Broker Check

Estate Planning Basics

May 18, 2023

At Foundation Wealth, we try to be as full service as an advisory firm can be.  The four pillars of financial planning are: 1) investment planning; 2) tax planning; 3) insurance planning; and 4) estate planning.  As your sworn fiduciary, my main goal is to advise on estate planning options (as I am also not an attorney). Our firm also includes Glen Frost who is an attorney and remains a resource for all estate planning questions.

It does not matter if net worth is $50,000 or $50,000,000, everyone needs a plan for their assets when they inevitably pass.  Here are some basics you should know about protecting your assets when you are no longer here to manage them directly.

First, what are you protecting your money from?  The first level of that is simply probate. Probate is when the courts administer your estate when you die.  As my old friend Rob Owings used to say: “if you don’t have an estate plan, the state is your estate plan.” Every estate goes through probate (even if you have a will). Here are three reasons why you want to avoid probate as much as possible-

  1. Delay. Probate is a court process. That basically means every aspect of the process needs to be approved by the court. Have fun with that.  This can make even the simplest of estate administrations take months, or even years.
  2. Lack of privacy. Probate is public record and means anyone (literally everyone) can find your records online. Your nosy neighbor can see all your finance and property info. If privacy is important to you, you will want to avoid probate.
  3. Attorney fees. Probating an estate isn’t easy without an attorney from everything I have learned. Attorneys are of course not cheap. But perhaps worst of all… An attorney cannot be paid with estate assets until your estate is through probate, therefore your heirs will have to foot the bill until such time.

But how do you avoid probate? A legal trust is a great place to start. A trust is a legal arrangement that gives you 100% control of your assets (even if you’re dead). 99% of people can benefit from a trust.  Some basics: the trustor owns the assets; the trustee is given permission, by the trustor, to manage the assets. The beneficiary then benefits from the trustee’s actions. Here’s why almost everyone should consider a trust:

  1. Privacy. Unlike the probate process, trusts are private records. No more snooping from the nosy neighbor.
  2. Control. You can customize a trust and you don’t have to distribute your assets outright.  For instance, you could choose to have the trust distribute assets to your child after they have reached an age, such as 25.  (They say our brains are not fully developed until age 25, so that sounds like a good age to me.)
  3. Asset Protection. When your assets are in a trust, they are shielded from many debtors/creditors. When your estate is probated, all debtors and creditors must be notified so they can make claims.

A trust avoids probate because it owns the assets and not you personally. Luckily, you get to stay in control of the assets, even after you’re gone. Avoiding probate should save your family money, stress, and TIME.

Well, that’s my advice for now. Estate taxes are another animal and another blog post for the future… As always, don’t hesitate to reach out should you have any questions.