Barnes Lipscomb & Stewart PLLC

What Is Joint Life Insurance?

 

“No matter how old you are, it's never too early or too late to begin thinking about your life insurance options.”

We never know what the future may bring, and waiting too long to investigate life insurance could leave loved ones in a financial bind, according to a recent article from Money, “What Is Joint Life Insurance and How Does It Work?” There are plans ranging from term and whole to individual and joint, and you’ll want to understand how each works before determining which policy best fits your needs.

Joint life insurance is a single plan covering the lives of two people with one premium, with the policyholders becoming each other's beneficiaries or passing benefits to their heirs. Depending on your coverage, these types of life insurance pay out death benefits when one or both of the policyholders dies.

This eliminates the need for separate policies for spouses or partners and minimizes paperwork and the underwriting and administrative costs associated with life insurance policies. This type of plan is often used for business partners, who can use the death benefit to fund the company if one of them dies unexpectedly.

Joint life insurance plans are usually permanent or whole-life policies and stay in effect as long as premiums continue to be paid or until the policy pays out. Investing in joint whole life insurance has certain advantages because it provides long-term certainty.

There are two kinds of joint life insurance—first to die and second to die.

A first-to-die life insurance policy pays a death benefit to the surviving policyholder when the other party dies. This ensures the living policyholder receives a payout, which can be used for living costs if the family’s primary income source is the first to die.

Situations where one spouse doesn’t qualify for life insurance may also make first-to-die life insurance a good idea. Insurance companies may be more willing to insure someone with pre-existing health conditions because there’s only one payout between two policyholders. However, the healthier spouse will most likely incur higher cost premiums with a joint policy than an individual plan.

The first-to-die joint policy terminates once the payout occurs, leaving the surviving spouse or partner without life insurance unless they have an additional individual plan. If the surviving party doesn’t have their own policy, they must purchase a separate policy to ensure their beneficiaries receive a death benefit.

Second-to-die life insurance, or survivorship life insurance, doesn’t pay out until both policyholders die. These plans are often used to leave money for beneficiaries or pay for funeral expenses. A second-to-die policy can be helpful with estate planning because heirs don’t pay estate tax on the death benefits unless they exceed estate tax thresholds.

Determining which policy best suits your family depends on several factors, including how you expect beneficiaries to use the proceeds. Life insurance policies should be part of a discussion with your estate planning attorney and align with your overall estate plan.

Reference: Money (Sep. 15, 2023) “What Is Joint Life Insurance and How Does It Work?”

Estate Plan can Ease Anxiety and Confirm Legacy

“Preparing for the future supports the causes you believe in and provides peace of mind for you and your heirs.”

Creating an estate plan can take stock of today’s priorities while creating a legacy by clarifying intentions. This could mean providing for your family, supporting charitable organizations, or providing a means for future generations to know about your passions. Estate planning also addresses tax issues and can be used to reduce court involvement with your estate, according to a recent article from Worth, “Take Charge of Your Legacy With an Estate Plan.”

For most people, considering death is uncomfortable, but your estate plan is essential to those loved ones taking care of your estate. Nearly all wealthy Americans expect to leave money or other assets to their children. People who don’t consider themselves wealthy also intend to leave property to their loved ones.

Consider what happens when no estate planning is done. It took six years to settle the $156 million estate of singer Prince, who died without a will in 2016. A jury only recently finished determining the inheritance of Aretha Franklin, who left conflicting wills after she died in 2018. While the estate was being decided, it dwindled from an estimated $80 million to $6 million.

Having an estate plan can also alleviate anxiety, with a survey showing individuals with investible assets of $1 million—$10 million feeling more in control of their finances once they have an estate plan in place.

Creating an estate plan may be easier if you address parts individually. You may even have some parts in place already, such as details about ownership of bank or investment accounts and beneficiary designations.

All assets need to be recorded, including digital assets. The estate plan should include information on life insurance proceeds because there may be adverse tax implications for the estate if they’re not appropriately structured. For instance, life insurance proceeds are generally exempt from federal income taxes; they are included in the estate and could potentially bump the estate's value above the federal estate tax exemption. This can be avoided by transferring ownership of the policy to another person or establishing an Irrevocable Life Insurance Trust. Any transfer of life insurance policies made within three years of death is subject to federal tax, so this step needs to be considered carefully with the help of an estate planning attorney.

Don’t overlook the emotions of loved ones. Items with sentimental value often cause family strife, so create a distribution plan for possessions. Your last will and testament should include jewelry, artwork, and family heirlooms.

Part of your estate plan addresses what would happen if you become incapacitated. This includes Do-Not-Resuscitate instructions and other wishes for medical care. Everyone over 18 should have a Power of Attorney in place so someone can manage their legal and financial affairs in case of incapacity. There are different types of POAs; your estate planning attorney will know which best suits your needs.

Estate planning is a time to speak with family members about the role they can play in carrying out your legacy. A family meeting to discuss values, vision, and purpose can be helpful at any level of wealth, from endowing a new building at an alma mater to volunteer opportunities in the community.

Your estate plan is not a “set-it-and-forget-it” document. It should be reviewed annually and fine-tuned, especially when significant life changes occur, like marriage, divorce, death, the sale of a business, a change in the law, or a change in real estate ownership.

Reference: Worth (Sep. 22, 2023) “Take Charge of Your Legacy With an Estate Plan”

Social Security Cost of Living (COLA) Is Likely to Increase in 2024

“Social Security COLAs are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of price changes for a selection of goods and services, including food, energy, and medical care, that is reported monthly by the federal Bureau of Labor Statistics.”

Following two years when Social Security Cost of Living Adjustments (COLAs) soared to the highest levels in decades, beneficiaries should not be surprised by more modest increases in monthly payments in 2024, reports a recent article, “Social Security COLA 2024: How Much Will benefits Increase Next Year?” from AARP.

The inflation gauge used by the Social Security Administration (SSA) to set the annual COLA rose at a 2.6% annual rate for July and 3.4% for August. These are the first two of three months the SSA uses to determine the final increase, which will be announced more formally in October.

The August uptick was a bit higher than anticipated, and September’s inflation numbers are expected to rise to similar levels. Analysts expect a 2024 COLA of about 3 percent.

This may seem like a letdown for recipients. Still, COLA is calculated to exactly offset the price increases faced by consumers, measured by the Consumer Price Index, since the prior COLA was determined.

A 3 percent COLA indicates inflation is slowing down or getting under control, which is especially important for seniors living on a fixed income. While a higher COLA sounds nice, it reflects rising prices, which can be far more challenging for retirees who count on Social Security benefits to pay their household bills.

All forms of benefits are affected by the COLA, including retirement, disability, family, and survivor benefits. The adjustment starts with the December Social Security benefits, which most folks receive in January 2024.

Benefits are calculated by the CPI-W, a subset of the main Consumer Price Index, which measures a broad range of retail prices. The SSA compares the average CPI-W for July, August, and September of each year to the figure for the same period the year before to arrive at the COLA for the year to come.

For example, the year-over-year changes in the CPI-W for the three months in 2022 were 9.1%, 8.7%, and 8.5%, respectively. Over the entire quarter, the index was 8.7% higher than average for the same period in 2021, resulting in the COLA used at the start of 2023.

If projections hold, and there’s no reason to think they won’t, the 2024 adjustment will align more with the relatively low inflation pre-pandemic period. When there’s no inflation, there’s no COLA. This happened in 2010, 2011 and 2016. The most significant adjustment ever? 14.3 percent in 1980.

Studies by the Center for Retirement Research show Social Security benefits generally keep up with inflation in the long term but can lag during short-term periods of volatility, depending on whether or not the price index is trending up or down when the COLA is set.

Beneficiaries in 2021 and 2022 lost buying power when COLAs were outpaced by surging inflation, peaking around 9 percent in mid-2022. This year, inflation was cooling somewhat when the 8.7 increase took effect and remained below the COLA level.

Another factor impacting the COLA’s value is Medicare costs. A rise in Medicare Part B premiums in 2024 would offset a portion of the COLA increase for Social Security recipients who have premiums deducted directly from their benefits, which is about 70 percent of Medicare enrollees.

Reference: AARP (Sep. 13, 2023) “Social Security COLA 2024: How Much Will benefits Increase Next Year?”

Have Estate Plan Checkup before Heading to Warmer Winter

“If you are headed somewhere warm to spend the winter months, you will want to be sure you have everything in order before you go.”

“Snowbirds” spend their winters somewhere warm, which usually means they own assets in more than one state. For them, special attention is needed to certain decisions in their estate planning documents, including Wills, Trusts, Power of Attorney, and Advanced Medical Directives, according to a recent article from Coeur d’Alene/Post Falls Press, “Headed South for the winter? Your estate plan may need some attention.”

If you live in multiple states at different times of the year or own assets like real estate in more than one state, your estate planning documents and overall estate planning strategy need to take this into account. Many people aren’t aware of the need for planning to avoid having their estate go through probate in every state where they own property.

Even if you don’t mind the idea of your estate being administered through probate, a formal court-controlled process, you probably don’t want your loved ones to go through this process in multiple states, which takes time and can be costly.

Another issue for Snowbirds concerns the Power of Attorney documents. Which state these are prepared in and which state’s laws govern the use of these POA documents is more complex than most people expect. There’s no one-size-fits-all answer, so having this discussion with your estate planning attorney before you travel for the season is critical. Don’t assume you have it all set up and can efficiently deal with it once you arrive at your winter home. The law is a little more complicated than that.

Any time you leave your home state for an extended period, you should bring copies of important legal documents. For most people, this includes your Financial Power of Attorney, Health Care Power of Attorney, Last Will and Testament, Living Trust, or any other Trusts you may have, Living Will, and a Physician’s Orders for Scope of Treatment Form. This last document is known by different names in different jurisdictions, which is another reason to review these documents with your estate planning attorney.

Will copies of these documents be accepted? This is another question to ask your estate planning attorney. In some cases, a copy will be sufficient for any purpose, while in others, the originals will be needed, regardless of how far away you are from them.

Estate planning documents should be in a safe and secure location, like a fireproof safe or your estate planning attorney’s office. If you are traveling, a set of copies should always travel with you.

Before you head to the airport or pack up for your winter sojourn, call your estate planning attorney to be sure your estate planning documents are all in order. Hopefully, you won’t need any of them, but if you do, you’ll be glad to be prepared.

Reference: Coeur d’Alene/Post Falls Press (Sep. 13, 2023) “Headed South for the winter? Your estate plan may need some attention”

What You Should Know about Inherited IRA

“Navigating the often complex world of inherited individual retirement accounts (IRAs) can be daunting, especially in the wake of losing a loved one.”

Inheriting an Inherited IRA can be even more complicated than the already complex world of inherited Individual Retirement Accounts (IRAs). Understanding the rules and regulations about inheriting an inherited IRA is critical to avoid major tax pitfalls, according to a recent article from yahoo! finance, “What Happens When I inherit an Annuity?”

After the passage of the SECURE Act, the rules concerning inherited IRAs became quite restrictive. Working with an estate planning attorney knowledgeable about IRAs can be the difference between a healthy inheritance or an unexpected huge tax liability.

An inherited IRA is an IRA left to a beneficiary following the death of the original account owner. The beneficiary who inherits the IRA can pass it to a successor beneficiary upon death. This creates the “inheriting an inherited IRA” scenario.

If the line of succession is not set up correctly, there is the potential for inherited assets to go through probate for a judge to rule on the rightful owner.

The original beneficiary is the first person to inherit the IRA. Once they have inherited the account, they may name their successor beneficiary. There are rules for the original beneficiary and the successor beneficiary.

The SECURE Act changed the timeline for inherited IRAs. It eliminated the “stretch” IRA strategy, which allowed beneficiaries to take distributions over their lifetime, stretching out the tax-deferred growth of the IRA over decades. Now, most non-spouse beneficiaries must withdraw all assets from an inherited IRA within ten (10) years of the original account holder’s death. This change presents new implications with regard to taxes, especially if the beneficiary is in their peak earning years.

Inheriting an inherited IRA can involve complex tax rules and pitfalls. There are timelines for taking required withdrawals and zero flexibility for mistakes.

You’ll also need to be sure the inheritance is documented correctly to avoid potential probate.

The rules differ for spouses inheriting an IRA since they shared assets with their deceased spouse. The SECURE Act allows spouses to treat the IRA as their own, providing more flexibility in distributions and potential tax implications.

Understanding the concept of Year of Death Required Distributions is essential. Let’s say the original owner was over a certain age at death. In this situation, a Required Minimum Distribution (RMD) may need to be taken in the year of death, which could impact the heir’s taxes for that year.

Knowing potential tax breaks related to inherited IRAs will also help with financial management. Non-spouse beneficiaries can deduct the estate tax paid on IRA assets when calculating their income tax.

These are complex issues requiring the help of an experienced estate planning attorney. Ideally, the conversation about what happens when you inherit an inherited IRA should occur while creating or revising your estate plan.

Reference: yahoo! finance (Sep. 5, 2023) “What Happens When I inherit an Annuity?”

What if Your Life Insurance Beneficiary Predeceases You?

“If you have life insurance, you know you were required to pick a single or multiple beneficiaries when you purchased your policy. When you die, the beneficiaries receive the payout from the policy.”

Most people understand the overall workings of life insurance, but according to a recent article from yahoo! finance, they may not know the answer to this question: “What happens if your life insurance beneficiary dies before you?”

Beneficiaries are typically spouses, family members, friends, or charitable organizations the insured cares about and wants to protect financially after the policy owner dies. However, sometimes, life doesn’t go as planned. If there’s one beneficiary and they die before the insured, an entire plan can be undone. This can be avoided with a few simple steps.

First, make sure you name several contingency beneficiaries, not just one. If there’s only one, and they die before you and no changes were made to the policy, the proceeds from the policy will most likely be paid directly into your estate upon your death.

This means the entire amount will go through probate, making it accessible to creditors and visible to anyone who wants to look up your will information. If there are outstanding debts, from a home mortgage to student loans or debts to the IRS, claims may be placed on your estate, including the insurance policy death benefit.

It’s possible your friends, relatives, or business associates could find themselves embroiled in an estate battle over these funds. Having a secondary and even a tertiary beneficiary named on the policy isn’t difficult to do and can prevent unnecessary litigation and disputes among loved ones.

If you’ve named more than one primary beneficiary and the primary beneficiary dies, in most cases, the death benefit proceeds from the life insurance policy will usually be distributed among the remaining beneficiaries. How it is distributed will depend upon whether or not it’s done on a per stirpes or per capita basis.

Per stirpes means the money will be divided equally between beneficiaries if the primary dies. If the proceeds are to be split between two children, but one has died before you, the surviving beneficiary still gets their intended share. The other share is still divided equally among the deceased beneficiary's children. Under a per capita arrangement, the death benefit would go to the remaining primary beneficiary.

What if you’ve named a nonprofit organization, but it shuts down or is absorbed by a different organization? A few different scenarios may occur. One is that the death benefit could be paid to your estate, which would be subject to probate. The second is the organization that superseded the organization you named as your beneficiary may step forward to claim the benefit.

Talk with your beneficiaries about any life insurance policies where they are the beneficiaries, and let them know your wishes for how the death benefit will be distributed. After you pass, they must contact the insurance company, ideally with a copy of the policy. They won’t automatically get the benefit unless they make a claim to the money and provide the required proof. Your estate planning attorney should be informed of your policy and beneficiaries, so they can help when the time comes.

Reference: yahoo! finance (September 5, 2023) “What happens if your life insurance beneficiary dies before you?”

Three More Reasons to Have an Estate Plan

“Estate planning not only makes things easier for your loved ones if you become incapacitated or when you’re gone, but it also does these three important things.”

Even after COVID, most Americans still don’t have an estate plan. A 2023 survey reported in Kiplinger’s recent article, “Three Overlooked Benefits of Estate Planning,” found that 75% of respondents didn’t have an estate plan. Worse, 72% of all respondents over age 75 didn’t have an estate plan.

It’s an easy task to postpone. No one likes to think about death, their own or their spouse’s. However, not having an estate plan condemns your loved ones to deal with an expensive, time-consuming, stressful mess that can be easily avoided.

Estate planning involves the creation and execution of the documents needed to address healthcare, financial, and legal affairs in case of incapacity or death. This is done with a series of documents created by an estate planning attorney. The names of the documents vary by state, but their function is roughly the same:

• Guardianship—if there are minor children, the will names who will receive custody of your children if you and your spouse both die.
• Will—A legal document used to express your wishes to distribute your property, name a guardian and an executor.
• Trust—A fiduciary agreement used to shield your estate from probate and allow further customization of your estate plan.
• Durable Power of Attorney—A legal document naming a spouse, partner, or other third party to manage finances if you can’t manage your own decisions.
• Advanced Care Directive—A document outlining the medical care you want or don’t want if you can’t make or communicate these decisions on your own.
• Medical Power of Attorney—A document naming a third party to make medical decisions if you are incapacitated.
• HIPAA Authorization—A document giving another person the right to view medical and insurance records and communicate with healthcare providers.

Why should you go through the trouble of having all these documents created? If focusing on the benefits of having an estate plan is the motivation you need to get going, here are several good reasons to have an estate plan.

Securing management of health care and finances if you’re incapacitated. No one likes to think they’ll ever be too sick to care for themselves or make their own decisions. However, this happens routinely to older Americans. Diseases like Alzheimer’s and other illnesses strike older adults with increasing frequency as they age. If you have an estate plan in place, family members can step in to take care of you if necessary. They’ll be able to pay bills to keep your household running smoothly, speak with your doctors and avoid going to court to obtain guardianship or conservatorship.

Fulfilling your wishes. Lacking a will, the laws of your state will determine how your property is distributed, with most states following a next-of-kin lineage. If you want your spouse to inherit everything and the state law divides your estate so 50% goes to a spouse and 50% is divided among the children, the state law will rule.

Another set of problems comes from outdated wills. If you named someone to be your executor thirty years ago and haven’t updated your will, they may no longer be in your life, or you may not want them administering your estate. Another problem is that if you’ve divorced a spouse and never updated your will, life insurance policies, or retirement accounts, your next call should be to your estate planning attorney and insurance agent.

Avoiding probate. Probate is a process where your will is filed with the court, reviewed by a judge, and approved—or not—to be administered. Depending on the jurisdiction, all documents, including your will, are available to anyone by searching the public records. An estate planning attorney can help you decide what assets you are willing to have to go through probate and what might be removed from your estate using trusts. Trusts provide more control over asset distribution and, depending upon the trust used, can provide protection from creditors and nuisance lawsuits. Trusts are also used in tax planning, which should go hand-in-hand with estate planning.

Estate plans have many benefits. Consider having an estate plan as part of your legacy to protect yourself during your lifetime and help your family.

Reference: Kiplinger (September 6, 2023) “Three Overlooked Benefits of Estate Planning”

How to Include Digital Assets in Your Estate Plan

“Cryptocurrency has changed the nature of what can be considered an asset, and that’s affected estate planning, too, the process of allocating your assets to your heirs on your death.”

While owning digital assets hasn’t changed the principles of estate planning, it has made the estate pre-planning process more complicated, according to the article “Estate planning and cryptocurrency: 5 tips for leaving your digital assets” from Bankrate. The hurdle is the information needed to retrieve digital assets, including passwords, keys and digital asset locations. There’s no one to call, and the stories of millions in digital assets lost forever are already legendary.

Here are five tips for cryptocurrency owners:

Know where the crypto is held. Cryptocurrency held with a traditional broker or crypto exchange can be handled like other investment accounts, if a beneficiary is named on the accounts or otherwise specified in a will or trust documents. An owner might try to hide the account. However, it generally can be found if the executor knows where the crypto is located.

If crypto assets are self-custodied in an off-chain wallet, and no one knows where the wallet is or its existence, crypto can be hidden and may not be retrievable. A title or probate search will not reveal them; it may be gone forever without the password, private key, or seed phrases.

Understand crypto can easily be lost permanently. Anyone holding crypto on an encrypted hard drive could lose the asset forever, if no one but the owner knows where it is or how to access it. If a hard drive is lost, destroyed, or stolen, or if the key is lost, the crypto is gone.

Provide access to crypto accounts. Whether it’s traditional brokerage accounts or crypto on a hard drive, you’ll need to provide the means and info for your executor or heirs to access these assets upon your passing. The challenge is balancing access with the security of the accounts. There are ways to set up a centralized location to secure all known seed phrases, keys and passphrases and then locate them in the most secure place available. For example, a hard copy list may be stored with other important documents in a fire and waterproof safe.

Another problem is that if your executor is unfamiliar with digital assets, they may not know anything about how digital assets work, making accessing the accounts challenging. You may need to bring them into the digital world as part of your estate planning process.

Protect access to accounts with best practices. If crypto is sent to another person, it’s basically unrecoverable. Don’t include this information in your will, as it becomes a public document upon going through probate. It may be better to secure digital vaults or use reliable, reputable third-party services to store access information. Be careful about providing access to family members who may take advantage of their digital fluency before the estate plan is settled.

Don’t forget cryptocurrency is taxable. Any realized capital gain is taxable, and so are purchases using crypto when the value of the goods is worth more than the purchase price of the crypto. If the estate is over the federal or state exemption level, it can owe estate taxes, even when the crypto is hidden. Tax implications, including tracking the cost basis and gain and loss metrics, are especially important during the asset transition phase. Executors dealing with crypto must be careful to declare the estate’s taxable gains and losses. The estate must meet all tax obligations, crypto and traditional assets included.

Speak with an experienced estate planning attorney about how your state’s laws govern cryptocurrency and digital assets as part of a comprehensive estate plan.

Reference: Bankrate (September 5, 2023) “Estate planning and cryptocurrency: 5 tips for leaving your digital assets”

Should You Have a Roth or Traditional 401(k)?

“The 401(k) was built on a simple idea. Set aside money from each paycheck to save for tomorrow and get a tax break today. Many workers now have another option: Save the tax break for tomorrow, too.”

The Roth 401(k) is a relatively new retirement savings tool funded with after-tax money and tax-free growth. It’s like the Roth IRA but with an additional benefit: workers may save significantly more than possible in an IRA, and often, there is a company match. A recent article from The Wall Street Journal, “Roth v. Traditional 401(k): Where to Put Your Money for Retirement?” examines the options.

Roths aren’t the best choice for everyone. Deciding how much to fund a Roth versus a traditional retirement account requires calculating your current spending, future taxable income, and some other unknowable factors—like life expectancy. Despite the choice's complexity, it offers the ability to reduce lifetime tax bills and leave more money for retirement and heirs.

The money withdrawn from a Roth can be tax-free, so it’s excellent for supplementing taxable income during years when retirees would otherwise be pushed into higher tax brackets. Starting in 2024, Roth 401(k)s will be exempt from the required distributions with traditional accounts. Roths can be left intact for heirs, although the accounts must still be emptied in ten years.

The best candidates for Roths are those who anticipate they’ll be in a higher tax bracket in retirement than now, which fits younger workers with years of raises ahead of them. For mid-career earners, it can be hard to tell whether they’ll be in a higher tax bracket during retirement. Some sources of retirement income, including Social Security and pensions, can provide some estimates of benefits. It’s still difficult to accurately predict the investment returns used to determine retirement account withdrawals.

How to decide? Start by comparing your current tax rate and the rate you expect to pay in retirement. For younger earners, the math favors the Roth. Some experts say once a person moves out of the 12% bracket, it’s best to start dividing savings between a Roth and a traditional 401(k). One rule of thumb: add 20 years to your age and put this percentage of money you are saving for retirement into a traditional 401(k), with the rest in a Roth.

If someone retires at 60 and their taxable income falls, it can present an opportunity to convert a traditional IRA or 401(k) savings into Roth accounts at a low tax cost.

Another tactic is the mega-backdoor Roth conversion, which can allow high earners to build a nest egg of tax-free retirement savings without giving up traditional 401(k) contributions and the tax breaks from making them.

Other reasons to consider Roth contributions? Your tax rate is likely to stay the same. To move a large amount into a Roth, big savers might want to contribute to a Roth while working and look for opportunities to convert money while temporarily in a lower tax bracket.

If you think tax rates will increase, as when many tax cuts enacted by Congress in 2017 are scheduled to expire, the Roth is a good way to protect from higher tax rates in retirement.

If you want to leave your 401(k) to heirs, they will have ten years before they need to empty the account, with no tax consequences. The tax-free nature of a Roth withdrawal, IRA, or 401(k) makes it well worth considering.

Reference: The Wall Street Journal (September 2, 2023) “Roth v. Traditional 401(k): Where to Put Your Money for Retirement?”

Do You Need a Will or Trusts or Both?

“A traditional will could be the simplest but not necessarily the best way to pass on your legacy.”

A comprehensive estate plan is the best way to protect yourself during your lifetime and your family after you’ve passed. For many people, it’s tempting to think a simple will is all they need, as reported in a recent article, “Is a Will Really the Best Way to Pass an Inheritance to Your Family?” from The Motley Fool. This might be true if your estate is relatively small. However, there are good reasons to consider using a trust or other estate planning strategies.

A last will and testament is a binding document to allocate assets after death, assign guardianship for minor children, name an executor to manage your estate and convey other last wishes.

However, there are other considerations to an estate plan, including taxes, special needs of heirs and how quickly you want assets and property to be transferred. Your estate planning attorney can discuss how best to accomplish your goals once they are articulated.

One of the challenges of having only a will is probate. This court process authenticates a will and gives the named executor the power to manage the estate and eventually distribute assets. Probate can be a long, costly and public process when assets are unavailable to heirs.

In some jurisdictions, probate is a matter of months. In others, it can be years before probate is completed if the estate is complicated.

Most people don’t know this, but wills in probate become part of the public record. Anyone can see everything in your will, including who you leave property to and how much they receive.

An alternative is the living trust. This document establishes a legal entity to hold assets during your lifetime. The trustee can be yourself and a secondary trustee. The trustee administers the trust according to your wishes, which are established in the language of the trust.

Depending upon your state, your estate planning attorney can put a provision moving assets into the trust after your death, in case any asset is accidentally forgotten and not moved into the trust.

Living trusts are also revocable, meaning they can be amended or revoked at any point during your lifetime. This provides a great deal of flexibility.

Joint ownership is another option used mainly by married spouses. Joint Tenancy with Right of Survivorship (JTWRS) is a popular way to own property. Assets owned jointly transfer directly to the surviving spouse (or joint owner) without the need for probate.

Just as everyone’s life is different, everyone’s estate plan is different. State law varies, and the size and complexity of your estate will influence how your estate plan is structured. Your best bet might be a mixture of wills, trusts and joint ownership arrangements. An experienced estate planning attorney can create a comprehensive estate plan to suit your and your family’s needs.

Reference: The Motley Fool (September 4, 2023) “Is a Will Really the Best Way to Pass an Inheritance to Your Family?”