{"id":5337,"date":"2023-03-20T19:04:56","date_gmt":"2023-03-20T19:04:56","guid":{"rendered":"https:\/\/www.theforesightcompanies.com\/?p=5337"},"modified":"2023-10-27T16:07:13","modified_gmt":"2023-10-27T16:07:13","slug":"finance-301-chapter-15-the-importance-of-estate-planning","status":"publish","type":"post","link":"https:\/\/www.theforesightcompanies.com\/blog\/finance-301-chapter-15-the-importance-of-estate-planning\/","title":{"rendered":"Finance 301: Chapter 15: The Importance of Estate Planning"},"content":{"rendered":"

A cobbler with no shoes is just unheard of, and a funeral director without an estate plan should follow suit. How can you \u2013 someone who confronts daily the reality of death \u2013 ignore the fact that all of us are going to die at some point?<\/p>\n

If you respect the fact that you will die someday, then you have the right\/obligation to plan how you want to transfer your assets to those around you. This article offers some insight into the key points of estate planning.<\/p>\n

ASSET TRANSFER METHODS<\/strong><\/p>\n

There are usually a few things you\u2019ll want to accomplish when creating your estate plan, the first of which involves determining who should be protected by the use of your assets until your death. Next, decide how to provide for the transfer of those assets to the intended parties. Lastly, you will want to figure out how to reduce the taxes and costs associated with transferring those assets.<\/p>\n

Now, most people think an estate plan consists of wills, trusts and insurance, but estate planning is more involved than that. There are three ways to transfer your assets upon your death.<\/p>\n

By Titling<\/strong><\/p>\n

This method is the easiest to understand. If you title property as joint tenancy, it means that you and another party (or parties) own the property equally during your lifetimes.<\/p>\n

Joint tenancy with right of survivorship means that upon the death of one party, the property passes automatically to the surviving party (or parties). This is also easy to understand and often laughingly referred to as a \u201cpoor man\u2019s estate plan.\u201d If your property is titled joint tenancy with right of survivorship, your legal will does not override this transfer to the surviving party (or parties) or affect it in any way.<\/p>\n

Another form of titling is sole property, which means you own the property in your name, all by yourself. Anything you own in your name will be transferred upon your death by your will.<\/p>\n

Tenants in common assumes two or more people own an asset\/property. They might own it equally (50\/50), for instance, or in any percentage upon which they mutually agree, such as 60\/40, 70\/15\/15, etc. Upon the death of a tenant (party), his or her interest is then governed by their legal will while the other tenants continue with their ownership.<\/p>\n

The last form of titling an asset, tenants by entirety, is the same as joint tenancy with right of survivorship, but it\u2019s used only for married couples. Upon the death of one tenant, the property passes to the surviving member of the couple.<\/p>\n

By Contract<\/strong><\/p>\n

If you have life insurance with a named beneficiary, then upon your death, the proceeds will go to the stated beneficiary since a life insurance policy is a legal contract.<\/p>\n

Now suppose your life insurance says the beneficiary is Mr. Smith, for example, but you want to give those proceeds to Mr. Jones via your legal will. Well, your will cannot come into play in this case because the transfer by contract controls the matter.<\/p>\n

Other examples of asset transfer by contract include some business arrangements, such as a buy-sell agreement. Such contracts will dictate how and what is transferred, with no influence by anything written in your will.<\/p>\n

By Will<\/strong><\/p>\n

Your will is a legal document that governs only the transfer of property\/assets owned in your name.<\/p>\n

Unfortunately, I recently witnessed an estate and business screw-up. Via the husband\u2019s legal will, he left the funeral business and its real estate to his children. The real estate was titled as joint tenancy with right of survivorship with his second wife, however, and she was not the mother of his children. She chose to sell the real estate to a developer, which basically forced the children to move the 75-year-old business to a new site.<\/p>\n

TRUSTS<\/strong><\/p>\n

Many people incorporate a trust into their estate plan, which is a hybrid document that basically controls assets. There are many different features to a trust, including:<\/p>\n