Estate Planning vs Will
Estate planning is the process someone takes in anticipate of their death. It involves the splitting and protection of assets. There are many tools used in estate planning, one of which is the last will and testament. Some people believe that estate planning and wills are totally different things. Many people see it as estate planning vs will creation.
Oftentimes it’s confusing because people tend to think that estate planning involves only those more difficult tools (like trusts, power of attorneys, etc.) and wills aren’t included in that.
This, however, just isn’t the case! Estate planning can include a will or you can forego one. That’s the beauty of estate planning; you’re able to pick and choose which tools best suit your needs.
Estate Planning Legal Services
So now that we’re done debunking estate planning vs will, we can focus on what estate planning legal services you’re looking for. Many lawyers take a “one-size fits all” approach to estate planning. They believe that everyone needs a living trust or that wills are the only way to go.
Everyone has different opinions when it comes to which tool is the best; the important thing is to figure out which one will serve you the best. So, what might you need?
This is a fairly common tool when it comes to estate planning. It’s very simple and is usually used when someone doesn’t have a very complicated estate. This is the “bread and butter” of most estate planning! But not all your assets can pass through your will:
Life Insurance: the named beneficiary on your life insurance automatically receives this money, regardless of what your will might state. It is in your best interest, though, to ensure that those names match if you do include a designation in your will.
Business Partnership: if you have a share in a business, no matter how small, you might not be able to pass it in your will. Be sure to look over any and all contractual documents before signing; this is a common clause in such paperwork.
Totten Trusts: also known an payable on death accounts (POD) follow the same rules as life insurance. If you’ve named a beneficiary on the form and a different one in your will, there’s a good possibility that the court will side with the documentation associated with the totten trust/POD.
Joint Tenancy: unfortunately, in most cases, property held in joint tenancy cannot be included in your will. This is because the full, legal term of your ownership is “joint tenancy with right of survivorship.” This means that the remaining owner has dibs, basically.
When creating a trust, you’ll have to decide what kind of trust best suits your needs. The most common, though, is the revocable trust (aka the living trust). This is a very popular option among people who wish to skip over probate court. That can be emotionally taxing and sometimes expensive. Because of this, people will opt for a trust instead.
Trusts can also make it harder for creditors to take your inheritance. It does not, however, make it totally off-limits. Creditors are still able to petition the court in order to get theirs hands on the assets within the trust to pay back old credit cards, loans, etc.
But why would someone use a trust if neither of those things really bother you?
Using a trust instead of a will can ensure that your family is getting the most amount out of their inheritance as possible. For example:
Let’s say Dad died, leaving an estate worth 3 million. Without a trust in place, it will probably pass down to the wife– Mom. And on her own, Mom already has an estate worth 3 million. This will put her at 6 million.
Let’s say Mom dies, that transfer of 6 million goes over the tax exemption level and taxes will be levied. However, if Dad had put his money in a trust and named Mom as manager, Mom could’ve had that estate independent from her current estate and it wouldn’t be taxed because it never actually transferred.
This can help some families with federal tax savings!
Power of Attorney
There two main types of power of attorney: financial and medical.
Financial POA: this is your typical POA. The principal (you) give the ok to have your agent (a close friend or family member) step in to make decisions for you in the event you become incapacitated. This could be because of old age, an illness, or an accident.
The requirements of creating a POA are very similar to will creation. You’ll need:
- Signed by the principal (you).
- Signed by a witness (other than you or your agent).
- Signed by a notary public (they can’t double as the witness)
- All of these people must be present at the same time to sign.
Medical POA: is who you’ll trust with any and all medical decisions. If you’re in a vegetative state, this is the person you’ll trust to make the call to “pull the plug,” so to speak. If you’re unable to make a healthcare decision, they’re your go-to person.
So by now you know that wills are a part of estate planning; it’s not either or. With estate planning, there are several different documents you can count on to make sure you estate is in order.
- Living Trust
- Prenuptial Agreement
- Power of Attorney
- Life Insurance
These are just to name a few. However, you’ll want to speak with an estate and wills lawyer to make sure you take care of all aspects of your estate in preparation!