Everyone needs an estate plan. It does not matter if your estate is small or large, an estate plan is necessary.
One reason that you should have an estate plan is to make sure that your assets go to whom you want. In addition, you will be avoiding probate, which is both expensive and takes a long time. Another advantage to an estate plan is that you will be able to choose who will be a guardian to your children.
The first step in Estate Planning is to identify what you would like your ultimate outcome to be and what your financial goals are. Do you wish to avoid probate? Avoid Estate Taxes? The answers to the following questions can help you to begin the process.
Explanation of Probate.
Probate is a Court process that requires the filing of your Will with the appropriate Probate Court when you die. The Court process involves the determination by the Court tha the Will presented is valid and whether the persons (beneficiaries) named in your Will shall receive the share you have designated. This process takes at least one year from the date of death. This Probate process can be avoided by the joint ownership of assets or where a beneficiary is named, such as life insurance, IRAs, and pension plans. Also, the transfer of assets to a Living Trust prior to death avoids Probate, your assets being controlled by the Trust Agreement
Estate (death) taxes Explained.
This is a tax that may be imposed on an estate by the State or Federal government. It is a tax on the transfer of assets at death to your heirs or named beneficiaries. All of your assets are subject to this tax, whether the asset is jointly held, life insurance proceeds (unless the policy is owned by an irrevocable insurance trust), any assets with a named beneficiary, such as certificates of deposit and the like. The State and Federal governments do provide for exclusion amounts which depend on the year of death and the whim of the legislatures at any given time.
Using a Trust to avoid Probate/ Estate (death) taxes.
If the assets are in a trust, whether a revocable or irrevocable trust, there is no requirement to probate those assets. While you are alive you or your spouse may be the primary trustee of the Trust with full control over the assets. Upon death, the Trust names a person who will act as a successor trustee with power to manage your assets according to your instructions set forth in the trust documents. Also, should you become incapacitated, the trust would provide for the successor trustee to manage your assets according to the trust provisions. Thus, you avoid the need for a guardian or conservator. All of this can be done without reporting to a Probate Court and in private
Once we have determined the proper course of action for your own unique Estate Plan, we will determine which specific documents best fit your situation, and should be prepared on your behalf. An estate plan requires the preparation of many documents, some of which are as follows.
Creating a Will
Everyone needs a Will. You need to determine who will take your property and when they will receive it. If you do not have a Will the State will determine who will receive your property. You can specify in your Will when you want a certain person to receive his/her share. You can designate who will administer your property after you die. That person is called the "Personal Representative" (Executor). You can name a person who will raise your children (Guardian) and/or a person who will take charge of your assets (Trustee). A Will can be changed or revoked at any time, as long as you are competent. A Will can be changed by the execution (signing) of an amendment (Codicil). Persons you name as your Personal Representative, Guardian, or Trustee should be trustworthy, have good financial judgment and business sense.