Estate Planning Checklist (The Motley Fool article) part 2 re assets

January 14, 2019 - Posted by: admin - In category:

taxes - No Responses

You need an estate plan. This is true even if you don’t have a lot of assets. It’s also true if you’re young, or if you don’t have close family member. Estate planning means preparing for the inevitabilities of life. People get sick or hurt, and you need a plan in place to determine what kind of medical care you’ll receive if this happens to you. People become incapacitated, unable to make important decisions on their own, or unable to live independently. And of course, people die. Estate planning helps to protect your family and your assets in any of these unfortunate situations.

This is the second post that reviews an online article by Christy Bieber and posted on The Motley Fool website. As noted in the prior post, Ms. Bieber’s article is a primer on estate planning basics. The first post addressed the first item on Ms. Beiber’s list of estate planning considerations and, unsurprisingly, those post will deal with the second item on her list, namely:

List the asset you want to include in your plan: When making a plan, you need to consider all of the money and property you own either independently or jointly.

I appreciate the logic of Ms. Beiber’s approach to estate planning, both in general and specifically how she formulates her list of items to consider for those just starting down the road of planning. The subject of assets is key at all stages of the planning and, as surprising as it may seem from the outside observer who has never been through the experience, the assets often get far too little focus and attention in the process. Why? Well, the reasons surely vary by person and circumstance. But why is such lack of attention problematic? Great question.

Consider for a moment that a trust is analogous to a barn (just say with me for a minute). A barn is designed to house and protect farm stuff, right? This might be animals, hay and other feed, equipment and the like. When those things are placed within the barn, the barn serves its function of protecting the same from the elements and from other forms of harm (and theft).

In a like manner, a trust can be viewed as a structure that hold and protects assets over time. Eventually, a trust can provide for a systematized and orderly manner of managing and distributing assets, but in the interim, while those assets remain within the trust, they are “protected”. Unfortunately, we see far too many trusts which are put in place and which then remain partially or totally empty from inception. The assets for which the trust was designed are never “legally connected” to the trust. The result in those situations is that such assets remain “outside in the cold” and are consequently unprotected.

To continue the barn analogy, it is pretty obvious that when a farmer and his architect sit down to design the barn, they do so with important considerations of cost, need, property to be protected and related mattes. In other words, if the farmer needs to house only one horse, a few chickens and a small tractor, he does not then require a 300 x 100 x 50 barn, complete with elevators. No, a much more simple, smaller and less ornate design and build will due for that farmer. In contrast, if the farmer has millions of dollars of large equipment and several prized livestock to protect, he will need to invest in a larger structure than the first farmer.

Trusts can and should also vary greatly in design, operation and execution (and cost). One size fits all does not work in the world of estate planning, any more than one size fits all works in the context of homes or clothing. And the assets which are going to be contained in and administered by a trust-based estate plan are a key factor in the requisite and recommended design of such an estate plan. Bill Gates and Jeff Bezos need a MUCH different estate plan than an 18-year-old high school graduate. Admittedly, that is an extreme example to illustrate the point. But the principal can be applied across the spectrum of people, circumstances and assets.