Five Basic Estate Planning

The following information and opinions are provided courtesy of Wells Fargo Bank, N.A.

A comprehensive estate plan involves more than just a will. Here are the five basic documents that everyone should consider.

1. Will

The document everyone typically thinks of first when they think of estate planning, a will is a legal document that becomes effective at your death to transfer your assets to whomever you like. A will has to be admitted to probate, a court-supervised procedure that in many states can be lengthy and expensive. Even if you have a revocable living trust (discussed below), a will is still necessary as a “backstop” and may provide guidance regarding guardianship of your minor children.

2. Revocable living trust

A revocable living trust is another document that sets forth where your assets pass at your death, but it is designed to provide two benefits that a will does not: probate avoidance and incapacity planning.

A trust is simply a legal arrangement between three parties: the person creating the trust (known as the grantor, trustor, or settlor), the trustee (who takes legal

for whom the trust is administered. In the case of revocable living trusts (“revocable,” meaning it can be revoked, and “living,” meaning it is created during the grantor’s lifetime), you are typically the grantor, the trustee, and the beneficiary. Even though you continue to control the property as trustee, you no longer own it outright. This means that the successor trustee named in the trust agreement takes over automatically if you become incapacitated or when you pass away.

It is important to note that a trust agreement operates only over those assets held in the name of the trust. If a grantor creates a trust but fails to transfer assets to it (known as “funding the trust”), it may not work as it was intended.

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