How Estate Planning Works
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Estate planning involves preparing and executing a will and/or other legal documents assigning people responsible for managing your assets, while living if you are unable to care for yourself, or on your death, and providing those people with instructions for how your assets are to be handled. A comprehensive plan should:
- Provide clear incapacity planning for you during your lifetime:
- How should your wealth be managed during your lifetime if you become incapacitated?
- Who should be in charge of your medical and personal decisions during incapacity?
- Who should be in charge of your financial matters during incapacity?
- Do you want to be kept on life support indefinitely?
- Provide clear post death instructions:
- Who should take care of any minor children?
- Who should manage your estate and/or trust assets?
- Who should receive your estate and/or trust assets, in what shares, and when?
To accomplish these goals and answer all of the necessary questions, in addition to a will, it is usually recommended that you have a health care power of attorney for medical decisions, a general durable power of attorney for financial decisions, and a living will which states whether or not you want life sustaining procedures stopped if your doctors determine that there is no hope of recovery from a terminal or vegetative condition. Depending on your personal, family, and financial circumstances you may want to consider using a trust as well.
Proper estate planning ensures the distribution and management of your assets occurs according to your wishes. While aging is often the motivating factor for clients to begin the estate planning process, no matter your age, something unforeseen can happen, and if you do not have a will or legal document your state laws will decide how your assets get managed and distributed. Should you become unable to care for yourself prior to appointing a representative to act on your behalf in a health care power of attorney and financial power of attorney you may require court proceedings to have a guardian and conservator appointed for you.
At the time of death, if no estate plan is in place your accumulated wealth will be distributed according to your state laws. Shares may be distributed in ways or to people that you would not have wanted, and the court will appoint an administrator to manage your estate and a guardian to control any minor’s inheritance until they reach the age of majority. Should both parents perish, the court will proceed to assign a legal guardian for any minor children without the input of the parents that could have been provided through proper estate planning.
The court process for administering an estate is called probate, and it can be complicated without an estate plan providing clear instructions on how the estate should be distributed. If you are unsure of how to get your estate planning efforts started, an attorney who focuses on planning can provide a checklist or worksheet to help you begin the process.
Probate governs only those assets titled in your name that do not transfer by other legal means. Probate is still required for assets that are transferring under the terms of a Will. However, probate does not govern assets owned jointly with a survivorship right held by the other owner, assets that contain a beneficiary designation as part of the ownership documents, or assets held in trust. Jointly owned assets with rights of survivorship are transferred to the joint owner at the death of one owner. Typically beneficiaries are assigned to assets such as life insurance, IRAs, 401s, or annuities. Assets with beneficiary designations are transferred to the named beneficiary at death without having to wait for probate. However, if a minor is named as beneficiary the court will assign some form of guardianship until the minor comes of age. If no beneficiary has been named for these types of assets they will be subjected to probate for distribution according to state laws or your estate plan. And finally, assets held in trust will be administered outside of the probate process according to the terms of the trust.
Trusts provide multiple options for managing assets and wealth accumulated during your lifetime.
- Revocable trusts allow the trust details to be changed during your life and can provide thorough incapacity and death planning.
- Irrevocable trusts are permanent and cannot be altered after initial creation (with some limited exceptions).
- Testamentary trusts are created through a will and do not take effect until after you have passed away.
- Living Trusts are created through a separate document and take effect immediately after they are created.
Revocable Living Trusts (trust which are both revocable trusts and living trusts) are a great vehicle for transferring assets or money without court intervention. These trusts have a number of great benefits:
- They can provide excellent incapacity planning for you and your loved ones;
- They can provide tax planning if your estate is subject to an estate tax;
- They can provide for responsible management of assets for young or irresponsible beneficiaries;
- They can avoid the necessity for a guardian to manage a minor’s inheritance;
- They can avoid delays in the transfer of ownership to the beneficiary;
- They can avoid the necessity for annual reports (called accountings) to be filed with the courts;
- They can simplify the administration process for your family and loved ones;
- The list can go on and on…
So, how do you get a legally valid, effective, and comprehensive estate plan in place?
The process is simple and painless. You can start by contacting The Law Office of Richard W. Hartman III, Attorney & Counselor at Law, PLLC today at (703) 255-7005!
There are only a few steps in the initial planning process:
- The Call: When you call, Richard will speak with you, get an initial consultation scheduled, and provide you with some information about how to prepare for your consultation.
- Initial Consultation: During the initial consultation you will discuss the key people involved in your plan (i.e. the people who will act for you, called fiduciaries, and the people you want to benefit from your plan, your beneficiaries), what you want to have happen in case of incapacity or death, and the best ways to accomplish your goals and protect you and your loved ones.
- Recommendations: At the conclusion of your consultation Richard will explain his recommendations for your planning needs, the costs associated therewith, and any alternative planning options you may want to discuss.
- Plan Preparation: Once you agree to have The Law Office of Richard W. Hartman III, Attorney & Counselor at Law, PLLC prepare your estate plan, Richard will get to work on your plan, providing you drafts to review a short time later.
- Plan Review: After you receive the drafts of your planning documents you should review them carefully. If you have any questions or what any changes you can always schedule a telephone or in-office appointment to discuss the documents with Richard.
- Signing Appointment: Finally, you have a signing appointment once all of your questions have been answered and any necessary changes have been made.
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