What is estate planning? Estate planning ensures that your hopes, dreams, and concerns for yourself and for your loved ones will be accomplished at your death or incapacitation. It protects you and those you love by keeping you, your family, and your sensitive business information out of probate court at your demise. A good estate plan will enable you to control your property while you are alive and well, to care for yourself and your loved ones if you become disabled, and be able to give what you have to whom you want, the way you want, and when you want, and to minimize taxes, attorney’s fees and court costs.

To understand the process of preserving your wealth, you should first understand six basic estate planning strategies:

Intestacy

First, there is the state’s default strategy, which comes into play when someone does nothing. This is called intestacy. The state has a statutory method for dealing with your estate if you become incapacitated and when you die. In other words, you permit the state to make the decisions you could have made.

Simple Wills

Another strategy is to prepare a will. With a will you can control what happens to your property when you die to the extent that you can determine who gets what. Unfortunately, a will has no effect whatsoever while you are alive. If you become incapacitated, a will won’t help. Of course, planning with only a will guarantees a probate administration of your estate.

Joint Tenancy with Right of Survivorship

A third option is to plan by selecting how assets will be titled. For example, various types of assets including bank accounts and real estate can be owned in joint tenancies with right of survivorship. In other words, a husband and wife could have a joint bank account that would belong to the survivor on the death of the first. However, this option does not help on the death of the survivor, does not deal with what will happen if the survivor becomes incapacitated, and has other inherent risks.

Beneficiary Designations

A fourth method is to control what happens to assets like life insurance, IRA’s and 401(k)’s by completing a beneficiary designation. If a beneficiary designation is made, the asset is not a probate asset, but the money may not be used to accomplish the insured’s or participant’s goals or purposes. Would you want an eighteen year old to suddenly gain control of the death benefit from your life insurance or the balance in your IRA or 401k?

Gifting

A fifth alternative is to make lifetime gifts. A gift is irrevocable when made and may lack the controls the donor may want to exercise over the donee’s use of the gift. Would your eighteen year old put his college fund to the best use if he or she had the money in their checking account?

Revocable Living Trusts

All of the above strategies, except the first, may have some part in an estate plan. However, only the last strategy, to create a revocable living trust, offers the promise of accomplishing all of the goals of an “estate plan.” This will enable you to control your property while you are alive and well, to care for yourself and your loved ones if you become disabled, and be able to give what you have to whom you want, the way you want, and when you want, and if you can, to save or minimize every tax dollar, attorney fee and court cost possible.

Everyone has an estate plan. Some are better than others. What kind of plan do you have?