Wealth Planning

Estate Planning 101: Back to Basics

October 1, 2021


It’s natural to think about how wealth will help fulfill your goals – retirement, travel, a nice home, helping family and charity, to name a few. Less obvious, but just as important, is making sure that your family and financial goals are met after you die.

Without an estate plan, your assets will be left to a list of your heirs determined by state law, and the courts would place any minor children with relatives. (We don’t know of anyone who would be pleased with these results!) Moreover, the distribution of your assets can be a public and costly process. Fortunately, all of these potential negative consequences are easy to avoid.

Here we discuss the pertinent pieces of a basic estate plan. Of course, laws vary by state, so you should consult with a local attorney to prepare your estate plan. Few young adults put an estate plan in place until they have their own children (and many don’t do it even then). We encourage you to pass this along to any young adults who might benefit from an estate planning primer.

The key documents

A basic estate plan for most people should feature five components:

  • Living Trust
  • Will
  • Assignment of Assets
  • Durable Power of Attorney
  • Health Care Documents

Your plan’s centerpiece: The living trust

What is a living trust?

A living trust is a legal document that allows you to name who will receive your assets upon death and specifically how and when the beneficiaries will receive the assets (i.e., in trust or outright, at what ages, any requirements to receive the assets, etc.). In addition, you can structure the trust to help protect the beneficiaries’ assets from creditors and spouses. Finally, a living trust can include provisions that reduce estate taxes, thereby leaving more assets for the beneficiaries.

In order to create a valid trust, you must choose a person or entity – known as the trustee – to hold the assets on your behalf. Generally with a living trust, the person who creates the trust (the grantor) also serves as the trustee during their lifetime. The grantor has full access to the trust assets during life and has the ability to change the terms of the trust at any time before death. After the grantor dies, a secondary trustee – a person (often a spouse or family member) or institution – is named to manage the assets and distribute them to the beneficiaries according to the terms of the trust.

Why do I need a living trust? How is it different from a will?

A living trust helps to avoid the potentially costly and public court process known as probate and ensures that your information (what assets you have and who the beneficiaries are) remains confidential. Additionally, any assets titled in the name of the living trust can be managed and distributed by the trustee according to your directions without court involvement.

In contrast, if you rely solely on a will to transfer assets at death, the named executor may need to file papers with the court to distribute the assets to the beneficiaries and the information becomes public knowledge. However, as discussed below, a will is still a critical component of any estate plan. A will serves in a limited but important capacity when used in conjunction with a living trust.

Where there’s a will, there’s a way

What is a will, and why do I need one?

A will was historically used to indicate who would receive your assets upon death. Some states still use a will for this purpose in place of a living trust and, in fact, a will can afford you most of the benefits of a living trust — with the exception of avoiding probate and keeping your financial affairs from becoming public knowledge.

More commonly today, though, a will serves in a limited but important capacity when used in conjunction with a living trust. The will states that any assets not titled in the name of the living trust should automatically be transferred to the trust upon death. This is known as a “pour-over will.” The will also allows you to name guardians for any minor children. Finally, it names the executor responsible for filing an estate tax return.

Making your planning count: The assignment of assets

What is an assignment of assets?

An assignment of assets is a document which indicates the intent to transfer title of your assets to the name of a living trust.

Why do I need an assignment of assets?

The terms of a living trust only apply to assets that are titled in the name of the trust. For example, if you own a home that is not titled in the name of your trust, the property would pass through your will at death and may be subject to probate, which largely defeats the purpose of having established the living trust.

You should transfer title to most of your assets into the name of your living trust, but if you die without having done so, your executor may be able to use the assignment to avoid a full probate. Additionally, the assignment states your intent that personal property for which there is no evidence of the owner on record, such as jewelry and household belongings, be distributed according to the trust terms.

Power tool: The power of attorney

What is a power of attorney?

A power of attorney (POA) is a document which allows you, the “principal,” to designate one or more people to act on your behalf, generally with respect to business and financial matters such as managing financial accounts and filing tax returns. The designated individual is known as your “agent.” The scope of the power of attorney may be broad (a general POA) or more limited (a special POA).

Generally, a POA is effective upon the principal’s incapacity, known as a springing power of attorney, making it an important tool for managing your financial affairs in the event that you cannot. However, the POA can be made effective as soon as it is signed. If effective immediately, the POA will remain in effect until the principal becomes incapacitated. More typically, though, the POA will remain in effect even if the principal becomes incapacitated and will last until death – this is known as a durable power of attorney.

A POA only applies to assets not titled in the name of your living trust, as the trustee of your living trust administers assets held in the name of the living trust (often, the trustee and agent are the same person).

If you do not complete a power of attorney and you become incapacitated, a court will likely need to appoint a conservator to handle your financial matters, which is a time-consuming and cumbersome process to go through at the time of a family crisis.

Estate planning Rx: Health care documents

What is a health care document?

A health care document advises your physician, family and friends about your healthcare preferences. In addition, it allows you to name a specific person or persons (an agent) to ensure your preferences are followed should you become unable to make your own healthcare decisions. More specifically, it can indicate preferences for end-of-life decisions such as whether to remain on life support, burial wishes, receipt of pain medication and organ donation. Any healthcare decisions not specifically stated in your health care documents are left to the discretion of your named agent.

There are different types of health care documents depending on your state of residence. A local attorney can confirm the proper form to use in your state.

What if a person does not have a health care document?

If you do not complete a valid health care document designating an agent to make health care decisions in case of your incapacity, the physician or hospital will determine the most appropriate person to make such decisions (usually family or close friends). In some cases, a court will need to appoint a conservator to make decisions. Either way, there is a lot of room for conflict among family members, which proper health care documents could help avoid.

What do I do once I have completed my estate planning documents?

We recommend retaining your original estate planning documents in a safe place. You should provide copies of your POA and health care documents to the individuals named as agents. You may also consider discussing your estate plan with your successor trustees so they understand your wishes while you are still alive. This provides them with a valuable opportunity to ask questions and seek additional guidance from you about your wishes. If you have minor children, you should have a discussion with those appointed as guardians. Finally, you should properly title assets in the name of your trust.

It’s easy to put off estate planning as something that’s not relevant until some distant future. This can leave one’s family and estate dangerously exposed. Fortunately, putting a comprehensive and effective estate plan in place does not need to be difficult or time consuming.

Editor’s note: This article has been updated since its original September 1, 2013, publication

Lisa Colletti
Lisa Colletti

Managing Director in Exclusive Family Office, Partner

Lisa Colletti, J.D., CFP®, serves some of Aspiriant’s largest and most complex client families. She has also played an important role in advancing and modernizing the client service experience across the firm. In 2021, she was named Managing Director of Aspiriant’s Exclusive Family Office.

Lisa joined Aspiriant’s New York office in 2011 and has worked in various leadership roles at Aspiriant while also advising clients. Lisa currently heads the strategy, growth and execution of our Exclusive Family Office group, which is a pioneer in the multifamily office space, providing clients with a multi-disciplinary, 360-degree view of their financial lives. With one of the largest and longest-tenured in-house teams, the group brings together strategic wealth planning which includes investment strategy, estate and philanthropic planning, income tax planning, family governance, and financial administration services to help clients make the best financial decisions for their families.

Ultimately, she works to help clients see the big picture, while mastering the details necessary to help clients with their estate planning. Her goal is to provide every client a comprehensive perspective, independent and objective advice, and solid support to help them achieve their financial goals and live life well.

Lisa has developed her expertise in comprehensive wealth management for affluent families since the mid-1990s. Prior to joining Aspiriant, Lisa worked as a director in the Private Client Advisor practice at Deloitte and Touche, where she began her wealth management career.

She completed her professional education at Fordham University, earning a bachelor’s degree in Accounting and a juris doctor (J.D.) degree from the School of Law. She is licensed to practice law in the state of New York, is a member of the Financial Planning Association, and earned the Certified Financial Planner designation in 2002.

Lisa has received numerous industry accolades and is frequently quoted in news publications such as The Wall Street Journal, Newsday, MarketWatch and USA Today.

Lisa lives in the suburbs of New York City with her husband and three children.

Dawn Baca
Dawn Baca

Director in Strategic Planning, Partner

Dawn joined Aspiriant in 2016 as a senior associate in strategic planning. For over 10 years her legal career has been focused on transfer tax planning including multi-generational wealth transfers, planning for business owners, and charitable planning for high and ultra-high-net worth individuals and families. In addition to reducing client estate, gift, and generation-skipping transfer tax exposure and assisting clients in designing their estate and philanthropic legacies, Dawn is a member of Aspiriant’s Planning Strategy & Research group, serving as the firm’s subject matter expert in estate planning as well as charitable giving. She helps monitor changes in estate and gift tax law as well as related topics, like California property tax, and contributes to internal and external announcements and articles. Dawn is also Aspiriant’s Strategic Planning department internal liaison, helping wealth managers in providing Strategic Planning services and resources to our clients.

Prior to joining the firm, she spent three years focusing on foundational estate planning and probate education and training, followed by an additional three years in the Wealth Strategies department at Bank of America Private Bank (then known as U.S. Trust) in Newport Beach where she assisted with comprehensive wealth management strategies for high and ultra-high-net clients.

Dawn earned her Executive LL.M. in taxation from New York University School of Law and her Juris Doctor degree from California Western School of Law, graduating magna cum laude. She served as an executive law review editor and, as a published author, Dawn earned the S. Houston Lay Award for Excellence in Writing, Analysis, and Contribution to International Law. Dawn was an Academic Merit Scholarship recipient and earned the Dean’s Scholarship for Ethnic and Cultural Diversity.

A Reno/Tahoe native, Dawn prefers to spend her time in the great outdoors with friends and family and is a former sponsored snowboarder and slope style competitor. She supported herself through college as a blackjack dealer followed by three years learning the culinary art of sushi as a sushi chef in Lake Tahoe.

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