Nationally syndicated radio host Dave Ramsey says,
“Everyone over 18 needs a will.”
A will is a great start to your legacy plan. However, there are many other planning tools that you should consider.
- Guardianship: If you have minor children, you should have official guardianship papers to identify a future caregiver for your children.
- Medical Power of Attorney: You should have a medical power of attorney to specify who you want to make medical decisions for you if you are not able to make these decisions for yourself.
- Advanced medical directive (also known as a “living will”): This document provides instruction to a medical provider regarding your end-of-life care wishes. Do you wish to be on life support? If so, for how long? Do you wish to receive artificial hydration/nutrition?
- Financial Power of Attorney: This document gives someone you choose authority to pay your expenses (housing, medical, etc.), sell real estate, transfer assets, and make other financial decisions on your behalf if you are unable to do so.
If you do not have your representatives identified
in writing and properly notarized,
the Court will appoint someone to make decisions for you!
Further, if your primary goal is to avoid your family having to go through the Court to probate your estate, a will may not be enough. Depending on the type and value of your assets, a will may still need to be submitted to probate. Key factors include: (1) do you own real estate that is not titled in joint tenancy; and (2) do you have more than $66,000 in probate assets? If the answer to either of these two questions is yes, your personal representative (aka executor of your estate) must file for probate.
If you have assets that would trigger the probate process, or if you own a business, you may wish to consider having an attorney work with you to prepare a Trust Agreement. A trust is no longer a necessary tax planning tool for many people given the current estate and gift tax deduction ($11.2m). However, a properly created and funded trust can also help you in the following ways.
- Provide an income stream for your beneficiaries as opposed to an outright distribution, ensuring their continued support and care.
- Place limitations on an inheritance (such as age or educational considerations).
- Protect an inheritance from being received by one who is engaged in substance abuse.
- Allow for a smooth transition of all property without placing an added burden on your loved ones.
- Avoid probate all together.
- Maintain your records as confidential (whereas a probate proceeding is public record).
- Minimize the overall cost of your estate plan and transition.
- Provide care for a special needs individual.
- Provide contributions to a charitable organization.
Some other considerations when making your legacy plan is that a will does not change the character of these assets.
- Property owned in joint tenancy
- Life insurance proceeds
- IRA or 401K distributions
- Pension plans
These are known as “non-probate assets” and are not affected by your will. The beneficiary you name on your life insurance policy, your 401K, your IRA and/or your pension plan (as well as other similar accounts) will control how these assets are distributed, period.
For further consultation and questions, please contact me!