What is Estate Planning?
Estate planning is a process
that creates a plan that covers the
transfer of your property at death as well as a variety of other personal
matters and may or may not involve tax planning. The core document most often associated with this process is
your will.
During
the estate planning process, your attorney works for you to meet your goals and
address your concerns with respect to your assets and how they are owned, and
your family structure. It can
involve the services of a variety of professionals, including your lawyer,
accountant, financial planner, life insurance advisor, banker and broker and
may also involve some of your loved ones if you choose.
What is your lawyer’s role?
It is tempting to use one of the
many do-it-yourself will kits available online and at your local office supply
store. These kits will work well
for some people, but the complexities of the law and the individual goals and
needs of your family are unlikely to be accomplished through a
one-size-fits-all approach. A
qualified lawyer can serve as your guide and interpret the network of laws that
control property rights, taxes, wills, probate, and trusts.
On the other hand, you can save
time and money by preparing thoroughly for a meeting with your estate planning
lawyer. You can organize your information regarding your assets, liabilities,
and title arrangements and discuss your feelings about providing for various
family members. You should provide copies of important documents such as
previous wills or trusts, powers-of-attorney, life insurance policies,
employment benefits, and prenuptial/domestic partnership agreements or divorce
decrees.
The advice and direction of your
attorney will be essential to implementing an estate plan that both disposes of
your assets according to your wishes and meets your other personal objectives.
What can a will do and do I need one?
If you die without a will, Minnesota
statutes will determine who receives your property. A will allows you to alter the state's plan to suit your
personal preferences.
A will provides for the distribution of
your property at death in any manner you choose (with a few exceptions). However, a will does not govern the distribution of all types of your property at your death,
and you should seek the advice of an attorney to help you plan for distribution
of these other assets so that they are distributed according to your wishes.
Wills can be of various degrees of
complexity and can be utilized to achieve a wide range of family and financial
objectives. If a will provides for the outright distribution of assets, it is
sometimes characterized as a simple will.
If the will establishes one or more
trusts, it is often called a testamentary trust will. Alternatively, the will
may leave probate assets to a preexisting inter vivos trust (created in your
lifetime), in which case it is called a pour-over will. In either case, the purpose of the trust
arrangement is to ensure continued property management and creditor protection
for the surviving family members, to provide for charities, and to minimize
taxes.
Aside from providing for the intended
disposition of your property to a spouse, children etc., consider these other
important objectives that may be accomplished in your will:
Good planning can also enhance your
support of religious, educational, and other charitable causes.
What is a Revocable Trust?
The term “living trust”,
“revocable trust” or “inter vivos trust” is generally used to describe a trust which
you can create during your lifetime, and which you can revoke or amend whenever
you wish to do so. You can also create an "irrevocable" living trust,
but that is permanent and is almost exclusively done to produce favorable tax
results.
A "living trust” is legally
in existence during your life, has a trustee who is currently serving, and owns
property that (generally) you have transferred to it during your life. While
you are living, the trustee (who may be you) is generally responsible for
managing the property as you direct for your benefit. Upon your death, the
trustee is generally directed to either distribute the trust property to your
beneficiaries, or to continue to hold it and manage it for the benefit of your
beneficiaries. Like a will, a living trust can provide for the distribution of
property upon your death. Unlike a will, it can also provide you with a vehicle
for managing your property during your life, and authorize the trustee to
manage the property and use it for your benefit (and your family) if you should
become incapacitated, thereby avoiding the appointment of a guardian for that
purpose.
The Estate Plan
A good estate plan will provide
not only for the distribution of your property after death through a will or
trust instrument, but will also help you and your loved ones prepare for
decision-making in the event that you or a loved one becomes unable to make
financial or personal decisions for yourself. Generally, these goals are accomplished through alternative
decision-making documents including a health care directive (as known as a
living will) and a power-of-attorney.