The term “Estate Plan” conjures up images of Scrooge McDuck swimming in his pile o’ gold or the rolling green hills of country club golf courses. So when people hear the term, have these mental pictures, realize that does not describe them, and they automatically dismiss the following conversation because it cannot possibly be relevant to them. They don’t even have a pool in their backyard, let alone enough gold to swim in.
This is typical because the term estate planning is often misused. Not because people use it incorrectly, but because they use the most narrow interpretation of it. Generally, the most common misconception of estate planning is that it is only relevant to multi-millionaires who are planning for retirement and minimizing their tax liabilities. This description is not incorrect, yet it represents a very small category of estates.
Estate planning is really planning for what you have, who you want to pass it to, and how you want to take care of those people you love after you pass away. A more appropriate image is that of a gift, with its own name tag of who you plan on giving it to.
But we already established that you ain’t rich. That’s fine, neither am I. You have much more to gift to your loved ones than just a bank account, home, or life insurance policy. What do people stand up to share at funerals? Life stories, adventures, lessons learned, and memories made with the individual that passed. Your assets are just a part of your whole estate plan. You can use an estate plan to share values, beliefs, dreams, aspirations, hopes, and stories. This sharing is usually done through one of two avenues, a living trust or a will.
A living trust is a document that comes into existence immediately after being signed and continues permanently, unless you decide to revoke it. It operates very much like a business as it has its own name, it can give and receive property, and after the creator passes away, it can get its own tax identification number. A trust’s key terms include who is in control of trust property, (if it is a revocable living trust, that is generally you the creator) and how to distribute your property once you pass away. This second aspect plays a huge part in sharing your values, beliefs, dreams, aspirations, hopes, and stories with the beneficiaries of your trust. Future posts will cover the different aspects of trusts in more detail.
A will is also a document that is signed, but doesn’t come into existence until the creator passes away. This means that the demands made and the provisions contained in a will are not controlling until after death. The most common will is a simple will and unlike the trust it does not have the same characteristics of a business. A will is more simple to set up than a trust, but it is not as flexible. It is also simple to destroy, replace, or amend. Also unlike a trust, a simple will is limited in its ability to share ideas, thoughts, and values. It is more of a checklist of who gets what of your goodies. Future posts will cover the different aspects of wills in more detail.
Estate plans are for everyone, especially people with young children. Many parents fail to plan because they falsely believe they aren’t rich enough to do so. If you pass before your children are able to know you, they won’t want the money you were able to give them. They will want the knowledge of who you were, what you believed in, and what your goals were. Do you doubt that?