A Last Will & Testament is Not Enough
Our law firm regularly receives inquiries from potential clients asking for a “simple Will” and how much they cost. While I never discount why people call and ask for an inexpensive solution to their estate planning problems, and I always appreciate their desire to establish a Will using our law firm, the question is analogous to someone calling a home builder and asking for only a front door and what they cost.
A “simple Will” or Last Will & Testament, (hereinafter, “Will”), generally accomplishes two tasks. It allows you to (1) determine who will receive or inherit your probate property, and (2) it suggests who should be appointed as the Personal Representative responsible for the probate administration of your estate. A Will does not avoid the probate process. Instead, it guides all interested parties through probate like a roadmap. A Will also does not control non-probate property or provide for any special estate planning topics such as avoiding estate taxes or topics that would otherwise require a Trust. A Will is just not enough when it comes to creating a thorough and complete estate plan. Instead, the following are additional measures you should take when creating a Will:
Create Powers of Attorney
A power of attorney is a very important estate planning document. At a minimum, every estate planning package should include both a Power of Attorney for Financial Decisions and a Power of Attorney for Health Care Decisions. There are several different kinds of powers of attorney that can be used depending upon the circumstances of your case. These critical documents allow a person to appoint an “attorney-in-fact” or “agent” to act in their place for financial or health care purposes. Powers of attorney generally fall into four categories.
• Limited POA. As the name implies, a limited power of attorney gives your agent the power to act in your stead for only a limited purpose. For example, a limited power of attorney for financial decisions could give someone the ability to sell a car for you while you are out of town.
• General POA. A general power of attorney provides your agent general powers and rights that you enjoy. For example, a general power of attorney may provide your agent the ability to make all financial decisions you require, including but not limited to, paying bills, executing contracts, selling assets, and obtaining records. A general power of attorney terminates upon your death or it may continue after you become incapacitated if it includes a durability provision.
• Durable POA. Both a limited power of attorney and a general power of attorney can be durable. For the purposes of a power of attorney, “durable” means the power of attorney remains in full force and effect even after you become incapacitated. In the event a power of attorney is not durable, then the agent’s authority would end when you become incapacitated and no person would enjoy the legal authority to act on your behalf while you were alive unless a court appoints a conservator or guardian. A durable power of attorney terminates upon your death.
• Springing POA. A springing power of attorney becomes effective when you become incapacitated, but it does nothing until then. In most springing powers of attorney, the standard for determining incapacity and triggering the power of attorney to spring into effect is clearly described in the document and normally involves a physician’s professional evaluation and determination.
Create a Living Will or Health Care Directive
A Living Will or Health Care Directive is a legal document you execute in the presence of two witnesses that details your health care wishes in the event that your condition becomes terminal and you are unable to participate in decisions regarding your medical treatment. The document directs that your attending physician(s) withhold or withdraw medical procedures that merely prolong the dying process and are not necessary to your comfort or to alleviate your pain.
Create Beneficiary Designations
Designated beneficiaries attached to your bank accounts, investment accounts, titled assets, and life insurance policies will generally inherit their assets upon your death without the need for probate administration. The decisions detailed in your Will do not supersede these beneficiary decisions as the assets with beneficiary designations become non-probate immediately your death and the Will cannot administer them. Two popular beneficiary designations that deserve your attention are your Payable on Death choices in financial institution accounts and your Transfer on Death choices in Department of Motor Vehicle titles.
Consider Joint Tenancy with Right of Survivorship
If you own real property with another person or parties, those assets can also be protected from probate administration. In most instances, the property is owned by husband and wife “in joint tenancy with right or survivorship.” Joint tenancy is also referred to as “tenancy in the entirety,” or “community property with right of survivorship.” Not unlike real property owned in joint tenancy, bank accounts and other property can also be owned jointly and avoid probate administration. When you die, your ownership interest in jointly owned property passes directly to the surviving joint owner. The decisions detailed in your Will do not supersede these ownership interests as the assets owned jointly become non-probate upon death and the Will cannot administer them.
Consider Trusts, Estate Tax Planning and Conditional Giving
At the time of writing this article, the Estate Tax Exemption amount for individuals is $11.58 million. If you expect your estate to exceed that amount and owe estate taxes, a Will may not help you lower the estate tax burden on your assets. The time to take steps to protect your estate from the “death tax” is during your lifetime; to that end, the creation of a Trust can operate to minimize estate taxes; a Will is generally unable to do this.
If you would like to place conditions on your beneficiaries before they receive their inheritance, you should utilize a Trust and not rely upon a Will. Both a Living Trust (one created during your lifetime) or a Testamentary Trust (one created through instructions provided in your Will) can help establish conditional asset distributions.
Leaving money or assets directly to a beneficiary who has long-term medical needs may threaten his or her ability to qualify for government benefits and may also create an unnecessary tax burden. An estate planning document called a Special Needs Trust is a more effective way to transfer assets to those beneficiaries after you pass away than a Will.
While the concept of an inexpensive and simple Will is appealing to most prospective clients, that Will is merely one aspect of an estate planning package and standing alone it rarely meets the most common goals of reasonable people. If this article stirs your interest in the creation of a more complete estate planning package, contact us today to schedule your initial consultation.
Todd Miller is a monthly contributor and regularly writes and speaks on various legal topic including estate planning, probate and elder law. He formed the Law Office of Todd Miller, LLC, 1305 Southwest Blvd., Ste. A, Jefferson City, Missouri in 2006. He has been recognized as 2016 Adviser of the Year by GolfInc; Golf Tax Consultant of the Year by Boardroom Magazine three times; and “10 Best” attorneys by the American Institute of Family Law Attorneys and “10 Best” attorneys by the American Institute of Criminal Law Attorneys. Mr. Miller earned his juris doctorate degree from the University of Missouri School of Law in 1999 and graduated with honors from Lincoln University in 1991. You may find him at www.toddmillerlaw.com (573) 634-2838 or on Facebook, LinkedIn, and Twitter.
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