Estate Planning Frequently Asked Questions
If you die without a will (intestate), your property will be distributed to your spouse and children, and if none, to other family members. Perhaps this is not exactly the way you prefer to dispose of your estate, but it is based on your state intestacy laws’ guess as to how most people would have distributed their property upon death. A will allows you to leave your property to those you want, and in the proportions you elect.
What is probate?
A will is a document that provides for the distribution of your property at the time of your death in the manner you choose. At death, your will goes through probate which means the process by which the will is determined to be your final statement, confirms the appointment of the person named as administrators, assets are gathered, applied to pay debts, taxes and expenses of the administration, and distributed to those designated as beneficiaries in the will.
Is it possible to legally pass property to another person without going through probate?
Yes, it is possible. Joint Tenancy, Beneficiary Designations and a Revocable Living Trust are examples of some probate avoidance devices. Keep in mind that although it is often beneficial to avoid probate, because it can be costly and time consuming, these devices have pitfalls. Additionally, probate is sometimes the best option depending on the situation.
What is the pitfall of Joint Tenancy?
Adding another person to your assets as a joint owner of “joint tenant with rights of survivorship” will allow your property to pass to the other individual upon your death without the need for a probate proceeding. The obvious pitfall is that while you are alive the other owner has access to 100% of that asset and the asset is subject to any claims of the co-owner and/or creditor of the co-owner.
Can Beneficiary Designations avoid the problems associated with Joint Tenancy?
Unlike Joint Tenancy, adding beneficiary designations to your property allows you to name an individual to inherit your property at your death without giving them any current ownership. The property will pass to the individual of you choice without going through a probate proceeding. One of the problems associated with Beneficiary Designations is that often times, the state is not divided equally among the family as was intended by the individual.
Why a Revocable Living Trust may be your best option?
Revocable trusts are documents wherein an individual Grantor creates a trust instrument and names an individual (usually themselves) or a bank as Trustee. The Grantor then transfers property into the trust and the Trustee manages the property and distributes the property according to the terms of the trust. Unlike the addition of joint tenants or beneficiaries on your accounts, which may lead to conflict among family members, a Revocable Living Trust allows you to specify how you wish your property to pass. A Revocable Living Trust also avoids some of the adverse tax consequences associated with joint titling and beneficiary designations, while accomplishing the same goal of avoiding probate.
Are Trusts only for the wealthy?
Trusts are not only for the wealthy. Many young parents with limited assets choose to create trusts either during life or in their wills for the benefit of their children in case both parents die before all their children have reached an age deemed by them to indicate sufficient maturity to handle property. This permits the trust estate to be held as a single undivided fund to be used for the support and education of minor children according to their respective need, with eventual division of the trust among the children when the youngest has reached a specified age.
What is a Power of Attorney?
A Power of Attorney is a legal document where one person (the principal) authorizes another (the agent) to act on their behalf. The Power of Attorney can be broad in scope, giving your agent the ability to make any and all financial decisions for you (a General Power of Attorney) or you can limit your agents authority by specifying the types of decisions you would like them to make on your behalf (a Limited Power of Attorney). You also have a choice whether you would like your agent to have the ability to make decisions both now and if you become incompetent (a Durable Power of Attorney) or your agent can be limited to make decisions only when you become incompetent.
What is the difference between a Power of Attorney and a Guardianship?
A Power of Attorney is a relatively low cost and private way to decide which family member or trusted friend will have the legal authority to carry out your wishes if you can no longer speak or act for yourself. If you do not have a Power of Attorney or if your Power of Attorney is not drafted properly, your family/friends may later face court proceedings and court supervised Guardianship. A court proceeding is not only costly, but the person appointed as your Guardian may not be the person whom you would have chosen yourself.
Why have a Living Will or Health Care Proxy?
A Living Will is your written expression of how you want to be treated in certain medical conditions such as if you wish to be given life-sustaining procedures. A Health Care Proxy is a document appointing and granting authority to a family member or other person to make medical decisions in the vent you are unable. These documents provide your expressed wishes, rather than making the family guess your desires. Physicians prefer these documents because they provide your desire as to your medical care and designate the person to consult in cases of unanswered medical questions.