Estate planning is a priority

As you accumulate wealth in pursuit of financial goals such as retirement or a child's college education, have you given any thought to estate planning?

Estate planning encompasses more than just the distribution of your estate to your heirs; it is a process designed to identify the best way to accumulate, preserve, and protect your wealth. A carefully prepared estate plan can help you address lifetime management issues, as well as death transfer issues.

Before you can develop strategies for your estate plan, you'll need to identify your planning objectives. Ask yourself the following questions:

• Whom do you want to benefit from your wealth?

• Do you want to donate some or all of your wealth to charity?

• Do you want to transfer some of your wealth to your beneficiaries during your lifetime or only upon your death?

• Do you have any situations that require specialized planning, such as a previous marriage or a special needs child?

With these questions answered, you can begin looking into the various estate planning tools available to you. In particular, wills and trusts are two essential components of an estate plan.

A will is simply a legal document that provides instructions outlining how you would like your assets administered and distributed at your death. In your will, you can name an executor or personal representative who will be responsible for carrying out your wishes after the probate process confirms the validity of your will. You can also nominate a guardian for minor children and plan for specific bequests to certain individuals or charitable organizations.

While a properly drafted will can detail your wishes and allow you to control the distribution of your estate, it is important to remember that a will is only operative at your death. For this reason, a will does not address lifetime concerns, such as the management of your assets in the event of incapacity.

A trust, on the other hand, is a legal document that names an individual or entity (the "trustee") who takes legal title to, and manages, the assets you transfer to the trust for the benefit of the persons (the "beneficiaries") you specify in the trust document. The trustee is responsible for managing and administering the assets according to the instructions in the trust document. Trusts are created in two different ways. A trust may be created and implemented while you are alive (an intervivos or living trust), or it may be created through your will at your death (a testamentary trust).

Because a testamentary trust is created through your will, it is effective only upon your death. As with all estates passing by will, the estate is subject to probate. At the conclusion of the probate process, the assets are distributed to the trustee. In addition, because it is created at death, the testamentary trust cannot provide for the management of your assets during your lifetime and, therefore, cannot plan for incapacity.

While wills and trusts are important to your estate plan, there are many other tools and strategies available to you as well. To develop a comprehensive estate plan to cover all of your needs, enlist the help of an estate planning attorney, tax professional and financial advisor.

Katye Delashaw is Vice President/Investments with Stifel, Nicolaus & Company, Inc., and can be contacted in the Montgomery office at 334-213-1607.