Why do I need an Estate Plan?

Avoiding Probate (only lawyers like probate)

The probate process occurs when you leave your estate to your loved ones using a will. This means that everything in your estate, everything you own, will pass through a process that is costly in both time and money and is also open to the public in probate court.

The court retains control of the process until the estate has been settled and distributed. In the meantime, it is not uncommon for probate courts to freeze assets pending the final disposition of the estate. All this can be avoided, however: with proper estate planning, your assets can pass on to your family without going through probate, in a manner that is faster, less expensive, and private.

Making sure Your wishes are followed while you’re alive

You are not dead yet! We are living longer and longer. Now incapacity comes before death for a lot of Arkansans. Incapacitation not only affects you physically; it can have serious consequences for the management of your financial affairs. It’s often mistakenly assumed that one’s spouse or adult children can automatically take control should he or she become incapacitated.

If you do not have an estate plan in place, the truth is more complicated: to arrange for another person or persons to manage your finances, they must petition a court to declare you legally incompetent, a process that can be long, expensive, and stressful. And, the Court may not appoint who you wanted!

Besides considerations of your financial affairs during incapacity, it’s often wise to establish a plan for your medical care. Much as you would designate a person or persons to make decisions about your finances while you are incapacitated, you can appoint someone you trust, like a family member or friend, to make decisions on your behalf about medical treatment options.

Life Stages and Estate Planning

Estate Planning: Single & Employed

If you’re a young worker struggling to pay off student loans, you probably don’t think of yourself as having any assets to pass on. But you still might have a 401(k) or life insurance policy at work. Make sure you have completed the beneficiary designation forms for these, since those forms (not a will) control who gets them.

If you die without signing a valid will or living trust, “intestate,” Arkansas law will determine how your other belongings and accounts—those without beneficiary forms—are distributed. In Arkansas, the assets of a single, childless adult go to his parents, if they are still alive. If you would prefer your assets to go to other people or a charity, then you will need to look into getting an estate plan drawn up.

Estate Planning: In a Relationship

A growing number of unmarried couples are living together, acquiring assets, and having children.  There is no common law marriage in Arkansas and you will not inherit if you are in this situation.

For this reason alone it is far better to record your wishes in a Will. If you are worried blood relatives might object, consider using a living trust as part of your estate plan, because it’s harder for them to challenge. Like a Will, a living trust spells out who gets your stuff when you die, but the assets in the trust avoid probate—the process through which a court determines that a Will is valid. For a trust to work correctly, however, you must title your assets in the trust’s name (known as funding the trust).

Incapacity

If you want your significant other (and not relatives) to make health decisions for you, make sure to update your health care power of attorney. And, if you want your significant other to make decisions regarding your property, update your durable power of attorney.

Joint Property

Buying a house together? Pay attention to how it’s titled. For example, if you own it as “joint tenants with rights of survivorship” and one owner dies, the other automatically gets the whole house. Alternatively, you might hold the property as “tenants in common”; if one owner dies, just that person’s share gets included in his estate. In this setup, if you want your share to pass to your partner you must say so explicitly in a Will, or it could go to your parents, forcing your significant other to move.

Estate Planning: Just Married

Married couples have more built-in protection than unmarried couples. For example, provided both are U.S. citizens, they can leave each other at death (or transfer to each other while alive) an unlimited amount of property without worrying about estate or gift taxes. And, if a couple has neither children nor wills, the surviving spouse can automatically inherit all of a dead spouse’s property depending on how it is titled.

Arkansas law governs what happens to your assets if you die without a plan. The children of the deceased get the first bite of the apple. This can be a big issue if you have kids from a previous marriage and they do not like your new spouse. If you have no kids, then the spouse gets your estate. However, if you have been married less than 3 years, then your spouse is only entitled to 50% of your estate and the other 50% goes to your parents. If you want to ensure you can care for your new spouse, then a plan that does so is necessary.

Estate Planning: A Bun in the Oven

If you’re a parent or about to become one it is time to get serious about planning. This is the case whether you’re married, single, or cohabitating, the first step is to sign a Will naming a guardian to raise your child.

Couples should agree on the choice of guardian and each of their Wills appointing the same person. The Wills should agree with each other in case both parents die together, e.g. auto accident. But disagreements often delay planning; most people don’t like to think about these things.

Children v. Spouse

Finally, don’t assume that if you are married with children all your assets will go to your surviving spouse. If you have kids in Arkansas the kids receive 2/3 and the spouse receives 1/3. This is oversimplified and it will depend on ownership and beneficiary on each asset, and of course your estate plan.   This can be a big problem if you have kids from other partners or spouses. Or, if your kids are over the age of 18,  then the spouse can be left without enough to care for herself.

Estate Planning: Headed for Divorce

The time between a separation and divorce is tricky from an estate-planning perspective. By law, spouses are entitled to inherit a minimum portion of each other’s assets, which is one-third in Arkansas. Unless they waive that right in a prenuptial agreement, it continues until the divorce is finalized. Some divorces are quick and uncontested. Some divorces can last for years and are hotly contested. You should revise your estate planning documents upon separation to protect your assets.

You can name other beneficiaries to receive your assets upon your death and disinherit your soon-to-be ex-spouse. If something does happen to you, then your ex-spouse will have to come force his or her share to be distributed to them. You also should consider appointing someone other than your spouse as your agent in your Power of Attorney and Healthcare Power of Attorney. If you lost capacity for some reason, e.g. in the hospital due to a car wreck, your Power of Attorney could give your spouse the right to give himself or herself your assets.

You may also want to consider changing any payable on death (POD) beneficiaries on your bank or investment accounts, as well as life insurance policies.

Estate Planning: Newly Widowed

Estate tax issues arise when your spouse passes away. Portability, allows widows and widowers to add any unused exemptions of their most recently deceased spouse to their own personal exemption. This isn’t automatic. The executor of the deceased spouse’s estate must file a federal estate tax return, even if no tax is owed. The return is due within nine months after the death, but a six-month extension is allowed. That makes the death of a spouse the wrong time to skimp on professional advice.

Other planning moves, too, should be made soon after a spouse’s death. Estate plans often call for certain elections to be made after the first spouse passes. You should contact your attorney to make sure the right elections are made within the necessary time limits. Revise your will and living trust and name new beneficiaries for any retirement assets you inherited from a spouse—otherwise, your own heirs could lose income tax benefits associated with these accounts. Also, make sure your Durable Power of Attorney and Healthcare Power of Attorney name someone other than your spouse.

Estate Planning: Planning to Remarry

Before remarriage, you should discuss your estate plans. This changes from should to must when there are children from a previous relationship. Do you want to leave everything to the kids, or half to the kids and half to the new spouse? If you want to benefit both grown children and your current spouse, decide whether the kids should receive an immediate inheritance or be forced to wait for the death of the surviving spouse. Whatever you decide, spell it out in a prenuptial agreement.

In a remarriage what a surviving spouse receives is often tied to the length of that marriage. For example, a prenup between can state that a spouse is entitled to 25% from the date of marriage through the tenth anniversary and 50% after the tenth anniversary. The remaining part of the estate would be given to the children.

If you later change your mind, you can alter the agreement. However, it is important that when people remarry with children from a previous marriage they discuss these estate issues. Also, making your children aware of your decisions can lessen the tension after your demise. Your new spouse will be thankful you did so. The moral is to sign a prenup; it is a lot easier to increase a new spouse’s inheritance than it is to limit it.

What kind of Estate Plans are there:

Wills and Your Estate Plan

Wills are commonplace enough that most people are familiar with the basic reason they’re used – in a nutshell, to determine who receives a deceased individual’s assets. Wills are capable of much more than just defining who inherits the family silver, however. The following are some of the useful things that can be done with a will:

List who gets what

As mentioned, when someone passes away, wills are typically used to determine to which person or persons the decedent’s property will be given.

Establish trusts at your death

There are often instances in which a person may not want a child or loved one to receive all of his or her inheritance at once. Or perhaps a person wishes that the beneficiary is able to use the property for a given amount of time or for a specific purpose, and then require that it be inherited by someone else. In situations like these, a trust can be useful, because a trust holds property on someone else’s behalf. When included in a will, trusts are frequently established for minor children with the purpose of appointing another person, a trustee, who can manage the children’s finances until they reach a given age or are mature enough to manage them on their own. Another common situation where a trust may be used is a second marriage – ultimately, a person may want his or her children to inherit the decedent’s property, but allow the surviving spouse to retain access to certain property in the meantime. Trusts can help achieve all of these goals.

Name guardians for your children

A will is also often used to designate who the decedent wants to raise his or her children if the surviving parent is unable to raise them.  The will typically includes at least one alternate should the first choice not be able to serve.

Naming executors and trustees

Wills are also used to name other important individuals involved in carrying out a deceased individual’s affairs: executors and trustees. The executor of the estate carries out the wishes of the decedent listed in the will, and if any trusts are created, instructions for those trusts are seen to by the trustee.

As you can see, wills can be very useful estate planning tools, but they are only effective if they are drafted correctly to meet the specific needs of each individual. Reviewing all of your options with an estate planning attorney can help you establish a will that guarantees your wishes will be honored.

List your funeral wishes

Though this information is often included in other documents, a will may also declare what should be done with an individual’s remains: whether to be buried or cremated, and where to be buried or the ashes spread.  More specific funeral instructions may also be listed, such as where and when the service should occur, what music should be played, and even which readings should be recited and by whom.

Tax planning

If you want to avoid estate or inheritance taxes, wills can be a useful tool. This approach to tax planning is sometimes achievable by including instructions to set up different types of trusts.

Do all my assets pass according to my Will?

Not all of your assets pass under the terms of your Will. You can and should designate some assets, such as life insurance, retirement accounts, assets in a trust, bank accounts, and other accounts, to pass to a specific designated beneficiary upon the occurrence of specific events, such as your death.

When should I update my Will?

If you already have a Will, you should review your Will periodically to make sure it your wishes have not changed. Some common situation that occur and lead to your desiring to change your Will are:

  • If you marry or divorce;
  • If you give birth to or adopt a child; when a family member or other beneficiary of your estate dies;
  • When there are changes in the federal estate tax laws or state tax laws that might impact your estate;
  • When someone you’ve named as an executor, trustee or guardian is no longer able to fulfill that role;
  • When you decide to change an executor, trustee or guardian;
  • When you want to change the way your property will be distributed;
  • When you move to another state;
  • When your net worth increases or decreases dramatically;
  • When your children are no longer minors, or are old enough to handle financial matters on their own; or
  • You wish to eliminate bequests to beneficiaries.

You should never try to change your will by marking on a previous will, i.e., writing notations in the margins, or crossing out words. This only risks the possibility of ambiguity and a potential will contest.

Trusts and Your Estate Plan

It’s easy to associate trusts with multi-millionaires who create large trust funds for their children, but trusts are hardly the exclusive province of the very wealthy. In fact, trusts are simple and beneficial tools that can be used in estate planning and are available to individuals from all walks of life.

Quite simply, a trust is an arrangement in which one party holds and manages property on behalf of another party. When it comes to creating a trust in regard to estate planning, you, as the estate planner (also known as the settlor, grantor, or trustor), transfer assets to the trust and authorize another person (the trustee) to manage those assets to the benefit of a third party (the beneficiaries). Protection from taxes or providing for the needs of underage children are examples of the many purposes trusts can serve.

The following types of trusts may be useful in estate planning:

Irrevocable Life Insurance Trusts

Irrevocable life insurance trusts. Irrevocable life insurance trusts (or ILIT’s) are typically used to transfer the proceeds of a person’s life insurance policy beyond his or her estate for the purpose of minimizing estate taxes

Revocable Living Trusts

Revocable living trusts often accompany wills to help accomplish the wishes of the deceased individual.  These trusts will ordinarily be used in states where the probate process is especially tedious, allowing the assets in the trust to avoid probate altogether. A revocable living trust may also be helpful when an individual owns real estate across several states.

If you are interested see our Living Trusts frequently asked questions page.

Trusts for Minors

A fairly common use for trusts in an overall estate plan is to leave money to one’s children or grandchildren. Usually, this helps to ensure that the children receive financial support for specific purposes, such as education, medical expenses, a general allowance, etc. Then, after meeting a given age or accomplishment (such as graduating from college), the restrictions on the trust are lifted and the children may use the assets they receive to do as they wish.

Special Needs Trusts

Specific trusts can also be set up to aid a person who has special needs. Individuals with special needs often receive benefits from the government, but will typically see those benefits suspended should they suddenly receive an inheritance. Only after exhausting the inheritance will those benefits transfers resume. While providing supplemental funds for an individual’s secondary requests, special needs trusts ensure that those government benefits continue to be available to meet the individual’s primary needs.

Spendthrift Trusts

Spendthrift trusts are specially designed to maintain close protection of assets from both the beneficiaries and creditors.  An independent trustee is typically appointed, and he or she has final say over the distribution of assets of the trust.

As you can see, there are a variety of trusts to serve a variety of purposes, and each trust can be tailored to meet your specific gift-making or estate planning needs.  With so many vehicles to choose from, an experienced estate planning attorney is a valuable resource to help you assess your finances and goals to determine which trust is best-suited to preserve your wealth and your legacy.

Special Needs Planning

If you are the parent or caretaker of a child or loved one with special needs (such as mental or physical disabilities), you must have faced a particularly challenging and worrying question when planning for their future: what will happen to them once you become unable to provide for their care?

Unfortunately, money and assets left for them in a typical will or trust may not be ideal. This is because receiving a sudden inheritance may count against the financial conditions that allow them to qualify for benefits under the Supplemental Security Income (SSI) and Medicaid programs. In effect, they will have too much money to receive their benefits. Thankfully, for those receiving SSI and Medicaid, the government does allow assets to be held in a specialized trust, called a “Special Needs” or “Supplemental Needs” Trust, so long as particular qualifications are met. Allocating assets to this type of trust will help ensure that your loved one continues to receive his or her public monetary benefits to provide for life’s basic necessities (food, housing, clothing, health care). The assets assigned to the Special Needs Trust can then be used to provide your loved one with the resources that would allow them to enjoy a richer quality of life.

Our firm’s attorneys can help you organize a Special Needs Trust to provide the funds to meet the supplemental needs of your loved one, all while maintaining his or her eligibility for government benefits. It is important to make clear that the Special Needs Trust can only supplement those basic public benefits; it cannot replace them. Furthermore, the trust does not provide the disabled beneficiary with its funds. Rather, it pays third parties who provide the goods and services to be used and enjoyed by your loved one.

The Special Needs Trust can be used for a variety of life-enriching purchases, such as:

  • Annual check-ups at an independent medical facility
  • Attendance of religious services
  • Supplemental education and tutoring
  • Out-of-pocket medical and dental expenses
  • Transportation (including purchase of a vehicle)
  • Maintenance of vehicles
  • Purchase of materials for a hobby or recreation activity
  • Funds for trips or vacations
  • Funds for entertainment such as movies, concerts, or sporting events.
  • Purchase of goods and services that add enjoyment and quality to life, including computers, videos, furniture, or electronics.
  • Athletic training or competitions
  • Special dietary needs
  • A personal care attendant or escort

If you are concerned about providing for your disabled beneficiaries after your passing, a Special Needs Trust will be a vital component of your estate planning. Special Needs Trusts are independent trusts that can be funded during your life with an investment or at your death with a life insurance policy, or can be included as a sub-trust within your existing living trust.

Advanced Estate Planning

You’ve worked hard throughout your life to provide for your family, helping to ensure their financial security.  However, the important assets you have gained may be subject to taxation by the IRS and state taxing authorities as your estate is being distributed.  Advanced estate planning strategies can help you avoid this.

Our firm frequently assists affluent families by employing sophisticated legal tools, including Family Limited Partnerships or Limited Liability Companies, Personal Residence Trusts, Irrevocable Life Insurance Trusts, and a variety of charitable gifting strategies to reduce Federal Estate Taxes, Gift Taxes, and Generation Skipping Transfer Taxes.

Using Family Limited Partnerships in Your Estate Plan

A Family Limited Partnership (FLP) is a type of limited partnership formed among members of a family. The primary benefits received from an FLP include savings on estate and gift taxes, as well as asset protection. At the same time, while enjoying these benefits you can also maintain control of the assets transferred into the partnership.

Upon establishing the FLP and transferring assets to it, you can grant limited partnership interests to your children or other beneficiaries. This achieves several different estate planning goals at the same time.

First, since the value of your taxable estate decreases with the gift of each limited partnership interest, any tax your beneficiaries might have to pay after your passing also decreases. Furthermore, because the gifts are made using the annual gift tax exclusion, you won’t be liable for any gift tax on the transfer.

Second, you can maintain greater value in the assets in the partnership relative to the value of the limited partnership interests. By definition, limited partners are not allowed to direct or control the routine operations of the partnership, which means a minority discount can be applied to reduce the value of any limited partnership interests you choose to transfer. In addition, because the partnership is a closely-held entity, a similar discount can be applied because the limited partnership interest cannot be sold publicly. Therefore, while you remain in control of the assets of the entire partnership, you are also able to leverage the FLP as an instrument to grant more wealth to your beneficiaries. Finally, a well-constructed FLP may provide protection from creditors, since the general partners are not required to distribute the partnership’s earnings.

Using Qualified Personal Residence Trusts in Your Estate Plan

Our homes frequently hold great value for us, both sentimental and material; as they are often among the largest parts of our estate, they can also hold great value to federal and state tax agencies.  One way to reduce the tax burden generated by a home is to establish a Qualified Personal Residence Trust or QPRT (pronounced “cue-pert”).  With this type of trust, you can still live in your home or vacation house, but transfer ownership for a substantial discount and freeze its value when it comes to estate taxes.  It works like this: You grant the title to your house to the QPRT (often to benefit your family members), but specify that you can continue to live in the house for a certain length of time, usually years. After that period has passed, the property passes to your beneficiaries without any additional estate or gift taxes, despite any appreciation in value the house may have accrued.  Once that happens, you are allowed to continue living in the home but must pay rent to your family or beneficiary so that the property is not included in your estate.  This can be advantageous, serving to further decrease the value of your taxable estate, although the rent income will be taxable as income for your family.  On the other hand, should you die before the end of the period, inclusion of the total value of the house in your estate is unavoidable, but in the majority of cases you are no worse off than you would have been had you not established a QPRT.  A QPRT also provides great protection from creditors: once the QPRT is created and your residence is transferred to it, the property is technically owned by the trust, rather than you.

Using Irrevocable Life Insurance Trusts to Lower Estate Taxes

It is commonly understood that the proceeds of a life insurance policy paid to your beneficiaries are not subject to income taxes. Unfortunately, this does not hold true for Federal Estate Taxes.  In fact, since life a insurance pay-out is considered part of your taxable estate, your family or beneficiaries could stand to lose up to half of its value to estate taxes.

To avoid this scenario, our attorneys can help you create an Irrevocable Life Insurance Trust. The goal of an ILIT is to own your life insurance policy, keep the policy outside of your estate, and prevent the proceeds from being taxable as part of the estate. Those untouched proceeds can then be used as your beneficiaries see fit, from paying estate taxes, debts, and final expenses to providing income to your survivors.  The ILIT serves as both the owner of the policy and the beneficiary.  Once created, you can then provide cash gifts to your trust by making use of an annual gift tax exclusion. The trustee uses these gifts to pay the life insurance premium, and the proceeds are made available to your beneficiaries upon your death.

There are a number of ways to set up an ILIT.  As one option, ILITs can be built to provide income to a surviving spouse while granting the rest to your children from a previous marriage.  And in the case of a child who is not financially responsible, you can arrange for distribution of a restricted amount of the insurance proceeds over a given length of time.

Our firm is dedicated to helping clients make educated, informed decisions about their assets and will work with you and your team of financial advisors and CPAs to implement a highly sophisticated and effective estate plan that allows for the maximum transfer of assets to your loved ones

Gun Trusts

An increasing number of gun owners, with help from their attorneys, are creating legal trusts to buy silencers, fully-automatic machine guns, or any other items or weapon whose sale is restricted by federal gun law, otherwise known as the National Firearms Act “NFA.” These gun trusts subvert the requirement to obtain local law enforcement approval or even undergo criminal background checks. This trust goes around much of the red tape and problems associated with personal ownership of NFA weapons.

These gun trusts allow the owners of the regulated firearms to use and share them legally with family members and to pass them down through the generations. These trusts are gaining in popularity because they offer legal protection from possible future laws that may ban the possession or sale of the firearms.

Benefits of a Gun Trust

Using a gun trust to transfer ownership of your weapons can avoid some of the federal transfer requirements and accomplish the following goals as well:

Gun trusts avoid probate. The firearms are held by a trust, therefore, they do not need to go through probate at your death.

Gun trust may avoid possible future restrictions on gun transfers. Although no such legislation has been proposed, some gun advocates fear that someday it will be illegal to leave certain firearms to inheritors or transfer them during life. The hope is holding the guns in a gun trust will let help them get around any limitations if those limitations are enacted.

Gun trusts allow more than one person to possess and use the weapons held in trust. You may want to name more than one person as trustee because each trustee will have the right to possess or use the trust’s firearms. If you do not, only the registered owner can possess or use NFA weapons.

Gun Trusts keep the gun in the trust even after the current owner’s death, avoiding the usual transfer requirements. Once the trust is created and funded – the transfer firearms to it – you can arrange for the trust to stay in existence even after your death. The trustees and beneficiaries of the trust would have whatever rights you grant them in the terms of the trust. Because the firearm stays in the trust at your death, the transfer procedure is avoided. That means your inheritors don’t have to pay $200 transfer tax, file an ATF transfer form, receive permission from the local chief law enforcement officer (CLEO), and get fingerprinted and photographed.

Gun trusts help the executor. The executor or administrator of your estate – the person who is responsible for gathering your assets, paying your debts, and distributing what’s left – may not know about or understand with the rules about ownership and possession of NFA and other weapons. An executor could violate criminal laws by transferring a weapon without going through the proper procedure, taking or sending it to a state where it is prohibited, or giving it to a person who is legally prohibited from owning it. When firearms are in a trust, the executor is not involved; the trustee is in charge. You can name a trustee who is well-versed in state and federal gun laws.

What does an Arkansas Estate Plan Cost?

First, I guess we need to talk about what an Arkansas estate plan can include. It can contain the following:

Living Revocable Trust, Irrevocable Trust, Last Will and Testament, Power of Attorney, Healthcare Power of Attorney, Living Will, Personal Property Memorandum, Funding of the Trust, deeds, and an LLC

Now, your estate plan can also include single parts of the above list. We try to provide Clients only the services they need. We will provide a free 30 minutes consult to answer your questions and ask questions of our own to try and figure out how best to address your estate planning needs.

Trust Plans:

Trust Plans include the following documents: 1. trust, 2. certification of trust, 3. funding instructions, and the following: 4. pour-over will, 5. financial durable power of attorney, 6. healthcare power of attorney, 7. living will, 8. assignment of property, 9. personal property memorandum, and  10. deeds.

Will Plans:

Will plans include the following: will, power of attorney, healthcare power of attorney, living will, and personal property memorandum.

The cost of the plan will be dependent on what you customized plan includes. You can schedule a free strategy session to figure out what that cost would be.

Estate Planning FAQ's

What is estate planning?

The heart of estate planning is determining what happens to your assets when you die. In one way or another, any property you own at the time of your passing must pass on to someone else. And in the vast majority of cases, you, as a competent adult living in the United States, have the right to determine who that someone will be. (This right is not absolute, however: most states observe spousal right of election, which doesn’t allow a spouse to be completely disinherited.) A proper estate plan dictates what should happen with your home, investments, business, life insurance, employee benefits (including a retirement plan), and other property in the event of death or disability. In addition, a good estate plan employs strategies to reduce any potential estate taxes and settlement costs. It’s also wise to include instructions to carry out your wishes regarding health care: in the event you are unable to make your directions known, your chosen representative can do so on your behalf.

Why is it important to establish an estate plan?

Estate planning is not just for the rich and famous; it can very often be an extremely useful tool for many different people. This is because the default process for distributing a deceased person’s property is more complex, time-consuming, and generally burdensome than many people realize. Contrary to popular belief, a person’s assets are not automatically shared among their children after he or she passes. Without sufficient legal preparations in place at the time of your passing for the management of your assets and affairs, the intestacy laws of the state will take over. Not only will the courts control the distribution of your estate, often resulting in the wrong people receiving your assets, your beneficiaries may face higher estate taxes as well.

This court-managed distribution of your estate is called probate, and is smart to avoid. Probate is public, can be expensive, and frequently keeps the assets of the deceased in limbo and unavailable to one’s beneficiaries for a substantial amount time. Lack of clear direction on your part can also leave your family members to fight among themselves for the opportunity to be appointed to manage your affairs. It is not uncommon for a family to fall into feuding over small sums of money or a family keepsake.

What does my estate include?

Your estate is everything that you own, no matter the location, including:

  • Your home or any other real estate belonging to you
  • Your business
  • Your bank accounts, including your share of any joint accounts
  • The full value of your retirement accounts
  • Any life insurance policies belonging to you
  • Any property owned by a trust and over which you exercise a significant control

How do I name a guardian for my children?

For children under eighteen years of age, it is vital to choose a person or persons to be appointed guardian(s) to look after them and their property. Naturally, if a surviving parent lives with and has custody over the minor children, he or she will automatically remain their sole guardian, even if you have named another guardian in your estate plan. You should also prepare for the possibility that the primary guardian is unable to serve or is not appointed by the court; as a contingency, you should name at least one alternate guardian.

What estate planning documents should I have?

After in-depth consultation about your specific financial and family situation, an attorney should prepare the following documents to make up your comprehensive estate plan:

A Living Trust allows you to manage your property by transferring the ownership rights of your assets to the trust. During your lifetime, you (and your spouse) serve as the Trustee(s) and beneficiaries, but you also choose any successor Trustees to fulfill your instructions upon your death or incapacity. A trust differs from a will, in that it typically takes immediate effect after death or incapacity. You are allowed to make changes to and even terminate your Living Trust; this is referred to as being “revocable”. A properly funded Living Trust also enables you to reduce the costs, publicity, and time associated with probate, and may even allow you to avoid the process altogether.

A Living Trust-based estate plan also requires the use of a pour-over will. This document lists your choice of guardian if you have minor children. A pour-over will also makes sure that the executor of your estate is able to transfer any assets owned by you into your trust so that they are distributed according to your wishes.

A Will (known formally as a Last Will and Testament) has the primary purpose of transferring your assets according to your wishes. It also usually appoints someone to be your Executor, who, as the name suggests, is the person you choose to execute your instructions. You should also use your Will to designate a Guardian to care for any minor children; alternate Guardians should be appointed as well in case your first choice is unable to serve. A Will becomes effective upon your death, but only after its admission by a probate court.

A Durable Power of Attorney for Property grants the ability to continue your financial affairs should you become incapacitated. Without a well-drafted power of attorney, finding someone to make decisions on your behalf during a period of disability may require applying to a court to have it appoint a guardian or conservator. Like probate, the guardianship process is tedious, costly, and can also take quite an emotional toll.

Durable powers of attorney for property generally come in two varieties. A present durable power of attorney immediately transfers power to your agent (also known as your attorney in fact), while a springing or future durable power of attorney takes effect only upon a later disability. The most common choices for an agent are a spouse or domestic partner, a trusted family member, or a friend, though anyone can appointed. Designating a power of attorney makes sure that your wishes are followed precisely, enables you to choose who will make decisions on your behalf, and takes effect immediately after a later disability.

A different, but related estate planning document is a Durable Power of Attorney for Health Care or Health Care Proxy. Should you lose the ability to make medical treatment decisions for yourself, this power of attorney allows you to designate someone you trust to do so for you. If you wish, you can limit the scope of the decisions your health care agent can make and also provide instructions that he or she has to follow. This keeps “you” in charge: health care professionals must respect your agent’s decisions as if they were coming from you.

A Living Will serves to tell others of the medical treatment you prefer in the event of permanent unconsciousness, terminal illness, or any other situation which leaves you incapable of making or communicating decisions regarding treatment. When included in your estate plan, a Living Will can help provide peace of mind and security and prevent unnecessary expenses and delays should you become incapacitated in the future.

Finally, you should also include a signed HIPAA authorization form with your other documents. This is because certain medical providers in the United States have refused to release medical information on the basis that HIPAA (the 1996 Health Insurance Portability and Accountability Act) does not allow such releases. Even close relatives, such as spouses and adult children, who would otherwise have permission through durable medical powers of attorney have been denied. Signing a HIPAA authorization form will ensure the release of medical information to whomever you choose, including your agents, successor trustees, and family.

Estate Planning Blog

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