Estate Planning for Young Families
Frequently Asked Estate Planning Questions
What is Estate Planning?
Estate planning is putting the right strategies and legal documentation in place to reduce cases of estate taxes and settlement costs. It is also initiated to cover future plans for your home, business, investments, life insurance, employee benefits, retirement assets and issues that might come into play in the event of death or disability. Estate planning also covers or makes adequate arrangements for basic estate documents like Revocable Trusts, Financial Powers of Attorney, Medical Powers of Attorney, Wills, and beneficiaries of life insurance policies. But most importantly, estate planning is a way to protect your family, your assets, and your wishes.
What things make up an estate?
- An estate is everything that is in your name regardless of where it is in the world
- Your home and other structures built that are in your name
- Your business or investments
- Your shares in joint accounts
- The total sum of your retirement accounts
- Any life insurance policies registered in your name
- Any property that is owned by a trust, which you have control over
- Your personal items
What is a Will?
Simply put, a Will is a legally binding document that allows you to designate the following:
- The individual who will own your estate after you die. Your estate includes every property you own that doesn’t pass to another person by joint ownership or beneficiary designation.
- The name of the individual who will take custody of your children before they reach adulthood. It applies only when your spouse is dead or unavailable.
- In the Will, you will state whether the beneficiaries of your will are going to take their inheritance out rightly or on trust.
- Your Will includes the name of your personal representative after you die. This person will be placed in charge of your estate and be responsible for distributing your property to other beneficiaries.
What is a Living or Revocable Trust?
A Living or Revocable Trust can be created by you to manage your assets while you are alive. For this to work, you will be required to transfer your assets to the Trust. However, you will still care for and control your property until your death. At your death, your Trust will continue and a Trustee will distribute according to your wishes.
The reason why people prefer a Living of Revocable Trust is that your assets can be easily passed to your beneficiaries without having to deal with the hassles of Probate. However, the disadvantage is that selling or handling assets controlled by the Trustee can be more difficult.
Every family is different and I can help you to decide on the best path to take based on your own individual circumstances. Everybody needs a Will. Not everyone needs a Trust.
What is a Health Care Power of Attorney?
The law gives you the power to appoint someone you trust to make medical decisions for you when you are rendered incapable to do so. You can exercise this right by utilizing a Health Care Power of Attorney. The Health Care Power of Attorney designates the person who will make all medical decisions on your behalf if you are incapacitated.
An important part of a Health Care Power of Attorney is the HIPAA Authorization. This will give your agent the authority to get your medical information when it is needed to help make decisions.
This is also an invaluable document to have when your children are over age 18. For example, if your son or daughter is away at college and gets in an accident you aren’t their primary decision maker by default. You need this form to protect them.
What is a Durable Power of Attorney?
It simply means giving another person control over your finances. The person is called an agent. Your agent has the right to act on your behalf, and this depends on what is stated in the document. The rights can include the power to pay bills, sign legal documents, sell real estate and take other financial actions on your behalf. This person must be someone you absolutely trust.
When you die, the Durable Power of Attorney becomes invalid and the rights to care for your assets are transferred to your Personal Representative under your Will.
What is Probate and why does everyone want to avoid it?
Probate is a court process where the estate and the assets of a deceased person are managed and distributed. It is a lengthy legal process that can only be avoided if the deceased prepared the necessary legal documents and planned ahead on how to avoid it. This process is more complicated if the deceased has many assets that must be sorted out before they are distributed. Property owned in other states, children from other marriages and family owned businesses are some of the reasons why it may be better to have a plan that avoids probate.
While all probate estates are unique, most involve the below stages:
- A filed petition with the correct Probate Court
- Legal notice is sent to the heirs under the Will
- Petition to appoint a Personal Representative (Executor) for the estate
- Taking of inventory and appraisal of the assets
- Payment of estate debts
- Sales of estate assets, if required
- Payment of taxes, when applicable
- Final and equal distribution of assets to beneficiaries