After Your Death, Do You Want the State to Make Decisions About Your Estate?
The answer is NO (capital letters and italics intended)! Without an estate plan in place, the state’s probate court will decide how your assets are distributed—who gets what and how much—and even who shall be a guardian for your children. And the cost for probate proceedings will take a chunk out of your inheritable assets.
Even if you have a relatively small bank account, rent an apartment, or have a few valuable possessions, you should have some type of directive in place that specifies who will be a beneficiary of your estate after you die. This is not solely for the rich or even for married couples. Everyone should have an estate plan. This will avoid family infighting, as well as expediting the transfer of assets. If left to the state’s probate system, these decisions can take months or years and cost a lot of money.
Components of an Estate Plan
An estate plan includes a will, but also addresses power of attorney and health care decision making while you’re alive. It may also name a guardian for your children, as needed. Very importantly, it will minimize taxes and fees on your estate.
Pretty much everyone is familiar with a will. This lays out in specific terms how your assets are distributed after your passing. It names an executor, who is in charge of decision making. With a will, you determine who becomes a beneficiary of your estate. This may include relatives, friends, and charities. When writing a will, you may specify guardianship of any children.
Another consideration in an estate plan is a trust arrangement. This document determines who controls your property not only after your passing, but while you’re still alive. Trusts come in many different flavors; the “revocable living trust” is basic vanilla. By setting up a trust, you name a trustee, who like the executor of a will, is responsible for ensuring your wishes are carried out. The trust specifies how your assets are distributed and when (for example, transferring $25,000 to your niece upon her 21st birthday). The trust will hold these assets until distribution is complete. Although a will and trust sound very similar, you have to complete a will that instructs that your assets (and which ones) are placed into the trust.
When using a financial power of attorney, you appoint someone you trust explicitly to make financial decisions in the event you are incapacitated and unable to do so on your own. This does not extend beyond your death, however.
A health care power of attorney designates someone to make decisions about your health care if you are incapacitated. These decisions may include continuing or discontinuing treatment, and therefore will need to be someone who understands your wishes.
A living will or advance directive is kept on file with your health care institution and caregivers. This document outlines your wishes for your medical care at the end of life. It addresses options such as ventilator support, do-not-resuscitate preferences, or other life-prolonging measures.
How Does Estate Planning Save Money?
Without a strong estate plan in place, court expenses will begin to mount upon your passing. These include fees for court and probate proceedings, lawyers’ time, appraisal services, and accounting services. As a result, a significant portion of your estate may no longer be available for your heirs. Your estate plan will minimize these expenses.
If you need to set up or review your estate plan, contact Isakov Planning Group today. We can help you understand how your estate can be affected by probate proceedings, as well as assist in discussing which professionals can draw up a will and trust.