The Importance of Having an Estate Plan
This article will briefly go over some of the components every estate plan should have, as well as covering some additional components you may want to consider, and why.
IntroductionA client recently asked me, *why do I need an estate plan? I will be dead before it matters anyway.* This sentiment seems to be shared by many. However, this sentiment is largely incorrect. A well-made estate plan does not only account for what happens after you die, it lays out your wishes for everything you want to happen in the event you can not make decisions for yourself, including those decisions that occur after you pass away. Every well-made estate plan will include several key components, and depending on your situation it may be advisable to add some more items into the mix. This article will briefly go over some of the components every estate plan should have, as well as covering some additional components you may want to consider, and why.
The Last Will and TestamentThe last will and testament, more commonly referred to simply as a *Will*, is a document that lays out your wishes for how your property should be distributed upon your death. A will can cover everything from your real estate holdings to bank accounts to personal property. The document also nominates a person or persons to act as your personal representative (also referred to as an executor) in carrying out the plan you laid out.
The will is overseen by the probate court, typically in the jurisdiction where you last resided prior to your death. The probate court is overseen by a judge, who will appoint the personal representative, verify assets are being distributed properly, and present a forum for parties to contest the will, and make claims against the estate. In Florida, Estates with less then $75,000 in total assets can go through a process called *summary administration*, which is less formal, abridged method of probate. Any estate over the $75,000-dollar limit is required to go through the process of *formal administration.* The formal administration process can last for 6 * 12 months, (or longer if the disputes arise) and cost anywhere from 3% to 10% of the total asset value in the estate by the time your done. In Florida, formal administrations require an attorney, which typically charge around 3% of the estates value for their services.
A Revocable *Living* TrustWhile not required in every estate plan, it may be advisable to set up a revocable living trust. While you are alive a living trust is inseparable from yourself, and can be changed by you at any time and for any reason. But what is a trust. A trust is nothing more than a document, placing control and ownership of property in one person, to be used for the benefit of another person. In the case of a living trust, the person controlling the property and the person benefiting from the property can be the same person.
So why use a living trust? Well there are a couple of reasons. Any assets placed in a living trust are not required to go through the probate process, which can save a great deal of time, money and headaches for your beneficiaries. Another reason is control. With a trust you have a lot more flexibility to place restrictions and controls on how the property you own is used. Yet another reason is the ability to lay out, and give easy access to your assets to be used for your benefit in the event you are incapacitated.
Let us say you were to become hospitalized, and unable to make financial decisions on your own. Who is going to pay the mortgage, the light bill, the hospital bill, the nurse. Who is going to ensure you get the care you need. Creating a trust allows you to designate a person who can quickly and easily step into your shoes and take over these functions.
You can think of a trust kind of like a moving van. All of the property you place in the back of the moving van goes wherever the driver goes. In the event of your incapacity, the person you select can simply push you over into the passenger seat and keep on driving, taking the property where it needs to go. Without a trust, you need to go to the court get an appointment, get orders allowing the access of funds, and all of these things take time, effort and money. Unlike the moving van example, the court process is like having to move everything from one truck to another piece by piece.
The Living WillA living will is a document that lays out your wishes in the event you are suffering from a terminal condition, in a vegetative state, or are on life support with no medically reasonable chance of recovery. Do you want to be kept alive as long as possible, or do you want the doctors to *pull the plug*? You use a living will to lay all of these decisions out, and nominate someone to advocate for those wishes for you.
Many people in Florida have heard about the case of Terri Schiavo, a Florida girl who suffered from a persistent vegetative state. The case went all the way to the supreme court and tore a family apart in determining how to proceed and whether she should be removed from life support. Living wills prevent such things from happening. Your family is not left guessing and fighting over what you would have wanted, because it is clearly laid out. Moreover, you are able to ensure you decide what happens to you, instead of some judge you have never met.
Power of AttorneyA power of attorney, commonly called a POA, is a document granting the authority for another person to act on your behalf in making financial, legal, or other decisions. You can grant a person blanket power to act on your behalf (Known as unlimited POA) or you can limit the powers your agent has (known as limited POA). With a power of attorney document, you can give another person the authority to act on your behalf in a variety of events, including if you have capacity or are incapacitated.
Why do I need a power of attorney though? Well, let*s say you become incapacitated, who is going to manage your real estate. Who is going to manage your stocks and bonds? In the event you are injured by someone, who is going to maintain a lawsuit on your behalf. These are all actions a person granted a power of attorney can take.
However, with that said, it is very important to select your POA agent carefully. A power of attorney can be a dangerous document if it falls into the wrong hands. I always advise my clients that while they should let the power of attorney know the document exists and how to find it, not to give it to them unless it is needed for some reason. That way, in the event your incapacitated, the agent can act by getting the document, but does not have the power to act freely at any time.
ConclusionSo what do you want to ensure that you consider when you create an estate plan? It takes a good deal of thought but hear are a few things you should probably think about. Tax consequences of your estate, the total amount of assets available, those who rely on you (such as children, a spouse, other family, or pets) and their needs, your wishes are in a medical emergency, who will handle your affairs for you after something happens, your financial and familial goals, your wishes for remains after you. pass away. Each of these things can be handled by a well-made, thought out estate plan.
At The Weil Law Group, we enjoy helping our clients think through all of these things, and then draft documents that ensure all of these items are met. If you don*t yet have an estate plan, or you think yours might need some updating, please give us a call at 954-603-7603 and we would be happy to assist you. Or visit us online at www.weilfl.com Our process has been specially designed to ensure all angles are considered. The process begins with a easy to fill out questionnaire, which is followed up with an in-depth meeting with one of our attorneys to discuss your situation. After this we draft your documents. Finally, you come into our office, enjoy a cup of coffee or a soda, and we have a signing party with witnesses, and a notary provided for you. Best of all, you will get one fixed price for everything, that you will know before you agree to anything.