Leaving a Legacy - PC1371-Print

ESTATE PLANNING

LEAVING A LEGACY

What You Need to Know About Leaving a Legacy

You’ve worked hard over the years to accumulate wealth, and you probably find it comforting to know that after your death the assets you leave behind will continue to be a source of support for your family, friends, and the causes that are important to you. But to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now. There are four basic ways to leave a legacy: (1) by will, (2) by trust, (3) by beneficiary designation, and (4) by joint ownership arrangements. WILLS A will is the cornerstone of any estate plan. You should have a will no matter how much your estate is worth, and even if you’ve implemented other estate planning strategies. You can leave property by will in two ways: making specific bequests and making general bequests. A specific bequest directs a particular piece of property to a particular person (“I leave Aunt Martha’s diamond broach to my niece, Jen”). A general

bequest is typically a percentage of property or property that is left over after all specific bequests have been made. Typically, principal heirs receive general bequests (“I leave all the rest of my property to my wife, Jane”). With a will, you can generally leave any type of property to whomever you wish, with some exceptions, including:  Property will pass according to a beneficiary designation even if you name a different beneficiary for the same property in your will  Property owned jointly with rights of survivorship passes directly to the joint owner  Property in a trust passes according to the terms of the trust  Your surviving spouse has a right to a statutory share (e.g., 50%) of your property, regardless of what you leave him or her in your will  Children may have inheritance rights in certain states Caution: Leaving property outright to minor children is problematic. You should name a custodian or property guardian, or use a trust.

BENEFITS OF A WILL  Distributes property according to your wishes  Names an executor to settle your estate  Names a guardian for minor children  Can create a trust

TRUSTS You can also leave property to your heirs using a trust. Trust property passes directly to the trust beneficiaries according to the trust terms. There are two basic types of trusts: (1) living or revocable, and (2) irrevocable. Living trusts are very flexible because you can change the terms of the trust (e.g., rename beneficiaries) and the property in the trust at any time. You can even change your mind by taking your property back and ending the trust. An irrevocable trust, on the other hand, can’t be changed or ended except by its terms, but can be useful if you want to minimize estate taxes or protect your property from potential creditors. You create a trust by executing a document called a trust agreement (you should have an attorney draft any type of trust to be sure it accomplishes what you want). A trust can’t distribute property it does not own, so you must also transfer ownership of your property to the name of the trust. Property without ownership documentation (e.g., jewelry, tools, furniture) are transferred to a trust by listing the items on a trust schedule. Property with ownership documents must be re-titled or re-registered.

Wealth | Investments | Planning Commerce Trust Company

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