What Is An Estate Plan and Why Do You Need One
An estate plan is a set of documents that detail your wishes related to your passing and names who will make choices for you if you are unable to. Issues dealt with by estate plans include who will receive your property, who will take care of your children and who will make medical and financial choices for you in your stead.
There are a variety of documents that you may need to ensure that your wishes are carried out, and an estate planning and living trust attorney can design and draft these documents. If you do not create an estate plan, the legal system will take over and make choices about who will receive your assets upon your death and who will make medical choices for you. These may not be the people who you would wish, so it's important that you do not put off creating an estate plan.
Estate Planning Documents
A will is one of the most well-known estate planning documents. In a will, you state who you want to receive your property and who you would like to care for minor children if you and the child's other parent are not able to do so. While a will can be an important part of an estate plan, it is not a very flexible way of leaving assets to heirs.
With a will, your assets pass upon your death to named individuals. There is no way to transfer the property at any time before your death via a will, and all of your possessions are transferred at once. If you only have a will, your heirs will have to go through probate, which is the process where assets that are not jointly owned are distributed. This can take anywhere from a few months to more than a year, and there may be legal fees associated with the process.
Trusts are one of the most diverse types of estate planning documents, and they can allow you to manage and invest your assets during your life. These documents also enable you to dole out your assets over a period of time or with certain requirements, which is not possible with a will. Having a living trust lawyer set up trusts for you can also help your heirs avoid probate, so they have become a very popular option.
Along with allowing you to manage assets while you are alive, trusts can also be very important if you want to leave assets for someone who is disabled. Many people who are disabled can take advantage of special state and federal programs that provide financial assistance, but if they make too much money, they may lose access to the program.
There are a variety of trusts, and each will have their own limitations, benefits and tax implications. A living trust lawyer can help you go over your options for different types of trusts and help you determine which are best based on your desires and circumstances.
Powers of Attorney
Unlike wills, powers of attorney are specifically designed to ensure that you and your assets are taken care of during your life. There are a number of powers of attorney, and they allow a trusted and named individual to make decisions when you cannot. Reasons for inability to make choices can range from simply being out of the country to having a medical condition that prevents you from being able to make rational choices.
There are also a few medical documents that are related to powers of attorney, and they make your wishes known or allow certain individuals access to protected information. For example, living wills allow you to outline what type of medical care you would and would not like to receive, and HIPAA forms enable named individuals to see your medical records. Just because someone is able to make medical choices for you does not necessarily grant them the right to see your medical files, so it's important that you ensure that your estate plan deals with these issues.
How you set up your will and trusts, if you have any, will play a significant role in the type of taxation that your estate and heirs will have to deal with. As of 2016, the current federal estate tax law provides individuals a $5.45 estate deduction, and any amount after that is taxed. While you may not have to worry about the federal estate tax, many states have their own estate tax, and the deduction amount is often far lower than the federal limit.
It's important to note that the people you name in your will may not receive assets if another person is a named beneficiary for the assets in question. For example, you may name your child as the person who should get a life insurance policy payout, but if your insurance company shows your spouse as the beneficiary, the payout will go to your spouse. As such, it is important that you make a complete list of all of your assets and ensure that your will, trusts and named beneficiaries all agree.
Keeping Your Estate Plan Current Once you've gotten an estate plan together, you still need to maintain it. Along with major changes in your life, such as deaths, marriages and the birth of children, federal and state estate planning laws may change. If your estate planning documents do not comply with current laws, it may result in your heirs having to pay more taxes or even the invalidation of some documents. A living trust attorney can help ensure that your estate plan is kept up to date based both on current law and your circumstances and needs.