The following article by Cynthia Griffin appeared on 10/11/23 in the News-Enterprise. It is a slightly different take on the documents related to estate planning, but interesting, just the same. Read on for details.
“When someone dies, one of the first questions the attorney will ask is what primary estate
planning instrument the decedent had in place.
The primary estate planning instrument is the main document used to hold the decedent’s instructions for the estate. Although the estate often has multiple documents, only one is the document intended to be the main set of instructions.
For example, someone using a trust as a primary planning instrument still would still need to have a last will and testament to cover any property that failed to be funded into the trust.
Furthermore, we do not include other methods of transfer as a possible primary planning instrument, but the actual legal document. The document is necessary to have in place even if all property will pass through joint ownership or beneficiary accounts.
If the co-owner or the beneficiary on the account is deceased at the time of distribution, the primary planning instrument likely will be needed to determine who will receive property, in what way, and who is responsible for handling the logistics of wrapping up the estate.
Primary planning instruments also only include testamentary documents — documents that determine estate planning after death. Some documents, such as trusts, may be both lifetime and after death documents, but other documents, such as powers of attorney, are limited to lifetime use only.
A primary planning instrument only would include the testamentary documents.
The three general categories of testamentary planning documents are irrevocable trusts, revocable trusts and wills.
Irrevocable trusts, if set up properly, and barring any unusual situations or family disagreements, usually are the easiest to use after death although often the most complicated to set up during life. Irrevocable trusts are the strictest form of planning instrument because of the asset protection.
Depending on the provisions within the irrevocable trust, it may still may allow the grantor to change beneficiaries or it may be set completely in stone upon execution. Those provisions also will determine the complexity and tax consequences after death.
Irrevocable trusts are generally the quickest to wrap up after death because of the creditor protection.
Because the trustee is not waiting for creditor claims, the trustee almost immediately can began taking action to liquidate or transfer assets to beneficiaries and to file any required taxes. However, the creditor protection only extends to assets properly funded into the trust during the decedent’s lifetime.
Revocable trusts are usually the next fastest category. However, unlike irrevocable trusts, revocable trusts do not offer creditor protection. For that reason, trustees either should open a probate case for the purpose of collecting creditor claims and barring future claims or they diligently should gather all bills and pay them before distributing the whole estate.
Both types of trusts prevent the need for probate court to distribute property to beneficiaries, so long as the property is in the name of the trust. Upon the death of the decedent, the successor trustee simply steps in as the acting trustee and follows instructions within the document.
The third, and most common, primary planning instrument is a will. Unlike trusts, wills are not independent entities so they do not directly own property, but merely direct where property should go after death. Wills must go through probate court and the court action generally must be open for at least six months.
Wills are the easiest to create and the most restrictive to use after death.
It is important to understand the different parts of an estate plan and to choose the pieces that best suit your own estate planning goals. Understanding the options for testamentary planning documents is a good place to start.”
This was an excellent example of the variety of legal documents and instruments estate planning attorneys like myself have to help clients protect their hard-earned assets and loved ones. It is not a “one-size-fits-all” solution; each individual’s situation requires a customized plan to meet their needs. I always ensure I understand what my clients want from their estate plan; what are their priorities, and have I met them? If you need to create or update an estate plan, I hope you’ll think of me; I’d love to help ensure your plan is uniquely yours, designed to protect you, your assets, and your loved ones. Call me at 513-399-7526 or visit my website, www.davidlefton.com, to learn more.
Source: The News-Enterprise 10/11/23. Written by Cynthia Griffin