The Law Office of Mahogany Taylor
A Probate, Estates, & Trusts Law Firm
Estate Planning Overview
Do you have a will or an estate plan? Many of you reading this either do not have an estate plan or haven’t updated your will or plan in some time. People often mistakenly think of estate planning a service only for the very wealthy. However, if you’ve got a family, a home and any kind of financial account, you should definitely have an estate plan. When done properly, an estate plan can help individuals resolve everything from designating a guardian for children to passing on a family-owned small business and mitigating any intra-family conflicts.
What is an Estate Plan?
An estate plan is a collection of legal documents that lays out your intentions and expectations for two general situations:
– What happens to your assets after you pass away
– What happens when you can no longer take care of yourself or your estate
What is an Estate?
An estate is everything comprising the net worth of an individual, including real estate, stocks and bonds, businesses, life insurance, retirement account funds and cash. In addition, your estate includes items that may or may not have intrinsic value, but carry significant sentimental importance.
Key Elements of an Estate Plan
Many people believe that having an estate plan simply means drafting a will or a trust. However, there is much more to include in your estate planning to make certain all of your assets are transferred seamlessly to your heirs upon your death. A successful estate plan also includes provisions allowing your family members to access or control your assets should you become unable to do so yourself.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.
Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Power of Attorney
A power of attorney (POA) is a legal document giving one person (the agent or attorney-in-fact) the power to act for another person (the principal). The agent can have broad legal authority or limited authority to make legal decisions about the principal’s property, finances or medical care. The power of attorney is frequently used in the event of a principal’s illness or disability, or when the principal can’t be present to sign necessary legal documents for financial transactions.
A designated beneficiary inherits an asset, such as a life insurance payout or the balance of an individual retirement account, after the death of the asset’s owner. The beneficiary is usually a spouse or other family member but may also be an estate, a trust, or a charity.
An advance directive is a document by which a person makes provision for health care decisions in the event that, in the future, he/she becomes unable to make those decisions.
There are two main types of advance directive — the “Living Will” and the “Durable Power of Attorney for Health Care.” There are also hybrid documents which combine elements of the Living Will with those of the Durable Power of Attorney.
Reasons Why You Need an Estate Plan
If you don’t have an estate plan in place, you are not alone. More than half of American adults pass away without a will or an estate plan. No one wants to think about death or disability, let alone plan for it. There are a wide variety of reasons people give for not having an estate plan in place. People think they aren’t old enough, they don’t have the assets for it, or believe they have plenty of time.
The fact is that estate planning is not just for the wealthy or aging, it is for everyone. Anyone can become disabled at any time. One of the most important steps you can take to protect yourself and your family is to establish an estate plan. If you don’t have a plan in place, there are several compelling reasons to start the process. A well-designed estate plan enables you to:
Protect Your Family
- Choose who will become the guardian of your children
- Determine who will manage your assets
- Plan how your assets will be distributed
Provide for Incapacity
- Determine the type of medical care you wish to receive should you become ill or incapacitated
- Designate who will make medical decisions on your behalf if you are not able
- Choose the person who will manage your assets until you are able to do so
Business Succession Planning
Business owners & partners:
- Plan for their retirement, unexpected incapacitation, or death
- Establish buy-sell agreements
- Identify potential successors
Benefits of planned giving:
- Reduce or avoid estate taxes through reducing the value of your assets
- Heirs receive inheritance free of unnecessary taxes and minimize current tax liability