Estate Planning 101

Estate Planning

Estate Planning consists of planning and setting up legally effective arrangements designed to:

  • Preserve your estate
  • Ensure continuity of management of your affairs in case of incapacity
  • Avoid Probate
  • Distribute your estate efficiently and effectively
  • Minimize or prevent disputes and challenges to your wishes
  • Minimize potential taxes and fees

A Good Estate Plan coordinates what happens to your home, savings, investments, businesses and retirement assets while you are alive and after you die.

Who needs an Estate Plan?
You do – whether your estate is large or small. Either way you should designate someone to manage your assets and make health care decisions for you if you ever become unable to do so for yourself. A simple Will along with Powers of Attorney may be sufficient to distribute a small estate. In today’s world however, the use of Revocable Living Trusts is increasingly more common.

Common Estate Planning Strategies

The “Do Nothing Plan” a.k.a. the “State’s Plan”
The American Bar Association estimates that approximately 70% of American Adults have the “Do Nothing Plan”. If your estate exceeds the minimum dollar threshold, Probate is automatic. The difference between this plan and having a Will is that with the “Do Nothing Plan”, your assets will ultimately be distributed in accordance with the “State’s Plan” and not your own. Also, of extreme importance is that the court will decide who will be guardian of your minor children. Sadly, this is usually the most expensive estate plan you could own, and the one that will give your family the greatest amount of grief and problems.

Estate Planning Strategies

The Last Will and Testament Plan
With this plan you create a Will that specifies who is to receive your assets after you are gone. Contrary to what some people have heard and many have been led to believe, a Will does not shield you from Probate, it virtually assures it. While your estate must still usually meet the minimum dollar threshold, a Will cannot be enforced until the court validates it through the Probate Process.

Revocable Living Trust Plan
A Living Trust is a legal entity designed to own and hold your assets for you. It is created by a legal document that, like a Will, contains your instructions for what you want to happen to your assets when you die. But, unlike a Will, a Living Trust avoids Probate at death, can control all of your assets and prevent the Court from controlling your assets at incapacity. Because there is no Probate with a Living Trust, all expensive Court proceedings and delays are eliminated. Your privacy is preserved and the emotional stress on your family is minimized. It can reduce or eliminate estate taxes through the use of A/B a.k.a credit shelter provisions in the Trust, is extremely hard to contest and even provides very effective prenuptial protection.

Other Important Estate Planning Documents

Estate Planning Documents

Durable Power of Attorney – Gives a trusted person the legal power and authority to act on your behalf in personal, financial and legal matters if you become incapacitated.

Advance Health Care Directive – Gives a trusted person the legal authority to make medical decisions for you if you are unable to make them for yourself, including decisions about your care and comfort, medical procedures and end of life decisions related to life support measures.

Pour Over Will – When used in combination with a Revocable Living Trust, the Pour Over Will directs the court to “Pour Over” into the trust, any assets that may have inadvertently been left out of the trust, so that distributions are consistent with the instructions contained in your estate plan.

Trust Instructions to your Successors - Managing and distributing an estate held in a Living Trust is usually easy and uncomplicated. A well-designed trust should contain instructions for your Successor Trustees to follow to ensure that your wishes are efficiently carried out and also so that your heirs do not unnecessarily spend your assets in hiring an attorney to “settle” your estate. While there may from time to time be specific settlement functions an attorney can assist your heirs with, generally speaking, a Living Trust should make an attorney’s services unnecessary after your death.