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How to fund an estate plan

On Behalf of | May 31, 2013 | Estate Planning |

New Jersey residents who are married may wonder about the process of setting up an estate plan for a spouse. Some spouses simply hold assets jointly, titled so that a spouse automatically inherits them at the time of death, or they have a basic will that leaves everything to a spouse. However, a simple estate plan can ensure that all assets are accounted for and transferred according to the testator’s wishes.

One way to avoid probate is to establish revocable trusts and transfer all assets into them during the person’s lifetime. Funding a trust after death will still require that heirs go through probate. Some experts will recommend having separate trusts for each spouse and funding each by equally dividing the marital assets. To avoid potential challenges down the road, both spouses sign the paperwork for each trust.

Once the trust is established, all bank accounts, brokerage accounts and mutual funds are retitled in the name of the revocable trust. All stocks, bonds and closely held business interests are transferred into the trust. Dividing business interests in half and putting half into each spouse’s trust may also help reduce tax liability. Once the interests are split, if neither trust contains a controlling interest, it may be possible to discount the shares to show that the trust holds only a minority interest. In some cases, that discount may reduce taxes on the share by more than 25 percent.

Many people prefer not to consider what happens after death. However, the best way to protect loved ones is to leave behind an estate plan that establishes how to distribute a person’s assets. An estate planning attorney may be able to establish an estate plan and hold relevant documents until they are needed.

Source: Forbes, “Estate Plan Funding for Spouses“, Stephen J. Dunn, May 27, 2013