Estate Planning and Wealth Transfer
Domain overview
Estate planning and wealth transfer tests the documents and title arrangements that control assets at death and during incapacity. Expect questions on wills, trusts, probate, beneficiary designations, powers of attorney, and transfer-tax concepts.
Core tools
A will directs probate assets and names guardians for minors. A revocable living trust can hold assets during life and distribute them after death, often avoiding probate. Irrevocable trusts transfer ownership and may remove assets from the estate, but reduce control. Beneficiary designations on retirement accounts and insurance pass by contract, outside the will. Powers of attorney and healthcare directives address incapacity.
Transfer mechanics
Titling matters: joint tenancy, community property, and payable-on-death designations can override a will. Gift and estate taxes may apply where the jurisdiction imposes them; annual exclusions and lifetime exemptions vary. A step-up in basis at death can make holding appreciated assets attractive.
Worked example
A client dies with a will leaving everything to a spouse, a $500,000 IRA naming the spouse as beneficiary, and a home titled jointly with a child. The IRA passes by beneficiary designation, not the will. The jointly titled home passes by survivorship, also outside the will. Only probate assets pass under the will. The reasoning shows why an estate plan must coordinate documents, titles, and beneficiary forms.
Traps that cost marks
- Assuming the will controls retirement accounts.
- Failing to update beneficiaries after divorce or death.
- Using joint ownership without considering creditor or tax consequences.
- Omitting incapacity documents and guardianship provisions.