Developing a personally tailored, effective Estate Plan is an important step to protect your assets and to provide for you and your family’s futures.
What is Estate Planning?
Your estate is your savings, investments, retirement funds, life insurance policies, business, home, and other assets which you have accumulated over your lifetime. An estate plan allows you to choose who will receive your assets rather than having the law and the courts decide for you. Proper estate planning can take advantage of federal and state tax exemptions, so more of your estate goes to your loved ones. It also allows you to select the person or entity that will be responsible for collecting your assets, paying bills, and distributing your assets.
Wills, Trusts, Healthcare Durable Power of Attorney (Healthcare POA), and Real Property Durable Power of Attorney (Financial POA) are all legal documents included in an effective estate plan.
Your Personal Estate Plan
After an in-depth interview designed to identify your goals for your heirs and estate and to make a comprehensive review of your assets, the lawyers at Hood Law will advise you on your options and can recommend a personalized estate plan to best meet your estate plan goals and needs.
For some, a standard estate plan is sufficient. Others may choose a more detailed estate plan which may include trust documents. A trust can protect your heirs from having to go through the probate process and can potentially reduce estate taxes by taking advantage of federal and state estate tax exemptions. A trust also can allow you to designate or restrict how assets are distributed to your beneficiaries.
Standard Estate Plan
A standard estate plan may include the following legal documents:
- Last Will and Testament—A Will is a legal document that details how your assets will be distributed after your death. A Will allows you to make important decisions regarding who will receive your assets; designates a guardian for any minor children; and appoints an executor who administers your estate upon your death. This legal document will not necessarily avoid probate or estate taxes.
- Health Care Durable Power of Attorney (Healthcare POA) – A healthcare durable power of attorney allows you to designate someone to make important health care decisions on your behalf should you be incapacitated, disabled, or unable to act. It also allows you to make decisions regarding life-sustaining treatment, organ donation, and restrictions on medical treatment. A healthcare power of attorney allows your loved ones to know your preferences and provides guidance to make difficult decisions easier.
- Real Property Durable Power of Attorney (Financial POA) –is a legal document which allows you to designate someone to have the power to act on your behalf regarding your property and financial affairs, such as paying bills, investing your assets and filing taxes should you become medically or mentally unable to do so as determined by a medical doctor.
Estate Plan with Trusts
An estate plan which utilizes the benefits of a trust for tax and probate avoidance purposes may include the following legal documents:
- Pour-Over Will—This type of will is designed for people who are setting up a trust. The pour-over will provide a safety net to allow any assets not titled in the name of the trust or an asset created by your death to be directed into trust and includes them in your estate plan.
- Revocable Living Trust—This type of trust allows you to take advantage of the federal and state estate tax exemptions in certain circumstances and will allow your heirs to avoid probate because your assets are, in effect, transferred while you are still living. As the owner of the trust, you still maintain control of the trust and may transfer assets in and out of the trust during your lifetime and as long as you are competent.
- Irrevocable Trust—In addition to taking advantage of tax benefits and avoiding probate, these trusts allow for maximum protection against creditors, but the owner of the trust relinquishes control over the trust assets during their lifetime.
- Marital Deduction Trust—This type of trust allows married couples to maximize the federal and state estate tax exemptions by creating a marital trust and a family trust and avoids probate. Each spouse maintains control over their respective trust, and they may easily transfer assets in and out of the trust during their lifetime, provided they are competent.
- Special Needs Trust – This legal document is a type of trust that helps to protect the assets of a person with disabilities. Special needs trusts allow you to leave assets and funds to your loved ones without disqualifying them from receiving governmental assistance or future public benefits. As an added benefit, any future funds, assets, or inheritances they might receive will be protected by the trust, and the money cannot be taken should they be sued.
- If you are a parent of a child with special needs who is turning 18 and your child’s disability renders them incapable of making financial and medical decisions, you may need to be legally appointed as your child’s guardian through a court directed guardianship process. (The steps you will need to take to obtain a guardianship are listed under Elder Law/Guardianship.)
- Insurance Trust— An irrevocable life insurance trust allows you to reduce or even eliminate estate taxes on the money that is paid out from life insurance benefits so more of your estate can go to your loved ones. Since the insurance trust owns your insurance policies for you, they will not be included in your estate for tax purposes.
- Real Property Durable Power of Attorney (Financial POA) –This is a legal document which allows you to designate someone to have the power to act on your behalf regarding your property and financial affairs, such as paying bills, investing assets, and filing taxes. You can have your Financial POA become effective immediately or only if you should you become medically or mentally unable to handle your financial affairs as determined by a medical doctor.
- Health Care Durable Power of Attorney (Healthcare POA) – A healthcare durable power of attorney allows you to designate someone to make important health care decisions on your behalf should you be incapacitated, disabled, or unable to act. It also allows you to make decisions regarding life-sustaining treatment, organ donation, and restrictions on medical treatment. Having a Healthcare Power of Attorney allows your loved ones to know your preferences and provides guidance to help make difficult health decisions easier.
Powers of Attorney (POA)
- Everyone over the age of 18 should have a Healthcare and Financial Power of Attorney. Powers of Attorney (POAs) allow the person of your choice to act on your behalf should you become sick or disabled and unable to handle your own day-to-day affairs. You decide the extent of authority the person you choose will have in the decision making. Powers of Attorney also eliminate the need for your loved ones to go to court to ask to be a court-appointed guardian.
- Healthcare Power of Attorney allows your representative to make important healthcare decisions on your behalf such as medical procedures, life support, organ donation, and end-of-life decisions if you cannot make them for yourself. Having a medical POA allows your heirs to know your preferences and provides guidance to make difficult decisions easier. Our attorneys will walk you through the options available and draft a personalized POA that will protect you and your heirs and give direction to those that you have chosen.
- Financial Power of Attorney allows your POA representative to handle your financial affairs such as paying bills, making deposits, managing investments, and filing taxes on your behalf should you be medically or mentally unable to do so. It is important that the duties given to your agents are clearly stated. The attorneys at Hood Law P.C. will advise you of your options and provide you with a personalized POA that protects your financial assets and your future.
- Power of Attorney (Not Durable). This type of legal document is for a specific purpose, such as giving someone else the legal authority to sign a real estate document when you cannot be present to do so. This Power of Attorney becomes invalid if you become incompetent.
What is Probate?
Probate is the legal court process in which a judge oversees the distribution of a person’s assets and appoints a person to distribute the estate of a person after their death.
If the deceased person has a will (testate), the court will appoint the executor named in the will to administer their estate. If the deceased person does not have a will (intestate), the court chooses and appoints an administrator to distribute the estate.
The executor or administrator will oversee the process of collecting the deceased’s assets, pay any outstanding bills and liabilities remaining on the deceased’s estate, and distribute the assets of the estate to the beneficiaries named in the will or as determined by the laws of the state if there was no will.
A common misconception is that if you do not have a will, your assets will go to the state. If you do not have a will, your assets will then be distributed to your heirs as the law provides. If no heirs exist, then your assets may go to the state.
The probate process can take as little as seven months and as long as several years, depending on whether the estate is disputed. The probate process can be avoided by having an estate plan and holding your assets in a trust.
The probate timeline includes the following:
- A petition for letters of administration is filed with the court after a person’s death.
- The court appoints an executor or administrator to administer the estate.
- A notice is placed in the newspaper to allow any creditors to come forward to file a claim, and the estate must remain open for at least six months from the date of the first notice in the newspaper.
- Generally, the executor/administrator will collect all the assets of the deceased and will pay all bills. Once the waiting period is over and the process complete, the remaining assets can be distributed to those indicated in the will or as provided by law.
Litigation: Probate, Wills, and Trusts disputes
Occasionally, disputes arise, such as the interpretation of a will, beneficiaries, or distribution of assets. The lawyers at Hood Law are experienced litigators and can represent you in court on these matters.