All the property that a person owns is part of his or her estate. Your estate includes everything you own less all of your liabilities. An estate can include a house, land the house is built on, cash, bank accounts, retirement accounts, stocks, bonds, clothes, jewelry, tools, cars, musical instruments, and other items.
The American Bar Association defines Estate Planning as:
"A process involving the counsel of professional advisors who are familiar with your goals and concerns, your assets and how they are owned, and your family structure. It can involve the services of a variety of professionals, including your lawyer, accountant, financial planner, life insurance advisor, banker and broker. Estate planning covers the transfer of property at death as well as a variety of other personal matters that may or may not involve tax planning. The core document most often associated with this process is your will."
Many people believe that estate planning is for those who are reaching the end of their life or only after death. This cannot be further from the truth. Estate planning really begins as soon as you have an estate. While they have good intentions, some people make terrible mistakes when proper planning is not done. Some of these mistakes include leaving all of their assets to their husband or wife, improperly titling real estate, not taking advantage of the gifting rules and allowances as provided by the IRS and not naming the correct beneficiaries on their life insurance policy.
One of the first things that you should do is define your goals and choose the various professionals to assist you in gathering the information and begin to put the plan together. Estate planning is not just about what happens after you die. A good estate plan will also protect you if you become
incapable of handling your own affairs. A good estate plan will let you, not the courts, keep control of your assets and control of decisions about your medical care when you can no longer handle your own affairs.
Most people need to plan out their estate at some point. The only time that you can prepare and implement an estate plan is while you are alive and you are capable of entering into a contract. There's no guarantee you'll have time down the road.
The drafting of the trust document is a very important function. It should completely cover your wishes regarding distribution of your property. The trust document may be used to protect your heirs by giving them rental or purchase rights to property. It can specify price and terms of an asset purchase. It is important to formally transfer all assets to the trust. Most assets can be transferred into the trust without adverse tax consequences, but if you have some unusual assets, you should check out the tax effects.
A trust is an agreement between a person that owns certain assets and another person who will take care of or administer the assets (called a trustee.) The trustee would take the position of its owner and make decisions on behalf of the owner.
There are many types of trusts that a person could create, each designed for a specific purpose. Estate planning is a major reason for creating trusts. Avoiding probate is another major reason to create a trust.
There are many reasons why one would want to create a trust. Trusts may be created to reduce estate taxes. A trust may be created if you have minor children and the beneficiary is incapable of handling their affairs. Trusts may protect assets from potential creditors and trusts can also help you accomplish many estate planning goals. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits.
A will tells the world exactly where you want your assets distributed when you die. It's also the best place to name guardians for your children. Dying without a will - also known as dying "intestate" - can be costly to your heirs and leaves you no say over who gets your assets. Even if you have a trust, you still need a will to take care of any holdings outside of that trust when you die.
With so many people entering the profession often on a part time basis, it is confusing to most as to who they should trust to assist them with financial and estate plans.
Many call themselves "tax experts, "tax advisors", "certified tax preparers", "trust specialists," "financial advisor" or other self imposed titles which are intended to suggest that the person has received advanced training in estate planning.
New Jersey, New York and other states are experiencing an explosion of promotions by unqualified individuals and entities which have only one real goal in mind: to gain access to your finances in order to sell you financial products and earn a commission.
Estate planning involves many aspects of your life. Prior to considering any estate planning, assemble a team of professionals who have much experience in estate taxes and estate planning. The team should include: