The ABC’s of Estate Planning by Attorney Gerald Cummings ~ Part 1 of 5
Many people have put off getting their will, trust, and other estate planning documents done, often because they “don’t have the time” or because they believe that these documents are not necessary. This article will address the need for estate planning and the need to get your estate plan done as soon as you can.
Why Estate Planning?
At its most basic, estate planning involves putting down, in writing, what you want to happen with your stuff when you pass. For people with minor children, however, estate planning involves much more than that. For those people, estate planning involves deciding who will raise your children and who will manage your assets for your children should you be unable to do so. These are critical issues that need to be addressed by any parent of a minor child.
Estate Planning Documents
There are several documents that make up a basic estate plan. They are:
Will – A will is a document that states who gets your stuff (real estates, bank accounts, stocks, bonds, mutual funds, personal belongings, etc.; it does not affect IRAs, annuities, life insurance, or any other type of account or investment in which you have named a beneficiary) after you die. If you have less than $100,000, a will is appropriate. If you have more than $100,000, you should consider a living trust as it will avoid probate. Probate is a very expensive and time consuming process. The attorney’s fees to probate a $600,000 estate are $15,000. In addition, your executor will be able to be paid this amount as well. A will is also where you nominate a guardian for your minor children. A guardian is the person who will raise your children.
Living Trust – A living trust is similar to a will with the added benefit that it avoids probate at death. It is simply a contract between the creator of the trust (the settlor) and the manager of the trust (a trustee) who agrees to hold property for the benefit of another (the beneficiary). Usually, the settlor, trustee, and beneficiary are the same person or persons. A living trust names a successor trustee to serve when the original trustee is no longer able to do so. The successor's job is to carry out the terms of the trust either by using the trust for the benefit of the settlor if he or she is still alive but unable to manage the trust or distributing the trust to the beneficiaries if the settlor has passed away. Because of these provisions, all property in the trust avoids probate, saving your estate and your children or other beneficiaries thousands of dollars.
Financial Power of Attorney – This is a document in which you name someone (known as your agent) to make financial decisions on your behalf, typically after being certified, in writing, by one or more physicians, that you are incapacitated and unable to manage your financial affairs.
Advanced Healthcare Directive – This document names someone to make healthcare decisions for you (your agent) if you are unable to do so yourself. In addition, you can specify what types of healthcare decisions you wish made for you, including decisions regarding termination of life support.
A complete estate plan will usually contain all of these documents. If you have any questions about this article or any of the topics discussed, please feel free to call me at (408) 286-2122.
Gerald W. Cummings is an estate planning attorney in San Jose, California. He works with families to help them achieve peace of mind, the peace of mind that is obtained by putting their wishes down in their wills, trusts, and other estate planning documents. He can be found on the web at www.cummingslegal.com.