Important Estate Planning FAQs
• WHAT IS A WILL?
A will is simply a letter to the probate judge telling the judge how you want your assets to be distributed at your death. Wills do not avoid probate. Wills have no legal authority until the will maker dies and the original will is delivered to the Probate Court. Special testamentary trust provisions in a will can provide for the management and distribution of assets for your heirs. Additionally, assets can be arranged and coordinated with provisions of the testamentary trusts to avoid death taxes.
• WHAT IS A LIVING WILL?
Sometimes called an Advance Medical Directive, a living will allows you to state your wishes in advance regarding what types of medical life support measures you prefer to have, or have withheld/withdrawn if you are in a terminal condition (without reasonable hope of recovery) and cannot express your wishes yourself.
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Oftentimes a living will is executed along with a Durable Power of Attorney for Health care, which gives someone legal authority to make your health care decisions when you are unable to do so yourself.
• WHAT DOES INTESTACY MEAN?
If you die without even a Will (intestate), the legislature of your state has already determined who will inherit your assets and when they will inherit them. You may not agree with their plan, but roughly 70 percent of Americans currently use it.
• WHAT ARE BENEFICIARY DESIGNATIONS?
You may avoid probate on the transfer of some assets at your death through the use of beneficiary designations. Laws regarding what assets may be transferred without probate (non-probate transfer laws) vary from state to state. Some common examples include life insurance death benefits and bank accounts.
• WHAT IS A DURABLE POWER OF ATTORNEY AND WHEN DO I NEED ONE?
These allow you to appoint someone you know and trust to make your personal health care and financial decisions even when you cannot. If you are incapacitated without these legal documents, then you and your family will be involved in a probate proceeding known as guardianship and conservatorship. This is the court proceeding where a judge determines who should make these decisions for you under the ongoing supervision of the court.
• WHY SHOULD I CREATE A TRUST?
You should create a trust for multiple reasons. Trusts can help you avoid probate. Trusts can also help you avoid certain types of taxes. If you create an irrevocable life insurance trust, for example, protects your death benefit proceeds from estate taxes. You may also be able to avoid the probate process by keeping certain property out of your estate. You can create certain conditions and terms for trusts, in order to protect your estate, as well.
• WHAT IS A REVOCABLE LIVING TRUST?
This is an agreement with three parties: the Trust-makers, the Trustees (or Trust Managers), and the Trust Beneficiaries. For example, a husband and wife may name themselves as the Trust-maker and trustees. They are able to create the trust and manage all the assets transferred to the trust, and have full use and enjoyment of all the trust assets. In addition a “trust protector provision” allows a third party to step in under the terms of the trust to manage the assets should the couple become incapacitated or die. Special provisions in the trust also control the management and distribution of assets to heirs in the event of the trust maker’s death. With proper planning, the couple also can avoid or eliminate death taxes on their estate. The Revocable Living Trust may allow them to accomplish all this outside of any court proceeding or probate..
• WHO SHOULD HAVE A REVOCABLE LIVING TRUST?
Whether you are young or old, rich or poor married or single, if you owned titled assets such as a house and want your loved ones to avoid court interference at your death or incapacity, consider a revocable living trust. A trust allows you to bring all of your assets together under one plan.
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