The Working Family Estate Plan
Who Needs An Estate Plan? Why Should I Do It Now?
Many people believe estate plans—which include wills, trusts, powers of attorney, and so on—are only for the rich. This is simply not true. There are several reasons why you need an estate plan, regardless of your income or your net worth.
Estate Planning Helps Avoid Probate
If you could imagine the worst possible legacy to leave your spouse, children and grandchildren after your death, it would invariably include the court system. Most people who have ever stepped into a courthouse come away less enthusiastic about returning there: they find the process slow, cumbersome, and frustrating. One major reason to get your estate plan in place now is to avoid a court-supervised process known as probate.
The Probate Process
An estate must be probated when a person dies leaving more than $100,000 in probatable assets, which include any property—real or personal—that have not already been devised. This means that the property stays in the decedent’s name after death with no named beneficiary. One asset that usually does not go through probate, because a beneficiary is already named, is life insurance. However, most property—think of your house, cars, bank accounts, the heirloom china set—is in your possession, and you hold legal title to it. The court will be left to oversee the distribution of your assets and paying off any debts of the estate. It is costly, burdensome, and lengthy—usually thousands of dollars, and months, or even years, in court.
How to Avoid Probate
By executing a last will and testament (will for short), you can leave your property to the person or persons you choose. However, this is not enough to avoid probate. Essentially, your wishes are made known through your will, but another step is required to keep your matters out of court. What you need is a trust, which is a modern invention of the law that creates a fictitious “person” that holds your assets because you put them there. It doesn’t change your ability to buy and sell, trade or make income off your property, it merely transfers ownership from you as a person to you as Trustee of your living trust. It’s a clever way of ensuring that after you die, a “living” entity—the trust—owns your property and thus can avoid probate, because technically, you are not the owner of your property – your trust is.
How It Works
You create a trust, and then you create a deed that transfers your house into the trust. You notify the bank that your accounts should be held by the trust. You keep living in the house and paying bills with your bank accounts, but the trust owns your assets and you are the “operator” (Trustee) of the trust. Then, when you die, your house and bank accounts (and any other property you put into the trust) pass to your beneficiaries without court involvement, if your trust is set up correctly.
There is a bit more to it than this, so please call (916) 442-5835 to set up a phone appointment with an attorney at Farrell, Fraulob & Brown. We will be happy to answer your questions.
Estate Planning Helps Your Loved Ones Care For You
More and more people are falling victim to Alzheimer’s disease and dementia, which prevent millions of Americans from making decisions regarding their own lives, property, and health. Please see some startling statistics from the Alzheimer’s Association website:
Power of Attorney for Health Care
Having an estate plan in place now is the only way to ensure that your loved ones are not guessing as to your wishes for your health care, your assets, funeral and burial/cremation arrangements, and other important decisions. Advance health care directives, also known as Powers of Attorney for Health Care, put decision-making power into the hands of someone you trust (the agent) in the event you can no longer act for yourself. These documents can be written to give immediate power to the agent, or the powers lie dormant until you choose to hand over the power or a doctor determines you cannot act for yourself. In addition, a living will gives you the ability to decide what kind of medical procedures you wish to be given to save your life. Please call (916) 442-5835 to discuss the details with one of our attorneys.
Power of Attorney for Asset ManagementIn addition to health care planning and decision-making, think of the financial decisions that need to be made. A Power of Attorney for Asset Management gives power to someone you trust, to make decisions regarding your property in the event you cannot act for yourself. Keep in mind that these powers are effective only while you are alive but cannot act due to your incapacity, or if you voluntarily relinquish your powers. The Power of Attorney can be held by the same person who will act as your Trustee. Call (916) 442-5835 to see if this document is right for your estate plan.
An Estate Plan Gives You Peace of Mind
Your estate plan will contain the necessary provisions for your end-of-life care, how your property will be divided, and who will act for you should you lose the ability to do so. Making these decisions now will give you great peace of mind, because you can rest easy knowing that whatever happens, you are prepared.
An Estate Plan Keeps Peace Among Your Loved Ones
How many times have you heard about fights erupting in otherwise peaceful families after Mom or Dad passes away? It is sad but true: when a loved one dies without having made his or her wishes known, the survivors can act irrationally, and conflicts arise. Emotions run high for those who are grieving a loss. But when estate planning documents are in place, much of the confusion and disagreement is replaced with order, structure, and harmony. Do yourself and your loved ones a favor, and get prepared.