Estate planning is 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 and may or may not involve tax planning. The core document most often associated with this process is your will.

If you die intestate (without a will), your state’s laws of descent and distribution will determine who receives your property by default. These laws vary from state to state, but typically the distribution would be to your spouse and children, or if none, to other family members. A state’s plan often reflects the legislature’s guess as to how most people would dispose of their estates and builds in protections for certain beneficiaries, particularly minor children. That plan may or may not reflect your actual wishes, and some of the built-in protections may not be necessary in a harmonious family setting. A will allows you to alter the state’s default plan to suit your personal preferences. It also permits you to exercise control over a myriad of personal decisions that broad and general state default provisions cannot address. 

A will provides for the distribution of certain property owned by you at the time of your death, and generally you may dispose of such property in any manner you choose.  Your right to dispose of property as you choose, however, may be subject to forced heirship laws of most states that prevent you from disinheriting a spouse and, in some cases, children. For example, many states have spousal rights of election laws that permit a spouse to claim a certain interest in your estate regardless of what your will (or other documents addressing the disposition of your property) provides. Your will does not govern the disposition of your property that is controlled by beneficiary designations or by titling and so passes outside your probate estate.  Such assets include property titled in joint names with rights of survivorship, payable on death accounts, life insurance, retirement plans and accounts, and employee death benefits.  These assets pass automatically at death to another person, and your Will is not applicable to them unless they are payable to your estate by the terms of the beneficiary designations for them. Your probate estate consists only of the assets subject to your will, or to a state’s intestacy laws if you have no will, and over which the probate court (in some jurisdictions referred to as surrogate’s or orphan’s court) may have authority.  This is why reviewing beneficiary designations, in addition to preparing a will, is a critical part of the estate planning process.  It is important to note that whether property is part of your probate estate has nothing to do with whether property is part of your taxable estate for estate tax purposes.

Trusts are legal arrangements that can provide incredible flexibility for the ownership of certain assets, thereby enabling you and your heirs to achieve a number of significant personal goals that cannot be achieved otherwise. The term trust describes the holding of property by a trustee, which may be one or more persons or a corporate trust company or bank, in accordance with the provisions of a contract, the written trust instrument, for the benefit of one or more persons called beneficiaries. The trustee is the legal owner of the trust property, and the beneficiaries are the equitable owners of the trust property.  A person may be both a trustee and a beneficiary of the same trust.

If you create a trust, you are described as the trust’s grantor or settlor. A trust created by a will is called a testamentary trust, and the trust provisions for such a trust are contained in your will. A trust created during your lifetime is called a living trust or an inter vivos trust, and the trust provisions are contained in the trust agreement or declaration. The provisions of a living trust or inter vivos trust (rather than your will or state law default rules) usually will determine what happens to the property in the trust upon your death.

A trust created during lifetime may be revocable, which means it may be revoked or changed by the settlor, or irrevocable, which means it cannot be revoked or changed by the settlor.  Either type of trust may be designed to accomplish the purposes of property management, assistance to the settlor in the event of physical or mental incapacity, and disposition of property after the death of the settlor of the trust with the least involvement possible by the probate (surrogate or orphan’s) court.
Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by the parents to indicate sufficient maturity to handle property (which often is older than the age of majority under state law). Trusts permits the trust assets to be held as a single undivided fund to be used for the support and education of minor children according to their respective needs, with eventual division of the trust among the children when the youngest has reached a specified age. This type of arrangement has an obvious advantage over an inflexible division of property among children of different ages without regard to their level of maturity or individual needs at the time of such distribution.

If you own property with another person as joint tenants with right of survivorship, that is, not as tenants in common, the property will pass directly to the remaining joint tenant upon your death and will not be a part of your probate estate governed by your will (or the state’s laws of intestacy if you have no will). It is important to note that whether property is part of your probate estate has nothing to do with whether property is part of your taxable estate for estate tax purposes.

If you own life insurance on your own life, you may either
(a) designate one or more beneficiaries to receive the insurance proceeds upon your death, or
(b) make the proceeds payable to your probate estate or to a trust created by you during your lifetime or by your will.
If insurance proceeds are payable to your estate, they will be distributed as part of your general estate in accordance with the terms of your will or, if you die without a will, according to the applicable state laws of intestate succession. If the proceeds are payable to a trust, they will be held and distributed in the same manner as the other trust assets and may be protected from creditors’ claims. Insurance proceeds that are payable directly to a minor child generally will necessitate the court appointment of a legal guardian or conservator. This can be avoided by naming a trust or custodial account under the state transfers-to-minors law as the beneficiary. Trusts often are used for insurance proceeds, even if the trust beneficiary is not a minor, to protect the assets from a creditors, divorce, to provide income tax planning and distribution flexibility, and to provide centralized or professional management of the proceeds.