Estate planning involves designing and implementing an individualized legal framework to allow you to control the use and disposition of your assets during your life and at, and after, death with minimal or no court intervention, and with the least amount of taxes and administrative costs possible.
Most individuals should have an estate plan that includes the following:
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- Revocable Living Trust
- Pour-over Will
- Nomination of Guardian for Minor Children
- Durable Power of Attorney for Assets (DPA)
- Advance Healthcare Directive
- Grant Deed Conveying Real Property into Trust
Revocable Trust
There are two main reasons why a revocable or living trust is part of an estate plan. First, the Trust avoids probate at death. Probate is expensive and time consuming. Assets transferred into the Trust during the life of the client are not included in the probate estate. Second, the Trust can be structured in a manner that will minimize or eliminate estate taxes.
A revocable trust allows for flexibility and control. Managing assets held in a revocable living trust are managed the same way assets not in a trust are managed. Trust assets can be accessed, spent, saved, and moved in the same way before the transfer. You can also change and terminate your revocable living trust at anytime.
Since there is no court involvement, your financial affairs are handled privately.
Wills
If you die without a will, the court will apply intestate laws to your estate. This means that the division and distribution of your estate is determined by your state’s intestacy statute(s). Under these statutes, your estate will usually pass to your surviving spouse, children, parents, and/or siblings. Guardianship of minor children will also be determined by the court.
Pour-over will acts as a catch all testamentary instrument of assets that were not transferred to the Trust. The assets may need to pass through probate, but will be distributed according to the distribution instruction of the revocable living trust.
Nomination of Guardian gives the court guidance in deciding who will be the minor children’s physical guardian if the parents pass away. The nomination of guardian, along with appropriate provisions in the revocable living trust, provides a comprehensive plan for the physical and financial needs of the children.
Durable Power of Attorney for Assets
This document gives a person the authority to conduct financial and business affairs for you if you become incapacitated.
Advance Healthcare Directive
This gives another person, usually a spouse or loved one, the authority to make decisions for medical care and treatment, or the withholding of treatment if desired, if you become incapacitated.
Brief Summary of Important Issues and Objectives for Your Estate Plan:
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- Plan on how children and other loved ones will be provided for in the event you are no longer able to provide for them due to your death or incapacitation
- Minimize estate tax liability and avoid probate as much as possible
- Preserve and increase the value of your estate so you can pass as much of your wealth as possible to your intended heirs
- Medical treatment you will receive if you ever become incapacitated and are unable to communicate your wishes
- Appoint someone to handle your financial, personal, business and legal affairs if you ever become incapacitated