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Components of the Estate
Home » Retirement » Estate Planning » Components of the EstateThe Will: It is a misconception that making a will requires a lawyer. Computer software and books are available that provide the necessary forms to disperse your property, name a guardian for your children and make basic decisions regarding your assets. However, if your life is complicated and a large amount of money or property is involved a lawyer is recommended. There should be two witnesses present (3 in Vermont) at the signing of the self-made will. A will is legal if you are of sound mind, the document must indicate this is your will (dated and signed) and witnesses are present at the signing. Your will does not have to filed with any government agency. After completing your own will, make sure you keep it in a safe place and the executor knows where it is located. The law protects surviving spouses so he/she won’t be left without anything. In all states, the surviving spouse has a legal right to claim a portion of the dead spouse’s estate. It doesn’t matter what the will states the surviving spouse receives some portion if the will is contested. If you don’t plan on leaving half of your estate to your spouse, it is wise to consult an attorney.
Personal Guardian: If you have children and are in the process of formulating a will, it is wise to name a personal guardian for them. This step should not be eliminated. Should something happen to you and no guardian is named, anyone can apply to raise your children. Naming one guardian and one alternate is wise. Take time to visit with the person you are naming to make sure this is something they would be willing to undertake if something happened to you or your spouse. Some parents name one person to raise the children and another to control financial matters. These are very important considerations to be made before you make this important choice regarding the future of your children.
Living Trust: A living trust will ensure your family will be able to avoid the hassles of probate. Probate court can drag on for months before property and assets are distributed. By the time they are distributed, there is less to go around to your heirs. Court fees and lawyer fees can erode up to 5 percent of your estate before distribution. There are many advantages to making a living trust. The property that is transferred into the trust during your life passes directly to the beneficiaries after your die. The property you own is held as a trustee so surviving members can claim assets immediately. The trust should include who will inherit property, who will take care of your children and distribution of items left in the trust. The trust should be signed in front of a notary and someone must be designated to be the successor trustee. You still need a will even if you are making a living trust. The will is the back-up for asset distribution should there be any questions. Should you acquire money right before you die and don’t get it under the umbrella of the living trust, then probate here we come. The back-up will can name that person to acquire any property that is not necessarily designated in the trust.
Beneficiary Designations: A beneficiary is simply the person or organization that is legally entitled to receive benefits as designated in a person’s will. This is a major issue when you are completing your estate planning. When naming your beneficiaries remember to consider the beneficiaries age, their ability to manage assets and pension plans. By law, the spouse is the primary beneficiary of pension plans unless otherwise designated in the will. If you are married and have assets under $1 million, a spouse is the most logical beneficiary. Should that spouse be unable to manage the life insurance money or inheritance, then a trustee should be named. If your minor children will inherit property from you when you die, it is important to name an adult to manage this property. Naming a beneficiary for bank accounts and retirement plans will ensure your beneficiaries receive the money automatically-payable on death. This is an important step when opening accounts. Naming immediate beneficiaries will keep this money out of probate.
Power of Attorney: The power of attorney is actually a legal document naming and giving someone else the authority to make decisions on your behalf. A power of attorney may pay your bills or sell real estate for you. They can assist you in your business transactions. A durable power of attorney is someone who assists you if you become sick or incapacitated in some way. This person can pay your bills or assist you in making decisions you cannot make. The power of attorney ends if you become sick so naming a durable power or attorney makes sense. There are two types of durable powers of attorney. You can name one person to take care of your financial affairs, but you can also name someone to make medical decisions if you can’t speak for yourself.
Healthcare Directive: Completing a healthcare directive protects you if you become unable to make medical decisions on your own. This directive includes a living will and a power of attorney for healthcare. The person you designate as your healthcare agent has the legal authority to make medical decisions regarding your health. Writing down health care wishes is another advantage to making a healthcare directive. You may indicate if you don’t have a desire to receive treatment that prolongs the dying process if you are terminally ill. The doctor and your designated healthcare agent may not change your wishes.
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