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Estate Planning
While nobody wants to think about death or disability, establishing an estate plan is one of the most important steps you can take to protect yourself and your loved ones. Proper estate planning not only puts you in charge of your finances, it can also spare your loved ones of the expense, delay and frustration associated with managing your affairs when you pass away or become disabled.
I realize that planning your estate can be an intimidating process. I also know that making these decisions can be some of the most important you will ever make. Who should I name as the executor of my estate? Do I need a will or a trust or both? Who will take care of my young children if it becomes necessary to appoint a guardian for them? Do I have particular religious, family or cultural customs to take into consideration?
In most states, if you die without a will or a trust, called intestacy, the law effectively writes a will for you. These laws set a rigid formula and make no exceptions for those in unusual need. Your estate must be administered in court, and often the cost will be greater than if you had planned your estate with a will or a trust. Therefore, there’s no time like the present to start making your estate plans.
Wills
Most people know about wills and their basic purpose – to ensure that one’s hard earned assets go to the right beneficiaries when an individual passes away. However, wills can be used for a lot more than simply dictating who gets a person’s antique lamp collection. Here’s a list of some of the very valuable things a will can do:
- List who gets what.
- Name guardians for children.
- Establish trusts.
- List funeral wishes.
- Naming executors and trustees.
While wills can serve as powerful estate planning tools, they are only effective if they are properly drafted to suit the needs of each individual. An estate planning attorney can review all your options with you and establish a will in a manner that ensures your wishes will be honored.
Revocable Living Trusts
Trusts are often the cornerstone of a properly planned estate.
A trust is a legal arrangement whereby one person, called a trustee(s), holds legal title to property for another person(s), called a beneficiary. You can be the trustee of your own living trust, thus keeping full control over all the property in the trust. It can be amended or revoked by you during your lifetime.
There are many types of trusts. A revocable living trust is the kind of trust most people think of and by far the most popular choice. A revocable living trust is simply a trust you create while you are alive, rather than one that is created at your death. Living trusts can help you avoid probate, estate taxes or set up long-term property management, and as such, are one of the most popular estate-planning tools. The big advantage to a living trust is that property left through the trust usually does not have to go through the probate process. Probate can be lengthy and costly and most people try to avoid it. The person you appoint in your living trust to handle your trust after your death (successor trustee) simply transfers the property in the trust to the beneficiaries you named in your trust. Holding property in a living trust requires some crucial documentation and it is best to consult with a qualified estate planning attorney to create your living trust.
Providing for Incapacity with Powers of Attorney
If you become incapacitated, you won’t be able to manage your own financial affairs. Many are under the mistaken impression that their spouse or adult children can automatically take over for them in case they become incapacitated. The truth is that, without proper planning, in order for others to be able to manage your finances, they must petition a court to declare you legally incompetent. This process can be lengthy, costly and stressful. Even if the court appoints the person you would have chosen, they may have to come back to the court every year and show how they are spending and investing each and every penny. If you want your family to be able to immediately take over for you, you must designate a person or persons that you trust in proper legal documents, such as a Durable Power of Attorney for Property, so that they will have the authority to withdraw money from your accounts, pay bills, take distributions from your IRAs, sell stocks, and refinance your home.
In addition to planning for the financial aspect of your affairs during incapacity, you should establish a plan for your medical care. The law allows you to appoint someone you trust – for example, a family member or close friend to make decisions on your behalf about medical treatment options if you lose the ability to decide for yourself. You can do this by using a power of attorney for health care where you designate the person to make such decisions. In addition to a power of attorney for heath care, you should also have a living will which informs others of your preferred medical treatments such as the use of extraordinary measures should you become permanently unconscious or terminally ill.
Providing for Minor Children
It is important that your estate plan address issues regarding the guardianship and upbringing of your children.
Your plan should name a person or persons you’d like to nominate as guardian for your minor children. You may also want to name a separate conservator, who is a person, or trustee in charge of the finances for your minor children. The conservator need not be the same person as the guardian. In fact, in many situations, you may want to purposely designate different persons to maintain a system of checks and balances. Without such a designation, the decision as to who will manage your finances and raise your children will be left to a court of law. Even if you are lucky enough to have the person or persons you would have wanted selected by the court, they may have undue burdens and restrictions placed on them by the court, such as having to provide an annual accounting.
You should give careful thought to your choice of guardian, ensuring that he or she shares the values you want instilled in your children. You will also want to give consideration to the age and financial condition of a potential guardian.
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If you don’t already have an estate plan, it’s never too soon to be prepared. There’s no cost to finding out if Attorney Douglas Boodt is right for your situation. Schedule a telephone call today.
Licensed in Illinois and Michigan