Estate Planning with Wills or Trusts

Most people know about wills and their basic purpose – to ensure that one’s hard earned assets go to the right beneficiaries when an individual passes away. However, wills and trusts can be used for a lot more than simply dictating who gets a person’s antique lamp collection. Here’s a list of some of the very valuable things a will can do:

• List who gets what. The most common purpose for a will or trust is to name which individual, or group of individuals, will receive particular property belonging to a person when he or she passes away.
   
• Name guardians for children. Typically, a will is the document that states who should raise a person’s younger children if something happens to the parent. The will also usually contains at least one alternate in the event the first choice cannot serve.
   
• Establish trusts. In many cases, a person may not want a child or loved one to receive all of the property that they are inheriting at once.  Additionally, and  as is more common, they are not aware that instead of an outright distribution (that exposes assets to creditors, possible current or future divorcing spouses, or taxes to Uncle Sam) a trust can be created for a child or loved one that offers asset and tax protection for that child or loved one while giving that person control over the trust.    In wills or trusts, trusts are commonly established for minor children, so that someone can manage the children’s money until they reach an age that their parents believe they will be able to manage it.  Trusts are also commonly used in second marriage situations – a person may want to allow a spouse to have access to certain property while the spouse is living, but for that property to ultimately pass to the decedent’s children.  Trusts can help accomplish that goal.
   
• List funeral wishes. Although this is also done in other documents too, a will commonly states whether an individual wants to be buried or cremated, and where the body should be buried or the ashes should be spread. Sometimes, wills contain other information about funeral wishes too like where it should take place and even what readings might be recited.
   
• Tax planning. Wills or trusts can be great tools for tax planning in order to avoid or limit federal or state estate taxes.   New York assesses an estate tax on assets in excess of $1,000,000 to anyone other than a spouse.   The Federal Government assess taxes on assets in excess of slightly more than $5,000,000. Typical "I love you Wills" leave all assets to the surviving spouse.  For those New York resident couples whose assets exceed the $1,000,000, leaving everything to the surviving spouse cries out "I want my estate to pay unnecessary New York State taxes".  There are relatively easy ways to actually double, from $1,000,000 to $2,000,000, the amount that can eventually pass tax free to children or other loved ones .
   
• Naming executors and trustees. A will states who will be the executor of an estate.  An executor is the person who will carry out a deceased individual’s wishes as set forth in the will.   A Trust will name a Trustee, whose function is similar to that of an Executor.  Wills or trusts can also name the trustee of any trusts established in a will or trust.

While wills and trusts can serve as powerful estate planning tools, they are only effective if they are properly drafted to suit the needs of each individual. An estate planning attorney can review all your options with you and establish a will and/or trust in a manner that ensures your wishes will be honored.