Estate Planning Q & A

What must I know before I do my estate planning?

You must know who your heirs are, what you own and to whom you want to leave your estate.

What is estate planning?

Estate planning is planning for your future. It involves preparing your last will, living trust, power of attorney and advanced directives. Estate Planning is planning how your estate will be handled when you become incapacitated or die.

What are advanced directives?

Advanced directives are documents that you sign ahead of time, giving instruction for future occurrences. They include health care proxies and living wills. Health care proxies appoint someone to make health care decisions for you if you are not able to make them yourself. A living will is your statement that in the event that there is no hope of your recovery, you do not want to be kept alive by artificial life support.

Why does a person need a will?

If you die without a will, the state will direct how your property will be distributed. If you do not have a will, all property owned just in your name alone will, after your death, be probated, with one-third going to your spouse, if you have one, and two-thirds going to your children, if you have any. If you have no spouse and no children, everything goes to your parents, if they are alive; if they are not alive, everything goes to your brothers and sisters, if they are alive; if they are not alive, everything goes to their children. In addition to the other expenses your estate will incur in probate, your administrator will have to post a bond to serve. This is an additional expense you can avoid with a will.

Why should I do a living trust?

You should consider a living trust as a way to protect your estate if you become incompetent and to transfer your estate at the time of your death without the expense or time of probate. If you become incompetent and are not able to manage your assets, you have named a person to handle your assets for your benefit until you die. By doing this, you avoid the expense of setting up a guardianship.

If I have a living trust, do I need a will?

Yes. Your will serves as a safety net. It catches anything that was not put into your trust during your lifetime and will pour it over into your trust after your death. A will also provides for the guardian of your minor children should you die while you have minor children.

When is an estate large enough to justify a trust?

If your estate is larger than $50,000, then you should consider a trust. One of the main benefits is to avoid probate expenses at your death. A secondary benefit of a trust is to avoid guardianship proceedings later in life, by naming a guardian should you become incapacitated.

What about a power of attorney?

A power of attorney is a useful document; however, it is a two-edged sword. The word attorney originally meant someone who represented you or stood in your place. When you give someone your power of attorney, that person has the power to act for you.

My spouse recently died. Should I put my children's names on accounts?

We discourage our clients from putting their children's names on their bank accounts or on the title to their property. Anything with your child's name on it, even if it originally belonged to you, is subject to the claims of your child's creditors. If you have placed your child's name on your bank account, at your death that account belongs to that child. In order for that child to transfer part of that account to his or her siblings, that child must make a gift and could possibly use up part of his or her unified credit or have to pay a gift tax.

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