The Ultimate Guide to Estate Planning

Insights

Protecting Your Legacy and Loved Ones

When you’ve spent decades building a solid financial foundation to pass on to your next of kin, the last thing you’d want is friction when it comes time to initiate the process. Significant estate taxes, instructions improperly documented in a will, and other complications can arise.

Beyond protecting your estate from these unforeseen factors, estate planning ensures your wishes remain respected—minimizing legal disputes or other concerns amongst your loved ones long after your demise.

Below, we’ll discuss what estate planning is, why it’s important, and how to protect your legacy and loved ones.

What Goes into Estate Planning?

Estate planning refers to the processes for preserving, managing, and distributing an individual’s assets upon their death. It’s essentially a wealth preservation tool, helping individuals with any net worth protect their assets when they are not present to do so physically.

Although there’s a common misconception that estate planning should start later in life, individuals looking to protect their legacy can do so at any time, especially during the active wealth-building stages of their careers.

Let’s break down common estate planning strategies.

Wills: Protecting Your Wishes After You’re Gone

A will helps legally document an individual’s specific instructions or wishes regarding the distribution of assets to loved ones upon the individual’s death. You can use a will to provide instructions for anything, from the types of asset protections you’d like to who will assume guardian rights over surviving minor children.

As a requirement by state law, wills are signed, witnessed, and filed in probate court for the instructions to be carried out by an executor upon the author’s death.

Since our legal system recognizes wills as binding documents, they help protect your estate even if loved ones or other parties decide not to honor an executor’s instructions. For example, you can ensure your surviving minors will be financially protected by documenting in your will which portions of your estate will be passed on to them. Legal documentation of these wishes creates a safety net for your loved ones in case of interference with your estate.

Estate Tax Planning: Tax Protections for Your Assets

When an individual passes, a significant portion of their assets distributed to beneficiaries may be lost to taxes. Creating an estate tax plan helps relieve the tax burden of transferring generational wealth.

One of the most common ways to protect assets for educational purposes is to transfer them into a tax-favorable 529 plan, where the tax on the funds is deferred until they are withdrawn. Upon withdrawal, these funds are not subject to state or federal taxes, provided they are used for educational purposes. However, the rules surrounding tax-favored plans may vary from one state to another.

The best way to identify which strategy will work best for your estate’s needs is to consult a trusted estate planning expert, like our team members here at Tomoro.

Trusts: Legal Protection for Your Assets

Trusts help high-net-worth individuals safeguard the privacy of their assets, especially when these individuals want to limit any association between these assets and their next of kin.

Like wills, trusts are legal structures that protect assets passed down to beneficiaries. Using a trust, a grantor allocates asset distribution, placing a trustee as the fiduciary who oversees these allocations based on the terms of the trust.

Examples of trusts include:

• Revocable trust – Here, the grantor maintains ownership rights throughout their life and can choose to change the terms of the trust before transferring it to a trustee who manages the assets in the trust upon the grantor’s death.
• Irrevocable trust – By placing assets in an irrevocable trust, a grantor gives up ownership rights and transfers trust management to a trustee. These assets are also not associated with a grantor, providing tax protection for the income they generate. The grantor’s creditors are also unable to access those assets.
• Charitable trust – These types of irrevocable trusts provide tax benefits to individuals who distribute a portion of the income from their assets to charities.

The estate planning strategies listed above can be combined or used independently, depending on your unique circumstances. Regardless of the legacy you intend to leave behind, protecting your assets should be at the forefront of any estate planning strategy, and that’s where the experts come in to help.

Prepare Today with the Future in Mind

After decades spent creating wealth and building precious assets, keeping them safe for your loved ones should be the priority. It’s never too late or early to start strategizing about ways to safeguard your wealth.

At Tomoro, we believe wealth should benefit those you choose without impacting your wishes. Our team holds significant estate planning experience, and we’ll sit down with you to go over the best strategies for establishing legal and tax protections for your hard-earned wealth, ensuring your wishes are fulfilled after you’re gone.

Contact us to learn more about how to protect your legacy.