What is an Estate Plan?
Let’s start with an estate. Almost everyone has an estate, whether they realize it or not. Your estate includes everything that you acquire during your lifetime. Things like your home, bank accounts, retirement accounts, cars, books, art, and other personal possessions all make up your estate.
If you die without a plan for your estate, the government has one for you. First, without a will, you’d be considered to have died “intestate.” This means that the state’s intestacy rules will kick in to determine how and to whom the state should distribute your assets. A court will appoint a representative to take your estate through the process of “probate,” which can take anywhere from six months to two years because of the required court supervision. The cost of probate will come out of your assets, costing around 5% of your estate’s value, and your estate will eventually go to your heirs in the manner described by law rather than in the way that you would have chosen.
An estate plan can eliminate the need to probate an estate. Let’s talk first about a trust, which dictates exactly how you want your estate to be handled. A trust is administered by the person of your choosing (called a trustee) without any court supervision. It can be creative and detailed and tailored to your family’s particular needs. For example, most parents would be apprehensive to allow a child to receive a lump-sum of money at the wrong time in the child’s life. Parents can specify in their trust that a child’s share should be set aside and ONLY distributed for things like health, education, maintenance and support. Perhaps at a certain age, the child can withdraw half of the assets, and then at a later stage in life, he may withdraw the rest. There are countless ways to draft a trust, which makes it all the more important to find an attorney who will listen to your needs and create an estate plan just for you.
The term “estate plan” also refers to additional documents that work together with your trust to handle your affairs both during your lifetime and afterwards. Powers of Attorney, for example, give an agent the power to act on your behalf with regard to financial matters in the event you are unable. Similarly, through an Advance Health Care Directive, you appoint an agent to act on your behalf in making medical decisions in case you are not in a position to make them yourself. Your Health Care Directive also allows you to dictate exactly what kind of end-of-life care you want (or do not want). This information can relieve stress and guesswork that your family might otherwise struggle through at an already emotional time.
An estate plan gives you and your family peace of mind. Please contact us to get yours in place.