Creating a thoughtful estate plan is one of the greatest gifts anyone can leave their loved ones. It is important to update your will when major changes occur. These might include marriage, divorce, opening or closing a business, buying or selling real estate, or birth or death of an heir.
Estate planning is a process that helps ensure that your desires for distribution of your property and assets at death are carried out. During life, to complete an estate plan, you should consider the following:
Wills
A will is the primary document that should be prepared while living, to be effective at death. A will is a written document expressing how you would like your estate to be distributed after death. Usually a will must be executed in the presence of two disinterested witness and be notarized. You must also have testamentary capacity (over the age of 18, of sound mind, and competent).
- Most folk need some sort of basic will.
- There are many options to avoid the hassle of probating a will.
- But none of them covers everything.
- A basic Will is a safety net for anything that may not be neatly captured in the other alternatives.
Intestate Succession
Estates with a valid will are referred to as “testate” estates. Those without a will are “intestate” estates. Testate estates normally pass through probate more quickly than intestate estates. The time required to settle probate estates depends on the type of property inherited, court caseload, and family dynamics.
- If there is no will, state law determines what the children inherit.
- There is a lot of variation among state laws.
- To transfer real property located in a state will likely require opening an estate in that state.
How long does the probate procedure take?
In every state, heirs and creditors are notified that probate is occurring. If heirs agree to the terms of the will, the probate process can usually be completed within a few months. The average time-frame to settle intestate estates (estates without a will) is 6 to 9 months. If creditor claims are submitted against the estate, probate can be prolonged for several months. When family members disagree over distribution of assets or if an heir contests the will, probate can be extend for a year or longer.
Estate planning is important because it ensures that your money and other assets are inherited by the people you want. Other benefits include limiting tax liability, saving heirs and beneficiaries trouble, money, and heartache, and preserving estate assets.
Trusts
A trust is an important estate plan document. Other estate planning documents include a last will and testament and intestate succession.
Every state has laws that determine who your heirs are and what proportion of the estate the heir is entitled to receive. Heir refers to blood relatives and are usually grouped according to closeness of relationship: Children and spouse; siblings and parents; aunts, uncles, and cousins. Where there is no will or trust, the estate is deemed “intestate” and must be settled according to state probate law. Individuals who inherit property under a will or trust are referred to as beneficiaries. Persons can be named as beneficiaries on bank accounts, life insurance policies, financial portfolios, retirement accounts, and certain types of titled property such as real estate – they need not be heirs. Remember heirs can be beneficiaries, but beneficiaries are not always heirs.
To complete an estate plan, you should consider adding trust documents.
- Trusts: A trust permits a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death. Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Trusts are classified as either express or implied:
- An express trust is created when a person has the intent to create a trust and complies with the requisite formalities to create a trust.
- An implied trust is created by conduct, regardless of whether there was intent to create a trust.
According to the American Bar Association, an estate plan allows you to
- Provide for your immediate or extended family.
- Get property to beneficiaries quickly.
- Plan for incapacity.
- Minimize expenses.
- Choose executors/trustees for your estate.
- Help a favorite cause.
- Reduce taxes on your estate.
- Make sure your business continues smoothly.
Estate planning is important because it limits tax liability. Other benefits include ensuring that your money and other assets are inherited by the people you want, saving heirs and beneficiaries trouble, money, and heartache, and preserving estate assets.
Power of Attorney
A power of attorney, including a heath care power of attorney, are crucial estate planning documents. This is especially important if you have Alzheimer’s disease, dementia, or are suffering from another chronic and debilitating illness. Individuals who are widowed or alone should carefully consider who they can trust to manage their financial and medical affairs when they lose the ability to make such decisions themselves.
- Power of Attorney: A power of attorney is a legal document you can use to appoint someone to make decisions on your behalf. The person you designate is called an “attorney-in-fact.” The appointment can be effective immediately or can become effective only if you are unable to make decisions on your own.
- New York State has a short-form and a long-form Power of Attorney form.
- Health Care Power of Attorney: A health care power of attorney is a legal form that allows an individual to empower another with decisions regarding his or her healthcare and medical treatment. A healthcare power of attorney becomes active when a person is unable to make decisions or consciously communicate intentions regarding treatments.
What kinds of decisions can my health care power of attorney agent make:
- Talk with physicians and other health care providers about your condition.
- See medical records and approve who else can see them.
- Give permission for medical tests, medicines, surgery, or other treatments.
- Choose where you receive care and which physicians and others provide it.
- Decide to accept, withdraw, or decline treatments designed to keep you alive if you are near death or not likely to recover. You may choose to include guidelines and/or restrictions to your agent’s authority.
- Agree or decline to donate your organs or your whole body if you have not already made this decision yourself. This could include donation for transplant, research, and/or education. You should let your agent know whether you are registered as a donor, or whether you have agreed to donate your whole body for medical research and/or education.
- Decide what to do with your remains after you have died, if you have not already made plans.
- Talk with your other loved ones to help come to a decision (but your designated agent will have the final say over your other loved ones).
Your agent is not automatically responsible for your health care expenses and should act within your financial means. Power of attorney documents, whether financial or for medical decision purposes, have no effect after death. The last will and testament and any trust documents control financial decision making after you die.
What you need to know about your spouse or partner before they die:
- How much life insurance is there? What are the company names and policy numbers?
- Who are the beneficiaries?
- Where are the bank, brokerage and retirement accounts?
- Is there a safety deposit box – where is the key?
- What are the addresses, phone numbers for next of kin?
- Who is the lawyer? Where is the will or trust?
- What are the passwords to all online accounts, including email, social media, and financial websites?
Estate planning is important because it saves your heirs and beneficiaries trouble, money, and heartache. Other benefits include ensuring that your money and other assets are inherited by the people you want, limiting tax liability, and preserving estate assets.