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What is Estate Planning?

Posted by attorney David Lutrey

What is Estate Planning?

Estate Planning deals with the protection and transfer of money, real estate, investments and personal property (“assets"). Estate Planning can preserve the orderly management of assets during life and help to ensure that those same assets are preserved for family upon death.

Estate Planning is a key component of financial success. Nearly anyone can benefit from Estate Planning. However, it is particularly important for those having significant assets.

Estate Planning is concerned with how property is owned, not which property is owned. Thus, Estate Planning is different than retirement planning or financial planning, which focus on selecting particular investments to maximize return.

Estate Planning commonly uses a combination of titling techniques and legal documents to achieve order and continuity during life and a specific framework for distribution upon death. Estate planning methods are very flexible and can accommodate an unlimited range of possibilities to suit almost any situation.

Some of the legal devices available as Estate Planning tools include: Wills; Trusts; Powers of Attorney; Living Wills; and small business entities such as Partnerships, Limited Partnerships and Limited Liability Companies. Estate Planning tools are highly customizable and they are usually used in combination for maximum effect. Some of the most commonly used Estate Planning Tools are Wills and Trusts. Wills

Wills are some of the most easily recognized and understood Estate Planning tools. Wills are written documents that establish rules for the distribution of a decedent’s estate. They can be short or long, simple or complex.

A Will nominates an executor. The executor has no power or authority until the maker of the Will dies. At that point, it is the executor’s job to wind up the decedent’s affairs by collecting all of the decedent’s assets, paying all of the decedent’s final expenses, and distributing any remaining assets according to the Will’s terms.

Generally speaking, in order for a Will to be legally recognized and enforced, the executor must hire an attorney to go to Probate Court. The probate process takes a minimum of six months and, in some cases, over a year to complete. Probate is often characterized as costly and time consuming. Trusts can be used to avoid probate.


Trusts are used to separate the “beneficial interest" of property from its “legal title." In other words, a Trust creates a situation where one person owns property for the benefit of another.

Lawyers use legal documents called “Trust Agreements" to establish Trusts. Trust Agreements contain rules for the Trust. One principal function of a Trust Agreement is to nominate a trustee.

The trustee’s power extends only over the assets specifically given to the trustee and made a part of the Trust estate. Once assets are made part of a Trust, the trustee is the only one who has the power and the duty to manage, invest and protect those assets.

Assets are considered to be given to the trustee when they are re-titled in the trustee’s name. At that point, the trustee becomes the property’s owner, and thus holds “legal title."

The process of giving assets to a Trust is called “funding." Once an asset is used to fund a Trust, it is no longer covered by a person’s Will.

Even though the trustee is the owner of the trust property, the Trust Agreement will contain terms that limit the trustee’s authority. For example, the trustee must hold, invest and ultimately use the Trust assets not for the trustee, but for the benefit of the individuals named in the Trust Agreement.

The people who are named in the Trust Agreement to benefit from the Trust are called “beneficiaries." Thus, as to the Trust assets, the trustee is the owner of “legal title" and the beneficiaries are the ones with a “beneficial interest."

Since the beneficiaries do not have legal title to the property, the beneficiaries cannot sell, encumber or otherwise touch any of the Trust assets unless the trustee consents. The trustee cannot consent unless the Trust Agreement allows it. As a result, Trusts are very useful for holding money for minor children.

Trusts survive the maker’s death. What’s more, the law allows a single person to be both the trustee and the beneficiary of a Trust that she creates herself. Thus, by naming a successor trustee in the Trust Agreement, Trusts can be used as Will substitutes for the purpose of avoiding probate.

Trusts can come in all shapes and sizes. They can be revocable or irrevocable. They can take effect today, or at death. They can stand alone or be included in a Will. Trusts can be created for nearly any legal purpose.

Trusts are used to save estate taxes, protect money for minor children or persons with disabilities, provide for a spouse or adult children from a prior marriage, accept gifts for grandchildren, avoid guardianship, avoid probate, and perform a myriad of other functions.

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