Tahoe-Truckee Market Beat: The importance of estate planning
September 26, 2016
Benjamin Franklin once said, "… in this world nothing can be certain, except death and taxes."
According to Wikipedia, the "death and taxes" phrase was in use before it was penned by Ben Franklin. Apparently, Daniel Defoe, in The Political History of the Devil, wrote back in 1726, "Things as certain as death and taxes, can be more firmly believed." In 1716, in The Cobbler of Preston, Christopher Bullock wrote, "Tis impossible to be sure of anything but death and taxes."
Since death and taxes are a certainty it makes sense to plan for them. If you don't have the expertise to plan your estate by yourself, you should consult with a competent estate planning attorney. Your financial adviser should work with your legal and tax advisers like part of a team.
It's very important to establish a sound estate plan and review it periodically. Most people should consider establishing a revocable living trust.
By having a trust, your estate does not have to go through the probate process, which happens if you only have a simple will. While it can be fairly expensive to establish a trust, it can also be expensive and time consuming to have to go through the probate process.
Estates that go through probate also become public information, so anyone can discover who your beneficiaries are and what assets they received from the estate. Sometimes unscrupulous people have been known to prey on young beneficiaries who recently inherited a substantial chunk of money.
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Once a trust has been established, assets that you want placed in the trust must be titled in the name of your trust.
Think carefully before placing retirement accounts in your trust. If you wish to use a trust for your retirement funds, it may be better to set up a separate trust for those.
Retirement accounts can pass to your beneficiaries easily and are afforded some asset protection by both federal and state laws. The limit of creditor protection for qualified retirement accounts varies from state to state.
One advantage to using a trust for your retirement accounts is to control the funds after your death if you're concerned about a beneficiary spending too much.
You should also consider how your non retirement accounts are titled. They can be held as community property, joint tenancy, payable on death or transfer on death. Estate planning is a very important part of your overall financial plan.
Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information is at his blog at http://www.sellacalloption.com or 775-657-8065. The mention of securities should not be considered an offer to sell or solicitation to buy investments mentioned. Consult your investment professional to understand the risks and/or how the purchase or sale of these investments may be implemented to meet your investment goals. Past performance is no guarantee of future results.