Estate Planning
Estate planning may sound daunting, but in reality it is just a term for a group of smaller decisions about your affairs. These decisions and documents can be made all at once, or piecemeal throughout your life as needed. Of course, the benefit to doing all of your estate planning at once is that you can be assured that all of your affairs are in order should something happen. However, it is important not to let the prospect of creating an estate plan overwhelm you or cause you to avoid taking smaller steps toward planning your estate. There are many aspects involved in estate planning, many of which can have benefits for you throughout your life, so it is to your advantage not to try and put this off until the last minute.
What is an Estate Plan?
An estate plan involves creating a comprehensive legal plan for managing your estate and personal affairs throughout your life as well as for dispersing it after your death. Various legal mechanisms can be involved in an estate plan, and the plan that is best for you will be tailored to your specific needs. Most estate plans include a last will and testament, health care directive, power of attorney, retirement plan beneficiary designations, and possibly a trust or trusts. As you can see, an estate plan is much more than a will, although that is what many people equate it with. Done correctly, a comprehensive estate plan can also include plans for your well-being while alive, such as plans for retirement, if you become incapacitated, and protections for your businesses and other assets. We will explore each of these elements more below. First, it is helpful to have an understanding of the probate process and how an estate plan can help alleviate and avoid some of its inherent drawbacks.
The Benefits of Estate Planning
Probate court is where the decedent’s estate goes to be settled. It is important to understand that a will does not help you avoid probate. Whether or not you have a will, your estate will likely have to be settled in probate court. Luckily, there are other estate planning mechanisms that can help you limit probate and keep critical assets easily available to your family members or other dependents. These include adding joint-ownership with survivorship rights to certain assets and/or forming a trust. Any assets with a joint-owner or that are placed in a trust will avoid probate. Utilizing certain kinds of trusts can also have major tax benefits. Of course, there is also the peace of mind that comes with knowing that all of your affairs are in order and your loved ones will be taken care of regardless of what happens.
Creating a Will
Even if you add joint ownership with survivorship rights and create a trust, if you have any assets not moved to the trust or given a joint-owner, they will be processed through the probate court, so a will is still important. There are also many situation in which you would not want to have assets titled jointly. There are many requirements for making a valid will of which most people are not aware. Simply writing your will out will generally not be an effective means of ensuring your intentions are carried out. In order to be valid in most states, wills must be signed by the testator, and their signature must be witnessed by at least two people of sufficient age and mental ability. The probate court will determine whether a will is valid. Having an attorney help you prepare your will can ensure that it will be valid and meet all necessary requirements. Having a valid will is especially important if you have a large estate that is likely to be challenged by beneficiaries.
Types of Trusts
There are a number of different types of trusts that can be utilized to help manage your estate, but the two most common are revocable trusts and irrevocable trusts. Regardless of which type of trust that you use, any assets that you wish to be held in the trust will be removed from your ownership and become the property of the trust. This is why the assets are able to avoid probate, because they are not technically your property. Revocable trusts are the most flexible. They can be changed at any time while you are alive, and you are free to add or remove assets and beneficiaries as you wish. An irrevocable trust is far more restrictive. The terms of an irrevocable trust are permanent unless a change is approved by all designated beneficiaries. While the lack of flexibility is a drawback, there are also benefits, especially when it comes to estate taxes. Any appreciated assets in an irrevocable trust are not subject to estate tax, so the sooner you create one, the sooner you can start reaping the future financial benefits.
Advanced Health Care Directives
An advanced health care directive, also known as a medical directive or living will, allows you to leave explicit instructions for your medical care in the event that you are incapacitated, seriously injured, or unable to communicate your desires for yourself in real time. This can be an especially important estate planning tool if your values or religious beliefs would prevent common medical procedures or life-saving measures, such as blood transfusions or life support.
Power of Attorney
A power of attorney is the same as a medical power of attorney, but it allows the designated party to handle financial matters for the incapacitated person.
Contact NBMS Law
If you are ready to create an estate plan that meets your needs, the experienced Pennsylvania estate planning attorneys at NBMS Law are ready to help. Contact NBMS Law today to schedule a consultation and take the first step toward peace of mind.