The Ultimate Guide to Estate Planning

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 What is the Ultimate Guide to Estate Planning?

Estate planning is an area of law which governs the management and transfer of property in connection with an individual’s death. The individual creating the estate plan, also called a testator, may use a variety of documents and tools in order to plan for the distribution of their property when they pass away.

The documents and tools which can be used includes:

  • Wills;
  • Trusts;
  • Durable powers of attorney; and
  • Other legal mechanisms.

If an individual passes away without having a valid will, then their property will be distributed according to the intestacy rules of that state. Intestacy may sometimes lead to property distributions which are not in agreement with the wishes of the testator.

Because of this possibility, it is important for an individual to carefully plan out their estate well before they pass away.

What Does Intestacy Mean?

If an individual passes away without having a valid will, they are said to have died intestate. This means that their property will be distributed according to the laws of their state.

This means that the individual’s property will be distributed to their heirs. For example, if the individual who passed away had a spouse, their spouse would be considered an heir and has the first right to inherit their property.

There are two general categories of law which govern how property in an estate is distributed, including community property states and common law states. In a community property state, a spouse can usually claim half of the marital property and the other half will be distributed according to the individual’s will or the laws of the state.

In a common law state, the property is distributed by other means, including by title, or legal ownership of the property. Many common law states, however, will provide the spouse a portion of the property of the deceased. In addition, many individuals hold their property in a joint tenancy with right to survivorship.

How Do I Create a Will?

A will is an oral or written communication by which an individual, the testator, provides instructions regarding how they want their property to be disposed of upon their death. In order to create a valid will, it must meet the following general requirements, which may vary by state:

  • The testator is required to be at least 18 years of age;
  • The testator must have in understanding of what a will is, the nature of a will, and that the document they are creating is, in fact, a will;
  • The testator must understand the relationships one has with their friends and family, and must know what kind of property they own;
  • The testator must sign the will;
  • The will must be signed by two to three witnesses, depending on the state requirements, or be handwritten;
  • The will must state which specific individuals will inherit which specific property; and
  • The testator must select an executor to carry out the will.

What is a Trust?

A trust is a legal instrument in which one individual, called a settlor, allows another individual, called the trustee, to hold assets, which will later be transferred to a third individual, called the beneficiary.

There are several steps a settlor must take and requirements which must be met in order to create a valid trust, including:

  • The intent to create a trust;
  • Finding and appointing a trustee;
  • Depositing property, called the trust res, into the trust; and
  • Designating beneficiaries who will receive the trust property.

Although a trust is typically created during the lifetime of the settlor, a trust is intended to outlast the settlor. A trust is often used in a situation where a beneficiary is not prepared to receive or manage the property which they are given.

For example, a beneficiary may be a child who may not be ready or mature enough to have the property. A trust is often used to help avoid the probate system as well as costly court battles.

There are numerous different types of trusts. For example, living trusts allow a settlor to maintain, modify, and live off of a trust while the settlor is still living.

A spendthrift trust helps to shield assets from creditors while also ensuring that a beneficiary will not spend all of the trust funds at one time. Special needs trusts may be created for individuals with special needs who will require continued care for the rest of their lives.

Regardless of the type of trust that is created, the trustee will owe a heightened level of duty. This means that the trustee is not permitted to abuse their position for their own gain and they are not permitted to commingle personal funds with trust funds.

What are Payable on Death Accounts?

A Payable on Death account, or POD account, is a bank account which transfers the funds in the account upon the death of the account owner. A POD account is a useful estate planning tool because it can quickly move funds to the intended beneficiaries without having to have a court hearing.

The account owner, or principal, is also able to access the account while they are alive. In addition, there are usually no limits on the amount of money which a POD account can hold or transfer.

What is Digital Estate Planning?

Digital estate planning is a newer estate planning concept. Digital estate planning involves the management and distribution of an individual’s online assets.

This many include assets such as:

  • Email;
  • Text messages;
  • Websites;
  • Financial or personal information; and
  • Social networking accounts.

Because digital estate planning is such a new concept, there are very few laws governing this field and they may not always be consistent. In these situations, private user agreements with social media companies such as Facebook and Twitter often address most of the issues surrounding digital assets after an individual passes away.

Although the laws related to digital estate planning may change over time, an estate planner should take into account their digital assets. A trust may be a useful way to manage an individual’s digital assets so that their personal data will not be stolen or lost when the account owner passes away.

What is a Durable Power of Attorney?

Durable Powers of Attorney, which are also called Advanced Health Directives, are legal documents where an individual appoints another individual, an agent, to act on their behalf. If the principal is incapacitated or unconscious due to age, injury, or illness, the agent is permitted to make healthcare or financial decisions on behalf of the principal.

Depending upon what legal rights are provided to the agent, they may be able to:

  • File taxes;
  • Purchase or sell property;
  • Remove or preserve life support; or
  • Decide whether the principal can undergo surgery.

It is possible for more than one agent to be appointed. If an individual decides to do so, there should also be a process for conflict resolution in place in the event that the agents disagree with one another.

The powers of an agent will end upon the death of the principal or will terminate if the principal actively revokes them.

What are Physician Orders for Life Sustaining Treatment (POLST)?

A Physician Order for Life Sustaining Treatment (POLST) provides directions directly to a physician and medical personnel. POLSTs provide directions to a treating physician to perform or not to perform certain medical treatments in the event that a patient is unable to make a decision, such as being unconscious following an accident.

POLSTs are often used to order physicians not to save a patient’s life in the event that they lose brain function or other medical conditions. POLSTs are required to be signed by a physician.

It is important to note that some states do now require a physician to meet with the patient or the patient’s agent prior to signing the paper. POLSTs are commonly given prior to surgical procedures, just in case anything goes wrong.

Should I Hire an Estate Planning Attorney?

It is essential to have the assistance of an estate lawyer for any questions or concerns you have regarding planning or managing your estate. Your attorney can provide you with advice regarding how to plan your estate in order to carry out your wishes.


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