MONEY MATTERS

I had the fortunate experience to hear from him the other day. During the past year, he’d had a couple of clients pass without a will or a trust. He reminded me that without those documents, it is the state courts that decide who a person’s heirs will be. That might mean that a scary uncle or the cousin that picked on you when you were a kid may be one of your heirs.

At any given point, we all know who we would want to have what we currently possess. However, the courts only decide based on what they can read. So if you have not prepared a document, they will read the law and split your estate based on the law. As Rohn points out, there are a number of legal tools available to accomplish your intentions.

The basics of a good plan may include an assortment of the following documents and tools:

· A Last Will and Testament specifies what is to be done with your property when you die. In it you may name heirs and the property they’ll receive, as well as name guardians for young children and a representative to carry out your wishes, among other potential things.

· A Living Trust created during your lifetime and revocable during your lifetime is used primarily to manage property and to avoid the probate process (the legal process by which a court settles an estate) associated with a basic will. (These trusts should be funded via transfers upon creation or with pour-over wills.)

· A Pour-Over Will transfers property owned by you at your death to a trust that existed prior to your death. The intent is to use the probate process to sweep up any assets that may not have been transferred to the trust during your lifetime.

· Joint Ownership Documents with Rights of Survivorship, often called joint tenancy, show that co-owners of property have a right of survivorship, meaning that if one owner dies, that owner's interest in the property will pass to the surviving owner. For instance, deeds for property owned by married couples often show the owners as joint tenants with right of survivorship. This method is often used to avoid probate because the property automatically passes to the survivor.

· Beneficiary Designations are forms used to transfer life insurance, pension, IRA and annuity survivor and death benefits and other pay-on-death proceeds to your designated beneficiaries.

· Durable Power of Attorney are powers of attorney given to a designated person or persons to act on your behalf. These powers are made "durable" by adding specific text to the document so that they will remain in effect or take effect if you become mentally incompetent.

· Medical Durable Power of Attorney for Health Care is the authority given to your designee to make medical decisions on your behalf if you are unable to do so.

· A Testamentary Trust is created by provisions of a will to take care of special situations or incapacitated heirs.

· A Bypass Trust is designed to take advantage of your lifetime applicable exclusion (the amount of money that can be given away tax-free: $1 million). The bypass trust is the most universally used method of saving estate taxes in family situations.

· An Irrevocable Life Insurance Trust is a trust to hold life insurance policies. It’s designed to exclude life insurance proceeds from the probate estate or from being subjected to estate taxes.

· Family Business Arrangements should be in writing regarding all family business concerning ownership, sale and management continuation under specific situations, including death.

· Charitable Gift Designations incorporated within a will or trust document specify the intent to transfer assets to a legal charity. Often these gifts will be deductible for income and estate tax purposes.

· A Minor’s Trust is an irrevocable trust to move property out of your estate for the benefit of minor children or grandchildren.

A good first step would be to discuss your estate with loved ones and with trusted family advisors. Then get in front of an attorney and sink those intentions into a set of documents. If you already have documents in place, pull them out of storage and review the terms to see if they meet your current needs. Circumstances change, and the current version may not fit your current plans. Perhaps it is a new spouse, children (or special needs child), divorce, a life threatening illness, a business venture that could lose value if a tragedy occurred to the owner, etc.

In the end, property will transfer. Your estate will be divided. Taxes may become due. And you will be remembered. Will your life be an inspiration to others or will it represent chaos?

* Cole Ehmke is an extension specialist in personal finance at the University of Wyoming in Laramie.