Estate Planning Documents Everyone Should Have

People hear the word “estate” and think that end-of-life financial planning is only for the extremely wealthy. You could not be more wrong. The extremely wealthy have the knowledge to surround themselves with lawyers and accountants to protect them from the dangers of improperly planned estates. The people most affected by the probate process and the estate tax are the middle class of this country.

I am married and have a daughter who is almost two years old. I like a house that used to have equity but today it’s mostly a mortgage. I rent my car, own a small business, and pay off student loans for my wife and me. We are a two-income household with a little money in the bank, but none of us will be able to withdraw it any time soon. If this scenario sounds similar to yours, you probably need an estate plan similar to the one I currently have. My estate plan includes the following:

Two Revocable Living Trusts – Both you and your spouse will be co-trustees of each other’s trust. You will have the same access to your assets that you have now. When the first spouse dies, the maximum tax-free distribution allowed for the year of death will fund a newly created bypass trust. The remainder of the assets in the deceased spouse’s trust will fund a newly created marital trust. The surviving spouse will have access to all assets in the spouse’s own living trust, as well as newly formed marital and bypass trusts. By setting up trusts this way, when the surviving spouse dies, we will be able to pass all assets to the children while paying only half (if any) of the estate tax. Using this technique will save your children over $500,000 in estate taxes. Plus, the trust will prevent probate entirely (saving you tens of thousands of dollars) and give your children complete asset protection, which means no one will be able to touch the assets you leave them, including divorce, creditors, or even the disputes.

Two Trust Property Assignments – This document helps fund trusts. For all real estate, we will sign and record deeds. For all bank and brokerage accounts, we will change the title to the property. However, for personal property, we do not have written title, so we place the property in trust and avoid probate by using an Assignment of Trust Property.

Will to Pour – There are many negatives to distributing assets through a will. First, all assets must be legalized. Second, the will does not offer control over the distribution of assets and does not offer asset protection to its beneficiaries. Another disadvantage is that a will becomes a public record as soon as the person passes away. Since the will will be recorded and everyone will be able to see it, we like to keep it as conventional as possible. We simply state that a trust exists and that the distribution will be handled by the trustee. We also state that any assets that you forgot to put into the trust during your lifetime must be “dumped” into the trust immediately. The will will also be used to name the guardian of your children.

Financial Power of Attorney – If you become incapacitated, either unconsciously or mentally unconscious, you must determine who you want to handle your financial affairs. It is very important to have this document on file considering that most married couples travel and vacation together. If an accident happens to one of them, it usually happens to both.

Health Care Surrogate Designation – In a similar line of thinking to the financial power of attorney, if you become incapacitated, either unconsciously or mentally unconscious, you must determine who you want to handle your medical decisions. In addition, the Health Care Surrogate Designation must also indicate if you want your surrogate to be able to see your medical records. Without this HIPAA language, the hospital will not allow your surrogate to see your records and make an informed decision.

Living Will – If you are in an “end of life” condition, meaning you are only kept alive by machines, the hospital will continue to keep you alive artificially no matter what your wishes are and no matter how much it costs. his family, unless you have a properly executed living will that allows your health care surrogate to give the doctor the necessary clearance to “disconnect.”

Execution and Financing – The biggest mistakes I see when reviewing plans written by other attorneys are execution and financing. I’ll be there to make sure all your documents run correctly. I will have my staff act as witness and I will act as notary. After signing the documents, I will scan them and save them on my computer, as well as on my external server, so that you can get a copy of them when you need it. I will also help you finance the trust. Creating the trust is similar to building a safe; it can only protect what you put inside it. I will draft the necessary deeds and guide you through the transfer of personal accounts to trust accounts.

Many people wait until it is too late. Tomorrow is not promised to any of us. If you truly care about your children and want to protect them both financially and emotionally after you’re gone, it’s imperative that you get your estate plan in place as soon as possible.

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