What is estate planning?
An estate plan is a legally enforceable plan that controls how property should be held, administered, and/or distributed. It also provides instructions for any financial or medical decisions that you deem necessary. Proper estate planning not only puts you in charge of your finances, it can also minimize expenses and eliminate frustrations associated with managing your affairs if you become disabled, or in the event of your passing.
When someone passes away, his or her property must somehow pass to another person. In the Indiana, any competent adult has the right to choose the manner in which his or her assets are distributed after his or her passing. A proper estate plan also involves strategies to minimize potential estate taxes & settlement costs as well as to coordinate what would happen with your home, your investments, your business, your life insurance, your employee benefits (such as a 401K plan), and other property in the event of death or disability. On the personal side, a good estate plan should include directions to carry out your wishes regarding health care matters, so that if you ever are unable to give the directions yourself, someone you know and trust can do that for you.
Why is it important to establish an estate plan?
Unfortunately, many individuals don’t engage in formal estate planning because they don’t think that they have “a lot of assets” or mistakenly believe that their assets will be automatically given to their spouse or shared among their children upon their passing. If you don’t make proper legal arrangements for the management of your assets & affairs after your passing, the state’s laws will take over upon your death or incapacity. This often results in the wrong people getting your assets as well as higher estate taxes.
If you pass away without establishing an estate plan, your estate would undergo probate, a public, court-supervised proceeding. Probate can be expensive and tie up the assets of the deceased for a prolonged period before beneficiaries can receive them. Even worse, your failure to outline your intentions through proper estate planning can tear apart your family as each person maneuvers to be appointed with the authority to manage your affairs. Further, it is not unusual for bitter family feuds to ensue over modest sums of money or a family heirloom.
What does my estate include?
Your estate is simply everything that you own, anywhere in the world, including:
- Your home or any other real estate that you own
- Your business
- Your share of any joint accounts
- The full value of your retirement accounts
- Any life insurance policies that you own
- Any property owned by a trust, over which you have a significant control
What documents do I need for an estate plan?
A comprehensive estate plan should include the following documents, prepared by an attorney based on in-depth counseling which takes into account your particular family and financial situation:
- Revocable Living Trust - A Revocable Living Trust can be used to hold legal title to and provide a mechanism to manage your property. You (and your spouse) are the Trustee(s) and beneficiaries of your trust during your lifetime. You also designate successor Trustees to carry out your instructions in case of death or incapacity. Unlike a will, a trust usually becomes effective immediately after incapacity or death. Your Living Trust is "revocable" which allows you to make changes and even to terminate it. One of the great benefits of a properly funded Living Trust is the fact that it will avoid or minimize the expense, delays and publicity associated with probate.
- Pour-Over Will - If you have a Living Trust-based estate plan, you also need a pour-over will. For those with minor children, the nomination of a guardian must be set forth in a will. The other major function of a pour-over will is that it allows the executor to transfer any assets owned by the decedent into the decedent's trust so that they are distributed according to its terms.
- Last Will & Testament - A Last Will and Testament, also referred to as a Will, is a legal document which sets out the will maker's directions as to who should receive his or her assets upon their death. A Will also typically names someone to be your Executor, who is the person you designate to carry out your instructions. If you have minor children, you should also name a Guardian as well as alternate Guardians in case your first choice is unable or unwilling to serve. A Will only becomes effective upon your death, and after it is admitted by a probate court. When individuals pass away without a will, the State shall control how their assets are distributed. The State isn’t interested in reducing costs, streamlining the distribution of assets, or making sure that the deceased individual's wishes are carried out. This happens while the financial and family affairs are public record since the State is administering the assets as the State sees fit.
- Power of Attorney - A Power of Attorney for Property allows you to carry on your financial affairs in the event that you become disabled. Unless you have a properly drafted power of attorney, it may be necessary to apply to a court to have a guardian or conservator appointed to make decisions for you during a period of incapacitation. This guardianship process is time-consuming, expensive, emotionally draining & often costs thousands of dollars. There are generally two types of durable powers of attorney: a present durable power of attorney in which the power is immediately transferred to your agent (also known as your attorney in fact); and a springing or future durable power of attorney that only comes into effect upon your subsequent disability as determined by your doctor. Anyone can be designated, most commonly your spouse or domestic partner, a trusted family member, or friend. Appointing a power of attorney assures that your wishes are carried out exactly as you want them, allows you to decide who will make decisions for you, and is effective immediately upon subsequent disability.
- Medical Power of Attorney - The law allows you to appoint someone you trust to decide about medical treatment options if you lose the ability to decide for yourself. You can do this by using a Medical Power of Attorney. By creating a Medical Power of Attorney, you designate the person or persons to make such decisions on your behalf. You can allow your medical care agent to decide about all medical care or only about certain treatments. You may also give your agent instructions that he or she has to follow. Your agent can then ensure that healthcare professionals follow your wishes. Hospitals, doctors and other health care providers must follow your agent's decisions as if they were your own.
- Living Will - A Living Will informs others of your preferred medical treatment should you become permanently unconscious, terminally ill, or otherwise unable to make or communicate decisions regarding treatment. In conjunction with other estate planning tools, it can bring peace of mind and security while avoiding unnecessary expense and delay in the event of future incapacity.
- HIPAA Authorizations - Some medical providers have refused to release information, even to spouses and adult children authorized by durable medical powers of attorney, on the grounds that the 1996 Health Insurance Portability and Accountability Act, or HIPAA, prohibits such releases. In addition to the above documents, you should also sign a HIPAA authorization form that allows the release of medical information to your agents, your successor trustees, your family & other people whom you designate.
At Politakis Law, we provide our clients with comprehensive estate planning support that’s personalized to suit their specific needs. We know that preparing for the future can be difficult and overwhelming, but when you turn to us, you can rest assured that we will offer professional, knowledgeable guidance to help you reach your goals. Ready to get started? Schedule your virtual or in-person consultation with Politakis Law today for estate planning & elder law assistance in Schererville.