When you think about estate planning, if you do not know much about it, you may equate it to the execution of a last will. This may seem like a very simple and straightforward thing that you can do at some point in the future.
Indeed, the majority of adults think this way, because most Americans don’t have estate plans in place. Unfortunately, these people are putting their loved ones at risk, and they are also failing to protect some of their own interests.
Obviously, people do not usually pass away when they are relatively young adults, but you never know what the future holds. In some ways, it could be argued that estate planning is more important for younger people than it is for their older counterparts.
How so? If you still have dependent children and you and your partner rely on two incomes to make ends meet, surviving family members could be faced with financial devastation if the unthinkable was to take place.
Without question, estate planning is a must for all responsible adults. There are a few different matters that should be addressed when you are constructing an estate plan, and it all starts with asset transfers. Let’s look at some of the different legal devices that can be utilized.
Vehicles of Asset Transfer
Of course, the last will is the most commonly utilized estate planning document. Many individuals have misconceptions about last wills, and one of them is the idea that assets are transferred quickly and efficiently after death when a will is utilized. In fact, in many cases, nothing could be further from the truth.
If you execute a will, you would be called the testator. In the document, you name a personal representative or executor to handle the estate administration tasks after you are gone. The estate administrator would be required to admit the will to probate, and the probate court would supervise the administration of the estate.
This process does not run its course overnight. Creditors are given time to come forward seeking payment, and the tasks that must be completed by the executor can be time-consuming. On average, the probate process will take somewhere between eight months to a year in most jurisdictions. Especially complicated cases can take longer.
In addition to the time consumption, there are expenses that accumulate during probate, and these expenditures reduce the amount of the inheritances that will eventually be received by the heirs. These would include probate attorney fees, accounting charges, court costs, the executor’s payment, liquidation expenses, appraisal costs, and additional incidentals.
Probate opens a window of opportunity for anyone that may want to challenge the will, and probate records are available to the general public, so there is a loss of privacy. These are a couple of additional pitfalls to take into consideration.
If these drawbacks do not sound very appealing to you, the good news is that there are other options. Revocable living trusts are often utilized by people that want to facilitate more efficient transfers to their loved ones. When a living trust is in place, the trustee that is named in the document can act without the supervision of the probate court.
These are two very commonly utilized asset transfer vehicles, but there are others. The ideal choice or choices will depend upon the circumstances.
Financial matters are definitely at the core of the estate planning process, but there are also end-of-life issues that should be addressed. In some cases, a patient can be kept alive indefinitely through the utilization of artificial life-sustaining measures, even if there is no hope of recovery. If you add a living will to your estate plan, you can state your wishes with regard to the implementation of these measures.
A significant percentage of elders become unable to make sound decisions on their own at some point in time, and Alzheimer’s disease is a leading culprit. To prepare for this possibility, you can include durable powers of attorney in your estate plan. One durable power of attorney can be used to name someone to handle your financial decision-making, and you can also include a durable power of attorney for health care matters.
If you have a living trust, you would be the trustee while you are living. In the trust declaration, you can name a disability trustee to assume the role if you become incapacitated.