The Ultimate Guide to Estate Planning

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The Ultimate Guide to Estate Planning

Estate planning is the subfield of family law that deals with managing and transferring property in anticipation of death. Planners, also known as testators, can use a variety of tools to plan for their demise, including wills, trusts, and durable power of attorney. If a person dies without a will, his or her property will be distributed according to the state’s intestacy rules.

What Is Intestacy?

If a person dies without a will, his or her property will be distributed according to the state’s intestacy. The state of intestacy is the state where the person passed away. Each state has its own laws on how the estate will be distributed when there is no will.

Usually, the spouse has the first rights. In a community property state, the spouse may claim her half of the marital property. The other spouse’s half of the marital property will be distributed according to the will or laws of the state. In a common law state, property ownership is distributed by title (legal ownership of the property). However, many common law states will give the spouse a portion of the deceased spouse’s property.

After the spouse, the descendants, or children and grandchildren, are usually next. Many states follow each child's line down until there is a survivor. However, some states will divide property by generation: first children, then grandchildren, great-grandchildren, etc.

If the decedent left no children, the next to take property are usually the decedent's parents. If the decedent’s parents and grandparents are no longer alive, the next to take property are usually the decedent’s aunts, uncles and cousins. In the event that the decedent does not have any close family, many laws determine that the person who will inherit is the next of kin.

How to Create a Will

A will is a written or oral communication by a person (the testator) stating how they want their property disposed of at death. To create a will, the will must meet the following requirements:

Although a well-written will is often the center piece of an estate plan, wills do have limitations. For instance, wills cannot give away property you do not own nor can they transfer property to your pet(s).

If you wish to modify your will, you need to be specific about which parts of the will you are modifying. If you intend to modify your entire will, your previous will shall be considered revoked, or canceled. Be careful though; in some cases, it may be unclear if a portion of a will is revoked or merely modified. For example, suppose a will gives $5,000 to Susan. Right below that paragraph though is another paragraph giving $6,000 to Susan. Susan could argue that she is owed $11,000 ($6,000+$5,000). Other beneficiaries of the will could argue that Susan is only owed $6,000 because the second paragraph revoked the first gift of $5,000. As you can see, it is very important that the testator is clear on what kind of changes are being made to the will.

A will can only be challenged by an "interested party." There are only two groups: persons who inherit under the will and persons who would inherit if the will was null and void. Typically, a will is contested for the following reasons:

How to Create a Trust

Trusts are legal arrangements where one person (the trustee) holds assets at the request of another person (the settlor) on behalf of third persons (beneficiaries). In order to create a trust, the settlor must:

Although trusts are typically created during a settlor's lifetime, trusts are intended to outlast the settlor. Trusts are most useful if the beneficiaries are not prepared to receive or manage the property they are given. For instance, the beneficiaries might be young children, disabled persons, or even pets, although there is no requirement that beneficiaries are unable to act for themselves. Trusts are also favored because they exist outside the probate system, thereby avoiding costly court battles.

There are many different kinds of trusts. A living trust allows the settlor to maintain, modify, and live off the trust while the settlor is still alive. Spendthrift trusts shield assets from creditors while also ensuring that beneficiaries won’t spend all the trust funds at once.

Regardless of the type of trust, all trustees owe their principals a heightened level of duty. In other words, trustees cannot abuse their positions for their own gain and they must manage the property entrusted to them with care.

Payable on Death Accounts

Payable on Death accounts, or POD accounts, are bank accounts that will transfer the account funds upon the death of the account owner. PODs are often useful estate planning tools because they can quickly move money to intended beneficiaries without having to go through a court hearing. The principal can access the account while the principal is alive and there are typically no limits on the amount of money a POD account can hold and thereby transfer.

Digital Estate Planning

Digital estate planning is a new concept that has only arisen in the 21st century. Digital estate planning is estate planning for digital or online assets, such as e-mail, text messages, websites, financial or personal information, and social networking accounts. Since digital estate planning is so new, there are very few laws regulating this field. Instead, private user agreements with social media companies like Facebook, Twitter, and Google address most of the issues with digital assets after a person passes.

Although the legal landscape may change in a few years, estate planners should take into account their digital assets now. A trust might be a useful way to manage digital assets so that personal information will not be stolen or lost when the account owner passes away.

End of Life Decisions: Durable Power of Attorney

In recent decades, doctors have been able to extend the life of the body, but the mind and soul of the patient often cannot be healed.

A Durable Power of Attorney, also known as an Advanced Health Directive, is a legal arrangement where one person appoints an agent to act on his or behalf. If the principal is unconscious or crippled due to an injury, illness, or age, the agent can make financial or healthcare decisions for the principal. Depending on what powers are given, the agent can file taxes, purchase or sell property, remove or preserve life support, or decide whether the principal can undergo surgery.

More than one agent can be appointed, but a process for conflict resolution should be in place if the agents disagree with one another. The powers end upon the death of the principal.

Physician Orders for Life Sustaining Treatment (POLST)

While Durable Powers give third person’s ability and direction to make financial and medical decisions on behalf of the patient, POLST give directions directly to the physician and medical personal. Physician orders are directions to the treating physicians to perform or not perform certain medical treatments in the event that the patient is unable to respond. POLSTs are commonly used to order the physician not to save a patient’s life in the event that the patient loses brain function, goes into a coma, or any number of other medical conditions.

POLSTs must be signed by a physician, but some states do not require that the physician meet with the patient or the patient’s agent before the physician signs the paper. POLST are often given prior to surgeries in case anything goes wrong.

Contacting an Estate Planning Attorney

If you need to create a will or otherwise manage your estate, you should contact an estate planning attorney for assistance. Your attorney will help you understand

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Last Modified: 08-18-2015 09:31 AM PDT

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