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Fundamentals of Estate Planning
If you're like most people, estate planning is on your to-do list. While few people look forward to putting their affairs in order, this task is something that should not be put off. Organizing a life plan ensures that all your worldly possessions are protected throughout your life and beyond. It also makes things easier for loved ones when it's time to settle your estate.
It is not unusual to think that estate planning is a depressing task. Most people don't relish the fact that their life will end one day. However, death happens to everyone so it's best to have a plan in place that lets you have a final say in how assets will be divided. Otherwise, state probate laws will dictate how your estate is settled and who receives your belongings.
There are numerous ways to protect assets and investments. Since everyone has unique situations it is best to work with an estate planning law firm. Attorneys can offer solutions that make estate settlement easy, as well as reduce tax liabilities for heirs.
Getting Started with Estate Planning
Regardless of the type of estate planning strategies used, every adult needs a will and testament. This document is invaluable because is provides information about possessions, estate administration, guardianship of minor children, and beneficiaries entitled to inheritance property.
One mistaken belief is it isn't necessary to prepare a Will if a person doesn't own any property. While a last Will does provide directives regarding distribution of assets, this isn't the primary use. Instead, the document helps expedite the probate process.
Probate is the legal proceeding used to record a person's death and transfer ownership of their property. It can be quite lengthy and costly, so it's best to make use of estate planning and avoid it altogether.
On the other hand, small estates can bypass certain aspects of probate if they qualify for state exemptions. Part of the exemption criteria is that a valid Will is recorded through the court. Exempted probate estates typically settle in 45 to 60 days.
Preparing a will and testament allows people to have a final say. They can pass along everything they own to anyone of their choosing and select an estate administrator to settle their estate. When a person dies without preparing a Will their estate is settled in accordance with state probate law.
Importance of Power of Attorney
Power of attorney forms are used in conjunction with estate planning to provide an added layer of protection. These forms let a person designate a personal agent to carryout various types of tasks and decision-making. Common reasons to grant POA privileges include:
- Managing personal finances
- Handling business dealings
- Overseeing real estate and financial investments
- Making medical decisions during times of incapacitation
Different kinds of power of attorney forms are available. Nearly all can be tailor-made for each person's individual circumstances. Each authorizes agents to handle important tasks on behalf of another so it is vital the document is prepared properly. Furthermore, it's crucial to select an agent who can be trusted to act in your best interest and not abuse their power.
The degree of powers granted to agents is determined by the power of attorney. As an example, general POA provides sweeping powers, while limited POA places restrictions on what tasks agents can perform.
Medical power of attorney allows people to provide written directives regarding procedures, treatments, and other life support options they want or do not want administered. A healthcare agent is designated and permitted to engage in medical decisions in the event a physician declares a person to be incapacitated.
Healthcare agents are only involved in decision-making in the event a person is unable to communicate on their own. Individuals should provide a copy of the medical POA to their personal agent, doctors, and life insurance providers. It's important to discuss healthcare decisions with agents and doctors so they are aware of your desires.
Using Trusts to Safeguard Estate Assets
Trusts are a good option for nearly everyone. Not only does trust property avoid probate, it can also be passed along to heirs in a timely fashion. Other benefits of trusts include:
- Reducing estate tax liabilities for heirs
- Expedite estate settlement proceedings
- Protect assets for minor children
- Maintain privacy for the family after death
There are several types of trusts, so it is advisable to get help from an estate attorney to determine which is best suited for your needs. Living trusts are one of the more widely used, but other popular options include family trusts, charitable trusts, and children's trust funds.
Each and every person can benefit from estate planning no matter the size of accumulated wealth. The basics include: preparing a Will, setting up power of attorney privileges, and transferring property to trusts.
Using the right type of estate planning strategies will lessen the burdens of estate settlement and ensure property is given to those of your choosing.