Estate Planning A good Estate Plan will consist of a variety of documents including Durable Powers of Attorney, Health Care Proxies, Last Will and Testament and possibly a Living Trust, if appropriate. The purpose is to assure the distribution of your assets to your loved ones after your death with the least amount of complication, time, and expense. Additional issues of incapacity and health care decision making are discussed elsewhere.
Most individuals in this country have no Estate Plan whatsoever, or at most, a simple Will or joint ownership of assets with their spouse. If you have no Will or Living Trust, the state will decide who will receive your assets after your death. This may or may not be consistent with your true wishes. You could have substantial assets going to a relative for whom you have little affection or regard. Nobody wants a result such as this.
The Court will also decide for you which of your heirs should administer the estate. Again this may not be the person you would choose to handle your affairs. In addition, if you have no Will or Living Trust, there can be no planning for estate taxes and therefore, the maximum amount will definitely be paid.
The execution of a valid Will assures you that your assets will be distributed to your loved ones in accordance with your wishes. You will also designate an Executor who will oversee the administration of the Estate.
This Will must of course, be probated upon your death. Probate essentially means that the County Surrogate Judge declares that the Will is valid and gives your Executor the power to act on behalf of the estate. A Will is a very technical document and should only be prepared by a qualifled attorney. Errors can result in the Will being disallowed and your wishes therefore ignored.
For those individuals or couples who have assets of $625,000 or more, it is very important to undertake certain tax planning so as to minimize the amount of Federal Estate Tax to be paid. While not necessarily complicated, such planning
can save a large estate well over $200,000 in Federal Estate Taxes. This type of tax planning utilizes a trust and may b c accomplished either through the use of a Will or a Living Trust. The Federal Estate Tax Law has been amended in August of 1997. These changes will among other things gradually increase the exemption, however inflationary increases in the value of one's estate make such planning still tremendously valuable.
In many cases, joint ownership of assets between Spouses can be the worst possible way of distributing assets upon death. While probate is avoided for these assets, the estate tax implications can be tremendously significant and outweigh any benefit from avoiding probate. Other issues of incapacity or nursing home care can also make such joint ownership very dangerous and detrimental.
A Will or Living Trust can also provide for a Trustee to handle the financial affairs of a beneficiary who is a minor or disabled. Without such provisions if a minor inherits from you he or she will be entitled to all of the assets at age 18, which many believe is too young to handle such responsibility. Also, any decisions or expenditures from these funds prior to the child reaching the age of 18 must be made with the approval of the Court. The use of a Testamentary Trust or a Living Trust provides flexibility and protection for the minor beneficiary. The Trust can provide for the assets to be used only for certain purposes and for the child to actually gain control of the assets at any age over 18 years that you feel is appropriate.
The execution of a valid Will is necessary even if you have established a Living Trust. There are always some assets that will be in your name alone and have not been transferred into the Trust. The use of a "Pour Over Will" which directs the Executor to transfer all of the Estate assets to the Trust is commonly used. A simple Will which parallels the provisions contained in the Trust would also accomplish this purpose.
In conclusion, it is imperative that any individual with assets or children do some sort of Estate Plan. The various options are too numerous and detailed to summarize in this handout. It is my intention only to give general information on relevant issues. The particulars of any Estate Plan will depend upon the individual circumstances including asset and income levels, family structure, history and dynamics, health circumstances of the parties and many other issues.
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