Often people come to our office seeking a basic estate plan. While there is no such thing as one size fits all in estate planning, there are basic documents that everyone should consider.
Last Will and Testament-
As discussed in the previous post, http://www.perlalaw.com/blog/the-4-major-pitfalls-of-not-having-a-will/ failing to execute a valid will has a number of draw backs. Wills give you the opportunity to set out who will inherit your estate. Without a valid Will, your estate will be distributed according to Ohio law rather than your wishes. A valid Will also gives you the opportunity to appoint someone you trust to administer your estate, called an Executor. Without this appointment, the court will appoint someone of the Court’s choosing instead, called an Administrator. There are a number of advantages of having an Executor rather than an Administrator. See http://www.perlalaw.com/blog/the-4-major-pitfalls-of-not-having-a-will/ for more information. In addition, if you have children under the age of 18, a Will gives you the opportunity to appoint a guardian for your children. If you have children under the age of 18, please see http://www.perlalaw.com/blog/the-basic-estate-plan-that-every-parent-should-have/ for issues to consider before drafting an estate plan.
A Will can be as simple or complicated as you wish. Many people simply want to give everything they own to their spouse, or if their spouse predeceases them, their children. But this does not have to be the case. You can establish a testamentary trust, for instance, where an inheritance will be kept in trust for your children until they turn a specific age. For example, 50% when your son turns age 25 and 50% when your son turns age 30. This is typically done if you have concerns over your child’s ability to handle money responsibly. A Will can also list specific items that you want given to different people. For example, my antique gold watch to my son and my diamond engagement ring to my daughter. The language of a Will can be drafted to suit your particular needs. It is important to know, however, that a Will only governs probate property. For example, a bank account with a POD or a joint account will be distributed based upon the POD designation or to the other joint owner automatically upon death, not according to a Will. See http://www.perlalaw.com/blog/what-is-probate-property-and-why-do-i-need-it-for-my-will-to-operate/ for more information.
Durable Financial Power of Attorney
A Financial Power of Attorney gives an individual of your choice the authority to make financial decisions and perform transactions on your behalf. A Durable Financial Power of Attorney stays in effect in the event of your incapacity. You should consider executing a Durable Financial Power of Attorney if you have difficulty managing your own affairs, due to a health condition or aging or you anticipate having difficulty in the near future. The Power of Attorney can go into effect immediately or it can be a Springing Power of Attorney, which “springs” into effect upon the occurrence of a chosen event. This can be your incapacity as certified by physicians or particular family members or friends, or another triggering event of your choice. Failure to execute a Durable Financial Power of Attorney could necessitate the need for a guardianship. A guardianship is a lengthy proceeding in Probate Court that, if possible, is best avoided.
Health Care Power of Attorney
Much like the Durable Financial Power of Attorney mentioned above, a Health Care Power of Attorney gives a person of your choice the authority to make health care decisions for you. However, unlike the Durable Power of Attorney which can go into effect immediately, the Health Care Power of Attorney only goes into effect if you are unable to make decisions for yourself, because you have become incapacitated or are in surgery, etc. You should consider executing a Health Care Power of Attorney if you have significant health problems, are elderly or anticipate having any kind of a serious medical procedure. A Health Care Power of Attorney can also give you the opportunity to make your wishes known concerning end of life decisions. Failure to execute a Health Care Power of Attorney could necessitate the need for a guardianship. As stated, a guardianship is a lengthy proceeding in Probate Court that, if possible, is best avoided.
A living trust is a revocable trust, meaning that you retain control over the trust and all the trust assets during your lifetime. You can terminate or change the trust at any time, including moving assets in and out of the trust. A living trust has a number of benefits. First and foremost, it can help your heirs by eliminating the expense and time of probate. It also allows you to consolidate and manage your assets in one coherent bundle. Moreover, if you wish to control the distribution of your assets after death, it is an essential tool. For example, you can delay distribution to a child if you are concerned over his ability to manage money responsibly or if he is simply too young to receive a lump sum. You can also leave distributions of trust assets up to the judgment of a trusted person called a Trustee if you are unsure what the needs of your beneficiaries will be in the future, if you are concerned over potential creditors of a beneficiary or a greedy spouse of a beneficiary, for example. The terms of a Trust can be drafted to suit your particular needs.
For more information on Last Will and Testament, Financial Power of Attorney, Health Care Power of Attorney, Living Trust or Estate Planning in general, seek out an Estate Planning Attorney.