There’s a lot of misinformation on the internet about how to plan for your estate properly. Very often, you will get that information from talking to your parents or your friends. We suggest you do your research and gather information from different sources. Friends or family may not know everything about estate planning law. Even when you talk to attorneys, they may steer you down the wrong road because they have some other incentives in mind.
Say, for example, you go to an attorney and ask them, how is the best way to plan for my estate? Or whether you should have a Will vs a Living Trust? A lot of Attorneys will tell you to create a Will. Now I’m sure many of you are familiar with the Last Will and how it works. And if you’re not, well, I’ll give you a few examples here of how a will works.
Typically a Will only operates when you die. So there’s no benefit while you’re alive to have a will. It’s designed so that when you pass on, it’s going to ensure that your estate is distributed to those beneficiaries who you designate in your Will.
Now therein lies the problem, in order for the assets to get to your beneficiaries. First, you have to die, and second, you’re going to have to go through probate because that is the legal process through which a Will operates.
Now, if you haven’t been through the probate process before, it’s not an enjoyable experience, and here’s why.
Why to avoid Probate?
You’re going to need an attorney. I don’t know about you, but most attorneys do not come cheap, especially when it comes to probate. That’s why so many of them will create Wills for $200 or $300. Because when you pass away, your family will come back to that attorney or their law firm. And you’ll ask them to handle the probate.
And that’s where they’re going to cash in because they’re going to have to handle that filing for you. The attorney will walk you through the entire process, which sometimes can take up to nine months. If somebody’s disputing it, we can be in probate for three, four, five years. If someone seizes an opportunity to make money off your estate because they can charge for handling your estate if your Will didn’t set up appropriately or adequately to stop them from charging.
The importance of setting up a Living Trust
What we recommend people to use is a living trust, because it bypasses probate altogether. Now what’s key here is you have to get this entity set up ahead of time. You have to set it up while you’re alive, of course. And then you have to fund the Trust.
A living trust can be set up as a revocable document, so you set it up, and you specify how you would like to have your estate distributed when you’ve passed on. And often the way it’s set up, if they’re a married couple, you’ll have this one Trust right here. It’s called a joint trust, and it’ll be for both spouses, and you’ll put all of your assets into the joint Trust. Then when the first spouse passes away, the survivor has it all.
Once the survivor passes away, then the assets will be distributed down to your beneficiaries. And this is where you put in a set of instructions on how they’re to receive the funds. Maybe you don’t want them to have all the funds outright; you want to stretch it out for a period of years, you can do that.
You want to incentivize them to go to college, to start their own business. You can put all of that into the Trust, so this is really important when you’re thinking about your estate, who do you want to receive your assets? And then how do you want them to receive them?
You must have this set of instructions, maybe you have children from a prior marriage, and we have other issues there as well that you want to take care of. So when the first spouse passes, maybe you want to ensure that assets are held over here for these children. So you can get as complicated as you want with this document.
And that’s why I tell people, this is the document you want to ensure that you create to hold all of your assets, and then when you’ve passed on, and then your spouse passes on everything that’s inside of here, bypasses probate.
You don’t need to bring an attorney in and pay the exorbitant fees to distribute out these assets to your beneficiaries per the terms of this trust agreement.
Now, when I talk about, you know, holding the assets in the Trust, what does that really mean?
Funding the Living Trust
What you want to do is you want to put all of your stuff into the living Trust. So if you have LLCs, they’re going to go inside of there, your bank account will be inside of there. Your personal residence will be inside of there, and your corporation will be inside of there. This process is referred to as called funding a living trust. All those assets get stuck inside that Trust, so wherever you go during your lifetime, let’s say I’m living in New York. And then I moved to California. All right, well, my living trust goes with me, and everything is held inside of it will go with, go to California, or wherever you go.
As long as you have your Trust fully funded, then it holds everything for you. It contains all that stuff, but let’s say we forget to put something inside our living Trust, a secondary residence we have in Phoenix, Arizona. Well, everything that’s funded inside the Trust will bypass probate altogether. However, this asset, the second residence in Phoenix, Arizona, since it wasn’t inside of the living Trust, will have to go through probate.
Other State Planning documents
I can not stress enough the importance of creating a state plan. When you create an estate plan online with our company AttorneyFee, you are not only creating the Living Trust, you’re also going to create a Pour-Over Will.
A Pour-Over Will is a Will that will act as a backup document to handle the that wasn’t transferred into the Trust, because you forgot to do it during your lifetime.
In addition to that, these are the other documents that every important for your state plan:
- Living Will is a document that describes how your affair should be handled if you’re in an irreversible vegetative state. When I mean affairs, I mean, personal affairs. Do you want to have hydration, food, pain medication? So this is important, when do you want them to pull the plug?
- Medical Power of Attorney. This document gives someone the power to deal with the Doctor, to make medical decisions on your behalf.
- Financial Power of Attorney. A financial POA is going to give someone the ability to handle assets that are outside of your Trust, that were not placed in there and deal with those financial accounts when you’re in irreversible when you’re in a coma or you’re unable to handle them on your own.
- Schedule of gifts. This document takes care of all the little things. Let’s say you have a watch or firearms, and you want them to go to a specific individual when you passed away. Well, that’s what you can do, you can put it down on the schedule of gifts, you write them out on there. And when you passed on, then those are the gifts that get made first. Because you can’t believe how many people fight over the stupidest things because they have sentimental value to them? So you want to make sure you have that addressed ahead of time before you passed. And you’ve listed that out during your lifetime who’s to receive those specific items. And the best part about it, you can change it at any time.
These are all key documents, every estate plan must-have: Schedule of gifts, will, Financial Power of Attorney, Medical Power of Attorney, and a living will. In addition to that most important Living Trust that bypasses probate, preserves your estate allows you to control it after you’ve passed on by having provisions in there that describe how the assets will be distributed to your children.