There are many questions that arise when a person begins planning for when they are gone. Most people want to provide as best they can for their families, but the process can be daunting. For many, understanding a bit about the estate planning process encourages them to take action.
Below are five of the most common questions people have about planning their estate and determining what will happen once they are gone.
1. What is the difference between a will and a trust?
Wills and trusts have some similarities. They are both estate planning tools and can work together to create the most complete plan for an estate. The main differences between a will and a trust are:
• Wills become effective after death, whereas some trusts are effective upon creation
• Wills direct who receives property upon death and appoint a legal representative to oversee this process, whereas a trust can distribute property prior to death
• Trusts cover only property placed in the trust, whereas wills cover anything owned solely by the person creating the will.
• Wills are public record, whereas generally a trust remains private.
There are advantages and disadvantages to both wills and trusts, so speak with your attorney about your circumstances to determine which of the options, or what combination of the two, is best for you.
2. What is Power of Attorney? Should I worry about it?
Power of attorney is the granting of legal rights to another person. Decisions you would typically make for yourself are made by that person in the event you are unable to do so. It is one of the most powerful estate planning tools because it gives the decision-making power that is yours alone to someone else. This person has the ability to make legal decisions concerning financial affairs and other matters. Appointing power of attorney ensures you assign the task to a person of your choosing, instead of relying on the courts to choose a person. It also saves time and money. It is possible to create a limited power of attorney that allows for only certain tasks.
3. Do I need to create a medical directive?
Medical directives can include power of attorney, a health care proxy, and medical instructions. Medical directives are an important part of estate planning, so no matter how unpleasant it might be for you and your loved ones to discuss, it is necessary and will save a great deal of emotional trauma in the future.
4. When should I make updates to my estate plan?
Certain life events trigger the need to update your will and other estate planning measures. These include:
• Marriage
• Children, by birth, adoption, or marriage
• Divorce
• Death of a spouse
• Change in assets
• Relocation
• Change in status of a guardian, trustee, or executor
• Changes in tax laws
If none of these life changes occurs within any five-year span, you should review your estate plan with your attorney in case there is a need for any other changes.
5. I’m worried my family will contest my will. What can I do to prevent this from happening?
All families have challenges and sometimes, these issues spill over into the planning and settling of an estate. There are several things you can do to make the arrangement you intend more likely to be upheld once you are gone:
• Ensure your will is properly executed by working with an experienced attorney
• Explain your decisions to family while you are still alive
If you need assistance with estate planning or you have questions that were not covered above, contact the experienced estate attorney in Littleton at Miller and Steiert, P.C.
