Many people, in fact most people, do not prepare an estate plan. For some it is a belief that estate planning is only for the wealthy, others believe it is for those that know they are ill, and yet I find people generally do not want to contemplate their own death. The truth is that nearly every adult should have some form of estate plan in place. If you have ever had a loved one die without a plan in place, you are likely familiar with the effort it takes to pick up the pieces.
When you pass – and it is a “when” and not an “if” – you probably want to control whom you want to receive your “stuff”, what or how much you want them to receive, and when they are to receive it. Ideally this can be accomplished with the least amount paid in taxes and without incurring unnecessary legal or other administrative expense.
Whether you are planning your estate in Kentucky, Indiana, Florida or any other state, most attorneys agree that every adult should have four documents in place. They are (1) A Will, (2) A General Durable Power of Attorney, (3) Health Care Power of Attorney or Designation of Health Care Surrogate; and (4) a Living Will (if desired). Together these documents save precious time and money.
A Will or Last Will and Testament is a legal document that provides instructions on how and to whom you want your property distributed upon your death and who has the power and responsibility to handle your affairs. It is a common misconception that if you draft a Will your estate will avoid probate. This could not be further from the truth. In fact, we sometimes refer to a Will as a “ticket to probate court.” If this is the only estate planning you have done, your estate will be administered through your state’s probate court.
Probate is not as bad as some people make it out to be, but generally speaking it takes more time and money to administer an estate through probate. The Will provides instructions to the court and to your executor on how you wish your affairs to be handled. The executor’s job typically consists of collecting all of your assets, paying valid debts and expenses, and then distributing the remainder of your property as you specify.
Should you die without a will, your state will have a law setting forth the default persons to receive your money or property. If there are no lawful heirs your property could be forfeited to the state. Nearly everyone would prefer to direct their estate, no matter how small, to an intended person or charity rather than give their money to the state.
In addition to the above, many states also allow you to name a guardian for your minor children in a will. Depending on the state you live in this may or may not be a binding request.
General Durable Power of Attorney
A power of attorney allows you to appoint someone you know and trust to make decisions regarding your finances and property when you cannot. Most often this document is used to help care for ill or elderly persons, but can also be used to handle the affairs of unavailable persons such as our soldiers serving overseas.
Having a valid power of attorney can eliminate the need for a guardianship or conservatorship. However, these are powerful documents. You should take great care in whom you choose to act on your behalf, and we would strongly recommend you consult an attorney in the preparation of this document.
Health Care Power of Attorney
A health care power of attorney, or designation of health care surrogate, allows you to appoint a trusted friend or family member to make medical treatment decisions for you if you are unable to do so. The scope of decision making can be quite broad, and often vests your agent with the power to make decisions regarding the administration or removal of life support.
A Living Will is an advanced directive which allows you to state your wishes regarding what type of life support measures you want taken if you are in a terminal condition without the ability to communicate yourself. The document can also be used to withdraw life support if measured were administered prior to learning of the existence of the document. It is important to know what medical standards your state uses in determining when the document becomes operative.
Revocable Living Trust
In addition to the four documents listed above many individuals and families are advised and choose to implement a revocable living trust. Like a will, if a trust is established and funded during your lifetime a trust can effectively direct the distribution of what you own to whom you want, how you want, and when you want. One big difference is that the administration of your trust estate occurs outside of probate court supervision.
If you were to become incapacitated, having a trust, along with the powers of attorney listed above, allows your family to avoid to the financial and emotional expense of initiating a guardianship and trying to have you declared incapacitated.
Revocable living trusts can also be used to do more complicated tax planning and protect your beneficiaries’ inheritance.
A Comprehensive Plan
In addition to the above, if desired Jonathan will draft documents allowing you to direct the distribution of specific items of personal property, instruct your loved ones on your wishes regarding the disposition of your remains and your memorial, and instructions for your executor or successor trustee on steps to take when it is their time to act.
For certain individuals and families the documents listed above do not adequately allow them to plan for their estate. The three primary reasons for this are a desire to protect your estate from creditors, give to charity in an efficient manner, or reduce taxes.
For example, a doctor may be concerned about losing his wealth in a lawsuit, or a family wishes to establish a scholarship at their alma mater. Also, in 2019, an individual can gift or leave $11.4 million to his heirs. This amount doubles for a married couple. Estates in excess of these amounts require special planning to minimize the impact of federal transfer taxes.
The Law Office of Jonathan A. Hall, PLLC has the experience and access to resources necessary to handle the largest estates.
Jonathan can assist you and your loved ones in implementing a plan today. Contact Jonathan for more information and to schedule a no-cost initial consultation.