Why Estate Planning is Important: Getting Started With the Basics

Having your property items distributed according to your state’s succession statutes is a rather rigid default distribution scheme because predetermined, specific percentages of your estate assets will go to your closest blood relatives—the state’s way, not yours. Whether or not you have a will, your property that does not pass according to its title or beneficiary designation goes through probate—that is, the state court’s system for monitoring its distribution.

Characteristics of a will

1. A simple will is a relatively inexpensive document, often costing a couple of hundred dollars. This guesstimate varies according to complexity, size of the estate, and geographic location.
2. A will only transfers property that you own in your name alone. Therefore, property you own as a joint tenant with right of survivorship or property that passes by beneficiary designation, such as life insurance proceeds or retirement assets, cannot be transferred by will.
3. Even if you have a trust, you should still have a will for any assets the trust does not cover.

Trusts as a complement to a will
You establish trusts during your lifetime. Trusts involve the transfer of your property to an individual or corporate trustee who manages the assets within the trust’s control for the benefit of one or more others — the beneficiaries.

A living, or , trust is one that is effective during your lifetime; a testamentary trust is one that is contained within the provisions in your will. A testamentary trust does not become operative until your death.

Because the will can be changed prior to death (assuming the testator, or creator of the will, is mentally competent) the trust terms are amendable. Living trusts can be created to be revocable or irrevocable. With a revocable trust, the creator of the trust, or grantor, has access to the trust corpus — another word for “principal” — while alive; the trust assets within an irrevocable trust, however, no longer belong to the grantor. Once transferred to the trust, they are owned by the trust entity.

For more information on estate planning and associated state taxes, visit the American Bar Association.