The knowledge that we will eventually die is one of the things that seems to distinguish humans from other living beings. At the same time, no one likes to dwell on the prospect of his or her own death. But if you postpone planning for your demise until it is too late, you run the risk that your intended beneficiaries — those you love the most — may not receive what you would want them to receive whether due to extra administration costs, unnecessary taxes or squabbling among your heirs.
This is why estate planning is so important, no matter how small your estate may be. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs and attorneys fees; and it affords the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.
Many people believe that if they have a will, their estate planning is complete, but there is much more to a solid estate plan. A good plan should be designed to avoid probate, save on estate taxes, protect assets if you need to move into a nursing home, and appoint someone to act for you if you become disabled. All estate plans should include, a durable power of attorney, Living Will, Health Care Surrogate, a will or a trust.
Durable Power of Attorney
A power of attorney is a legal document delegating authority from one person to another. A power of attorney terminates if the principal becomes incapacitated, unless it is a special kind of power of attorney known as a “durable power of attorney.” A durable power of attorney remains effective even if a person becomes incapacitated. In the document, the maker of the power of attorney (the “principal”) grants the right to act on the maker’s behalf as that person’s agent. What authority is granted depends on the specific language of the power of attorney.
Advanced Care Directives
An advanced care directive is a statement about how you want medical decision to be made should be unable to do so. Simply put it gives “advanced directions” to medical facilities as to your wishes regarding medical treatment. A living will and a health care surrogate are two types of advanced care directives.
Health Care Surrogate
A health care proxy designates someone you choose to make health care decisions for you if you are unable to do so yourself. A health care proxy or surrogate can also receive health care information. Florida statute also allows you to designate a alternate health care surrogate as well.
A living will is a document that you can use to give instructions regarding treatment if you become terminally ill or are in a persistent vegetative state and unable to communicate your instructions. The living will states under what conditions life-sustaining treatment should be terminated. If you would like to avoid life-sustaining treatment when it would be hopeless, you need a living will. A living will takes effect only when you are incapacitated and is not set in stone — you can always revoke it at a later date if you wish to do so.
When drawing up a living will, you need to consider the various care options and what you would like done. You need to think about whether you want care to extend your life no matter what or only in certain circumstances. A living will can dictate when you want a ventilator, dialysis, tube feeding, blood transfusions, and other life- saving or life-prolonging options.
A DNR is a different document. A DNR says that if your heart stops or you stop breathing, medical professionals should not attempt to revive you. This is very different from a living will, which only goes into effect if you are unable to communicate your wishes for care. Everyone can benefit from a living will, while DNRs should be only used after serious consultation with family and only for very elderly and/or frail patients.
A will is a legally-binding statement directing who will receive your property at your death. If you do not have a will, the state will determine how your property is distributed. A will also appoints a legal representative (called an executor or a personal representative) to carry out your wishes. A will is especially important if you have minor children because it allows you to name a guardian for the children. However, a will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate and aren’t covered under a will Probate assets include, but are not limited to, the following:
Some examples of assets that will have to pass through probate include A bank account or investment account in the sole name of a decedent. A life insurance policy, annuity contract, or individual retirement account payable to the decedent’s estate. Real estate titled in the sole name of the decedent, or in the name of the decedent and another person as tenants in common, is a probate asset (unless it is homestead property).
A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a “trustee,” holds legal title to property for another person, called a “beneficiary.” Trusts have one set of beneficiaries during those beneficiaries; lives and another set — often their children — who begin to benefit only after the first group has died. There are several different reasons for setting up a trust. The most common reason is to avoid probate. If you establish a revocable living trust that terminates when you die, any property in the trust passes immediately to the beneficiaries. This can save time and money for the beneficiaries.
Certain trusts can also result in tax advantages both for the donor and the beneficiary. These could be “credit shelter” or “life insurance” trusts. Other trusts may be used to protect property from creditors or to help the donor qualify for Medicaid. Unlike wills, trusts are private documents and only those individuals with a direct interest in the trust need know of trust assets and distribution. Provided they are well-drafted, another advantage of trusts is their continuing effectiveness even if the donor dies or becomes incapacitated. For more information on trusts, click here.