estate planning faq's

When is the right time to consider estate planning?

There’s no clear-cut answer, but even a single, 25-year-old millennial should have a Will, Health Care Directive and Durable Power of Attorney in place. You need to prepare for the unexpected, and you want to make it as easy on your family as you can. If you have children or significant assets such as a house, property, investments, retirement accounts and other financial accounts, you will want to have an estate plan.


Who Needs Estate Planning?

The short answer is everyone. There are many things that go into estate planning which most people do not realize. A common misconception is that only those in their golden years need to do their estate planning, but that is not the truth. Yes, it is important for those advanced in age to estate plan, but it is equally important for younger people, as well. 


No matter what stage of life you are in, there is some estate planning you need to do. If you have little to no assets, you still need at a minimum, a will. Ideally, you still need powers of attorney and health care directives. If you have children, you want to make sure your children are cared for should something happen to you and your spouse. Who is going to take care of them? If you have a home and do not want your loved ones to have the headache of transferring your assets out of your estate, you’ll want to consider a trust. The more decisions you make now, the less decisions you leave your loved ones to make after you are gone. 


What is included in an estate plan?

 Every situation is different, but some basics things an estate plan may include:

  • A will - this can be simple or one that addresses a more complex estate with significant assets and property
  • Guardianship nomination - this is where your will includes the naming of a guardian, if you have children
  • A trust - this lets you manage assets while you are still alive, but allowing your heirs to avoid the probate process
  • Durable power of attorney - a trusted person who will take care of your legal, health and financial responsibilities if you are mentally incapable
  • A health care directive - appoints an agent who will make decisions about your medical treatment, if you are incapable of doing so


Will or a Trust?

A will is a directive on who you want to administer your estate and how you would like your estate to be distributed to your family and friends. It also can dictate who you would have as the guardian to your minor children. 


A trust goes one step further than a will. It also dictates how your estate will be administered, but will allow your family to avoid going through probate. It creates a separate entity that holds your property that will be distributed according to the trust agreement. 

So, to answer this question, it depends. Most situations you will need both. 


When should I update or change my estate plan?

Whenever a significant life event occurs is the time you need to update your will or trust. A few scenarios exist, including buying a home, starting a business, the birth of children or grandchildren, getting a divorce, or diagnosis of a serious medical condition, just to name a few. It is a good idea to look it over every 3 to 4 years though just to make sure nothing has changed. 


What happens if I die without an estate plan?

The distribution of your assets is determined by state statute and your assets will be distributed among family members or your “heirs at law.” Your procrastination has taken the decision-making out of your hands, and that is not a good thing. By having an estate plan, you make the decisions now about where your assets are distributed before you can no longer make those decisions. Do you really want the state statute to decide who gets your assets or even worse, who will take care of your minor children?


What is Probate and Why do I want to Avoid it?

Probate is the formal, court supervised procedure to identify all assets and liabilities of a deceased person (a “decedent”) and determine their beneficiaries. It oversees the distribution of assets either with a will or without a will. It can last months in the court system, even if it is not contested. Besides being a long-drawn-out process, it is a public proceeding that can end up costing thousands of dollars. 


What is a Transfer on Death Account?

There are some things that a will cannot do and that is to transfer assets that are held in a transfer on death account. Usually these are financial accounts such as investment accounts, retirement accounts, and life insurance policies. These assets transfer to their designated beneficiary upon your death. The only time these can be distributed through a will is if there is no beneficiary listed and it defaults to your estate. It is very important that you frequently review your beneficiary designations because you do not want assets to go to the wrong individual.  Failing to update your beneficiary designations may result in the wrong individual receiving the benefits. At that point nothing can be done to fix it. 


What Happens to property I own as Joint Tenants, with rights of Survivorship?

Real estate and certain financial accounts can be owned as joint tenants with rights of survivorship. This means that you own the asset jointly with the other individual(s) and whoever survives the longest becomes the sole owner. This can be very useful in estate planning. All real estate must transfer to the heir/beneficiary through the probate process unless it is owned in a trust or as joint tenants. If you and your spouse own a home as joint tenants and one of you passes away, you do not have to go through probate to transfer that asset to the surviving spouse. 


How can I make sure my life insurance benefits are used to care for my minor children?

Life insurance is great to make sure your minor children have something to survive on should something happen to you and your spouse. It gets a little tougher to make sure that those benefits are used for that purpose though. Most life insurance companies will not pay a benefit to a minor child. Once the child reaches the age of majority, the insurance will pay the benefit out all in one lump sum. It is not very useful for their care if you cannot access it until they reach the age of majority.  Additionally, an 18-year-old with a large amount of money usually does not make the soundest financial decisions. If you have a trust in place you can leave the trust as the beneficiary and direct the trustee to use the money in the way you intended. You can spread out distributions, so your children do not spend it all and have nothing for their future.  


When should my power of attorney document take effect?

There are typically three different time frames for when your power of attorney can take effect. The first is upon execution. This means that as soon as you sign and notarize it, your agent/attorney in fact has the authority to make decisions as if they were you. This can be useful in many situations but can also be dangerous. It gives your agent a lot of power over your decisions. 


The second time frame is upon a certain date. You choose a date in time in the future of when it goes into effect. If you have a surgery coming up and will be in the hospital for some time, this can be useful. Usually these are limited, and you not only have a start date but an end date as well. 


The third and most common time frame is upon determination of incapacitation. This is the most common because it allows your agent to make decisions only after you have reached a point where you cannot make day to day decisions for yourself. Typically, this is when a physician makes the determination. 


As you can see, there are benefits to all three, making it important that when setting up your power of attorney you choose the right options for you. 


Why do I need a health care directive/living will?

The goal of estate planning is to make decisions now so that there is a plan in place if a time arises when you’re unable to make those decisions. A healthcare directive or living will allow you to make decisions about your health care prior to the time that you may not be in a position to do so. 


What are your wishes when it comes to staying on life support? Do you want to be an organ donor or donate organs for research? These are just a few of the questions that you can make now that will help your family and can assure your wishes are fulfilled. 


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