The Second Prong Of Estate Planning: Wealth Transfer

Last blog, we covered the first prong of estate planning — “incapacity planning”.  In this blog, we look at the second prong of estate planning  — “wealth transfer”.  The question you need to ask yourself (and ultimately answer) is:  “How do I transfer my assets to my loved ones in the most cost-effective, efficient way?” 

Traditional Wills

Traditionally, people commonly used the “Last Will and Testament” as a means of transferring wealth at death.  In order to be effective, the Will must be filed with and pass through Probate Court at death.  Currently, many people have sought out alternative methods of wealth transfer due to concerns over Probate Court costs, privacy issues, administrative delays, etc. (Note:  Wills do not govern the transfer of joint tenancy property, or assets with beneficiary designations.)

Beneficiary Designations

Certain assets pass automatically at death by virtue of “beneficiary designations.”  Commonly, assets such as retirement accounts, insurance policies and annuities carry beneficiary designations.  While expedient, beneficiary designations require immediate transfer when it is often undesirable, and lack the flexibility necessary to provide for all possible contingencies.

Joint Tenancy 

“Joint Tenancy With Rights of Survivorship” allows property to pass to the surviving “joint tenant.”  But, when only one tenant remains, the asset will eventually be subject to Probate.  You may have heard that adding another joint tenant will avoid Probate (for example, putting your son’s or daughter’s name on your bank account or deed to your home).  But this strategy comes with a high price tag, and may result in increased capital gains exposure – as well as the risk of loss to the other joint tenant’s creditors.

Revocable Living Trust 

A Revocable Living Trust provides a comprehensive alternative.  A Living Trust can funnel all types of assets to the intended beneficiaries, without court intervention, unnecessary capital gains exposure, or the risk of loss to the beneficiaries’ creditors.  It can also provide for more contingency planning than beneficiary designations, and can provide for the continuation of beneficiary protective trusts long after the original trust-maker has passed away.

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