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Thu, May 26

Community View | Don’t let your assets be eaten up; make an estate plan

It is unfortunate many seniors do not put their wants and desires in writing in regard to their assets prior to them passing away. And because of this, many of their family have to trek through the quagmire of the legal system in order to finalize their loved one’s estate.

Most everyone has heard those horror stories where a loved one never implements any legal documents prior to their death and now the relatives have to deal with the wrath of the legal system and probate court. In many cases, the assets are eaten away by court and legal costs.

There are ways for everyone to ensure their desires and decisions are carried out after their death, and it is two words – estate planning.

Estate planning is essential to protect assets and it can be easily done by purchasing a computer program for about $55 as a “do-it- yourself” project, or there are numerous legal professionals, both attorneys and paralegals, available to help with preparing living trusts, wills, and living wills – better known as an advance health directive, and pour-over wills. One thing that must be noted is if an individual utilizes a paralegal service, the paralegals are not allowed to provide legal advice to the client.

In a nutshell, there are numerous estate planning documents including a Last Will and Testament, burial and/or memorial instructions, a Revocable Living Trust, an Irrevocable Trust, Living Wills – better known as an Advance Healthcare Directive, Financial Power of Attorney and Pour-Over Wills.

Seniors must ensure they include information in their estate planning about their valuables such as jewelry, heirlooms, firearms and artwork or that favorite fishing pole, bank and brokerage statements, safe deposit boxes and their location, stock and bond certificates, life insurance policies, corporate records, car and boat titles, deeds and the decedent’s prior three years of income tax returns.

A Last Will and Testament is a legal document by which a person, the testator, expresses his or her wishes as to how his or her property is to be distributed at death, and names one or more persons, the executor, to manage the estate until its final distribution.

When it comes to understanding trusts, knowing the difference between revocable and irrevocable trusts is crucial. If someone asks for a revocable trust and gets an irrevocable one, or vice versa, the legal and tax consequences will be significant.

Living trusts are of the most popular estate planning tool that is most often used to avoid a court-supervised settlement of an estate, or probate. In most cases, a living trust is a viable and attractive solution to many because it is “user-friendly.” Unlike other trusts, the individual creating the trust, or grantor, can act as the trustee during his lifetime. The grantor can also make changes to the trust, giving them ultimate control over trust management. Under many circumstances, a living trust can be invaluable in securing their legacy.

A Revocable Living Trust is simply a type of trust that can be changed at any time. In other words, if a person has second thoughts about a provision in the trust or change their mind about who should be a beneficiary or trustee of the trust, then they can modify the terms of the trust through what is called a Trust Amendment. Or, if they decide that they don’t like anything about the trust at all, then they can either revoke the entire agreement or change the entire contents through a Trust Amendment and Restatement. Revocable Living Trusts contain a detailed set of instructions covering three important periods of your life: what happens while you are alive and well; what happens if you become mentally incapacitated; and what happens after your death. In addition, assets held in the name of your Revocable Living Trust at the time of your death will avoid probate.

An Irrevocable Trust is a trust that can’t be modified or terminated without the permission of the beneficiary. Typically, any person or entity can be named as a beneficiary of a trust, will or life insurance policy and the one distributing the funds (the benefactor) can put various stipulations on the disbursement of funds (e.g.: the beneficiary must have attained a certain age or be married). There can also be tax consequences to the beneficiary. For example, while the principal of most life insurance policies is not taxed, the accrued interest might be. The benefit of this type of trust for estate assets is that it removes all incidents of ownership, effectively removing the trust’s assets from the grantor’s taxable estate. The grantor is also relieved of the tax liability on the income generated by the assets. While the tax rules will vary between jurisdictions, in most cases, the grantor can’t receive these benefits if he or she is the trustee of the trust.

Not everybody has heard of a Pour-Over Will, but it is essential in estate planning. If someone has a trust-based estate plan, then their Last Will and Testament will only be used as a safety net to catch assets that they did not transfer into your trust prior to their death and puts those assets in the trust after their death. It contains minimal instructions since the trust is the main document governing their estate plan.

An Advance Healthcare (Medical) Directive, also known as a Living Will, personal directive, advance directive, or advance decision, is a legal document in which a person specifies what actions should be taken for their health if they are no longer able to make decisions for themselves because of illness or incapacity.

A Living Will is one form of an advance directive, leaving instructions for treatment. Another form is a specific type of power of attorney or health care proxy, in which the person authorizes someone (an agent) to make decisions on their behalf when they are incapacitated. People are often encouraged to complete both documents to provide comprehensive guidance regarding their care. An example of combination documents includes the Five Wishes in the United States.

It doesn’t have to take a “chunk” of your hard-earned savings and/or assets to memorize your wants and desires.

If the aforementioned information about estate planning is confusing, take the time to speak with an attorney to receive a consultation about the things needed to safeguard assets.

Some attorneys might charge a fixed fee or an hourly fee for the first meeting when a person wants to decide whether the lawyer can help them with their trust, will, etc.

If someone decides to hire an attorney to handle their estate planning, they must ensure they get the fees and costs in writing. The average cost of a Last Will and Testament is about $450; a Living Trust runs between $750 and $1,500 depending upon the complexity of the trust; an Advanced Healthcare Directive normally runs about $150; and a Pour-Over is normally included in the cost of a trust.

No matter what someone decides, to compete the legal documents on their own as a do-it-yourself project or have and attorney or paralegal to complete them, they need to make sure their assets are enjoyed by their loved ones – not drained by court and legal costs.

Keep more money in the family by avoiding potentially lengthy and expensive court proceedings; ensure estate planning documents are in place.

(Butch Meriwether is a resident of Golden Valley.)

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