Why Should I Create a Will?
A last will and testament allows an individual to decide how their assets will be distributed after death and who will serve as their personal representative/executor. If you die without a will, state law controls the distribution of assets to close family members and who can serve as personal representative. However, state law may not correspond with your intent. A will allows you to:
-Choose who receives your assets after death through bequests of cash or property (e., a home or family heirloom) to particular family members, friends, or charities.
-Plan for estate tax, inheritance tax, and probate expenses.
-Appoint a custodial guardian and/or financial trustee for young children. You may also determine what age(s) or life achievement(s), such as college graduation, a young beneficiary must attain before receiving assets.
-Plan for a spendthrift or indebted beneficiary by limiting access to assets and protecting assets from creditors.
-Create a pet trust to ensure your pets are cared for.
Note- Not everyone needs a will. Call Denise to discuss what your assets are, how they will pass upon death, and whether you need a will to accomplish your intent.
Avoiding Probate Through Revocable Trust Planning
Any assets owned individually in your name which do not have a beneficiary designation must pass through probate, a court process supervised by the local Register of Wills, after your death. This is true even if you have a will. The regular probate process takes a minimum of six months, can be costly, and requires filing numerous documents with the Register (including a petition to open the estate, an inventory listing estate assets, and an accounting tracking all income, expenses, and distributions, etc.).
A revocable trust agreement permits all assets held within the trust to avoid probate. A revocable trust is established during an individual’s lifetime, typically with that individual acting as both the grantor (who funds the trust) and trustee (who manages trust assets). Functionally, the grantor maintains the same control and use of the assets during their lifetime, and probate is avoided. The trust agreement appoints a successor trustee, who will manage and distribute assets after death according to the trust terms. A revocable trust can be amended at any time.
Whether a trust is right for you is a personal decision based upon your circumstances. Trust planning is typically more expensive, and retitling assets into trust is more labor-intensive than just establishing a will. Moreover, the benefit of having a trust inures more to your heirs/beneficiaries than to you, as they will be the ones avoiding probate. Revocable trusts tend to be most practical for older individuals, whose assets are stable, and individuals with assets in multiple states.
Two Documents Everyone Needs: A Power of Attorney and Medical Directive
Powers of attorney and medical directives plan for scenarios we hope do not happen, including incapacitation and serious illness. Though powers of attorney and medical directives are often prepared in conjunction with a will, unlike a will, they are used only during your lifetime.
A power of attorney allows you to select a person (i.e., a close family member or trusted friend, your “agent”) to assist you with financial and legal matters. Situations in which powers of attorney are used include: 1. disability (if you become unable manage your affairs); 2. age (elderly individuals may want assistance with paying bills, filing tax returns, etc.); and 3. unavailability (if you are traveling, your agent may sign important documents on your behalf). If you do not have a power of attorney and become incapacitated, a family member must petition the court to appoint a guardian to manage your affairs, a costly, time-consuming, and public process.
Similar to a power of attorney, a medical directive allows you to select a person to make medical decisions on your behalf if you become incapacitated. Your medical directive is also used to specify your treatment preferences in the event of a terminal condition or vegetative state.
Establishing a power of attorney and medical directive allows you to make very important, personal decisions in advance, preventing family members from experiencing conflict or having to make difficult decisions for you.