Many people ask “should I have an estate plan?” For most of us, the answer is “yes.” People who do not have an estate plan should think about preparing one. Those with an estate plan should review and update it from time to time.
Estate planning means deciding what will happen to your property when you die, how you can make it easier for heirs to receive your property, and how you can reduce the tax bite so your heirs will get as much as possible.
When someone has no estate plan, his or her property goes to heirs according to state laws. Most inheritance laws were passed long ago and apply to everyone no matter what their situation. Often, they don’t get property passed just the way a person wants, and the laws don’t help much in reducing taxes.
Anyone with a family, some savings or other property should seriously consider whether they need an estate plan. This is especially important for seniors and anyone in less than perfect health. But even people in good health can be victims of accidents, and hard as it is to accept, eventually everyone dies. So after reaching adulthood, no one is too young or healthy to plan his or her estate.
There’s also an illusion that estate planning is for only the rich. This may once have been true. But with inflation and rising living standards, today a wide range of people have a high enough net worth to make estate planning worthwhile. Also, regardless of money, anyone with young children will want to choose the guardian for them in case of death. An estate plan can also address matters like care in case of old age, disability and serious illness.
Certain tools are part of most estate plans. They include:
• A will. Wills are used to say who you want to receive your property when you die. But wills can do other things as well. A will can let you choose your executor -- the person who will be in charge of managing your estate during probate, including making sure your debts are paid and that property is distributed in accordance with your will. A will can also say who you want to serve as guardian for your children if you and your spouse die while they are minors.
• A living trust. This can help avoid the delays and costs of probate, which is the court procedure of administering your will.
Trusts are legal devices that let someone stop being the “owner” of property but still control it. With a living trust, you can transfer title of your home, car, stocks or other property to the trust. You can serve as both trustee and beneficiary during your lifetime, which lets you control the property in the trust and obtain the income stream or other benefits it provides. When you die, a successor trustee (that you have named) will distribute the property in the trust to the successor beneficiaries. This transfer occurs outside of the probate process.
Another common use of living trusts is to help avoid conservatorship proceedings (called “guardianship” proceedings in some states) if you become incapacitated. Since you have already given someone the power to manage the assets in your trust, a court won’t have to appoint someone.
• Life insurance. When you die, this insurance policy pays money to the person or people you designate. The purpose might be to provide enough money for a spouse or children to replace the earnings lost due to your death. Life insurance proceeds usually do not go through probate.
• Health and disability insurance. Medical care for a serious injury or illness can wipe out a lifetime of savings. Worse, a disabling injury could end your ongoing income by stopping you from working. Health insurance, whether from an employer program or bought separately, and disability insurance, can help you maintain an income stream and protect your savings if you can't work, or if you need costly medical care.
• Retirement plan statements. Your employer may have sponsored a retirement or pension plan. Make sure you have the statement of terms and benefits of each plan, and the statements you received over the years summarizing your contributions, company contributions, and the amounts in your plan account. If you don't have these, you should contact each of your current and prior employers to get them.
• Records of your other property. Make sure you have copies of the deed to real estate you own, your stock certificates or brokerage account statements, your insurance policies, bank statements for your savings accounts, and documents regarding any other properties. For whoever must assemble your assets upon your death, their task will be easier if records are available. Any property you own that cannot be located, for example, because no one knows about it or if records are not available, will eventually be turned over to the state.
• Your bank account. Many people set up their bank account as a “Totten Trust.” This is a legalistic way of saying your bank passbook account is set up to go directly to your heirs when you die without going through probate. A bank officer should be able to help you do this.
• A power of attorney. This lets you appoint someone to handle your financial affairs. It authorizes them to sign documents as if they were you. A usual power of attorney automatically expires if you become incompetent. But that could be when you need it most. So another form, called a “durable” power of attorney, stays valid until you die, as long as you do not revoke it.
If you want the power of attorney to take effect only when you are unable to act, you can grant a “springing” durable power of attorney. It takes effect in situations you specify, such as if your doctor and a trusted family member agree that you are incapacitated.
• A health care power of attorney. This lets you appoint someone to make your medical decisions if you cannot make them yourself. The decisions can cover a variety of medical matters, including consent for hospitalization and surgery.
• A living will. This document lets you specify the types of life prolonging treatment you want — or do not want — if you become terminally ill. It’s called a living will because it takes effect while you are still alive.
Estate planning involves arranging your affairs to be handled by the people you want when you become unable to handle them yourself due to illness, incapacity or death. It involves thinking about the future and having all the necessary documents to help make sure your wishes are carried out. Our law firm can help you prepare a plan for managing your property while you are alive, and make sure you have all the needed documents to manage your estate when the time comes.
Contact an attorney at Triscaro & Associates today. Please call us for all your legal needs. We offer a full range of legal services to individuals, families and businesses, including personal injury, estate planning, real estate, family law and business matters. We are dedicated to providing the highest quality legal services at a reasonable cost.