The purpose of planning your estate is to provide guidance to your family or friends at a time when you are no longer able to speak for yourself, either due to incapacity or death. Estate planning is about more than just what you have and who you leave it to; it is about your legacy and the memories your family and friends carry with them after you have passed.
Many people focus only on the assets they own and how those things will be titled, but there is much more to it! A person may have a “simple” plan and just divide everything equally between his children. While that may work for a majority of people, increasingly individuals find that they have special situations. Provisions might be needed to care for a disabled or low functioning child; parents may want to require children to be responsible before they receive a sum of money; children may want to be sure that aging parents receive quality health care. Simply leaving money to an individual does not provide them guidance in how to properly handle the inheritance.
There are several ways to plan an estate, but only two are truly Estate Plans and we will cover those two in this post.
Last Will and Testament
A Last Will and Testament (Will) is simply a set of instructions to the Probate Court for how assets titled solely in your name are to be distributed or managed following your death. You nominate someone to be responsible for carrying out those instructions, a Personal Representative, but the Court actually appoints that person and oversees their actions.
The court has a standard process which must be followed in order to make sure that your final expenses are paid and that the proper people receive the remainder of your assets. This process takes time, usually about one year for just a simple estate. It is also public; anyone can go to the Court and view or request copies of your personal information.
Living trusts have become extremely common due to the ability of the Grantor, the owner, to control assets during his or her life, but to grant authority to a trusted relative or friend to manage the Grantor’s financial affairs if he or she becomes incapacitated or to distribute assets when the Grantor dies.
There is no Probate requirement for a Trust, so everything is handled privately. This is the key difference between a Will and a Living Trust. In a Will, the authority to act comes from the Probate Court after you die. In a Trust, the authority is in the document from the very beginning. Therefore, the person you trust to handle your business has only to prove that you are no longer capable, either due to incapacity or death.
While trusts are a bit more complex to set up than a will, the increased benefits in privacy, time savings, and lowered cost down the road are leading more people than ever to select this as their primary estate planning tool.
There are also other methods you should consider when planning your estate and you should also contemplate the tax consequences of your plan. However, we will cover those topics in a future post.
If you have questions about these issues you should speak to an attorney who cares about you and your long-term goals. You can learn more about our Estate Planning Attorneys here.
*This article is very general in nature and does not constitute legal advice. Readers with legal questions should consult with an attorney prior to making any legal decisions.