Estate Planning: An At-a-Glance Overview

Estate planning, or legacy planning, entails preparing your affairs for the future, including death and other life events. While older adults might give more thought to estate planning, it is an essential tool at any age.

Why It’s Important

With estate planning, individuals and families can protect their interests after death or incapacity.

  • You can provide for spouses, children, and dependent family members when you pass away.
  • You can arrange your care and financial affairs should you suffer a severe accident or illness that renders you incapacitated.
  • If you are a parent, you can nominate a guardian to care for and manage the inheritance of your minor children.
  • If you own a business, you can prepare to transfer it to family members, colleagues, or other trusted individuals.
  • You can make arrangements for your long-term care when you can no longer live on your own.
  • You can also make funeral preparations, determine what happens to your body when you pass, and prepay for your funeral, all of which can help lessen the burden on your family members.

What Is an Estate?

Legacy planning entails passing on your estate. Your estate is everything you own, including:

  • Savings and checking accounts
  • Retirement accounts
  • Investments
  • Life insurance
  • Annuities
  • House and other real estate
  • Car
  • Personal possessions, such as jewelry, furniture, and sentimental items

When you die, your estate encompasses all your property upon death. If you sold or gave away property before death, it is no longer part of your estate, and you cannot transfer it upon death.

Items you own with another person are also part of your estate. Depending on the type of asset, it might automatically pass to the other owner. For instance, if you own a home with your spouse as tenants by the entirety, it will pass to your spouse upon your death.

What Is an Estate Plan?

An estate plan consists of legal documents and arrangements that determine the distribution of your assets when you die or outline your care if you become incapacitated.

While a will can be a central component of an estate plan, a solid plan encompasses more than a will. It can also include legal tools that allow assets to pass outside of a will and probate, the process by which a court oversees the distribution of assets in a will.

Estate Planning Tools

In addition to your will, your estate plan could include the following:

  • Purchasing jointly owned property or adding a joint owner to your property
  • Recording a deed to transfer ownership of real estate upon death, while retaining all benefits of ownership during life (“Lady Bird Deed”)
  • Creating a Trust to avoid probate and/or to arrange for management of assets during your incapacity or after your death
  • Designating a beneficiary on a pay-on-death bank account, retirement account, or annuity
  • Buying life insurance to benefit your family should you pass away
  • Creating a trust for a child or spouse or other individual with special needs
  • Obtaining long-term care insurance to cover future nursing home or assisted living fees
  • Executing power of attorney documents, naming health care and financial agents
  • Executing a Patient Advocate Designation, providing instructions for care  and who will make medical decisions should you become incapacitated
  • Preparing a transfer on death instrument to pass ownership of your property to a beneficiary upon death
  • Planning for the transfer of closely-held businesses and other investments on death
  • Considering whether to make lifetime gifts and learning about the implication of such gifts on taxes and  current or future Medicaid benefits

What Is an Estate Planner?

As professionals helping people make future arrangements, estate planners are attorneys who focus on end-of-life preparations. Estate planning attorneys assist people with drafting legal documents and understanding laws and taxes that could affect them and the loved ones they will leave behind.

When creating estate plans, individuals may need to consult attorneys as well as other experts, including financial planners, accountants, life insurance advisors, bankers, and real estate brokers.

What Does the Final Distribution of Assets Involve?

If your estate plan is based upon the transfer of assets by the use of a Will (or if you die without an estate plan and you have assets in your name), your estate will require probate. The final distribution of assets is a conclusory step in the probate process before the court closes probate. When an estate goes through probate, the personal representative must satisfy all debts, and the court must resolve all disputes before allowing the beneficiaries to receive the assets. The court transfers ownership of the assets to the beneficiaries during the final distribution of assets.

If your estate plan is based upon the use of a trust, you will name a trustee to administer your affairs and distribute your assets after your death, without any  probate court proceedings or filings.  The trustee can be a family member or other trusted individual who will follow the instructions you have provided in your trust and keep all beneficiaries informed during the process. If disputes arise, the trustee or the beneficiaries can request resolution through the probate court, but most trusts are administered without the need for probate court intervention.

Do I Need a Lawyer for Estate Planning?

Although the law does not require that individuals secure legal representation to make estate plans, many find the support and guidance of estate planning attorneys invaluable. An estate planning attorney can help you identify the legal tools and strategies that suit your needs, as well as draft the necessary documents, such as wills, trusts, and powers of attorney. A legacy planning lawyer can help you preserve your estate’s wealth and may work with tax professionals.

In addition to addressing tax concerns and drafting documents, these attorneys can help you avoid probate. Probate, the process by which the court oversees the distribution of assets in a will, can be expensive and time-consuming for surviving family members. It also opens the door for disgruntled people to challenge the validity of the testamentary document, further complicating asset distribution. An estate planning attorney could help you organize your assets to transfer outside of probate to make the transfers simpler, easier, and less vulnerable to challenges.

Please feel free to call the office of Wenzel Bennett & Harris, PC at 989-356-6128 to schedule an estate planning consultation. You will meet with an estate planning attorney to discuss and review  the options which will work best for your individual and family situation before deciding on your estate plan. Then, at your direction, your attorney and professional staff will prepare the necessary documents to carry out your wishes.

If you have specific questions about your situation or would like to learn more, reach out to the team at WBH here.

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