An estate plan is crucial to managing your asset-base upon death the way you desire… so the courts do not do it for you.
What is an Estate Plan?
An estate plan is a series of documents and arrangements that specify how your assets would be handled and distributed should you pass away. A proper estate plan is crucial to ensure your final wishes are followed. An estate plan includes three key documents: a will, a medical power of attorney, and a financial power of attorney.
A will, called a last will and testament, lays out memorial requests, designates assets to beneficiaries, and appoints a fiduciary (personal representative). A will also lay out how assets will be handled if you pass away. For example, if you have children under age 18, a will appoints a guardian over them or assets left to them. Without this document, the court will appoint a guardian. A will also handles the remainder or residuary of the estate. Drafting a will is an essential part of a proper estate plan.
Unlike a will, which only goes into effect after an individual has passed, a power of attorney goes into effect when an individual is still alive but unable to handle their affairs (incapacitated). Powers of attorney (POA) is a document that allows another individual to stand in your shoes and make decisions for you that you would otherwise make yourself. This could look like a variety of things, from handling mortgage payments to making medical decisions.
Establishing this document will ensure your life decisions are in the hands of someone you trust. A medical power of attorney grants an appointed individual the ability to make medical decisions on your behalf. A financial power of attorney is drafted strictly for financial decisions.
The Importance of an Estate Plan
An estate plan plays many different roles. It designates a personal representative, previously called an executor (male) or executrix (female), who carries out the specific terms of the will. The personal representative appointed is bound to follow the terms of the will and cannot go outside of said terms.
An estate plan also lays out specific bequests (gifts given to appointed individuals). The individuals who receive these gifts are called beneficiaries. It outlines instructions for the funeral, any memorial or ceremony requests, religious regulations, and other specified requests.
After all assets are distributed, there is still the question of what to do with the remainder of the property. The residuary clause is a section in the will designed to cover everything not specifically given as gifts. It disposes of the rest of the estate once the personal representative distributes all the bequests. The personal representative or executor will take everything that is not a special request and distribute them to the beneficiaries listed. For example, choosing to leave your son a family ring would be a specific gift (a bequest), while choosing to divide your property equally among your two children would be known as the residuary.
A proper estate plan also helps you avoid probate. Probate is the court settlement of an estate after an individual has passed. Many try to avoid probate as it is a long and tedious process. Intestate probate occurs when an individual dies without a will. Testate probate takes place when an individual dies with a will but needs letters testamentary (a court issued document) to transfer certain assets or property. Both types aren’t preferable, but intestate probate is the primary one to avoid. Intestate probate can result in court procedures that last between nine months and three years. Additionally, it is five to ten times more expensive than an estate plan. Thankfully, you can avoid intestate probate with a proper estate plan.
It’s crucial to ensure your assets and property are handled exactly how you want after you pass away. Creating an estate plan also saves your family time and money from intestate probate and difficult decisions.
How We Can Help
Baxter Legal Services can aid you in creating a plan for an effortless transition of assets to your designated beneficiaries. We will help you decide who will inherit your assets, who will handle your financial affairs if you are incapacitated, and who you want to make medical decisions for you if you are unable to make them for yourself. Creating a sound estate plan is a demonstration of a responsible and thoughtful legacy that will be appreciated by your loved ones. Contact us today to get started on your estate plan.