There is a common misconception that estate planning is only for high net worth individuals, but establishing an estate plan and creating a trust can be the correct decision for anyone. Anything you have ever accumulated in your life is your estate.
Having a plan to manage it is smart and often necessary. In essence, estate planning is giving what you have to whom you want, the way you want, when you want, and with the least amount of taxes and expenses possible. Failure to execute a plan can have dire consequences.
What is my estate?
Your estate is anything you own or have control over. Your estate includes:
- Your home or equity in your house
- Bank accounts
- Retirement accounts
- A business or other investments
- The proceeds of a life insurance policy
- Personal property such as:
- Your car
- Equipment or tools
What is an estate plan?
An estate plan is a combination of legal documents which dictate how to distribute your assets. A comprehensive estate plan will likely include:
- Trust documents
- Living Will or Advanced Directive
- Financial Power of Attorney
- Health Care Power of Attorney
A will is a legal declaration that names the person who will distribute an estate and determines the recipients. It is generally recommended that everybody, regardless of circumstances, delineate their desires in a will.
In the cases of those who die without a will and have assets that exceed debts and funeral expenses, their estates will be subject to “intestacy,” a process where state laws determine how the assets are distributed. If assets are being distributed via intestacy, lineage will usually govern over what the decedent would have preferred. This should be avoided as it has a tendency to cause unnecessary complications and family discord. Creating a will will ensure your wishes are followed regarding the distribution of your estate.
A Living Will or Advanced Directive provides for your wishes if you are incapable of making informed decisions regarding your health care and medical treatment. The living will also appoints a health care proxy who will become authorized to make medical treatment decisions regarding life-sustaining treatments if you are unable to make decisions regarding the use of such procedures. Creating a living will is an excellent gift to give your loved ones so that they will not be forced to make difficult decisions regarding your life-sustaining treatment since you have already indicated your wishes.
Powers of attorney are estate planning documents that help take care of you while you are living. There are two powers of attorney often included in an estate plan, a health care power of attorney and a financial power of attorney. These documents grant individuals of your choosing the power to oversee your finances and healthcare decisions in the event you become incapacitated and are not able to make decisions for yourself.
A financial power of attorney allows you to nominate another person to act as your agent to manage your financial affairs when you are unable to do so. You can grant your agent broad power over all accounts, limit that authority to only one account, allow your agent to act for a specified period of time or for an extended period of time.
A healthcare power of attorney allows someone else to make medical decisions on your behalf if you are incapable of making them. Without a healthcare power of attorney, your spouse and your parents might argue about medical treatment. The most famous U.S. case regarding health care decision making is the Terri Schiavo case. Terri Schiavo remained in an irreversible persistent vegetative state for nearly 15 years, while her spouse and her parents engaged in a lengthy legal battle regarding her medical care. An executed healthcare power of attorney would have avoided this situation. Powers of attorney are critical documents, especially if you are not married.
A trust will bypass the probate court while a will is subject to probate. Without a will, any creditor will have a chance to make a claim on your estate, even if you pass with no debt. Creating a trust avoids the probate process saving you and your heirs time and money. The delay caused by the probate process can lead to unpaid bills and default on debts including the mortgage. Proper estate planning can allow someone to step in quickly and pay bills to prevent default, saving time and money. The cost of not meeting with an estate planning attorney can be much greater than the cost to meet with one.
A trust also is not publicly accessible, but a will is not and can be contested by anyone. As a general rule with trusts you can avoid attorney costs and court fees associated with probate, although establishing some trusts require attorney involvement depending on their complexity. Trusts can also provide for distribution of inheritance at a later date for minor children and determine how much they receive and how the money should be spent (such as for education or medical expenses only). Trusts ensure your assets go where you intend them, especially in families affected by remarriage.
Create your estate plan – Contact Skillern Law Firm Today
Establishing an estate plan and creating a trust can be the correct decision for anyone. For more information and to set up an appoint to create your estate plan, contact the attorney at Skillern Law Firm, PLLC. The attorney will create the right estate plan for your situation, and budget and guide you through the process every step of the way. Contact us today at 918-805-2511 or firstname.lastname@example.org.