ESTATE PLANNING
Estate Planning Overview
Estate planning is the process of arranging for an orderly disposition of your assets after death so as to avoid legal and financial complications, excessive fees and expenses, and in some cases, avoid or minimize estate taxes. If you are reading this web site and you have not done an estate plan, you are in good company because 70% of Americans have nothing in place.
Essentially there are three basic options when doing your estate planning--a will, a living trust, or intestate succession--the later of which is essentially the do nothing approach.
Please read on for a brief description of these options.
Living Trusts
A trust is a legal document which assures that a decedent's property and assets are transferred to his or her heirs according to their wishes. A Trust ensures more privacy because it does not have to go through the court (probate) system and the distribution is often more timely. There are also tax advantages for those persons with a greater net worth. Further, the terms of a trust are typically not disclosed to the public, as the terms of a will become public record at your death.
Do-Nothing Approach
If one dies intestate (or without a will), the decedent's property will normally be subject to probate, and the property will pass to those heirs as determined by the laws of the state in which the decedent resided, regardless of the decedent's wishes.
Probates can often run anywhere from 9 to 12 months and the fees are a percent of the gross value of the estate.
Keep in mind that although there are significany advantages to a trust over a will, a trust generally cost more to establish than a will. One should consult with a competent attorney to decide what is right for him or her.
With a trust, the person who establishes the trust manages his or her property before death or incapacity, as well as provide how trust assets and the income earned by the trust are distributed after death. If you become incapacitated or disabled, the trust is in place to manage the financial affairs, usually by your named successor trustee. Therefore, a trust provides for more comprehensive disability planning.
However, even with a living trust, you still need a "pour-over will" as backup for assets not vested in your trust.
Wills Overview
Writing a will is less complicated and less expensive than you might think. In fact, without a will, your state’s law will determine what happens to your property and assets by means of “intestate succession.”
Under intestate succession, your property and assets will be distributed to your spouse and children, or, if you don’t have children or a spouse, it will be distributed to your relatives according to state law. Only if you don’t have any relatives will your property and assets potentially get turned over to the state.
A will also enables parents to nominate guardians for their minor children in the event of their untimely death.
Probate Overview
Probate is the legal process by which property owned by someone who has died without a trust in place effects the legal title and transfer of assets to their heirs. In other words, probate is simply determining who gets what assets when someone passes away, either by looking at the will, or if no will exists, then the laws of intestacy--laws that determine the hierarchy of heirs. Probate law is a complex field and, practically speaking, requires an attorney's guidance.
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