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Trust 101

The Elements and Benefits of Estate Planning

Looking to build and protect your legacy for your family's future generations? This list from Baird Trust points out the building blocks that can get you started.

Estate planning is for more than just the ultra‐wealthy; it's a vital tool for everyone who wants to leave something behind for their family and the causes they believe in. The benefits range from asset protection to charitable giving to avoiding probate.

Haven't started on an estate plan yet? Here's what you need to know:

Building Blocks of an Estate Plan

Last Will and Testament A will is a legal declaration of how, when and to whom you want your assets to be distributed upon your death. If you die without a will, your assets could be distributed according to your state's laws, which could run counter to your personal wishes.

Power of Attorney A power of attorney is a legally binding document that appoints someone to act as your agent and manage your financial or legal affairs. A living will, also known as an advanced health care directive, formally outlines your wishes for medical care.

Provisions in Case of Incapacitation An estate plan can help you build the structure that protects your assets and invests decision‐making abilities in the people and financial institutions you trust – before the worst happens and you can't make those decisions yourself.

Retirement/Life Insurance Designations Proper beneficiary designation can help keep assets from retirement plans and life insurance policies from falling into probate, or going to outdated or deceased designees. Remember, a beneficiary designation overrides anything set forth in a will or trust.

Trusts Trusts are vehicles for holding your assets that can shield them from taxes, help them grow for future generations, and make your charitable giving more effective. They can be revocable or irrevocable, depending on your needs.

Philanthropic Tools Tools that can help with philanthropic giving include various charitable trusts, charitable endowments and family foundations. Charitable giving comes with many tax implications, so this is an area in which an estate planner can provide significant benefit.

Benefits of an Estate Plan

Protecting Assets As part of an estate plan, gifting strategies and irrevocable trusts can help make sure that your assets stay where you intended them to be and to protect them from unknown creditors.

Mitigating Taxation If your estate value is in danger of bumping up against the federal estate tax – the exemption for 2022 is $12.06 million – planning strategies can help ensure the amount of tax due is reduced or eliminated so your assets remain as part of your legacy. Certain states also levy an estate or inheritance tax.

Planning for Business Succession Estate planning can ensure that a business stays within the family and is run by the people you designate, as well as minimizing the tax bite your heirs will have.

Avoiding Probate Probate court proceedings can be a cumbersome, time‐consuming and often expensive process for distributing your assets after you're deceased. A detailed estate plan can help direct your assets while keeping your heirs from going through the probate process.

Protecting Confidentiality Some elements of asset transfer, such as probate court proceedings, are public and can expose your financial situation to anyone who chooses to learn about it. Estate planning strategies like revocable living trusts can help protect the privacy of your assets.

Preserving Long‐Term Family Legacy And finally, the most important reason to make use of estate planning is to ensure that subsequent generations are able to enjoy the legacy you've worked so hard to provide.

If any of these potential benefits apply to you, it's time to start estate planning. Your Baird Financial Advisor can work with you to help ensure that your legacy – and your family – are protected.

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