What is an estate plan?
Estate planning is a process where a living person anticipates and plans for the management and distribution of his or her estate both during life and after death, and at the same time minimizing certain taxes and expenses associated with probate or other legal processes. Estate plans also provide for certain contingencies, such as physical or mental disability. Common estate planning tools include Wills, Trusts, and Advance Directives. Estate plan can be simple or very complex depending on the needs of the client, but for people an effective plan can be developed quickly and with little expense with the assistance of a competent estate planning attorney.
Do I need an estate plan?
No, not of you don’t mind someone else (the government) deciding where your hard-earned assets go and reducing . But if you do mind, an estate plan is critical no matter how many or how few assets you may have. You work hard for what you have, and even simple estate plan can ensure that your hard-earned wealth will remain intact and is passed on the way, and to whom, you choose. The cost of estate planning is relatively inexpensive , and truly a case where an ounce of prevention is truly worth a pound of cure.
Is an estate plan expensive?
No. A simple but effective estate plan, consisting of a Last Will and Testament, Durable Power of Attorney, Heath Care Power of Attorney and Living Will, is very inexpensive and can be completed by an estate planning attorney very quickly. The value of an estate plan is not the few dollars you spend to put it in place, but what an estate plan can do for you and your family now and in the future.
What is the difference between a Will and a Living Trust?
When advising clients, some estate planning attorneys prefer Wills and others lean more toward living trusts. The short answer is that a Will requires that a decedent’s (the deceased person) assets must pass through the Probate process and a Living Trust is designed to pass on assets and avoid probate. When a person with a Will dies, the decedent’s assets are frozen until a probate estate is opened in Court. The somewhat lengthy process of Probate normally requires the assistance of a Probate Attorney, which can be extensive, reducing the value of the estate that you pass on. In many ways it may also be hard on the estate executor, (many times a surviving spouse or other family member), at a time when they are grieving. A Will also becomes a public document once it is probated, potentially exposing confidential information to the public. On the other hand, A Living Trust avoids the probate process because the Trust is a separate entity that owns the property after the person who sets up the Trust (called the Grantor or Settlor) places his or her property into the Trust while living, under the management of a Trustee. Many times the Settlor and the Trustee are the same person when the Trust is established and while the settlor is living, but when the Settlor/Trustee dies management passes to a “Successor Trustee”, who can immediately access and pass on assets without opening a probate estate, and as directed by the Settlor when the Trust was originally established. There is another important difference. A Will does not take effect until death, so it’s no help during lifetime planning. Alternatively, a Living Trust can help preserve and increase an estate while living and offer protection under certain living circumstances such as mental disability.
What if I die without a Will?
If a person dies and has no Will the government has mandated at scheme to pass on assets called “intestate succession”. An intestate estate must be opened in probate court where letters of administration must be obtained appointing an estate administrator and authorizing that person to do carry out such tasks as paying your bills, giving your spouse an allowance, settling funeral expenses, and/or distributing your assets according to Tennessee’s rules of intestate succession. The somewhat lengthy probate process normally requires the assistance of a probate attorney, which can be extensive and reduce the value of the estate that you pass on to loved ones. In many ways it may also be hard on the estate administrator, (many times a surviving spouse or other family member), at a time when they are grieving. Worse, intestate succession rules inflexibly prioritize who receives your hard-earned assets and in what amounts, based on marriage and blood kinship. Failure to consult with an estate planning attorney to establish an estate plan while living, may expose you to the risk of having part of your estate go to an unintended or even unknown blood relative, with absolutely no recourse available, or losing out on an opportunity to preserve your estate for loved ones, and avoid taxes and other governmental costs.
Who can be my Trustee in a Living Trust?
In most Living Trusts the person setting up the Trust (called Grantor or Settlor) is also the named Trustee. You and your spouse can also set up a Living Trust together and be Co-Trustees and control every asset that you jointly own. A Living Trust will also designate a “Successor Trustee” to manage the Trust if you die or are incapacitated in some way.
What if I become mentally or physically disabled and don’t have an estate plan?
A Will takes effect when you die, but what if you have a stroke or an auto accident and become unable to care for yourself, pay bills, conduct business, or make medical decisions? Even if you do have help of family members or friends, they may not have the legal authority required to get information, pay bills, conduct business or make medical decisions routinely required by banks, investment and financial institutions, Physicians, hospitals, rehabilitation or long term care facilities. In that case a friend or loved one will be required to obtain an attorney to open a conservatorship or guardianship in court. The conservatorship can be cumbersome and extensive, taking a toll on the value of your wealth. In some ways it may also be hard on the conservator, who in many cases will be a spouse or other family member. The simple alternative is to see an estate planning attorney to establish an estate plan that includes Living Trust, durable power of attorney, health care power of attorney, and Living Will to authorize or give direction to a loved one or friend who can assist you if you are incapacitated in some way. Decisions about your general care, financial matters, and health care can be made and executed quickly if you have these documents without the time, expense, and stress of court.
I don’t have money or investments, and don’t own a house, so do I need an estate plan?
Yes! There is more to an estate plan than passing on assets. Any basic estate plan should address contingencies both while living and plan for distribution of assets after death. In Tennessee, a durable power of attorney authorizes a person or persons you designate to receive information and conduct all kinds of business on your behalf should you become hurt or mentally disabled. A HIPAA compliant Health Care Power of Attorney can authorize a person to make healthcare decisions and arrangements of rehabilitation or long-term care on your behalf. And a Living Will can authorize certain actions regarding extraordinary life sustaining measure should you be able to communicate them yourself. All these documents are revocable should you want to change revoke the authority or change the person you want to assist you.
I thought estate planning is only for older people of the wealthy?
No. Everyone should have at least a basic estate plan regardless of their age, wealth, or number of assets. A basic estate plan will address important matters for you during your life and after you die. It should include advance directives such as a Health Care Power of Attorney, a Durable Power of Attorney and, Living Will for your lifetime, and a Will for after your death. Or, Living Trust that can be useful both during your life and after your death. An estate plan can be developed and created very quickly with the help of a reputable estate planning attorney and is a relatively inexpensive process. A basic plan utilizing these documents can be created for as little as $500.
Can I put my house or farm in a living trust?
Yes. Real estate can be deeded and transferred into a Living Trust with little effort or expense. This is particularly useful if you own real estate in two different states. Without a Living Trust, a probate estate must normally be opened in the state where the decedent was domiciled and ancillary estate(s) opened in the state(s) where other real property is owned. This can be a cumbersome and very expensive process. Alternatively, if real estate is transferred into a Living Trust it avoids probate altogether, which can potentially have several advantages including favorable tax treatment, little or no legal fees, and immediate passage of asset as directed in the trust.
Is it possible to avoid the trouble and expense of probate when I die?
Yes, Depending on your assets and debts, there are a number of ways to avoid opening a probate estate. Perhaps the most common is to designate beneficiaries for assts at financial institutions or on insurance policies. Payment on Death (POD) or Transfer on Death (TOD) are both legally recognized designation methods for transferring financial assets outside of probate in Tennessee, and designated beneficiary on an insurance policy is unchangeable upon the insured’s death and cannot be reassigned in probate. Another method involves the way and asset can be titled. For example, titling of an asset as Joint Tenancy with Right of Survivorship enables property to pass directly to the joint owner with no other legal action. This is a common way of titling property owned jointly by husband and wife, but its not exclusive to married couples in Tennessee. A Living Trust is particularly effective in passing on property without going through the Probate process as it can transfer both real estate and personal property, provided that property was properly transferred into the trust in the first place. A reputable estate planning can advise and assist you in any of these and other methods of avoiding the effort and expense of the probate process.
Can I use a form from the internet for my Will?
Possibly. These forms are for making an Attested Will. In Tennessee, Attested Will is typed, signed by the Testator’s hand, witnessed and notarized. It’s the most common type of Will in Tennessee and usually drafted by a lawyer after consulting with the Testator, but a form can be used. A word of caution if you are using a form, however. According to Tennessee Code Annotated § 32-1-104 an attested will must be executed in a certain way to be valid. Requirements include having the Testator attest that the will is in fact his/her Will and the Will must be signed by The Testator in the presence of two witnesses, and the two witnesses must sign in the presence of the Testator and of each other. Considering what’s at stake, I would say, “don’t try this t home”! For little more than the price of an evening out you can have a properly drafted and executed Will which addresses all your specific needs and virtually eliminates to possibility of a will contest for an improperly executed Will.
What is a Will?
A Will is legal document that directs the management and distribution of a persons estate after death, Tennessee recognizes three types of Wills: Attested Wills, Holographic Wills, and Noncupative (oral) Wills. Each of these Wills have specific drafting and execution requirements. Those interested can read about these requirements in Tennessee Code Annotated §§ 32-1-104 (Attested Wills); 32-1-105 (Holographic Wills); and 32-1-106 (Oral Wills).
Can I write my own Will?
Yes. Tennessee recognizes a handwritten Will, referred to as a “Holographic Will”. Not all states recognize such a Will. A holographic Will requires that the person making the Will ( called the Testator) record all material provisions and sign the Will in his or her own handwriting. There are no witnesses required to attest to the Holographic Will itself, but when the Will is probated, the probate attorney must produce two witnesses that can attest that the handwriting in the Will is in fact that of the Testator.
What is a Trust?
A Trust is an estate planning device used to direct the distribution of the Trust Grantor’s assets after death. These assets can include real property (real estate) and/or financial assets or other personal property. There are various types of Trusts depending on the desired purpose. For example Trust may also be used to manage and distribute assets for minor children or disabled persons. A Trust for minor children can be established as testamentary trusts (in a Will) or in a separate trust instrument. Disabled children can be accommodated by Special Needs Trusts. A Spendthrift Trust may also be used to limit spending by a wasteful heir. Trusts can also be used to manage and protect wealth over future generations after the Grantor dies.
What are Advance Directives?
Advance directives are legal documents designed to direct others in assisting you if you become legally incapacitated. An estate plan may include such directives as a health care Power of Attorney, a Durable Power of Attorney, or a Living will, to facilitate assistance with health care, debt and asset management, finances, or extraordinary live preserving measures.
Can an estate plan help me avoid taxes?
Yes. Income, gift, and estate tax planning are necessary considerations in creating an effective tax plan. These tax areas or often moving targets from year to year and Estate Planning attorneys routinely utilize the services and advice of certified public accountants or certified financial planners when assisting clients in developing an appropriate estate plan. There are various and sundry ways of tax avoidance. Gifting is an example which allows a person to reduce the value of the estate by gifting as much as $15,000 per year without incurring a gift tax. Other alternatives may include creating tax advantages by certain titling of financial accounts and real estate, or by the use of life insurance policies.
If you have questions about probate, wills, trusts or other estate planning concerns consult with an experienced Tennessee estate planning attorney at Bennett & Michael as soon as possible. Contact the team today by calling 615-898-1560 to schedule your free appointment.
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