Estate planning can be a very complex process. There are a lot of different factors, each with its own intricacies, and almost as many tools and techniques to consider. It’s no surprise then, that creating an estate plan can seem overwhelming and difficult to understand, especially with all of the professional jargon and terminology.
That’s why we believe it’s critical that estate planning professionals offer a simpler approach when it comes to working with clients.
Not only does it help you, as the client, better understand your estate plan, it also helps your professional team better defend your wishes against challenges, based on you not understanding that to which you agreed.
Here are three easy steps you can take to start planning your estate without becoming initially overwhelmed by the details:
1. There Are Only Two Ways to Give a Gift
This concept is not entirely true but from your perspective, as the client, it will help you make the necessary decisions without getting bogged down by the numerous techniques.
When transferring wealth and assets, there are only two options for gifting them in your estate: an absolute gift or a trust.
An absolute gift means that the beneficiary can do whatever they want with the asset. They can invest it, spend it, share it, sell it, or even give it away.
A trust, on the other hand, allows you to create stipulations around the asset. If at any point in time you use the term “but” when describing the gift, you are indicating that you need a trust.
2. Decisions Can Be Based On Three Key Scenarios
Another way to streamline the estate planning process is to break down your flow of decisions using key scenarios.
- What would you do if your spouse survived you?
Would you leave everything to your spouse or would you want to leave something to your children and grandchildren as well. Will it be given as an absolute gift or in a trust or perhaps a combination of both?
- What would you do if you survive your spouse and have descendants?
Would you leave everything to your children? Would you divide your estate evenly? Will it be an absolute gift or a trust? Will it differ per child?
- What would you do if your spouse predeceased you and you have no descendants?
Would you leave everything to a close companion or donate it? Will you give it as an absolute gift or a trust?
As you can see, by focusing on these three scenarios, it is easier to make the necessary decisions while avoiding the confusion of considering multiple “what if’s” all at once.
3. Focus On 6 Factors When Creating a Monetary Trust
Similar to the above decisions, monetary trust planning can be broken down into a set of key elements.
- Beneficiaries - Who will the beneficiaries be? Who will inherit your estate?
- Trustees – Who will be in charge of administering the property within the trust? Who are your alternative choices?
- Duration - When do you want the trust to end?
- Mandatory Payments - Are there specified payments? Will the beneficiary receive a specified amount when they turn a certain age? Will they receive a yearly amount?
- Discretionary Payments - Can the trustee, at their discretion, pay income to the beneficiaries? If so, what are the limits? Are there specific guidelines?
- Gift Over – If the primary beneficiary passes away or the trust ends, what will happen to the balance of the trust?
These steps are not all encompassing, but are instead a simplified introduction to estate planning that will help get you thinking about the future.
Your estate planning professional should ultimately be the one who guides you through the process, in a way that is easy to understand.
At MacMillan Estate Planning, it is our goal to make comprehensive estate planning uncomplicated and easy.
If you have any questions, or would like to work with us, please feel free to register for a complimentary consultation.
