Wills and Estates
Or where does my stuff go when I die?
We all understand the inevitability of death and taxes. DeWitt Law can
ease your mind about the impact of both. We do this by assisting you in
developing a plan to meet your needs, to ensure your intentions are carried
out, and to minimize expense.
A typical estate plan is comprised of four documents, each serving their
own specialized purpose. The four documents of a typical estate plan are:
- Will or Will Substitute
- Power of Attorney for Business Purposes
- Power of Attorney for Health Care Purposes
- Living Will
Will
A Will is what its name implies: A statement of the writer's intention, or will, for the disposition of his/her estate after death. Typical Wills provide for the payment of debts and taxes, the disposition of personal property, treatment of beneficiaries and appointment of an executor. Wills may contain provisions for the care and financial protection of minor children and a variety of other provisions.
Wills can be simple, boiler-plate documents or elaborate, custom drafted manuals for the distribution of your assets. Will substitutes, including revocable living trusts, irrevocable trusts, family trusts and so on can be utilized to affect your desires with greater control, manipulate tax exposure, and more.
You can do anything you want with your assets in a Will so long as your desires do not violate the law or public policy. As a practical matter, most Wills look about the same. After all, most folks have similar basic priorities for the disposition of their property and debts after they die. Most people find that a reasonably simple, reasonably economical Will fits the bill.
Clients frequently ask when is the appropriate time to execute or revise a Will. There are no clear answers except one: Too early is better than too late. Generally, it is a good idea to "get your affairs in order" or have your Will reviewed if you are getting married, buying a house or having a child. Anytime there is a change to the makeup of your family, your plan should be reviewed to determine whether the change affects your Will. It is crucial to have your plan revised if you are getting a divorce. Coming into a significant amount of money is another event that should trigger a call to your estate planner.
Once your Will is in place, it is a good practice to have it reviewed from time to time. Many clients have their estate plans reviewed annually. This is a sound practice for clients who are experiencing frequent life changes, or want reassurance that their plan still accurately sets out their intentions.
Power of Attorney for Business Purposes
Conceptually, powers of attorney are documents that grant authority to another person to act on your behalf.
A Power of Attorney for Business Purposes grants authority to an agent to manage your business affairs if you are unable to do so. The agent is called your "attorney-in-fact." As your representative, your attorney-in-fact can sign contracts, pay bills, file taxes, sell property, and give gifts on your behalf. In short, a typical power of attorney for business authorizes your attorney-in-fact to do everything you could do as if you were doing it yourself.
The name of this document is often shortened to "Durable Power of Attorney." It is called "durable" because, if properly drafted, the grant of authority to your attorney-in-fact will remain effective if you lose the capacity to make your own decisions.
The key to creating a Power of Attorney for Business Purposes that suits your needs is to specifically set out the powers of the attorney-in-fact, making sure the powers granted are consistent with how you would want your affairs to be managed. For example, if you want your attorney-in-fact to be able to give gifts as a way of reducing your estate for tax planning purposes, your power of attorney should specifically grant that authority.
Powers of attorney are effective until the death of the maker. Your attorney-in-fact will not be able to do anything on your behalf after the moment of your death. After death, all authority to conduct business on your behalf falls to your estate's personal representative, whether that be the executor appointed in your Will or an administrator appointed by the court in the absence of a Will.
Power of Attorney for Health Care Decisions
Powers of Attorney for Health Care Decisions are a grant of authority to another person to make health care decisions for you if you are unable to do so for yourself.
Determination of competence to make your own decisions can be an important issue to consider. Oftentimes the maker of a Power of Attorney for Health Care Decisions will authorize his/her attending physician to make the determination. Once the doctor says you are incapable of making your own decisions, your health care attorney-in-fact will begin making decisions for you.
Living Will
A living will expresses your desire to die naturally. The creator of a living will does not want to be kept alive artificially when there is no hope of recovery. In this age of medical technology, living wills have become a necessary part of the estate plan. Sometimes the maker wants every possible effort made to prolong the dying process. In this case, the maker can execute a "reverse living will" setting out his/her intent for every available means to be utilized to keep the maker alive.
Living wills permit the maker to take responsibility for this very personal decision, sparing family members from having to make a painful determination. Living wills also ensure assets are not wasted on hopeless efforts to prolong the dying process, preserving the maker's estate for the benefit of those h/she has identified as beneficiaries.
Living wills can be custom drafted documents setting out specific procedures authorized by the maker in the event of a terminal injury or illness. More often, makers use a simple form adopted by the legislature and codified in the statutes. One advantage of using the statutory form is that doctors, lawyers and judges are familiar with it and are more likely to follow their standard procedure than if faced with a form that may require interpretation of the maker's intent. Another advantage is the low cost of reproducing the statutory form.
Probate- is it really a dirty word?
Probate is a cryptic term that simply refers to the process of passing your property to your heirs through the courts. Estates can go through the court system in a variety of ways depending upon the size, complexity and make-up of the estate. Some estates can be "probated" as simply as filing a few documents and getting a judge's approval to make distributions. Other estates require a great deal of time and effort to reduce to distributable assets, and may remain on the court's docket for months.
Probate has taken on a reputation as something to be avoided. Many people have been frustrated by probate due to the time required to wind up an estate and the cost. The probate process has many built-in protections for the heirs and creditors who have an interest in the estate. These protections generally are in the nature of notification requirements with significant deadlines to respond, making the probate process somewhat slow. If you are an heir waiting for an inheritance check, the process can seem interminable. It is also difficult as an heir to see your inheritance being used to pay attorneys, accountants, appraisers and tax collectors, all of whom are involved to make sure everyone with an interest in the estate is treated properly. Avoiding the court system can be attractive, but in many cases the probate process is an effective weapon in your planning arsenal. It is often advisable to force an estate into probate to take advantage of the protections the process offers. For example, even simple Wills often create a trust to hold money for minor children. By setting up bank accounts, insurance policies and other investment accounts so that they cannot be distributed without going through probate, the Will creator can force those funds into the trust, ensuring the money will be properly handled for the benefit of the children. In some cases the cost of avoiding probate leads one to embrace it. For property to pass without going through probate, the property must already have another owner when you die. A joint bank account is a good example. When the first owner of the bank account dies, the survivor owns the account and can spend the funds without permission from the probate court. Insurance proceeds that are paid out to a named beneficiary are another example. For some clients, using the probate process makes better sense than paying to re-title every asset to avoid probate. This is especially true where the estate is comprised of valuable assets but limited cash, because the owner may need the cash to live, whereas the expense of probate can be taken out of the sale of assets after the owner's death.
As a practical matter, most estates are comprised of a combination of probate and non-probate assets. That is, some assets will pass directly to a beneficiary, like a life insurance distribution, and some assets will require the court's supervision to pass.
The advantages of probate are considerable. The proper use of the probate process provides creditors and heirs with a final determination of their interests. Creditors who do not pursue their claims are barred. Tax liabilities are determined and disposed of. Heirs who receive distributions should have confidence their inheritances come with no strings attached.
Probate is not a dirty word. Probate is merely one of many methods of passing property to your heirs, and whether it should be avoided depends upon the circumstances of each individual estate. When an estate goes through probate, the process offers a great deal of protection and finality for everyone involved. Finality is the key word to any resolution, making probate an attractive and often efficient option for your estate plan.
To set up an appointment to prepare your will, contact our office via our contact page or call us at 919.338.8200.