Legacy and Estate Planning Basics

We function as third-party consultants, “sitting in the middle” with clients as they create a legacy plan that celebrates their values and what makes them unique, while maximizing how they’re able to support their loved ones and causes they care about. Once a family has gotten organized and spent some time considering their goals, we’ll act as “professional hand-holders,” of sorts, bringing their existing professionals into the loop to help bring a plan to life. 

But, let’s start at the very beginning. What is estate planning? What is legacy planning? What are the major things to include or think about in your plan, and how do you know you have your major bases covered?

What is an estate or legacy plan?

An estate plan outlines the transfer of assets from one individual to another, often with a goal of being tax-efficient in order to maximize heirs’ financial inheritance. It’s typically handled through a will or trust, making it official and legally binding. This is the ideal case, but about 60-65% of American adults don’t have a plan. At all. Or if they do, they don’t know or understand what it says! That’s a huge missed opportunity, so we’re trying to change that statistic. 

What assets make up someone’s estate?

Everything, both the things that are “owned” and the things that are “owed.” So, to the positive, it’ll include real estate, vehicles, stocks and bonds, artwork, life insurance, retirement funds, pensions, etc. On the other side of things, any mortgage or loan balance(s) count against the grand total. We find that many families have no idea what their net worth is, and they’re often surprised by the amount they have to work with. 

Why would someone take time (and spend money) to plan out their estate-related wishes?

We recognize that creating a thoughtful legacy plan is an investment of both time and money. Here are some of our clients’ top motivations for creating one:

  • Preserve day-to-day wealth and future income
  • Provide for a surviving spouse/children
  • Fund children’s or grandchildren’s education or other life events
  • Identify strategic, short-term charitable giving opportunities
  • Leave a legacy gift for charitable causes

What does the estate planning process typically include?

This is a little different for everyone, and we’re committed to guiding a person or couple from start-to-finish as they:

  • Organize their important documents and approximate the value of their assets
  • Consider the long-term impact, and implications, of various planning tools 
  • Make a will
  • Set up a trust, or multiple trusts
  • Make current or future charitable donations
  • Name a personal representative, guardian for minor children, and/or trustee to be involved in carrying out their plan 
  • Identify loved ones to be beneficiaries/heirs in their plan
  • Make current or future charitable donations
  • Set up funeral arrangements

What are some typical phrases or words that tend to be confusing for people?

There are a lot of them, and we’ve created a full index here, but these are the most common terms/words we use, which tend to be a bit confusing:

What is a Will? 

This is the most basic document within your estate plan. 

  • A will is a legal document that clarifies what you want to happen with your property (and minor children) at the time of your death. 
  • A will can only deal with probate assets: property that you own that have no way of passing on to another individual without the probate process. 
  • A will typically does not include life insurance, retirement plans, real estate held by joint tenants, etc., because these assets name beneficiaries directly. These non-probate assets will pass to those named outside of the legal, state-managed probate process. 

What is a Revocable Trust? 

This entity is a trust funded during the trustee’s lifetime, and it can be changed at any time. The owner/grantor may change the terms, add or remove property, or even (as the name implies) revoke the trust entirely. In estate planning, we talk primarily about “revocable living trusts,” because they offer the greatest amount of flexibility if circumstances or family dynamics change. But keep in mind there are many other forms of trust, and that can be cause for confusion! It is also a legal document, so a lawyer must get involved each time the terms of the trust are changed. 

  • If you have a trust in place, the person in charge of settling your final affairs would be called your successor trustee, rather than an executor/personal representative.
  • A trust is a separate, taxable entity, almost like a new member of the family. The owner must transfer ownership of assets into the trust’s name after forming it, but before death, in order to receive the benefits of having a trust.
  • A trust is private, in that it does not go through the probate process, which is public. 
  • The will still plays a crucial role, as it will “catch” any property you own that hasn’t yet been moved into the trust at death. This type of will is often called a “pour-over will.”

What are Testamentary Charitable Vehicles? (Or, what is Planned Giving?) 

Planned Giving is strategic charitable giving that is arranged in the present but often completed at a future date. It is often a way to avoid unnecessary tax for you, an estate or trust on the whole, or specific loved ones. Sometimes there are planned options people believe are beyond their capabilities:

  • Bequests are gifts made directly to charity, from an estate, after someone’s death.
  • Donor Advised Fund (DAF) may hold assets set aside for heirs to give charitably on someone’s behalf after they’re gone. Funding a DAF earns an immediate charitable deduction, with lots of flexibility for how and when gifts are made by the family down the road.  
  • Charitable Trusts (including Charitable Remainder Unitrusts-CRUTs, Charitable Lead Unitrusts-CLUTs, Charitable Remainder Annuity Trusts–CRATs, and Charitable Lead Annuity Trusts–CLATs) are long-term investment tools that can assist with giving to loved ones AND your favorite nonprofit organization(s).

What are Healthcare Directives and Living Wills?

These separate, but similar, documents outline your wishes for medical treatment.

What is a Medical or Healthcare Power of Attorney? 

This is someone whose duties take place while the designator is still living. A medical power of attorney document can include provisions for a wide range of medical actions including personal care management, hiring a personal care assistant, deciding on a medical treatment, and making decisions on medical treatments overall. In Wisconsin, where many of our clients reside, this person is designated using The Power of Attorney for Health Care form, which makes it possible for adults to authorize other individuals (called health care agents) to make health care decisions on their behalf should they become incapacitated.

What is a Durable Power of Attorney for Legal & Financial Matters? 

Similar to a Healthcare Power of Attorney, this person is designated to make business decisions on your behalf, in the event of your incapacitation or death. The document designating this role may be the most important of all legal documents! Here’s a full, downloadable guide we put together recently, and it includes an overview of each of these types of powers of attorney.


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