Three Estate Planning Items Everyone Need
Many people mistakenly believe that estate planning is only necessary for the wealthy. In reality, a basic estate plan is essential for everyone, regardless of income or net worth, because we all want to minimize confusion, unnecessary costs, and stress for loved ones after a death.
Without proper preparation and documentation, assets—like houses, retirement plans and savings accounts—can end up in limbo for years, sometimes requiring expensive legal assistance to straighten matters out.
At a minimum, everyone should have the following three items in place:
An up-to-date will or trust.
Wills are easy to create, but they require the distribution of assets to go through probate. Probate is a legal process that involves:
- Validating a deceased person’s will;
- Identifying, inventorying, and appraising the deceased person’s property
- Paying debts and taxes;
- And ultimately distributing the remaining property as the will directs.
The probate process often requires a lot of technical paperwork and court appearances, and the resulting legal and court fees are paid from estate property—reducing the amount that’s passed on to heirs.
A trust can be more expensive to set up and requires professional assistance, but it provides benefits that a will cannot. First, when they’re structured properly, trusts will help avoid guardianship or conservatorship if you become incapacitated. A will only works after you’ve died; a trust, by contrast, works all the time, including periods of incapacity before death.
Trusts usually avoid probate, which helps beneficiaries gain access to assets more quickly as well as save time and court fees. Depending on how it’s structured, a trust may also reduce estate taxes owed and can protect an estate from heirs’ creditors.
A durable power of attorney.
A power of attorney is a written authorization that allows someone else to make financial and legal decisions for a person if that person should become hospitalized, disabled or otherwise incapacitated.
Not all powers of attorney are created equal. Some are put in place for short periods of time only—while a person is vacationing overseas but dealing with legal matters at home, for example. That’s why it’s important to have adurable power of attorney in place, which simply means that the agreement is not for a temporary period of time. It may be valid immediately when it’s signed, or it may go into effect at a later point. But what makes it “durable” is the fact that it will survive your later incapacity. (If a power of attorney is not durable, it is revoked when you become incapacitated – the very moment when you need it most.)
Powers of attorney for property should only be given to trusted individuals, ideally those who are good with financial and legal matters. Medical powers of attorney can be separated and given to someone else, if desired.
Updated beneficiary designation forms.
Beneficiary designation forms on life insurance policies, 401(k) accounts and other assets will generally override any conflicting provisions within a will or trust. It’s essential to make sure all forms are checked and updated regularly, ideally on an annual basis.
For more information about Attorney Charles Tyler, Sr. or the services our office provide, please feel free to explore our website at www.tylerlawoffice.com. You may also call our office at 234-208-7900. We look forward to working with you as you plan, prepare and protect your assets.