Do I Need Estate Planning?
You may have been told at some point that you need estate planning. That term is thrown around a lot, but many people do not know exactly what it means. So what is estate planning? Estate planning is the process of creating legal documents to direct the distribution of your assets upon your death. Estate planning often includes planning for your incapacity. The important aspects of estate planning include describing the distribution of your money and property and choosing the right people to make decisions for you if you are unable to make the decisions yourself.
What Documents are Part of an Estate Plan?
You have probably heard of the documents that entail an estate plan. Those documents are as follows:
- A Will. A Will is well-known as the document that describes how you want your assets to be distributed upon your death. A Will names an Executor of your estate to oversee the management of your estate until the money is turned over to your loved ones. A Will is filed with the Circuit Court upon a person’s passing, and a probate may or may not need to be opened. A Will can also name Guardians of minor children, a very important aspect for those with minor children who want to ensure that their choice in family members get custody of the minor children if something should happen.
- A Trust. A Trust is a wholly legal creation that acts as a stand-in for your own person. A Trust can survive a person’s death and own the assets that the person owned in life. This is a powerful tool in estate planning because it provides many benefits a Will cannot. For instance, a Trust can hold assets over a period of time and the Trustee can then distribute money in intervals to your loved ones rather than just leaving money outright to your loved ones. Many people with minor children choose to create a Trust so those minor children aren’t gifted their entire estate immediately. A Trust is also used to avoid probate, because assets passing through a Trust are generally not subject to probate. If done correctly, a Trust is a powerful tool to avoid probate and the expense that comes with it.
- A Power of Attorney for Property. A Power of Attorney for Property is different from a Will in that its purpose is to give another person authority to access your property and finances while you are still living but incapacitated. This permits a trusted individual to pay your bills on your behalf, enter into contracts, and sell property as needed. It is important to have a Power of Attorney for Property in place because if you become incapacitated without one, your family will have to petition a Court for Guardianship in order to make those same financial decisions. A Guardianship is a complicated Court process that is best avoided where possible.
- A Power of Attorney for Healthcare. A Power of Attorney for Healthcare is the healthcare corollary to the Power of Attorney for Property. A Power of Attorney for Healthcare gives authority to another person to make healthcare decisions for you if you are unable to make those decisions yourself. This allows a loved one to step in and make decisions immediately regarding how you wish to be treated while undergoing medical treatment. It can include end of life decisions and situations where you may want to be taken off of life support. Or in the alternative, you can specify that you want to be kept alive no matter what.
- A Living Will. A Living Will is simply a declaration that you make that states how you wish to be treated if you are incapacitated and there is no hope of recovery. Many people opt to not be kept alive artificially if their attending physicians have determined there is no hope of recovery. But that is something you can specify in your Living Will.
- A Transfer on Death Instrument or Trustee Deed. If you own real estate you will want to make sure it is part of your estate plan. You can create a transfer on death instrument, which transfers your real estate to a person or persons of your choosing upon your death, or you can create a Trustee Deed to transfer the real estate to a Trust that you have created. Both options have their pros and cons and it is best to speak to an attorney before attempting to change your real estate ownership.
What are the Consequences of Not Having an Estate Plan?
If you don’t have an estate plan, you are taking many risks and increasing the burden upon your surviving friends and family. Specifically, the following problems will arise:
- Who is to act as a fiduciary? Since you did not name an Executor, Power of Attorney, Trustee, etc., then it will be up to the Court to decide who can make decisions for you. The person chosen by the Court may not have been the person that you would have chosen.
- Who gets your assets? The State of Illinois has laws of descent and distribution that may not be in line with how you want your assets to be distributed. For instance, if you have a spouse and children, your spouse will be entitled to half of your assets and your children will get the other half. Most people would rather have their spouse get everything and then let the spouse provide for the children.
- Tax Liability. If you have not set up proper estate planning, you may be subject to State and Federal Estate Taxes. These taxes can be quite large, but there is planning available to minimize taxes paid. You are potentially leaving a lot of money on the table by not creating an estate plan.
As it becomes clear, it is absolutely necessary to have some form of estate plan regardless of your wealth or circumstance. Anyone 18 or older should have some or all of the above-mentioned documents in place.
Contact a Lake County Estate Planning Attorney Today to Get Your Documents in Place
Estate planning is essential, but it is something that is easy to put off. But don’t delay. It is important to have documents in place to protect your family and minimize the burden that a lack of estate planning will put on them. Contact a Lake County estate planning attorney today at 847-596-7494. Get your plan in place so you no longer have to worry.