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Leaving a legacy: Make proper financial arrangements now

Bill Scruggs
Tuesday, Nov 6, 2012

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, friends and the causes that are important to you. But to ensure your legacy reaches your heirs as you intend, you must make the proper arrangements now.

There are four basic ways to leave a legacy: (1) will (2) trust (3) beneficiary designation and (4) joint ownership arrangements.

A will is the cornerstone of any estate plan. You should have a will no matter how much your estate is worth, even if you’ve implemented other estate planning strategies. With a will, you can generally leave any type of property to whomever you wish, with some exceptions, including property that passes according to a beneficiary designation, property owned jointly with rights of survivorship or property held in a trust.

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: revocable and irrevocable. Revocable trusts are very flexible because you can change the terms of the trust 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, cannot 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. A trust cannot distribute property it does not own, so you must transfer ownership of your property to the name of the trust by re-titling or re-registering it. A revocable trust is also a good way to protect your property in case you become incapacitated.

Property that is contractual in nature, such as life insurance, annuities and retirement accounts, passes to heirs by beneficiary designation. Beneficiaries can be persons or entities, such as a charity or a trust, and you can name multiple beneficiaries to share the proceeds. You should name primary and contingent beneficiaries. Be sure to re-evaluate your beneficiary designations when your circumstances change (e.g., marriage, divorce, death of beneficiary).

Two (or more) persons can own property equally, and at the death of one, the survivors become the owner. This type of ownership is called joint tenancy with rights of survivorship (JTWROS). A JTWROS arrangement between spouses is known as tenancy by the entirety. There is another type of joint ownership called tenancy in common where there is no right of survivorship. Property held as tenancy in common will not pass to a joint owner automatically, although you can leave your interest in the property to your heirs in your will. You may find joint ownership arrangements are useful and convenient with some types of property, but may not be desirable with all of your property.

Bill Scruggs is financial advisor and co-branch manager at Raymond James Financial Services Inc., 430 N. Washington Ave., Suite A, Cookeville. He can be reached at (931) 520-0778 or www.raymondjames.com/BScruggs. The information contained in this report does not purport to be a complete description of the developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Scruggs and not necessarily those of RJFS or Raymond James. Securities offered through Raymond James Financial Services Inc., member FINRA/SIPC, an independent broker/dealer, are not insured by FDIC, NCUA or any other government agency, are not deposits or obligations of the financial institution, are not guaranteed by the financial institution, and are subject to risks, including the possible loss of principal.


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