Estate Planning

Estate Planning Introduction
While it may be the last thing you want to think about, estate planning is an important step you can take to protect the interests of your family. A well prepared estate plan will help you ensure your wishes are carried out and your loved ones are taken care of once you’re gone. If you pass away without a plan in place, your family members may be left to sort out the mess in court. To give you a better idea of what estate planning entails, this section provides detailed information on wills, trusts, health care directives, probate, and estate administration. You’ll find articles and resources on making a will, challenging a will, creating a health care power of attorney, setting up a trust, navigating the probate process, and more.
Wills, Living Wills, and Trusts
A will can help make the transition after a loss as painless as possible for your loved ones. Your property will be transferred quickly and many tax burdens can be avoided. Wills typically describe the estate, name individuals who will receive specific property, and dictate any special instructions you may have. Depending on your wishes and the size of your estate, your will could be anywhere from a single page to a lengthy document.
While a will allows you to express your financial wishes once you’re gone, a living will expresses your health care preferences while you’re still alive. With a living will, you’ll be able to designate the medical treatment you wish to receive, should you become unable to communicate your wishes due to illness or incapacitation. A health care power of attorney, on the other hand, allows you to designate a person who can make medical or end-of-life decisions on your behalf.
Trusts are another estate planning tool you can use to manage your property and avoid tax burdens. A trust can either be created during a person’s lifetime, or after death, by a will. There are a number of different types of trusts serving a wide range of functions. An asset protection trust, for example, is designed to protect a person’s assets from future creditors. A charitable trust, on the other hand, is used to benefit a particular charity or cause.
Estate Planning Lawyers
An estate planning attorney can help you in a number of different ways. If you’re interested in creating a will or setting up a trust, an estate planning attorney can draft the necessary documents and help lay the legal groundwork for your plan. That way, your loved ones will be able to avoid the costly and time-consuming probate process. In addition, if you’d like to express your wishes regarding medical treatment, an estate planning attorney can help you draft a living will or a health care power of attorney.
If a loved one dies without a will, on the other hand, probate could be necessary. Probate is the court-supervised process of sorting out a person’s affairs. If that’s the case, it may be important for you to find an experienced probate attorney. An estate planning attorney will be able to guide you through the probate process and represent your interests in court.
Planning an Estate
Planning an estate is one of the most important things you can do for yourself and for your family members. Despite its importance, estate planning is often considered a low priority by many people, even as they age. Creating a proper estate plan can make the difference between having your assets and other property distributed as you wish, versus having a court make decisions that may not reflect your intentions. It’s never too early to begin to plan, and people who do so early on have the advantage of becoming more knowledgeable about estate laws over time. This section provides basic tips and information to help you begin planning your estate, and information for consulting with an estate planning attorney is provided. In addition, you may want to download FindLaw’s Guide to Estate Planning [PDF] for quick reference.
Estate Planning Statistics
According to the American Bar Association, 55% of Americans pass away without a will or other estate plan in place. For Americans under the age of 35, the percentage without some form of estate plan in place is over 90%.
Types of Estate Plans
A will, a power of attorney, and a trust are some of the types of estate plans. As you begin planning, it’s important to be informed about the various forms of estate plans, so that you can decide which is the most suitable. For example, one plan might be more advantageous than another when it comes to estate taxes. Note that estate planning includes healthcare power of attorney, which grants another person the right to make medical decisions on your behalf, and special accounts to pay for school tuition that avoid the gift tax.
Estate Laws
The federal government and each state have enacted estate laws. These laws cover issues such as estate taxes, procedural requirements for planning an estate, and the dispute settlement process. If you’re considering an estate plan, make sure you fully understand the laws that apply, so that you can make an informed decision in choosing the plan that most suits your needs and wishes.
The Consequences of Failing to Plan
In extreme cases, a failure to plan one’s estate can lead to ugly disputes and costly lawsuits between family members. If a court is asked to distribute assets, it may do so in a way that doesn’t reflect the decedent’s wishes. Also, it can take a year or more for a court-appointed executor to locate and manage estate property. Another consequence of lacking an estate plan is the payment of unnecessary taxes and other costs.
How an Attorney Can Help
An estate planning attorney can answer your questions about the various forms of estate plans and explain the features and benefits of each. He or she can also help you to set up a plan that distributes your estate according to your wishes. This section provides a link for consulting with an experienced estate planning attorney in your area.
Wills
Welcome to the Wills section of FindLaw’s Estate Planning Center, where you’ll find resources covering how to prepare a will, how to amend or revoke an existing one, the benefits and limitations of wills, and more. Other topics include an overview of inheritance law, information about challenging a will, a discussion of living wills, and a list of important factors for married couples to consider.
The Basics
Wills are perhaps the most common and well-known form of estate plan. A valid will allows a person to designate how his or her estate is distributed and otherwise managed upon his or her death. In most circumstances, a person who creates a will can feel secure in knowing that the will’s instructions will be honored. On the other hand, a person who passes away without a will runs the risk of a court or other estate administrator making decisions that do not reflect the person’s wishes and intentions. Unfortunately, the failure to create a will can lead to disputes between family members, and even to expensive lawsuits and the ruining of relationships.
First...
One of the most important decisions that comes with creating a will is deciding on a competent and trusted executor. This is the person that will carry out the instructions contained in your will. Of course, you’ll also need to create a list of beneficiaries, and it’s important that you begin to learn about estate tax laws, to minimize the taxes that you and/or your heirs pay.
What Makes a Will Legally Valid?
Estate planning laws vary by state, so it’s best to consult with an attorney if you have specific questions about your state’s laws. Generally speaking, a person must have been of “sound mind” when he or she created the will. This means that he or she understood the effects and consequences of the will, and that he or she was not coerced or otherwise manipulated into signing it. Typically, at least one witness is required to verify the will, and it’s best that this person be someone who doesn’t stand to benefit from the will. Although wills are usually made in writing, oral wills can be valid, and recently, electronic wills have been upheld in some courts.
Will Limitations
A will cannot violate state or other laws. As an example, a person cannot circumvent a state’s community-property marriage laws by asserting in a will that his or her spouse is entitled to no property. Also, note that some states have passed heirship laws that require, for example, children to be listed as heirs in a decedent’s will. A will that breaches heirship laws will likely not stand up in court, and the decedent may be considered intestate.
How an Attorney Can Help
An estate planning lawyer can answer your questions about wills and other estate plans. He or she can also explain applicable estate laws to you and help you to create a will that fits your needs and reflects your intentions. This section provides a link for consulting with an experienced estate planning attorney in your area.
Living Wills
A living will is a type of estate plan that allows a person to express his or her medical and end-of-life treatment decisions, in order to provide family members and health care personnel with clear medical care instructions. In general, if a living will meets legal requirements, then the instructions it provides are legally valid and binding. This section gives an overview of living wills and other health care directives, provides state-specific resources related to these types of estate plans, and contains a link for consulting with an estate planning lawyer in your area.
The Purpose of Having a Living Will
The purpose of a living will is to ensure that a person’s medical care and treatment wishes are honored should he or she become mentally incapacitated. For example, if a person decides against receiving life support, he or she can express that decision in a living will. By creating a living will or a similar health care directive, you can accomplish two important goals: you inform family members of the types of treatment that you want and don’t want, and you provide them with advanced notice of your intentions, so that there’s no uncertainty later on. If you create a living will, you reduce the likelihood of emotional and ugly disputes over your medical and end-of-life care. Unfortunately, the desire to avoid dealing with an awkward and uncomfortable subject leads many people to forego creating living wills.
Recent Trends
In a recent survey, 42% of American adults stated that they had created a living will or other health care estate plan of some type. While there’s still room for improvement, only 17% of survey respondents had a living will or a similar plan in 1994. The most common reason given for not creating a health care directive was that the subject of mental incapacity and end-of-life care was difficult to approach.
State Laws
Every state has some form of health care directive for residents to express medical care preferences and instructions. Keep in mind that states may use different terms and have different requirements and procedures. For example, one state might use the term “living will,” while another state uses the term “advance health care directive.” Also, one state may require medical personnel to obey living will instructions, while another state merely provides medical personnel with legal immunity if they choose to obey will instructions. If you have questions about your state’s health care directive laws, it’s a good idea to speak with an attorney.
What You Can Express in a Living Will
Depending on the state, a person can provide treatment instructions concerning blood transfusions, dialysis, use of a respirator, and the administration of life-sustaining drugs and intravenous fluids. It goes without saying that these decisions should be carefully considered, with family members and friends consulted. If you begin thinking about your living will early on, you’ll give yourself time to plan carefully and to consult with your loved ones.
How an Attorney Can Help
An attorney can answer any questions you have about living wills, and he or she can help you to create a will that states your end-of-life and other medical decisions clearly. This section provides a link for consulting with an experienced estate planning attorney in your area.
Trusts
Trusts are estate-planning tools that can help you manage property during life while ensuring a smooth transition of affairs after death. The Trusts section of FindLaw’s Estate Planning Center includes practical information on different types of trusts including living trusts and charitable trusts. You’ll also find useful guidance on how to set up a living trust, choosing a trustee, tax implications of trusts, when it makes sense to hire an attorney and related issues.
Types of Trusts
There are many different kinds of trusts possible, though all trusts can be separated into two groups; revocable and irrevocable trusts. The key difference, that one can be revoked and the other cannot, is apparent in their names, though the reasons for selecting one or another has more to do with other details about ownership and control.
A revocable trust, often called a “living trust,” are trusts in which the person making the trust transfers their title of property into the Trust, serves as the initial Trustee, and has the ability to remove, change, modify, alter, or entirely revoke the trust during their lifetime. Trusts of this sort are useful because the trust owns the property, rather than the person making the trust. As such, when the person dies the property held in trust is not subject to probate. An irrevocable trust, by contrast, is one that cannot be altered, changed, modified, or revoked once it has been created.
Revocable trusts may be vulnerable to claims by the creator’s creditors. To access these assets the creditor will need to petition the court for an order enabling them to access the assets of the trust, but the control the trust maker maintains in trusts of this kind is precisely what makes the assets vulnerable to creditors. Upon death a revocable trust becomes irrevocable.
There are many kinds of revocable and irrevocable trusts. We detail many of the trust types and their characteristics elsewhere in this section.
Setting up a Trust
Trusts, regardless of their type, have some common features. A trust is a transfer of legal ownership of property or assets from the property owner, called the trustor, to a person or institution responsible for handling the property, called a trustee. This property is held for the benefit of a third party, called the beneficiary.
A trustee is often compensated for their management of the trust. Regardless of whether they are paid the trust creates a “fiduciary” relationship between the trustee and the beneficiary, meaning that they can only act in the interests of the beneficiary. The grantor may act as trustee, but they still have the fiduciary duty. The grantor may also be the beneficiary of a trust, or among several beneficiaries. The obligations created by these different roles are important to consider when establishing a trust.
Many factors can influence the procedure for setting up a trust, including the age, size of the estate, and the marital status of the trustor. We provide information on choosing a trustee, amending an existing trust, as well as why a trust might be useful and how a trust ends.
Durable Financial Power of Attorney
The durable financial power of attorney is simply a way to allow someone else to manage your finances in the event that you become incapacitated and are unable to make those decisions yourself. The power is granted in a document, and is not only useful for you, but can really help your family in times of crisis. More precisely, it grants someone legal authority to act on your behalf for financial issues. This person’s official name depends on the state you live in, but is often referred to as your agent or as an attorney-in-fact.
Your Financial Agent’s Tasks
You can set the limits of your agent’s power, granting as much or as little power as you think is appropriate. When deciding whether to set limits, consider the kind of tasks your agent will likely be asked to perform:
Paying your bills
Paying your taxes
Paying medical expenses
Managing your real estate assets
Accessing your financial accounts
Investing on your behalf
Collecting any retirement benefits
Transferring and selling your assets
Buying insurance for you
Operating your small business
Hiring someone to represent you
Your agent cannot do whatever he or she wants to do, but must act in your best interests. One area of potential conflict to keep in mind is in regards to paying for medical expenses. Often, people also name a medical agent who can make medical decisions for them. If your financial and medical agent aren’t the same person or disagree on medical care, the financial agent can make receiving medical care difficult.
Creating a Durable Financial Power of Attorney
Most states have simple forms to fill out to make someone your financial agent. Most states don’t require that you use these forms, but it is always a good idea to do so.
Generally, the document must be signed, witnessed and notarized. If your agent will have to deal with real estate assets, some states require you to put the document on file in the local land records office. Finally, many banks have their own forms, and while not strictly necessary, it will make the process much easier if your bank knows who your financial agent is.
When it Begins The first distinction to keep in mind when you are granting a financial power of attorney is whether or not to make it “durable”. Durability simply means whether the power is always there, but it has significant consequences that may not be apparent. The best way to illustrate this is by example.
For example, if you grant it but don’t make it durable, then when you are incapacitated, your agent will have the power to make financial decisions as you would expect. However, if you recover, that power is now gone. This means though, that if you are then incapacitated again, that person is no longer your financial agent since the power was given but then extinguished by your recovery. So decide whether you want to make the power durable or not.
Generally, it goes into effect the second you sign it. If you do not want this, you should create a “springing” financial power of attorney. This means that the power is not granted to your agent until you are incapacitated (and certified as such by a doctor). Springing powers can be durable or not.
When it Ends
The financial power of attorney is automatically extinguished upon your death. That means that your agent can only make financial decisions for you while you are alive and incapacitated. To deal with financial matters after your death, you need to name an executor in your will. Other ways it can be extinguished include divorce, the event that your named agent is unavailable, or if a court invalidates your document or you revoke it. Because there are many ways for the power to end that you can’t plan on, it is helpful to name alternate agents.




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