Many people ignore estate planning because they believe it's too complicated or only meant for the very rich. But the truth is, everyone should be planning for the administration and protection of their assets during their lifetime, as well as for the direction and disposition of their assets upon their death.
Today we'll cover the components of estate planning and answer our most frequently asked questions about how and why you should put together an estate plan.
In this post we'll cover:
- Wills - Trusts – Estates
- Living Wills / Healthcare Proxy
- Powers of Attorney
- Tax Planning
- Business Succession Plans
Let's get started with some questions.
Just what is estate planning?
Estate planning is no more than advance planning for the efficient disposition of your assets upon your death and the minimization of the taxes paid on your estate. Additionally, good plans also provide for the administration and protection of your assets should you become disabled or incapacitated during your lifetime.
Isn’t estate planning just for the rich?
Estate planning is for everyone, regardless of their financial position. The goal of estate planning is not just the distribution of assets and reduction of taxes, but also to ensure that your wishes and directions are carried out.
How do I get started?
You begin by meeting with your attorney to establish exactly what you want to accomplish – such as deciding who will be responsible for carrying out your directives and making special arrangements for disabled family members, children or grandchildren.
Additionally, it includes determining who will direct family finances should you become unable to do so, and deciding in advance, should you wish to, how medical decisions might be made in case of a terminal illness.
What’s the process like?
Once you and your attorney have settled on your plan, you begin the process to ensure that your wishes are carried out, using the basic tools of estate planning. Some basic tools include: A Will, a Durable Power of Attorney, a Living Will/Healthcare Proxy and if necessary, a Trust.
Isn’t that complicated and expensive?
Not in most cases. When directed by an attorney who is experienced in this area, the process should be relatively quick and easy. Most clients are surprised how reasonable the cost of estate planning can be compared to the costs and peril associated with an unplanned estate.
Do I need all tools for my estate plan?
Three of the tools - the Will, Health Care Proxy and the Durable Power of Attorney - are recommended for everyone. Not everyone elects to have a living will (which is a statement of your preferences about your medical care in the event of a terminal illness). The use of a Trust is determined by the complexity of your directions regarding your assets and the size of your estate.
What is a Will?
A Will represents your directions of how you wish your assets to be distributed. It spells out who will receive your assets, in what amounts and under what terms. It also names the people you select to carry out your wishes. More importantly, if you have minor children, it designates the people who will be charged with the responsibility of raising them. Without a will, your assets will be distributed according to the New Jersey Laws of Intestate Succession, which may not be what you had in mind, and your estate administrator will have to post a custody bond.
What does Power of Attorney mean?
Durable Power of Attorney names a person who may act on your behalf in case you become incapacitated during your life. Failure to have such a power of attorney may result in no one being able to pay your bills, requiring a Court Order naming someone to run your financial affairs, or the appointment of a guardian. In most cases, the cost of the Power of Attorney is less than the Court filing fees alone.
What is a Living Will/Healthcare Proxy?
A Living Will/Healthcare Proxy is a document that designates someone to have legal authority to make medical or other health care decisions, should you be unable to make such decisions - especially in the case of a terminal illness and can memorialize some of your medical preferences including, but not limited to, your feelings about organ donation and life support.. The Living Will/Healthcare Proxy designates specific family members to make decisions for you if you have not indicated specific preferences.
What is a Trust? How is a Trust used?
There are many types of Trusts, but in the most basic form, it is an agreement made during your lifetime or established by you, wherein you name someone (a trustee) to handle the management and distribution of your assets. This asset management may be during your life and/or after your death. In addition to management and distribution, a Trust may also be designed as a tool to avoid taxes, avoid probate, or manage assets in the event of a disability. Depending upon your particular circumstances, a Trust may be revocable (cancelable) or irrevocable. Your attorney will guide you through their purpose and use.
What is Business Succession Planning?
Most small businesses or family owned businesses are usually run by one or two people who control every aspect of the business. Yet, one of the most commonly ignored aspects of running a small business is the simple act of Succession Planning. Far too many business people fail to prepare a plan because they are afraid of facing the possibility of death, infirmity, or the inability to work any longer.
The result is often fatal -- many businesses that took decades to build fail because no plan is in place. Succession Planning addresses who may handle the finances or how control of the business is to be divided among remaining family members. Our experience with these sensitive, yet necessary issues, can help assure the successful continuation of a business that might otherwise fail due to lack of planning.
If you have questions about this article or need help getting started on your estate plan, call our offices at 732.462.7170.