When most people think of Estate Planning, they immediately think of a Will. Even for a person with the most modest of estates, a Will provides the opportunity to determine the guardians for your minor children or dependents and an executor to handle the task of administrating your Estate; and Will allows you to name exactly who will receive your estate and in what shares. The executor is responsible for identifying the assets, protecting them while the estate is being administrated, and distributing the assets to the people you specifically want to receive them. Without a Will, you will not control who will be the guardian of your children, who will handle the administration of your estate or who will receive the assets in your estate. Those things are all determined by laws that may not reflect your wishes and desires. A Will allows you to control the things that are important to you.
Review and Update Beneficiary Designations
Not every asset is subject to a Will. Assets like life insurance, IRA's, and 401(k)'s can be distributed on death to designated beneficiaries. Those assets will transfer to the beneficiaries with or without a Will. People often make initial beneficiary designations when a life insurance policy is created or an IRA or a 401(k) is established, and forget about it. Those beneficiary designations are part of your "estate plan". Those assets will be distributed to the beneficiaries you have designated. You should make sure that the directions in your Will and the beneficiary designations work together to carry out your desires for the distribution of your Estate. Most people name a spouse. Minor children may not be appropriate, but you might want to add adult children as secondary beneficiaries. If you have been divorced, you probably do not want your ex-spouse to remain named as a beneficiary. Beneficiary designations are part of your estate plan and should be reviewed periodically
Health Care and Property Management Directives
Your Estate Planning should not only address plans in the event of your death, but also plans that may need to be implemented during your life. You should at least have a Living Will that memorializes your final directives in the event that a determination is made that an illness or condition is terminal and death is imminent absent artificial means of keeping you alive. Without any direction, a physician has a professional obligation to keep you alive by whatever means possible, even if that means sustaining you in a vegetative state. If that is not your desire, you may leave the instructions you want a physician to follow in a health care directive like a Living Will. Powers of attorney allow you to name people you trust to act as your agent(s) to make health decisions for you manage your financial affairs if you are unable to make decisions and manage your own affairs. Without powers of attorney, you may have no say in who handles your health care decisions and your finances.
Review How Property is Owned
How you hold title to assets is part of your estate planning because some forms of ownership have estate planning consequences. For instance, property held in joint tenancy will automatically transfer to the surviving joint tenant when one joint tenant dies. Bank accounts that are "payable on death" (POD) will automatically transfer to the person(s) named. Many people add names to bank accounts to allow another person access for convenience to write checks. If the person is added as a joint owner, that account will become theirs when you die. If that is not your intention, that person must be added "for convenience only". How title is held to property may have an affect on your estate planning, so you should review how you own your property periodically to make sure that it makes sense in light of your estate planning desires and wishes.
A trust created while you are alive may make handling your estate easier and less costly for your children, and a trust can give you more control over the administration of your estate than just a Will. If you create a trust, and put substantially all of your assets into the trust, your estate will not be subject to the probate process. Probate is a court proceeding, requires an attorney and takes from 7 to 9 or more months to complete in Illinois. The cost and delay of probate can be avoided by using a trust. With a trust you can leave instructions for the trustee to follow in providing for minor children, payment of colleges expenses and delaying distribution to your children until they are mature enough to handle the assets on their own. Trusts can also shelter assets from your children's creditors or bad marriages and even from your own childrens' from their own bad judgment. Trusts can be used to minimize or avoid federal estate taxes and state death taxes, among other things.
Although there are many more estate planning tools and considerations, every estate plan should include a Will, a Living Will, a Health Care Power of Attorney and a Property Power of Attorney. You may have other concerns, like whether a Trust might be right for you, how to handle your retirement assets as part of your estate planning, estate taxes, how to provide for an adult disabled child and other more complex issues. There are many issues and interrelated complexities in estate planning, but understanding the basic components, will help you get started. Seek the advice of an attorney who does estate planning. Choose an attorney like you would choose a doctor. Get a recommendation from a friend or someone you trust. Find an attorney who has a good reputation in the community. When you meet with the attorney armed with some basic knowledge, you will help the attorney to be efficient in helping you, and you will feel confident in discussing your estate planning.
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