Estate Planning And Wills
What Exactly Is Estate Planning?
At a minimum, estate planning is making a plan ahead of time and naming whom you want to receive the things you own after your death. However, good estate planning is much more than that. Believe it or not, almost everyone has an estate. Your estate is comprised of everything you own— your car, your home, other real estates, checking and savings accounts, investments, life insurance, furniture, and other personal possessions. No matter how large or how modest, everyone has an estate and something in common—you can’t take it with you when you die.
When you die—and it is a “when” and not an “if”—you probably want to control how those things are given to the people or organizations you care most about. To ensure your wishes are carried out, you need to provide instructions stating whom you want to receive something of yours, what you want them to receive, and when they are to receive it. You will, of course, want this to happen with the least amount paid in taxes, legal fees, and court costs.
What Happens If Someone Dies Without An Estate Plan Or Even A Will?
If you don’t have an estate plan or a will, your state has one for you, but you probably won’t like it. If you die without an intentional estate plan, your assets will be distributed according to the probate laws in your state. In South Carolina, if you are married and have children, your spouse and children will each receive a share. That means your spouse could receive only a fraction of your estate, which may not be enough to live on. If you have minor children, the court will control their inheritance. If both parents die (i.e., in a car accident), the court will appoint a guardian without knowing whom you would have chosen.
Given the choice—and you do have the choice—wouldn’t you prefer these matters be handled privately by your family and your attorney, and not by the courts? Wouldn’t you prefer to keep control of who receives what and when? And, if you have young children, wouldn’t you prefer to have a say in who will raise them if you can’t?
How Often Should People Give Their Estate Plan A “Check-Up”?”
The best practice is to review your estate plan on a regular basis, annually if possible. When you look over your estate plan, you should consider any life changes that have occurred recently, like a marriage or a divorce, the birth of a child, or even moving to a new state. Any time you experience a significant change in your life, there’s a good chance that your estate plan should be modified. So, when change happens, check with your estate planning attorney and take the recommended action.
Another reason to periodically review your estate plan is to keep abreast of changes in the law. Legal changes affecting your estate plan can happen without you even realizing it. That’s why it’s smart to establish a relationship with a good estate planning attorney who has a program in place to advise clients of legal updates. If your attorney doesn’t offer this, then check in with him or her when you review your plan, just to make sure you’re not missing anything.
What Are The Basic Items In An Estate Plan And What Does Each Item Do?
Many people think that having an estate plan simply means drafting a will or a trust. However, there is much more to include in your estate planning in order to make certain all of your assets are transferred seamlessly to your heirs upon your death. A successful estate plan also includes provisions to make sure your family members can access or control your assets should you become disabled.
The basic items in a thorough estate plan are:
- Will/Trust – Wills are drafted to ensure that property is passed according to an individual’s wishes. In addition, some trusts help limit estate taxes or legal challenges. However, simply having a will and/or trust isn’t enough.
- Durable power of attorney – In the event of your disability, It’s vitally important to have a durable power of attorney (POA) so that an agent or a person you assign can act on your behalf.
Absent a power of attorney, a court may be left to decide what happens to your assets (if you are found to be mentally incompetent). The court’s decision may not be what you wanted.
This document can give your agent the power to transact real estate, enter into financial transactions and make other legal decisions as if he or she was you. This type of POA is revocable by the principal at a time of his or her choosing, typically a time when the principal is deemed to be physically able, deemed mentally competent, or upon death.
In many families, it makes sense for spouses to set up reciprocal powers of attorney. However, in some cases, it might make more sense to have another family member, friend or a trusted advisor who is more financially savvy act as the agent
- Beneficiary designations – A number of your possessions can pass to your heirs without being dictated in the will (retirement accounts and life insurance policies, for example). This is why it is important to maintain a beneficiary (and a contingent beneficiary) on such accounts.
- Healthcare power of attorney – By drafting a healthcare power of attorney, you can designate another individual (typically a spouse or family member) to make important healthcare decisions on your behalf in the event of incapacity.
If you are considering executing such a document, you should pick someone who you trust, who shares your views and who would likely recommend a course of action that you would agree with. After all, this person could literally have your life in his or her hands.
Finally, a backup agent should also be identified, in case your initial pick is unavailable or unable to act at the time needed.
- Guardianship designations – While many wills or trusts incorporate this clause, some “form” wills don’t. If you have kids or are considering having children, picking a guardian is incredibly important and sometimes overlooked. Make sure the individual or couple you choose shares your views, is financially sound and is genuinely willing to raise children. As with all designations, a backup or contingent individual/family should be named as well.
Absent these designations, a court could become involved and could rule that your children live with a family member that you wouldn’t have approved of. In extreme cases, the court could mandate that your children become wards of the state.
- Letter of intent – A letter of intent is simply a document left by you to your executor or to a beneficiary. The purpose is to define what you want to be done with a particular asset after your death or incapacitation.
While such a document may not necessarily be valid in the eyes of the law, it helps inform a judge of your intentions and may help in the distribution of your assets if the will is deemed invalid for some reason.
If You Needed An Estate Plan, What Would You Look For To Tell You You’re Talking To The Right Attorney And What Warning Signs Would You Heed?
You will want to make sure that the attorney you retain will approach your planning in a reflective and effective way that builds a strategy based on your persona! values and goals?
You will also want to make sure your attorney is very skilled at estate planning while being understandable and able to explain the law clearly. Some very gifted lawyers are not skilled at explaining the complex estate tax and other laws to clients. You’ll be paying good money for your estate plan, so you should be able to understand the documents you’ll need to sign. This will help avoid surprises and disagreements among family members at critical times.