Estate planning is the legal means by which you can take control and determine specifically what will happen to your estate if you become incapacitated or after you pass away. Estate planning is a way of easing the burden of your loved ones and ensuring that your wishes for your estate are fulfilled. It is essentially an invaluable gift that you give to yourself and the people you love.
Your estate includes your personal property, real property, and all other assets you may own. For instance, your estate may include the following:
Yes, everyone needs an estate plan! Even if your estate is modest, establishing an estate plan will ensure that your estate goes to the people that you choose. Creating an estate plan can also avoid conflict amongst loved ones.
Every estate plan is different, however, estate plans usually include the following:
Although Wills, for many years, have been the epitome of Estate Planning, laws have become more complicated than just a will. A will is important to have, as it tells the courts how your assets were meant to be distributed. However, the biggest problem with wills is that they must pass through a complicated process called probate. Probate is the legal process through which a deceased person’s estate is distributed to the rightful beneficiaries. The court oversees the administration of the will and ensures the will is valid and the property gets distributed the way
the deceased intended. In other words, it can be a very costly and lengthy process.
A Trust is considered its own legal entity. This means that a Trust can bypass the Probate process, therefore the court does not need to oversee the process, and essentially makes it more cost effective for your estate. A Trust is more difficult to challenge compared to a will, as the Trust has been established with direction on who gets what and assets are already retitled into the Trust. Additionally, you can add restrictions on inheritance, whereas a will cannot. For instance, you can require a beneficiary to finish college before receiving their inheritance.
A living trust is established when the Grantor (the person creating the trust) is still living. A living trust allows the Grantor to change the terms of the trust or revoke the trust – this is called a Revocable Living Trust.
Upon your death/incapacity, your living trust becomes irrevocable, meaning no one can change/revoke the terms of your trust.
An irrevocable trust does not allow for the terms of the trust to be changed/revoked once it has been created.
Yes! Assets that are included in your will are those that are in your individual name at your death and not in your trust, therefore, you will need to create a will that will include these assets. Typically, a well drafted estate plan will include what is called a “pour over will”.
A pour over will directs that the remaining assets that are not in your trust be automatically transferred into the trust. This ensures that any assets that were neglected to be added to the trust, whether by accident or by purpose, ends up in the trust.
After establishing a trust, the next step is to fund your trust. Funding your trust is the process of which you transfer asset ownership from your individual name(s) into your trust. Funding your trust appropriately will ensure that your trust has control over your assets, thus distributing the asset to the proper beneficiary. This will also prevent that your asset(s) go through the probate process after your death. The attorney can provide you with instructions on how to properly fund your trust.
A power of attorney allows an individual (the agent) to handle certain assets if you become incapable of handling them yourself.
A health care directive allows you to provide direction to your healthcare wishes/preferences, in the event that you become incapacitated/unable to express informed consent.