Estate Planning 101

Estate planning is about much more than deciding who receives your assets when you die.

A well designed estate plan can establish who manages your finances if you become incapacitated, who makes health care decisions on your behalf, who would care for your minor children, and how your assets ultimately pass to the people and organizations you care about.

In this Tidecrest Expert Series conversation, we sit down with Dan Finn, an estate planning attorney and founder of Finn Legal Group, to discuss the fundamentals of estate planning and how those needs can change as a family's wealth and circumstances evolve.

Watch the full conversation below, then continue reading for the key estate planning concepts discussed.

Key Takeaways

• Estate planning is relevant even if you do not consider yourself wealthy.
• A foundational estate plan often includes a will, trust, durable financial power of attorney, and advance health care directive.
• A revocable living trust can help properly titled assets avoid probate, but generally does not provide creditor protection for the person who created it while living.
• Creating a trust is only part of the process. The trust also needs to be properly funded.
• Parents of minor children should consider who they would want to serve as guardians.
• Estate plans should be reviewed as your family, assets, business interests, and goals change.
• Families with substantial wealth may eventually need to consider more advanced estate, tax, and succession planning strategies.

What Is Estate Planning?

At its core, estate planning is a series of legal decisions about what should happen if you become incapacitated or pass away.

An estate plan can address questions such as:

• Who should manage your assets if you cannot?
• Who should make health care decisions for you?
• Who should care for your minor children?
• Who should receive your assets?
• When and how should beneficiaries receive those assets?
• Who should be responsible for carrying out your wishes?
• Many people associate estate planning exclusively with death. Incapacity planning is an important part of the process as well.

A thoughtful plan establishes who can step in and make important financial and health care decisions if you are unable to make them yourself.

The Four Foundational Estate Planning Documents
While every situation is different, the discussion highlights four documents that commonly form the foundation of an estate plan.

1. A Will
A will establishes instructions for how certain assets should be distributed at death and allows parents to nominate guardians for minor children.

For parents, the guardianship decision alone can make creating a will worthwhile.

Without your own nomination in place, decisions regarding guardianship may ultimately need to be resolved through the court system.

2. A Revocable Living Trust
A revocable living trust provides a structure for holding and managing assets during your lifetime and distributing them after your death.

When properly established and funded, a trust can also help certain assets avoid probate.

The person creating a revocable trust can generally maintain control over the assets during life and modify the trust as circumstances change.

3. Durable Financial Power of Attorney
A durable financial power of attorney authorizes someone to handle certain financial matters on your behalf if you are unable to do so.

That could include paying bills, managing financial accounts, and handling other financial responsibilities.

The goal is to establish who you trust to step in before that authority is actually needed.

4. Advance Health Care Directive
An advance health care directive allows you to identify someone who can make health care decisions on your behalf if you cannot make those decisions yourself.

It can also document your wishes regarding certain medical decisions.

Making these choices in advance can provide valuable guidance to loved ones during an already difficult situation.

What Does a Revocable Living Trust Actually Do?
The revocable living trust is one of the estate planning tools wealth managers frequently encounter because it can directly affect how investment and other financial accounts are owned.

A trust generally involves three roles:

Grantor
The person who creates the trust and establishes its terms.

Trustee
The person responsible for administering the trust according to those terms.

Beneficiary
The person or people who benefit from the trust assets.

With a typical revocable living trust, the person or couple establishing the trust may initially serve in all three capacities.

One of the primary benefits is that assets properly owned by the trust can generally avoid the probate process when the owner dies.

What Is Probate?
Probate is a court supervised process used to administer certain assets after someone dies.

For families, avoiding probate where appropriate can have several potential advantages, including greater privacy and a potentially more efficient transfer process.

Probate proceedings are generally matters of public record, while the administration of a living trust is typically private.

This can become particularly relevant as the size and complexity of a family's estate grows.

However, simply creating a trust does not automatically mean every asset will avoid probate.

That brings us to one of the most important points from the conversation.

Creating a Trust Isn't Enough. It Needs to Be Funded.
A beautifully drafted trust may accomplish very little for assets that were never properly connected to it.

Funding a trust generally means properly transferring or titling appropriate assets so the trust actually owns them.

Depending on the asset and planning strategy, that may involve:

• Retitling certain brokerage accounts
• Changing ownership of real property
• Reviewing bank accounts
• Coordinating beneficiary designations
• Reviewing newly acquired assets
• Not every asset should necessarily be titled directly in a trust, which is why this process should be coordinated with your estate attorney and financial professionals.

But the broader lesson is simple:

Creating the documents is not the end of estate planning. Implementation matters.

An unfunded or improperly funded trust may fail to accomplish some of the objectives for which it was originally created.

Does a Revocable Living Trust Provide Asset Protection?
This is another common misconception.

A standard revocable living trust generally does not protect your assets from your own creditors while you are alive simply because those assets have been transferred to the trust.

Why?

Because you generally continue to control and benefit from the assets.

More advanced trust structures can potentially be used for asset protection and estate planning purposes in appropriate circumstances, but those strategies involve different legal, tax, and financial considerations.

The key distinction is that probate avoidance and creditor protection are not the same thing.

Estate Planning Matters Even If You Aren't Wealthy
You do not need a $50 million estate for planning to matter.

Consider parents with young children.

Even if their financial assets are relatively modest, they may still need to determine:

• Who should care for their children?
• Who should manage money for those children?
• At what age should children receive inherited assets?
• Who should make financial decisions if a parent becomes incapacitated?
• Who should make health care decisions?
• Receiving a large inheritance outright at age 18 may also be very different from receiving assets through a structure designed to provide oversight and flexibility as a child matures.

Estate planning is therefore not solely about minimizing taxes.

For many families, control, protection, guardianship, and clarity are more important than tax planning.

Two Common Estate Planning Mistakes
The conversation highlights two particularly important mistakes.

Mistake #1: Never Updating the Plan
Your estate plan should evolve as your life evolves.

The decisions you make when your children are five years old may not make sense when they are 25.

Your financial circumstances can also change substantially.

Over time, you may:

• Accumulate significantly more wealth
• Start or sell a business
• Purchase additional real estate
• Become charitably inclined
• Have grandchildren
• Move to another state
• Experience changes in your family
• Develop new tax or legacy planning concerns
• An estate plan created years ago should not automatically be assumed to still reflect your current life.

Mistake #2: Creating a Trust but Never Funding It
This may be one of the easiest mistakes to overlook.

You can spend considerable time and money creating an estate plan but fail to retitle appropriate assets or coordinate beneficiary designations afterward.

That can undermine the intended purpose of the plan.

Estate planning should therefore include both document creation and implementation.

How Estate Planning Changes as Wealth Grows
One of the most useful parts of the conversation is the recognition that estate planning is not static.

The priorities can change considerably as wealth accumulates.

A Young Family Building Wealth
For a couple in their 30s with young children, priorities may include:

• Guardianship
• Basic asset distribution
• A revocable living trust
• Powers of attorney and health care directives
• Life insurance
• Providing financial support for children if both parents die
• At this stage, the focus may be less about sophisticated tax planning and more about protecting the family.

A Family With Several Million Dollars
As wealth grows, additional considerations can emerge:

• Tax planning
• Business succession
• Real estate ownership
• Asset protection
• More thoughtful inheritance structures
• Updating life insurance needs
• The estate plan begins to interact more directly with the family's broader financial plan.

A Family With Significant or Generational Wealth
At substantially higher levels of wealth, the conversation can expand further.

Potential considerations may include:

• Estate tax exposure
• Business succession
• Lifetime gifting
• Charitable planning
• Irrevocable trusts
• Life insurance planning
• Multigenerational trusts
• Preparing heirs to receive wealth
• Creating a broader family legacy
• Advanced strategies should not be implemented simply because they exist.

The appropriate structure depends on the family's assets, goals, tax circumstances, and what they ultimately want the wealth to accomplish.

Estate Planning and Wealth Management Should Work Together
Estate planning documents do not exist in isolation.

Your attorney may design the legal structure, but implementation often touches investment accounts, insurance policies, retirement assets, real estate, business interests, and beneficiary designations.

That makes coordination important.

Your estate attorney, financial advisor, CPA, and other professionals should understand how their respective pieces fit into the broader plan.

A trust that says one thing while account ownership or beneficiary designations say something else can create unintended results.

The objective is to make sure the legal plan and the financial plan are working together.

The Bottom Line
Estate planning is not something reserved for the ultra wealthy.

At its most basic level, it is about deciding who should manage your affairs, who should care for your children, how your assets should be handled, and who should make decisions if you cannot.

As wealth grows, those same questions can become more complex.

The important thing is to start with the appropriate foundation, properly implement the plan, and continue reviewing it as your life and financial circumstances change.

Is It Time to Review Your Estate Plan?
If you have never created an estate plan, or if your existing plan no longer reflects your family or financial circumstances, consider speaking with a qualified estate planning attorney.

At Tidecrest Wealth Management, we work alongside clients' attorneys, CPAs, and other professionals to help ensure investment accounts, beneficiary designations, insurance, and broader financial planning are coordinated with the estate strategy.

If you would like to discuss how your estate plan fits into your broader financial picture, contact our team to start a conversation.

This material is provided for educational purposes only and is not intended as legal, tax, or individualized financial advice. Estate planning laws and strategies vary based on individual circumstances and jurisdiction. Consult a qualified estate planning attorney and other appropriate professionals regarding your specific situation.