What Parents Need to Know About Estate Planning
Do you need a will? Suggestions on ensuring your family's future
What is estate planning?
Several steps must be taken when a person dies. After the funeral services or last rites are completed, the decedent’s personal belongings must be gathered, creditors must be paid (including any medical or funeral expenses, and payment of any taxes which may be due) and all estate property must be distributed. Guardians or adoptive parents will be appointed for any minor children left without a parent. An individual’s estate plan is simply the tool used to accomplish these things.
A basic estate plan includes:
What is a will?
A will tells the world exactly how and to whom you want your assets distributed when you die, and who should administer the distribution of those assets. A will is also the document where guardians for your children are named. Dying without a will, also known as dying “intestate,” can be costly and a time-consuming process for your heirs, and leaves you no say over who gets your assets.
What can a will do for me?
A will is a written legal document. In a will, you can do things such as:
- Name the people that you choose to receive your property upon your death
- Name the person you wish to be guardian for your unmarried children under the age of 18
- Name your “personal representative,” the person you wish to handle your affairs after your death
- In some cases, avoid or minimize, in a legal way, any taxes your estate or your family may owe
- Make special provisions — sometimes by creating a trust — for the care of your minor children or other family members with special needs
- Generally avoid problems which can occur if you die without a valid will
What happens if a person dies without a will?
If you do not leave a valid will, the court distributes your estate to your relatives in a certain order set out by law. This is called “intestate succession.” The law will treat all your property the same. There are no special provisions for heirlooms, jewelry or the family business. If your legal heirs do not agree among themselves to a specific division of your property, it may be necessary to sell property to achieve the distribution of value required by law.
Making a will is especially important for people with young children because a will is the document which establishes guardianship of minors. If you do not name a guardian in your will and if there is no surviving parent, the court will appoint a guardian for your minor children. This may not be the person you or your spouse would have wished.
What is a trust?
A living trust is legally in existence during your life, has a trustee who is currently serving and holds title to property which you have transferred to it during your life.
While you are living, the trustee (who may be you) is responsible for managing the assets in the trust as you direct, and which can be for your benefit. Upon your death, the trustee is generally directed to either distribute the trust property to your beneficiaries (whomever you choose to leave your assets to) or to continue to hold it and manage it for the benefit of your beneficiaries.
Like a will, a living trust can provide for the distribution of property upon your death. Unlike a will, it can also avoid the need for probate, provide you with a vehicle for managing your property during your life and authorize the trustee to manage the property and use it for your benefit if you should become incapacitated, thereby avoiding the appointment of a guardian for that purpose.
Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate taxes and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits.
A trust may be a useful estate-planning tool for your family if:
- You want to leave your estate to your heirs in a way that is not directly and immediately payable to them upon your death. For example, you may want to stipulate that they receive their inheritance in three parts, or upon certain conditions being met, such as graduating from college.
- You want to support your surviving spouse, but also want to ensure that the principal or remainder of your estate goes to your chosen heirs (e.g., your children from a first marriage) after your spouse dies.
- You and your spouse want to maximize your estate-tax exemptions.
- You have a disabled relative whom you would like to provide for without disqualifying him or her from Medicaid or other government assistance.
What is a general power of attorney?
An important part of lifetime planning is the power of attorney. Valid in all states, these documents give one or more persons the power to act on your behalf.
The power may be limited to a particular activity (e.g., closing the sale of your home) or general in its application, empowering one or more persons to act on your behalf in a variety of situations. It may take effect immediately or only upon the occurrence of a future event (e.g., a determination that you are unable to act for yourself).
The latter are “springing” powers of attorney. Springing powers of attorney may give temporary or continuous, permanent authority to act on your behalf. A power of attorney may be revoked, but most states require written notice of revocation to the person named to act for you.
An important reason to use powers of attorney is to prepare for situations when you may not be able to act on your own behalf due to absence or incapacity. Such a disability may be temporary (e.g., due to travel, accident or illness) or it may be permanent.
If you become unable to manage your personal or business affairs and you do not have a power of attorney, it may become necessary for a court to appoint one or more people to act for you. People appointed in this manner are referred to as guardians or conservators. If a court proceeding is needed, you may not have the ability to choose the person who will act for you. With a power of attorney document, you get to choose who will act and define their authority and its limits, if any.
What is a health care or medical power of attorney?
With the increasing ability of medical science to sustain our lives, people are living much longer than ever before. Unfortunately, as we grow older and experience poor health, we may find ourselves in a position where decisions need to be made as to how we wish to be treated in a variety of medical situations, such as consenting to surgery or treatment, or admitting us into a health care facility.
Sometimes we even find ourselves in a condition where we can no longer express our preferences. Medical powers of attorney and advance health care directives allow us to deal with these situations if they arise. Without such documents in place, your family may find it necessary to obtain court orders to deal with your medical situation.
What is a living will?
A living will is your written expression of how you want to be treated in certain medical conditions. This document permits you to express whether or not you wish to be given life-sustaining treatments in the event you are terminally ill or injured, to decide in advance whether you wish to be provided food and water via intravenous devices, “tube feeding,” and to give other medical directions that impact the end of life.
Life-sustaining treatment means the use of available medical machinery and techniques, such as heart-lung machines, ventilators and other medical equipment and techniques that will sustain and possibly extend your life, but which will not by themselves cure your condition.
In addition to terminal illness or injury situations, most states permit you to express your preferences as to treatment using life-sustaining equipment and/or tube feeding for medical conditions that leave you permanently unconscious and without detectable brain activity.
Originally published by Avvo