Less than 5,000 people were expected to pay the estate tax in 2020. The reason so few people have to pay this tax stems from estate planning. A properly planned estate rarely needs to pay the estate tax.
What a properly planned estate looks like depends on your resources and situation. Different types of estates serve different needs. If you hope to provide well for your heirs, you’ll need help navigating the process.
Come along with us and we’ll lay out common types of wills and other wealth management tools. While one article won’t be enough to lay out the finer points of each, you can go into the process armed with some of the best wealth management practices.
Types of Estates and Estate Planning Tools: Wills
Some people only need the most basic form of estate planning. The standard will lay out your preferences for what happens to your assets after you die. An estate and trusts attorney can go over your will and make sure it will hold up.
Some people want their heirs to receive their inheritance faster or with greater specificity than a simple will allows. Other types of wills, such as testamentary trust wills and joint wills, allow the decedent to set further conditions.
A testamentary trust will place some assets into a trust, overseen by a designated trustee. This allows you to place conditions on the timing and approach to distribution.
Types of Estates: Family Trusts
If you don’t want to create trusts through your will, you have other options for family trusts. Choices like generation-skipping trusts and life insurance trusts protect your assets for specific heirs and circumstances.
Each of the types of family trust varies in how it works. This article goes into each type of trust in greater detail, illustrating how you can use them and who each best targets.
Types of Estates: Life Estate
A life estate plays roles in both the land ownership sense of an estate and the death and dying sense of an estate. A life estate gives someone interest in a property only while alive. After the holder’s death, the property reverts to its original owner.
Consider a case in which you’ve promised inheritance of your house to your youngest child, but your oldest son lives with you as a caretaker. You could make yourself and your oldest son life tenants, allowing both of you an interest in the house until your death. Your youngest child would receive the house once both of you died without it passing through probate.
Be Ready to Ask Questions
The range of types of estates and types of wills is vast. Covering every way an estate could be planned would be a grand undertaking. Don’t think of this article as the be-all and end-all, but use it to start asking your estate planner about potential solutions.
If you’re looking for more information on legal issues or estate planning, try checking out our legal section. We hope our articles can point you in the right direction for a variety of legal and financial issues.