There are many different types of documents used in the field of estate planning. If you are not intimately familiar with this area of legal specialization, there is no reason why you would understand most of them. As a response, we will provide a basic overview of several different estate planning documents in this blog post.
Last Will
A will is the most commonly utilized legal device in the field of estate planning. Just about everyone is aware of the fact that you can use a will to state your final wishes with regard to the way that you want your assets transferred after you die.
The individual that would take care of the hands-on estate administration tasks is the executor. You name an executor when you create your last will. If you were to fail to do so, a personal representative would be appointed by the court.
Speaking of the court, when a will is used, it must be admitted to probate. In New York, the Surrogate’s Court is in charge of probate matters. During this process, creditors would be given a chance to come forward seeking satisfaction, and final taxes and other expenses would be paid.
The assets would be identified and inventoried by the executor, and if necessary, there would be appraisals and liquidations. After all of the tasks have been completed to the court’s satisfaction, the estate would be closed, and the executor would be empowered to distribute inheritances to the heirs.
Probate serves a purpose, but it is not necessarily beneficial to the rightful heirs to an estate. On average, it takes between nine and twenty four months to run its course under ordinary circumstances, and no inheritances can be received during this interim. There are also expenses that accumulate to reduce the value of the estate, and because probate is public, privacy is lost.
Living Trusts
An alternative to a last will that is widely utilized to avoid probate and the problems that go along with it is the living trust. These trusts are revocable, and if you establish one, you can act as the trustee and the beneficiary while you are living.
You name a successor trustee and successor beneficiaries in the trust document. After your passing, the trustee would distribute the assets in accordance with your wishes outside of probate. The public would have no access to the details, and you would have the ability to instruct the trustee to distribute limited assets over an extended period of time if you choose to do so.
Irrevocable Trusts
In addition to the revocable living trust that can be dissolved entirely by the grantor of the trust, there are also irrevocable trusts. When you established the latter type of trust, you may still retain control over, and indirect access to, your assets. Irrevocable trusts can provide significant benefits under certain circumstances.
High net worth individuals may be exposed to federal and/or state level estate taxes, and assets in an irrevocable trust can be excluded from your taxable estate. People also use these trusts in an effort to gain Medicaid eligibility, because it will pay for nursing home care, and Medicare will not. You can convey resources into a Medicaid trust to get them out of your name to meet the Medicaid asset requirements.
These are a couple of reasons why estate planning attorneys recommend irrevocable trusts, but there are others.
Advance Directives for Health Care
There are two advance directive for health care that should be part of any well-constructed estate plan. One of them is a living will. With this document, you state your life support preferences.
The other one is a health care proxy that is used to name a representative to make other types of medical decisions on your behalf in the event of your incapacitation.
Durable Financial Power of Attorney
A durable financial power of attorney can be added to name an agent that would be empowered to handle your financial affairs if you ever suffer from incapacity.
Attend an Upcoming Workshop!
Our attorneys are offering a number of free workshops over the coming weeks, and you can learn a lot if you attend the session that fits into your schedule. To get all the details, click the following link: Rochester Estate Planning Workshops.
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