The very mention of estate planning can be intimidating, with so many unfamiliar legal terms and the seemingly complex procedures. On top of that, few of us like to ponder the notion that we will not be around forever. As a result, it is common for many people to procrastinate when it comes to drafting a will and other vital estate planning documents.
But it's unwise to put off these important decisions. A carefully drafted estate plan is the key to your peace of mind, knowing that your wishes will be carried out and that your family will be cared for in the event of your incapacitation or death. It is important to familiarize yourself with these basic estate planning documents.
1. Last Will and Testament
Most people are familiar with the term "Last Will and Testament". A will is the most basic estate planning document. It is an essential means of determining where all of your assets will end up in the event of your death. Contrary to a common misconception, the need for a will is not limited to the wealthy. Should you die without a will, you will die intestate and your assets will be distributed by the state in accordance with state law—which may not necessarily reflect your own wishes.
You have worked hard over the years to acquire everything that you have. A will allows you to maintain control over where your estate goes, and enables you to protect the interests of your family. The document names an individual that you appoint to serve as the executor of your estate. This executor will oversee the distribution of your assets after your death. Through your will, you may even pass on certain specified possessions to a friend or family member. Those persons with minor children should also make it a priority to specify a guardian, who would be entrusted with the care of their young ones should both parents pass away.
2. Power of Attorney
It is essential that you designate a trusted person to make decisions on your behalf in the event that you are unable to do so. A power of attorney enables you to appoint a reliable individual, whether a family member, a trusted friend or your attorney, who will be authorized to manage your finances and make key decisions about legal matters should you be unable to handle these affairs yourself. You can choose to grant a very broad general delegation of authority, or you can limit the power of attorney to certain specified acts.
There are different types of powers of attorney that serve various purposes and situations. A limited power of attorney provides your agent with limited powers and is intended to fulfill a specific duty, while a general power of attorney is meant to convey broader powers and authorities to your agent. Upon your death, the power of attorney ceases to have any authority and it cannot be acted on.
3. Living Trust
Those who have significant assets should consider a living trust, which are commonly drafted as "revocable living trusts". A living trust is a mechanism which puts your assets into a different entity, under your control, for your use during your lifetime.
The general purpose of a living trust is to avoid probate. Probate is the court supervised process of distributing a deceased person's estate. While many states offer a simplified procedure for distributing the assets of estates below a certain specified value, probate can become a costly and time-consuming process for larger estates. Unlike a will, a living trust can generally avoid the probate process, which results in faster distribution of the assets to your beneficiaries.
A "revocable living trust" allows you to remain in control of the trust assets as trustee, and it can be dissolved at any time. You will also designate a "successor trustee" your assets to your beneficiaries upon your death. It is important to note that the assets or property which are to be administered by the trust must have been transferred to the trust. As a note, if assets are not transferred to the trust, they may still pass to designated beneficiaries if they are named on those assets.
Those who opt for a living trust would also want to include what is known as a "pour over will." This document addresses the distribution of any assets that you may have acquired after the trust was created and which you did not transfer into the trust before your passing.
Because individual situations and state laws vary, your choice of a living trust is a complex matter that requires the sound advice of an estate planning professional.
Do I need an attorney?
The answer to this common question is both yes and no. You can find very basic forms that are readily available on the internet, and these might minimally meet the requirements of your state. But the law in this area is often complex, and requirements for wills and other estate documents vary depending upon your jurisdiction. State laws often specify very particular statutory standards for what will constitute a valid document. By obtaining the advice of an experienced estate planning attorney, who will be familiar with local requirements, you can ensure compliance with the law and, most importantly, that your wishes will be carried out.
Don't leave your assets unprotected. It is important that you take some time today to learn the many benefits of estate planning.
When you are looking for experienced, ethical and efficient legal services, contact the Morrar Law Office.
Tawfiq Morrar is an attorney in Elk Grove, California and handles all aspects of estate planning, in addition to business and transactional law. Mr. Morrar can be reached at (916) 968-7973 or tjmorrar@morrarlaw.com
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