...all documented estate plans are not created equal; the tools and strategies employed in the planning process can have a profound and enduring impact on the well-being of future generations.

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Ensuring our loved ones are taken care of and our final wishes are carried out after we pass away is a top concern for a majority of people in the financial planning process. And yet, according to a 2022 survey by Caring.com, only a mere 33% of all adults in the U.S. have documented their end-of-life plans in some way. This indicates a noticeable disparity between recognizing the significance of these plans and actually putting them into action. But all documented estate plans are not created equal; the tools and strategies employed in the planning process can have a profound and enduring impact on the well-being of future generations.

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The purpose of an estate plan is to determine the beneficiaries of your assets, designate who handles responsibilities in the event of your incapacity or passing and outline the manner in which these tasks should be carried out. The best written documents are ones that successfully reduce unnecessary costs, mitigate potential family quarrels, and ensure your wishes are carried out after you pass. 

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The three categories of estate planning: 

• Intestate = Nothing set up, subject to probate.

• Will = Documented end of life wishes, still subject to probate.  

• Trust = Legal entity that can fully avoid probate. 

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What’s probate and why avoid it?

Probate is the legal process of settling a deceased individual’s estate where the court oversees the distribution of assets — reasons to avoid it:

• Access to liquidity - While the average length of probate is about 18 months, probate moves at the pace suits the courts, during which time surviving loved ones won’t have access to the assets. A lot of it is unavoidable in the process of probate; for example giving a specific amount of time from the notice that is sent out to any/all other potential beneficiaries to stake their claim on the estate’s assets. 

• Privacy - The probate process is public and estate information is on display. Which can lead to family quarrels after seeing what others may be receiving.

• Costs - The average cost of the probate process in the US is 10% of an estate. Said differently, for an estate valued at $1 million, that would be $100,000 that is no longer included in the legacy gift to survivors. 

• Control - If probated, everything is subject to the court's interpretation. The best way to have control after you pass is to establish one or more Trusts tailored precisely to your preferences. Here’s a common example; beneficiaries do not have access to inheritance until they reach age 35 other than for health, education, maintenance, and support (HEMS). 

• Not being a burden on the next generation - If you value leaving your affairs in a manner that provides a smooth transition for your loved ones, trusts are the way to do it. With a will, your named representative (normally an adult child or trusted friend/sibling) will be the person responsible for walking through the public legal situation. 

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What's a living trust? 

A trust is a legal entity that owns the property and assets placed in it. If it’s “living,” that means it can be modified (revocable) during your lifetime and has the same tax ID as you (a separate tax return isn't necessary). After you pass away the trust becomes irrevocable, meaning it cannot be changed, and it then gets its own tax ID (and requires its own tax filing). 

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The 3 role types in any given trust:

    1. Grantor(s): The person who funds a trust.

    2. Trustee(s): The person who oversees/manages the trust (can be the same or different than the grantor).

    3. Beneficiaries: The person who financially benefits from trust assets or income held/registered in the name of the trust.

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It’s not enough to have one, you have to fund it - meaning you have to register/title assets in the name of the trust. 

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At Pattern, we advise from the lens of each specific persons’ goals and values. A living trust is a great solution for someone with one or more of the following goals and/or values:

• They want immediate liquidity for their survivors.

• They want to avoid potential disputes between family members and other loved ones.  

• They want to keep their estate private to protect their survivors from those that might come out of the woodwork with less than pure intentions.

• They want to place inheritance contingencies to protect their heirs from themselves.

• They want to ensure the best care for their adult dependents or loved ones with special needs.

• They want to ensure the best care for their minor children.

• They want to optimize the financial impact of their legacy. 

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Everyone can benefit from using a living trust.  Fortunately, living trusts are not just for the elite. An increasing number of attorneys are offering them at reasonable rates. Our Pattern advisory team would love to connect with you about your specific legacy goals and what unique solutions are possible. Download the Pattern iOS or Android app to connect with a Pattern advisor today.

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