What is an Estate Plan?

Your “estate plan” is a legally binding plan that defines how your wealth will be managed if you need to be cared for in sickness, plus how your wealth will be distributed after your death. The estate plan also serves to preserve the values that matter most to you, so that after your incapacitation or death, your estate lives on in a manner that you, not the courts, decide.


When planning your estate, there are four basic courses of action:

  1. Do nothing,
  2. Establish Joint Tenancy for your assets,
  3. Draft and execute a will, or
  4. Establish a Revocable Living Trust.

Option 1. Do Nothing

Studies indicated that up to 70% of Americans don’t take any action to prepare for illness or death, either because it’s not something they want to think about or because they don’t know what to do. Of the remaining 30%, most have only executed a simple will or rely on the laws of joint tenancy to pass on their assets to their spouse. However, without a Revocable Living Trust, which I’ll explain shortly, most estate distributions will be determined by state law, not by the wishes of the deceased.

When the government steps in to determine your wealth distribution, your family’s best interests are of little concern. The estate is simply distributed according to the letter of the law. The chances increase that your estate will accumulate high death taxes, legal fees, and probate costs. Plus, the stress resulting from a poor plan can be divisive, and has even destroyed families.

Option 2. Establish Joint Tenancy for your Assets

As it’s formally called, Joint Tenancy with Right of Survivorship is a situation in which two or more people share title to an asset. When one of the owners passes away, his or her share of the ownership passes to the other “joint tenant” automatically. The “right of survivorship” term means that whomever lives longer gains ownership of the asset.

You might think that a will would override joint tenancy laws. Not so. Since the transfer of a jointly held asset essentially occurs automatically upon death, it’s out of the estate before the will is even triggered.

Imagine two cousins own a piece of property as joint tenants. When one dies, his will states that his wife should inherit all of his assets. But because the property is owned in joint tenancy, the surviving cousin (Joint Tenant) owns the entire property; the surviving spouse has no claim on the property! This and other problems of joint tenancy can be avoided with a good estate plan.

Option 3. Draft a Will

Movies dramatize a “last will and testament” as the final say on how an estate will be distributed. In reality, a will isn’t as ironclad as many people think, and doesn’t hold sway over joint tenancy laws or insurance proceeds. In fact, once the will enters into the probate court system, it’s not in the hands of your family any more, but in the hands of the court and probate attorneys, where it’s subject to their discretion and open for public scrutiny. There is no guarantee that your wishes will be fulfilled.

The mere drafting of a will, alone, creates even more problems because a will doesn’t gain relevancy until after you die. Therefore, it doesn’t help with planning for illness or long-term care. In general, the Last Will and Testament is an inefficient and poor planning tool.

Option 4. Establish a Revocable Living Trust

A Revocable Living Trust is the most reliable and thorough foundation for an estate planning portfolio, and provides the most complete financial protection for you and your family.

When we set up a Living Trust in your name, title to all of your major assets is transferred from your name to the name of the trust. You are listed as the Trustee and Beneficiary, so you still have total control to make decisions regarding your assets (property, investments, cash, etc.). After your death, your successor trustee will take over the trust. Your family won’t have to endure the lengthy and costly process of probate court, and because the values that are important to you are written into the trust, you can be assured that your estate will be handled in accordance with your wishes whether you are sick and unable to manage it, or pass away. Your trust can even determine how your health care will be financed in the event that you or your spouse becomes disabled, thereby minimizing the expense to your estate. A Living Trust avoids Probate, can finance your final health care expenses, and supports the values that are important to you.