3 Considerations for Succession Planning Beyond the Basic Will

Basic estate planning, including the drafting of a Will, usually involves relatively straight forward considerations such as who will be the beneficiary of your property, and who would be appointed to be in charge administrating your estate (the Personal Representative). Once these decisions are made, a basic Will can be created.

However, there are very important estate planning issues that need to be considered beyond the simple Will, including the following:

  1. Estate Taxes. Currently federal estate taxes are an issue for estates over five million dollars. Virtually everything we own is taxable, but what many people do not realize is that certain assets we do not presently possess can also be taxable. For example, life insurance is free from income tax but not estate tax. Assets that may have been transferred for less than fair market value might be valued differently in the gross estate. The combination of a variety of different assets, including but not limited to life insurance, retirement plans and real estate may put many people over the exemption amount. Without proper planning roughly 45% of property over five million dollars will go to the government (a combination of the federal and Minnesota estate tax).
  2. Probate Avoidance. Property passing under the terms of the Will, typically will not avoid probate. The probate process, governed by the court and state law, can be lengthy and expensive. A Revocable Living Trust, if properly funded during lifetime, can effectively remove many if not all of your assets from the probate process and avoid the time and expense of court proceedings. An example of a probate asset would be a brokerage account in your name alone. Such an asset could be conveyed to a revocable living trust, naming you as trustee during your lifetime, and in that case your use and management of that account would be virtually the same. The primary difference is that upon your death, the account is administrated within the trust and is not considered a probate asset.
  3. Asset Protection. There are certain instances when you will not want to leave an inheritance to someone outright because the inheritance at that point is no longer protected. The assets could be lost to judgments, creditors, divorce proceedings, and the like. Leaving the assets in trust can protect the intended beneficiary. At the same time, the trust can be designed to be very flexible, and even a beneficiary can be a trustee of the trust.

Clearly, an effective estate plan goes beyond the drafting of a basic Will in many instances.

For more information on this article, please contact Nic Wenner at (612) 355-2202.

Parker & Wenner Attorneys at Law