Everyone Can Benefit From Estate Planning
Some people think that an estate is something only wealthy people have so only they should be concerned with estate planning. That misconception has caused countless well meaning people to ignore estate planning! Don’t be fooled: while not everyone may have an estate in the sense of a gorgeous mansion surrounded by lush acres, everyone has estate in the legal sense of the word. Whether your net worth is $10,000 or $10,000,000, whatever assets you leave behind after your death make up your estate.
When a person dies, their assets must be distributed to others. This could happen in a number of ways:
- A person could pass away leaving no will or trust. Unless they meet the small estate exemption from probate (less than $50,000 for personal property and less than $75,000 for real property), a probate action is required to transfer the deceased’s assets to others. A probate like this can be very expensive and time consuming since potential heirs may fight over who gets what. This could mean court hearings, discovery, depositions, motions, a trial and lots of attorneys’ fees.
- A person could pass away leaving a valid Will. Unless their estate meets the small estate exemption, a probate is necessary. However, this type of probate can be accomplished much quicker and for far less money than if the deceased had not left a Will. Because the deceased spelled out his or her wishes in a Will, this type of probate is more like an administrative process than full blown litigation.
- A person could pass away leaving a valid Trust. A Trust is unique in that no probate is required to transfer the assets in the Trust. During the person’s lifetime they transferred assets out of their own name into the Trust’s name. Since the Trust owns the assets and not the person, this means that when the person dies there is no need for a probate to transfer those assets.
As you can see, everyone can benefit from estate planning, regardless of their net worth.
An Estate Plan Helps Your Family When They Need It
Not only does having an estate plan benefit your family from a probate perspective, it can save your family from having to make complicated and heart wrenching decisions while you are alive. Remember the Terri Schiavo case? Terri, a perfectly healthy 26 year old, collapsed in her home suffering major cardiac arrest. Terri was later diagnosed as being in a persistent vegetative state. For the next 7 years, Terri’s husband and parents fought in very public court battles about whether or not Terri would want life prolonging procedures in her condition. During these fights, there was no input or guidance from the one person who should have the most say – Terri. Why? Terri had no estate plan informing her loved ones of her wishes.
An estate plan can help ensure that your wishes are followed, even if you are unable to do so yourself. It will protect your family from having to make very difficult decisions, like Terri’s family. It will specify how you want your assets divided, which should prevent family fighting and minimize time and money spent in court. It will ensure that your financial affairs are managed according to your wishes and provide for your family, even when you can’t.
Estate Plan Basics
Every estate plan should contain, at a minimum, the following documents:
- A Last Will and Testament: this document details how you want your assets distributed after death. It also names who will be the personal representative of your estate, responsible for managing your estate and distributing your property. This document also names a guardian for minor children. By creating a Will and naming a guardian for your minor children, you can select the person who will give them the best possible care. Without a Will, a court will make all of these decisions for you.
- Healthcare Power of Attorney: this document names one or more people who you want to make your healthcare decisions should you not be able to make them yourself. If you become incapacitated and do not have a Healthcare Power of Attorney, your family will have to go to court and get a court order appointing someone to make these decisions for you. Again, you will have no say in who the court appoints.
- Financial Power of Attorney: this document names one or more people who you want to manage your finances if you become disabled or incapacitated. Your agent under your Financial Power of Attorney will be able to manage and access your assets and pay your mortgage, hospital bills and any other expenses that may arise. If you need such an agent but do not have a Financial Power of Attorney, the court will pick one for you. It may or may not be someone that you want accessing and managing your money.
- Living Will: this document states whether or not you want life prolonging procedures if you are in a persistent vegetative state or irreversible coma. This is the “pull the plug” or “do not resuscitate” document you’ve probably heard about. Without this document, your family could end up like Terri’s, fighting over what they think you would have wanted. Without a Living Will, you will have no input on one of the most important decisions of your life.
We also like to include a Personal Property Memorandum with these documents. A Personal Property Memorandum is like an extension of your Will and states how your want your tangible personal property distributed (things like jewelry, china, antiques, furniture, etc.). Although you can address this in your Last Will and Testament, people often change their minds. If you include this in your Will and change your mind, you will have to change your Will and have it re-signed, witnessed and notarized. An easier solution is to use a Personal Property Memorandum. If you change your mind, rip up the Personal Property Memorandum and make a new one. You won’t have to change your Will or get anything witnessed or notarized.
Plan Today, Don’t Wait Until Tomorrow
An estate plan addresses critical, life altering decisions. Having an estate plan can mean the difference between family harmony or nasty family fighting. It can mean knowing that your children will get the best possible care instead of hoping the court does what’s right for them. It means protecting and providing for your family, not leaving them in chaos.
Remember, by the time you need an estate plan, it’s already too late.
KEYTLaw can give you peace of mind. With a variety of packages to fit any budget, you can rest assured that your family will be protected with a KEYTLaw estate plan. See “Arizona Estate Plan Contents & Costs.”