Frequently Asked Questions About Estate Planning
Estate planning is the process of creating a written plan for how your assets will be managed and distributed while you are healthy, during your incapacity, and after your death. A properly drafted estate plan also identifies who will handle important decisions when you become unable to do so.
It might ensure that your wishes are followed, avoid family disputes, minimize taxes, and protect your loved ones from unnecessary legal and financial hassles.
State laws will decide who inherits your assets, which may not align with your wishes. For example, in a small family, it is possible that a 2nd cousin you have never met could inherit all or a portion of your estate. Failure to have a written plan typically leads to delays, higher costs, and family disputes.
Key documents include:
• Will: Specifies who inherits your property and names guardians for minor children.
• Possibly a Trust: Manages assets during and after your life, often avoiding probate.
• Durable Financial Power of Attorney: Appoints someone to handle financial matters if you’re incapacitated.
• Durable Healthcare Power of Attorney a/k/a Healthcare Directive: Outlines your medical wishes and appoints someone to make healthcare decisions.
• Living Will: Expresses your end-of-life preferences.
• HIPAA Release: Lists the people that can obtain information from healthcare providers about your health.
A will is a legal document that specifies:
• Who gets your property.
• Who are Guardians for minor children.
• An executor to carry out your wishes. In Florida the “executor” is called a “Personal Representative.”.
A trust is a legal entity that holds assets for beneficiaries. It’s useful if you want to:
• Avoid probate.
• Manage assets for minor children.
• Protect your children’s inheritance if a spouse remarries. (e.g., the trust can make sure that the deceased spouse’s children inherit after the second spouse dies instead of the parent’s new spouse of life partner).
• Provide financial support for someone over time (e.g., a spouse or disabled child).
• Protect a child’s inheritance from divorcing spouses or lawsuits.
• Protect a child’s inheritance from being wasted on frivolous items or an in-law’s influence.
Probate is the court process for settling your estate. It can be time-consuming and public. A properly structured estate plan (e.g., with a trust) can help you avoid probate and keep your financial information and wishes private.
You can minimize taxes by:
• Using trusts.
• Making lifetime gifts.
• Taking advantage of tax exemptions and credits.
Your estate must pay off debts before distributing assets to beneficiaries. If your estate doesn’t have enough, debts may go unpaid, but family members are generally not responsible unless they co-signed or guaranteed the debt.
Review your plan:
• Every 3–5 years.
• After major life events (e.g., marriage, divorce, births, deaths, or changes in financial circumstances).
• Executor aka Personal Representative: Is responsible for paying debts and distributing assets in accordance with the wishes expressed in your Will.
• Trustee: Manages assets in a trust according to instructions contained in the Trust Agreement.
Assets with named beneficiaries (e.g., life insurance, retirement accounts) might pass outside your will or trust. Ensure these designations align with your overall plan by consulting with an attorney. For example, if an investment account has a beneficiary designation to your x-spouse, then that asset will go to the x-spouse and not the person(s) listed in your Will or Trust.
While you can create basic documents online, an attorney might ensure your plan complies with state laws, avoids mistakes, and addresses complex situations.
• Living Will: States your medical wishes when you are at the end stage of a terminal illness or in a permanent vegetative state (e.g., life support preferences).
• Healthcare Directive aka Durable Healthcare Power of Attorney: Includes a living will and appoints someone to make healthcare decisions on your behalf.
Yes, you can update it anytime while you’re alive and mentally capable. Keep it current as your life changes.
• List your assets and debts.
• Decide on beneficiaries and guardians.
• Choose an executor aka personal representative, trustee, and power of attorney.
• Meet with an attorney to create the necessary documents.