No book, article or video can tell you exactly what you need to plan your estate. There is no law that requires you to have any specific document. However, estate planning documents save you and your family time and expense in the future. If you plan now, you can avoid a situation where you are unavailable, and your family has to scramble to figure out what steps to take. Besides avoiding scrambling, estate planning documents allow your family to avoid some very expensive and time consuming steps such as probate and guardianship proceedings. Whether or not you want a specific estate planning document or strategy is an individual decision. An estate planning attorney can evaluate your specific situation and walk you through the costs and benefits of each strategy and document. In this article, we will go through some common estate planning documents and evaluate the situations where they may be most valuable
A Last Will and Testament is one of the most common estate planning documents. It allows the will-maker to determine where they want their executor to transfer the will maker’s probate property to after the will maker’s death. The general definition of probate property is solely-owned property without a beneficiary designation. A will also allows you to name an executor, who is the person who will take care of your estate’s taxes and bills, and distribute the estate property. A third major benefit of having a will is that you can name a guardian for your minor children.
Wills are Most Beneficial For:
-Parent of a minor child(ren), you should have a will to determine who will be your children’s guardian should both parents die.
-If you have a number of people and charities that you want your assets to go to, a will is the only way to ensure the assets will go where you want them to go.
-If you have a large estate, you should have a will to choose an executor.
-If you are in a long term relationship, but are unmarried, you should have a will, or your partner will not be entitled to any of your assets.
What Happens if You Don’t Have a Will:
-State intestate law will determine how your assets are distributed. The court will appoint an administrator to administer your estate. The court will appoint a guardian for your minor children.
Trusts are a valuable tool for managing your assets, which creates a separate entity for you to place your assets into. A trust allows you to determine who receives your assets, and who should manage those assets. Unlike a will, however, a trust does not have to go through the probate or conservatorship process. It is very flexible, can have Medicaid and estate tax benefits, and can become effective immediately, upon incapacity, or at any other time the trust maker chooses. Trusts can also be revocable or irrevocable. As stated, trusts are very flexible and come in many different varieties. The most popular trust for estate planning is the Living Trust. The living trust takes a will’s job of saying where your assets should go after you are gone. The main benefit of the living trust is that avoids the time and expense of the probate process. A trust is also confidential, as opposed to probate, which is a public process. Estate plans almost always combine a living trust with a pour-over will. A pour-over will transfer the will maker’s remaining assets into the trust, so the trustee can distribute the assets according to the trust’s terms. You also need a will to appoint a guardian if you have minor children. You can also name other trustees to the trust, allowing them to use the assets to manage your affairs, should you become incapacitated.
Living Trusts are Most Beneficial For:
-People with probate property who want to avoid the time, expense and publication of the probate process. The probate process can last as long as three years and cost as much as 10% of your estate's value.
Trust in general are valuable to people who want to avoid estate tax, qualify for government benefits, leave money to someone who is inexperienced with money, protect themselves and their heir from creditors, judgments and divorce and give money to charity.
Issues with Trusts
-Trusts do cost money both to create and to maintain. You also need to make sure to fund the trust or its benefits are lost. Depending on the type and purpose of the trust, adding assets to the trust can also mean giving up control of the assets.
In Part II of this article we will discuss Advance Directives and Financial Powers of Attorney