the distribution of all of your assets. Joint tenancy property and life insurance proceeds both pass outside of your Will. Wills do not take effect until a person dies, so they are of no help with lifetime planning. Upon a person's death, his or her Will becomes a public document when it is filed with the probate court. It is then available to anyone who wants to read it. Once a Will enters the probate process, the deceased person's estate is no longer controlled by his or her family. Rather, the estate is in the hands of the court and the probate attorneys. Simply stated, a Will guarantees that your estate will go through probate. Therefore, it is a poor estate planning document for most families. Why do so many estate planning professionals recommend a Revocable Living Trust? A Revocable Living Trust is a complete Will substitute. It can control all of your assets both during your lifetime and after your death. Here's how it works: when you set up your Living Trust, you transfer the title to all of your major assets (stocks, bonds, real estate, etc.) from your name to the name of the trust. You then name yourself as the trustee and beneficiary. This gives you total and complete control of your assets. You can buy, sell, trade, do whatever you wish with your property, just like you do now. Here is the difference, and the real benefit of a Revocable Living Trust. When you die, there will be no assets left in your name (all of your assets will be in the name of the trust) and, therefore, no probate for your family to endure. Whomever you name as your successor trustee will immediately gain control of your assets to distribute them according to your exact instructions.
