What is Estate Planning?
Estate Planning is nothing more than establishing a plan for you to: 1) maintain control of your property and financial affairs while you are alive and healthy; 2) allow others to manage your property and affairs if you are sick or incapacitated; 3) to give your property to whom you want and the way you want it given, after your death; and 4) to accomplish goals 2 and 3 without probate and unnecessary taxes and expenses.
What Is a Will?
A will is a written legal document that leaves specific instructions to be followed upon a person’s death. A will only affects property owned by a person that is in his or her individual name at death. Therefore, a will requires probate. Among other things, a will can designate guardians for minor children, name the executor of the will, and, most importantly, designate who is to receive the deceased individual’s property. Because wills only work when a person dies, they provide no planning for disability or incompetence.
What Is Probate?
The term “probate” generally refers to the process of administering the estate of a deceased person who owned property in his or her individual name at death. In simple terms, the probate process involves locating and appraising the decedent’s property, paying the decedent’s bills and taxes, collecting money owed to the decedent and, finally, transferring the decedent’s property to his or her heirs. Because probate is a formal legal process, it shares the characteristics of any formal legal process: it requires a lawyer; it takes time, costs money, and is open to the public. Probate often takes 6–12 months and costs 4% – 6% of the value of the probate estate.
WHAT IS A TRUST?
A revocable living trust is an alternate estate planning document that accomplishes more than a will. A Trust allows a person to prepare an estate plan to: (1) maintain control of his or her property while alive; (2) maintain control of assets and provide for his or her care if he or she becomes disabled or incompetent; (3) provide for the distribution of property after death; and (4) it accomplishes all of these goals without the time delays. Revocable living trusts meet all of the major estate planning goals and are flexible and easily changed during the Trustmaker’s lifetime. Revocable living trusts are useful planning tools for most estates because in addition to cost effcient estate tax planning they provide for disability planning, and they avoid probate after the Trustmaker’s death.
Although a revocable living trust is a powerful estate planning tool, a good estate plan should also contain other supplemental documents such as living wills and healthcare powers of attorney. Healthcare powers of attorney insure that your healthcare decisions can be made by your spouse or children when you are too sick to make those decisions. Living wills express your treatment wishes at the end of your life.