Couzens, Lansky, Fealk, Ellis, Roeder, & Lazar, P.C.

Estate Planning Basics

The Purpose Of Estate Planning

The purpose of this article is to provide you with information about estate planning and various documents used, including: Wills, Trusts, Powers of Attorney, Patient Advocate Designations, and Living Wills.

Estate Planning involves arranging our affairs to provide for the orderly management and disposition of our property at the time of disability or death.

The primary concerns of an estate plan should include:

Being sure the right people receive our property, at the right time, with the proper management.
Minimizing publicity, expense and inconvenience, including avoiding probate when appropriate.
Minimizing publicity, expense and inconvenience, including avoiding probate when appropriate.
Minimizing taxes payable on account of death.
Making any desired charitable or special gifts.
Maximizing opportunities to protect assets.

Each of the following documents helps to address one or more of these concerns.

Last Will And Testament

A Last Will and Testament or "Will" is the most basic estate planning document. A Will is a legal document stating how your property is to be disposed of at your death and should be dated, witnessed and signed by you. A Will is subject to probate.

Your Will is the proper place to:

Name the personal representative who will oversee the disposition of your probate estate.
Name the guardians for your children, to serve if neither natural parent can care for them.
Make gifts to individuals or charities.
Specify final takers of property where heirs you otherwise named predecease you.
Specify the order of death between you and your spouse if a common accident occurs.
Specify any special instructions regarding burial, cremation or organ donation.

A Will may be amended as long as the "testator" remains competent. A "Codicil" is an amendment to a Will.

Even with a Living Trust, a Will should be signed. This will pour over any probate property to the Living Trust.

Living Trusts And Joint Ownership Avoid Probate Court

The Probate Court will oversee who gets all property passing at death, except property passing:

By a valid contract without probate (e.g. life insurance, pensions, or Living Trust property).
Automatically by law without probate (e.g. joint property).

If you die without a valid Will, your probate property will be distributed according to the "intestacy" laws. The intestacy laws may not coincide with the decedent's wishes. Tax saving opportunities may also be lost. Intestacy laws do not give any gifts to charities. These problems can be avoided with a valid Will or a Living Trust.

Living Trusts Are Preferred

A Trust is an arrangement of property where the assets are transferred to a trustee, to be managed for the benefit of specified beneficiaries.

The most common estate planning Trust is a Living or Revocable Trust. The same person may set up the Trust (the "Settlor"), manage the property as trustee and be the initial beneficiary. A Living Trust can be amended at any time by the Settlor while competent. Any assets held in the name of a Living Trust are not subject to Probate when the Settlor dies or becomes disabled.

Living Trusts Provide Many Benefits

A Living Trust can provide all the advantages of a Will, plus:

Property management now or, if preferred, only during disability or at death.
Probate avoidance.
Retention of property in trust for a surviving spouse in a manner that avoids federal estate taxes on the property at the death of the survivor (a "residuary" or "credit shelter" trust).
Retention of property in trust after the Settlor's death, to be distributed to the named beneficiaries only when and as the Settlor has specified.

A Testamentary Trust is included as part of the creator's Will, becomes effective only at death, and is subject to probate. Such trusts are no longer preferred.

There are several specialized types of trusts in addition to those noted. An Irrevocable Life Insurance Trust owns life insurance for the creator's beneficiaries. The insurance is intended to be excluded from the taxable estate of the creator. Such trusts may not be amended after they are created.

Charitable Remainder Trusts and Charitable Lead Trusts are irrevocable trusts established for the benefit of named individuals and one or more charities. Income and estate tax savings can result.

Durable Power Of Attorney

A Power of Attorney is a document authorizing another person to act as your agent, signing your name for the purpose specified. A Power of Attorney is not valid during periods of incapacity, unless it is "durable" under local statutes. Without a Durable Power of Attorney, a Probate Court order appointing a guardian or conservator would be necessary to act on behalf of an incapacitated individual.

Patient Advocate Designation

A Patient Advocate Designation or PAD is a document designating an individual to make your medical decisions while you are unable to do so. The PAD should include specific instructions regarding life support procedures.

Living Will

A Living Will is a statement that your life should not be artificially prolonged.

These and many other documents may be used in the estate planning process. A unique plan must be customized for each person.

What Should You Do Next?

Contact one of our attorneys for additional information about planning your estate.