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Leaving a Legacy

You’ve worked hard over the years to accumulate wealth, and you probably find it comforting to know that after your death the assets you leave behind will continue to be a source of support for your family and friends. But, to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now. Two of the most common ways to leave a legacy are by will or by trust.

Wills
A will is the cornerstone of any estate plan. You should have a will no matter how much your estate is worth, and even if you’ve implemented other estate planning strategies.
You can leave property by will in two ways: making specific bequests and making general bequests. A specific bequest directs a particular piece of property to a particular person (“I leave Aunt Martha’s diamond broach to my niece, Jen”). A general bequest is typically a percentage of property or property that remains after all specific bequests have been made. Typically, principal heirs receive general bequests (“I leave all the rest of my property to my wife, Jane”).
With a will, you can generally leave any type of property to whomever you wish, with some exceptions, including:

  • Property will pass according to a beneficiary designation even if you name a different beneficiary for the same property in your will
  • Property owned jointly with rights of survivorship passes directly to the joint owner
  • Property in a trust passes according to the terms of the trust
  • Your surviving spouse has a right to a statutory share (e.g., 50%) of your property, regardless of what you leave him or her in your will
  • Children may have inheritance rights in certain states

Trusts
You can also leave property to your heirs using a trust. Trust property passes directly to the trust beneficiaries according to the trust terms. There are two basic types of trusts: living or revocable, and irrevocable.
Living trusts are very flexible because you can change the terms of the trust (e.g., rename beneficiaries) and the property in the trust at any time. You can even change your mind by taking your property back and ending the trust.
An irrevocable trust, on the other hand, can’t be changed or ended except by its terms, but can be useful if you want to minimize estate taxes or protect your property from potential creditors.
You create a trust by executing a document called a trust agreement (you should have an attorney draft any type of trust to be sure it accomplishes what you want).
A trust can’t distribute property it does not own, so you must also transfer ownership of your property to the name of the trust. Property without ownership documentation (e.g., jewelry, tools, furniture) are transferred to a trust by listing the items on a trust schedule. Property with ownership documents must be re-titled or re-registered.
You must also name a trustee to administer the trust and manage the trust property. With a living trust, you can name yourself trustee, but you’ll need to name a successor trustee who’ll transfer the property to your heirs after your death. A living trust is also a good way to protect your property incase you become incapacitated.


Unsure how to leave your legacy? Contact Tammy Fleming at (319) 874-4321 or tfleming@fsb1879.com to schedule a 30-minute, no obligation, consultation today.