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"It's important for parents to set up their estate and do some legacy planning, which can mean a lot of different things, such as deciding whether to leave money to charity or heirs or to spend it all," said Douglas Boneparth, a CFP and partner at Longwave Financial, a fee-only firm.
For those who want to pass on wealth to the next generation, trusts can be a useful tool for doing so, experts say. A trust, which can be structured in different ways, might specify exactly when assets pass to your beneficiaries (such as when they reach a certain age) and how the money should be used, such as only for expenses tied to education, health care or other necessities. Trusts can also keep your estate out of probate court — which can be an expensive and time-consuming process — and minimize estate taxes.
Most estates aren't subject to federal estate tax, since the current exemption for individuals is $5.45 million, and $10.9 million for married couples. But many states have much lower estate-tax thresholds, Carter noted.
Expenses tied to the probate-court process can also chip away at your estate, leaving less for heirs, he noted. That's one reason to consider establishing a living trust, in which assets are held for your benefit during your lifetime and transferred to your designated beneficiaries after you die.
"If you have a will, your estate will go through probate court," Carter said. "It can cost thousands of dollars in legal and administrative fees, depending on the complexity of the estate and other issues.