What should the first step in estate planning be?

On behalf of Scaringi Law posted in Estate Planning on Saturday, July 25, 2015.

According to a recent article, only about 56 percent of American parents have a living trust or will in place. Thus, many Americans still need to take that first step in estate planning.

Our law firm focuses on estate law. We recommend a will as the starting point. A will can memorialize an individual's plans regarding asset transfers to specific beneficiaries. The will should also name an executor who will handle the expenses and taxes of the estate before distributing the decedent's assets.

Yet a will does not complete the planning process. For example, readers may not have realized that a will typically won't have any legal effect if an individual becomes incapacitated. Said another way, a will goes into effect after an individual passes. To plan for the possibility of incapacity, then, an individual should designate a durable power of attorney or execute a living will. That designee will be able to make health-care decisions on the individual's behalf if he or she becomes incapacitated.

A trust also offers more flexibility and options than a will, since it contains instructions not only for the transfer of assets, but also for the financial management of assets in the event of an individual's incapacity. There are various types of trusts. We recommend a revocable trust because it allows an individual to maintain control over the assets in the trust during his or her lifetime. That control means there will not be tax benefits during the individual's lifetime. After his or her passing, however, the assets in the trust generally avoid probate. Unlike a will, the instructions and operation of a trust are also not a matter of public record.

Source: The Street, "5 Biggest Estate Planning Mistakes You Can Make," Jason Notte, July 13, 2015