Everyone should have an estate plan that controls what happens to your possessions and minor children when you pass away. Estate tax related problems should also be considered. If you do not have an estate plan, it can cause a difficult burden for your family and heirs. Also, without estate planning, you will not be able to control what happens to your assets when you die.
Depending on your specific goals and the complexity of your estate the following are some of the documents customarily used in an estate plan.
- Wills and TrustsWills
A Will is a legal document that upon your death, states who is to receive personal assets, who will be your personal representative for the distribution of assets, and who will be the guardian and conservator for you minor children if both parents are no longer living. Unlike trusts, a will only becomes effective upon death and not during the lifetime of the person making the will. To be considered a valid will, the signing and certain provisions of the will must meet certain requirements.
Even though the law allows you to prepare your own will, it is advisable to consult with an attorney. If the will is determined to be invalid, your wishes in your will may not be followed.
Trusts are an increasingly common document used in estate planning. Specific trusts vary but the purpose is to state how your assets are to be distributed. The trust creates a fiduciary duty between you and the trustee where the trustee holds title and manages the trust assets. The trust assets are then distributed upon your death according to your instructions in the trust.
A trustee is someone or a company to manage your Trust. The trustee can be you during your lifetime. Whomever you choose, the trustee should be someone you have confidence in to follow the terms of your trust. If needed, an attorney can assist the trustee in carrying out the trustee’s duties.
Usually, you do not want to leave your assets to your children if they are minors. You may want to delay final distribution of all of the trust assets to your children until they have reached a certain age after 18, such as age 25. Your trustee will manage and distribute the trust assets for your children according to your trust.
Because the trust is private, your assets can be distributed to your heirs without the involvement of the Probate Court. Sometimes a probate can delay the distribution of assets and can be expensive. Determining the best trust for your family should be discussed with an attorney because the decision can be complex depending on your specific goals.
Usually, estate planning using a trust will also use a “pour-over will.” The will is used if there is an asset that was not placed in the trust and requires probate. The assets in the will usually will be distributed to the trust in the probate and then distributed according to the trust. This will can also contain provisions for minor children.
- Powers of Attorney – Financial and Health Care
Powers of Attorney for health and other matters are an important part of your estate planning.
DURABLE POWER OF ATTORNEY FOR HEALTH CARE
This directive is effective during your lifetime. This document gives someone you trust the authority to make medical decisions when you are unable. You can name one or more persons to act for you.
DURABLE POWER OF ATTORNEY
This document allows someone else to perform almost any act for you, such as signing deeds, opening and managing financial accounts. This power of attorney terminates when you pass away or revoke the power of attorney.
SPECIAL OR LIMITED POWER OF ATTORNEY
This document grants limited authority to accomplish a certain act, such as selling your home.
SPRINGING POWER OF ATTORNEYThis is a power of attorney that is effective only when a certain event occurs such as if you become incapacitated.
- Living WillA living will, or healthcare directive, allows you to state whether you want life support measures if you are in a permanent unconscious condition or terminal condition. Having this document make it easier for you family and health care provider if you are in this condition.
Other considerations for Estate Planning:
- Probate and Trust Administration
The probate process can take some time and expertise to complete. Usually the personal representative will consult with an attorney to assist them. An attorney can also help determine if a probate is necessary.
Not all estates require a probate. Certain estates with a value below a certain amount may not need to be probated. Property may pass directly to beneficiaries of specific estate assets. Assets in a trust are also not subject to the estate process.
Probate is a legal procedure for settling the estate of someone who dies owning property. The Will is filed with the Court. The personal representative named in your Will takes control of your assets. Some of the duties of the personal representative are:
- Review the Will
- Give Notice to Persons named in the Will and Heirs
- Prepare an Inventory and Valuation of the assets
- Publish Notice to Creditors in a Newspaper
- Pay Valid Claims and Debts of the Decedent
- Prepare Final Tax Returns and Pay any Taxes
- Prepare a Final Accounting
- Distribute Assets According to the Will
- Close the Estate No Sooner than 6 Months after the Probate was Opened
Like a personal representative of a will, a trustee has certain duties upon your death. Some may be:
- Review Trust
- Give Notice to Named Beneficiary in the Trust and Others, if required
- Prepare Inventory and Valuation of the Trust Assets
- Pay Debts and Claims
- Prepare Final Tax Returns and Pay any Tax
- Prepare Final Accounting
- Distribute Trust Assets
When a trust is created assets are placed in the trust and are managed by the trustee during your lifetime. You can be the trustee of your trust during your lifetime. Upon your passing, if you were the trustee, then your successor trustee administers and distributes the trust assets to the beneficiaries of the trust as directed by the trust.
Like the probate, the administration of the Trust can involve some complex issues. The Trustee can work with an attorney to assist with the administration.
- Trust vs. Will, which is better?Wills and Trusts are both important estate-planning methods, but are different. A Trust is established when you sign the Trust. A Will is not activated until your death. Upon your death, only a Will goes through the probate process. Some other differences are the following:
- Ancillary ProbateAn ancillary probate is a probate proceeding in another state that is required in addition to the primary probate. The ancillary probate is necessary because the person who died owns property that requires probate in another state. Montana law provides an ancillary process that is much easier and quicker than a typical probate.
- Medicaid PlanningAttorneys can assist families with qualifying for Medicaid. Medicaid planning can involve preserving a family’s assets to pass to the next generation. Long-term care can be very expensive.
- How to Avoid ProbateAvoiding probate can keep your family estate private and quicken the transfer of your assets to your family. There are several methods to avoid probate, such as trusts, joint ownership or property, and transfer on death beneficiary documents. There is also a simplified procedure for small estates. An attorney can help you with avoiding probate and advise you on any tax implications.