When people think of estate planning they generally think only of the distribution of their estate assets after death. A well thought out estate plan, however, does far more than just decide how your assets will be distributed when you die. For starters, your estate plan should protect those assets and help them grow while you are alive and then make them work for you during your retirement. Do ensure that happens, you need to have the right financial planning tools as well as the right legal advice. Although every estate is as unique as the individual creating the estate, there are some common estate and financial planning tools that people often use.
The Need for Comprehensive Estate Planning
Everyone knows they need some kind of estate plan in place, even if that means nothing more than a Last Will and Testament. What you may not realize, however, is the need for comprehensive estate planning. A comprehensive estate plan takes into consideration all of your various life goals and objectives, both current and future, and creates plans accordingly. For example, if you have a child with special needs, the needs of that child must be considered throughout your estate plan. Likewise, if your family will need immediate access to assets to pay bills and survive in the event of your death, you will need to include probate avoidance as a goal in your estate plan. The need to create a comprehensive estate plan cannot be stressed enough when discussing financial planning tools.
Protecting Your Estate Assets While You Are Alive
One of the most useful, and most flexible, of all the estate planning tools is a trust. A trust can also be an extremely beneficial financial planning tools as well. Trusts are first divided into two types — testamentary and living trusts with the former not activating until the death of the Settlor (creator ) and the latter activating when all the formalities of creation are in place. Living trusts are further sub-divided into revocable and irrevocable living trusts. As the name implies, a revocable living trust can be modified, changed, or revoked. An irrevocable living trust cannot be modified, changed or revoked by the Settlor once it becomes active. This inability to change or revoke an irrevocable living trust makes it a very useful asset protection tool. Because assets transferred into the trust become trust property, they are out of the reach of creditors or others threats. Trusts can also decrease the tax implication of transferring assets when the right type of trust is used and it is properly drafted.
Growing Your Estate Assets
There are a seemingly endless number of financial planning tools that can help your assets grow over the course of your lifetime. Simply parking assets in a bank account will allow them to earn interest; however, the interest rate is usually dismal. More advanced options might include money market accounts, IRA’s, and securities. Certain types of trusts can also help grow your estate assets by minimizing the tax implications of the transfer that is at the heart of the trust terms. To ensure that you are utilizing the best financial planning tools available to grow your assets it is imperative that you work closely with both your financial advisor and your estate planning attorney.
How Your Estate Plan Fits in with Financial Planning
Again, comprehensive estate planning is the key to a successful estate plan. Your assets are what you are trying to protect and pass down to loved ones with your estate plan. In order to have assets to pass down, however, you must protect and grow those assets while you are alive. This is where the crossroads of financial planning and estate planning meet. You need a strong financial plan that includes the best financial planning tools. You also need a well thought out estate plan that includes the best estate planning tools. Finally, you need to make sure that your financial plan fits into your estate plan
For more information, please join us for one of our upcoming free seminars. If you have additional questions or concerns about financial planning tools and how they fit into your estate plan, contact the experienced Illinois estate planning attorneys at Nash Bean Ford & Brown, LLP by calling 309-944-2188 to schedule your appointment today.