Estate planning is one of the most important steps any person can take to make sure that their legacy, belongings, and health care wishes are honored, and that their loved ones are provided for in their absence. Life happens, so no matter your age or financial status, you need an estate plan to ensure you and your loved ones are protected and provided for no matter what! Below you will find some basic estate planning information to provide you with an understanding of the documents that make up a basic estate plan.
A will is a legal document that provides instructions for distributing your assets to your family and other beneficiaries upon your death. An estate planning attorney can customize the provisions of your will to meet your needs and goals by assisting you with designating your beneficiaries and the conditions that must be met prior to your beneficiaries receiving their inheritance. In a Will, a personal representative (also known as an “executor”) is typically designated to pay final expenses and taxes, and then distribute your assets. If you have minor children, you can also use your will to designate a guardian to care for your minor children upon your passing. By designating a guardian in your will, you can help ensure that your children are always loved and cared by someone with your similar morals and values. If you do not have an estate plan in which you name your choice for guardian, it will be up to a court to make the choice for you. You don’t want a judge who doesn’t know you or your children to make such an important decision for you and your children without your input.
To be effective, a will must be signed by the person making the will and signed by two witnesses. A Last Will and Testament will need to be proved to be legitimate through a process called probate after your death. Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion after you pass. During a probate proceeding, the court oversees the payment of liabilities and the distribution of assets. Typically, an attorney is employed by the personal representative to initiate the probate proceeding.
Because a will does not take effect until after you pass, it cannot provide for management of your assets if you become incapacitated. Thus, it is necessary to have other estate planning documents described below, as they become effective if you become incapacitated.
2. Durable power of attorney
A power of attorney is a legal document in which you name another person to act on your behalf. This person is called your agent or attorney-in-fact. You can give your appointed agent broad or limited management powers. It is important that you fully trust whomever you name as your attorney-in-fact. You should choose this person carefully because he or she will generally be able to sell, invest and spend your assets.
An attorney-in-fact’s authority to act on your behalf typically terminates upon your disability or death in a traditional power of attorney. However, with a durable power of attorney, your attorney-in-facts authority to act can begin and/or continue upon your incapacitation depending upon what is specified in your durable power of attorney. Your attorney-in-fact’s continued authority to act on your behalf when are incapacitated provides a financial management safety net. A durable power of attorney terminates upon your death. Failure to have a financial power of attorney can result in the need of a costly probate proceeding called conservatorship to designate a conservator (similar to a guardian) for your finances and property.
3. Health care power of attorney
A durable power of attorney for health care is a legal document that authorizes someone to make medical decisions for you in the event you are incapacitated and unable to do so yourself. This document and a living will can be invaluable for avoiding family conflicts and possible court intervention if you should become unable to make your own health care decisions. Failure to have a healthcare power of attorney can result in the need of a costly probate proceeding called conservatorship to designate a conservator (similar to a guardian) for you.
4. Living will
A living will is a legal document that expresses your wishes regarding the use of life-sustaining measures in the event of a terminal illness. It expresses what you want but does not give anyone the authority to speak for you. In Tennessee, this document is often combined with a health care power of attorney. Once you execute this document, you should give a copy to your medical providers.
5. Revocable living trust.
There are many different types of trusts with different purposes, each accomplishing a variety of goals. A revocable living trust is one type of trust often used in an estate plan. By transferring assets into a revocable trust, you can provide for continued management of your financial affairs during your lifetime (when you’re incapacitated, for example), at your death and even for generations to come. Your revocable living trust lets trust assets avoid probate and reduces the chance that personal information will become part of public records.
There are three main roles in a revocable trust. They are the grantor (also referred to as settlor), the beneficiary(ies), and a trustee. The grantor is typically the person who creates the trust. Thus, you will be the grantor for your revocable living trust. Once your revocable living trust is created, you will need to transfer your assets to the trust, this is often called retitling your assets. The beneficiary(ies) are the people or organizations who will receive the income and/or principal according to your trust’s terms. The beneficiary(ies) are often you, your loved ones, and organizations which you may wish to provide financial support. Typically, you are designated as the beneficiary of your revocable living trust while you are living, and your loved ones become beneficiaries of the trust upon your passing. A trustee is the person who manages the trust assets. The trustee can be you, a family member, or a corporate trustee. It is important that the trustee you designate is someone honest and trustworthy.
You can change a revocable trust’s provisions at any time during your life. If you act as your own trustee, you continue to manage your investments and financial affairs. In this case, your account might be titled “John Doe, Trustee of the John Doe Revocable Living Trust Dated 05-12-2012.” Because this legal entity exists beyond your death, the property that is titled in the trust does not need to go through the costly and time consuming probate process.
If you don’t have minor children or own any assets, then a will based estate plan may suit your estate planning needs. However, if you have minor children or own any assets, then a trust based estate plan will likely better suit your estate planning needs.
If you or someone you know are seeking answers to questions, concerns, or inquiries about estate planning, call (901) 315-0559 and schedule an Estate Planning Session with Walls Law Firm today, and we will be glad to help you gain clarity!
Our law office is located in Memphis, Tennessee, but we also serve Bartlett, Germantown, Cordova, Collierville, Millington, Shelby Forest, Shelby Farms, Lakeland, Fisherville, Arlington, Eads, and Rosemark, Tennessee.
This information is for advertising purposes only. It does not constitute legal advice, create an attorney-client relationship, or guarantee particular results.