Are You a Candidate for Estate Planning?

• Do you own a home or other real property?
• Do you have a bank account?
• Do you have children?

It is a common misconception that estate planning is only for the wealthy. If you answered “Yes” to at least one of the above questions, then you have an estate which means you are a candidate for estate planning.

• Common Pitfalls

It is very common for an individual to have estate planning documents they think are good legal documents. Quite often the documents were drafted many years ago or by the individual themselves using generic “form” documents bought at an office supply store or from the Internet. As a result the documents are out of date and not in compliance with the current law, not drafted under the proper state law, or the individual’s wishes have changed, but are not reflected in the documents. Problems arise when these issues are not discovered until a family is going through a health crisis situation and the documents are discovered to be inadequate or not reflective of the individual’s wishes.

A well thought out estate plan, under the guidance of a knowledgeable legal professional, is critical to avoid theses common pitfalls. Estate planning documents should be reviewed every 3 – 5 years or upon a major life event, i.e. birth or adoption of a child, marriage, purchase of a new home, death of a spouse, etc. Forming a relationship with a trusted legal advisor enables you to have a comprehensive estate plan that is always current to meet your needs.

**Please contact us for a complimentary review of your documents and to discuss your estate planning options.**

What is Estate Planning?

Estate Planning is planning for both today and the future, both financially and medically. While everyone’s circumstances are different, at a minimum the three basic documents everyone should have are a Last Will and Testament, Durable Power of Attorney, and an Advance Directive for Health Care. Depending on an individual’s situation, estate planning may include additional documents and planning, such as a Revocable Trust, Testamentary Trust, Irrevocable Life Insurance Trust (“ILIT”), Life Estate Deed, re-titling of assets, and/or gifting of assets during a person’s lifetime directly to the desired beneficiaries. Estate planning may also result in the reduction of state and federal estate taxes, probate fees and overall asset protection.

• Last Will and Testament

A Last Will and Testament allows you to leave your assets to the individuals of your choosing. Additionally, a Will affords you the opportunity to choose someone you believe will take care of your affairs and distribute your property in accordance with your wishes after you die. If you die without a Will, you will die “intestate” resulting in the laws of the State where you reside to determine who will receive your property. 

If you have a minor child, dependent spouse, an elderly dependent parent or a disabled child, a Will with testamentary trust and guardian provisions may be necessary. The appointment of a guardian ensures that the person of your choosing will be responsible for minor children or a disabled dependent person. The creation of a testamentary trust ensures that a trustee of your choosing will manage your assets after your death for the benefit of your designated beneficiaries.

• Durable Power of Attorney

A Durable Power of Attorney allows a designated individual, known as an “attorney-in-fact,” to manage financial affairs on your behalf if you are unable to do so. Your attorney-in-fact may be given broad powers to do everything or limited powers to perform specific acts.

• Advance Directive for Health Care

An Advance Directive for Health Care (also known as a Health Care Power of Attorney and/or Living Will) allows a designated individual, known as a “heath care agent,” to make health care decisions for you, such as the selection of hospitals, doctors or type of medical treatment, if you are unable to make those decisions for yourself. Additionally, this document allows you to set forth your “end stage” wishes regarding medical treatment, such as feeding tubes, resuscitation, respirators, medication, surgeries, etc.

The Health Insurance Portability and Accountability Act (“HIPAA”) imposes strict guidelines regarding the release of private information to unauthorized individuals. It is crucial to have a well drafted Advance Directive that sets forth HIPAA release language allowing your Health Care Agent access to medical information.

• Trusts

There are many types of trusts used in the estate planning process. Some of the most common trusts include Revocable Trusts, Special Needs Trusts (“SNT”), Irrevocable Life Insurance Trusts (“ILIT”), and Marital Trusts/Credit Shelter Trusts. Trusts may be testamentary, meaning the trust provisions are built into a Will and only come into existence upon the death of the creator of such Will. Other trusts are separate “living” trusts that are created while an individual is alive and may be revocable or irrevocable by the trust creator.

• Life Estate Deeds

A life estate is created when an owner (“Grantor”) of real property conveys the property to another (“Remainderman”) while reserving certain rights to the property, typically for the remainder of his or her life (“Life Tenant”). The Grantor may reserve only the right to live in the property for his or her life and have no other powers (“Life Estate without Powers”), or the Grantor may retain control and have the right to sell, mortgage or otherwise deal with or dispose of the property, including undoing the deed that created the life estate interest (“Life Estate with Powers”).

What is Probate?

Probate is the formal legal process of administering your estate after your death. Everyone has an “estate” no matter how small. If you die with a Will, you will have a “testate” estate. If you die without a Will, you will have an “intestate” estate. The probate process typically takes anywhere from six months to several years, depending on the estate planning done or lack thereof and the complexity of the estate. Common costs may include inheritance taxes, appraisal and advertising expenses, probate fees, personal representative commissions, attorneys’ fees and court costs.

While in some cases probate is a preferable way to settle an estate, probate administration can be a lengthy process that can be overwhelming for grieving family members. Probate can tie up assets that may be needed by family members and assets subject to probate are subject to claims of creditors. Proper planning and titling of assets through methods such as joint accounts, pay on death designations and life estate deeds, may allow your assets to pass to your heirs automatically upon your death without becoming part of your probate estate.

What is a Guardianship?

What if you need to have your financial affairs and/or health care decisions managed by someone else? What if there is no Power of Attorney or Advance Directive for Health Care appointing someone to act for you, or there are documents but they are very poorly drafted or invalid? Someone would need to seek the appointment of a guardian of either your person (for health care) and/or property (for financial) through the Circuit Court in the county where you reside. This procedure requires a court hearing, and the process can take several months. Court Appointed Guardians must file a report with the court annually and may need to petition the court for approval of certain decisions.

What Taxes are there to Consider in Estate Planning?

There are several types of federal and state taxes, including estate tax, capital gains tax, gift tax and inheritance tax, that impact one’s estate, most of which can be avoided or reduced with proper planning. You do not necessarily have to have a large estate to be affected by taxes or to benefit from basic tax planning.

Most people have worked hard to earn what they have and wish to ensure that as much as possible is preserved for their loved ones. Because the tax laws have many technical requirements, attempts to protect one’s estate or redistribute one’s wealth without professional guidance could result in a lost opportunity to avoid a substantial tax impact.

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