The Legal Lowdown

WHAT IS ESTATE PLANNING?

Estate planning is the process of creating a plan to manage and distribute a person's or couple's assets during their lifetime(s) and after death. The goal of estate planning is to ensure that such assets are distributed in accordance with their wishes, while minimizing taxes and legal expenses.

WHAT ARE SOME TOOLS USED FOR ESTATE PLANNING PURPOSES?

1. Will: A will is a legal document that outlines how a person's assets will be distributed after their death. It also names an executor who will manage the payment of debts and distribution of assets.
2. Trust: A trust, usually referred to as a revocable trust or revocable living trust, is a legal document and arrangement in which a trustee holds and manages assets for the benefit of one or more beneficiaries. Trusts can help to minimize estate taxes, provide long-term management of assets and streamline distribution at death.
3. Life Insurance: Life Insurance policies can help to provide financial support for loved ones after an individual's death. They can be used to pay for funeral expenses outstanding debts and other expenses. 
4. Beneficiary Designations: Beneficiary designations can be used to name individuals, trusts or organizations as beneficiaries of account, life insurance policies and other assets.
5. Power of Attorney: A power of attorney is a legal document that gives another person(agent) the authority act on behalf of the individual who created the document(principal).
6. Advance HealthCare Directive: An advance healthcare directive is a legal document that outlines an individual's wishes for medical treatment if they become incapacitated or unable to make decisions themselves.

WHAT SORT OF INFORMATION WILL MY ESTATE PLANNING ATTORNEY NEED?

1. List of Assets: The attorney will need a list of all your assets including real estate, bank accounts, investments, and insurance policies, along with the approximate value of each asset. This will help the attorney determine which estate plan best suits your needs and provide guidance on estate tax planning strategies.
2. Beneficiary Information: We will need the names and contact information of the beneficiaries you want to include in your estate plan, for example, your spouse, children, and other family members. The attorney will also need to know whether any beneficiaries have any special needs or require specific considerations in the estate plan.
3. Goals & Objectives: It is important to convey to your attorney exactly what your goals are for your estate - such as how you want your assets to be distributed upon your death, who will be responsible for managing your assets if you cannot, and any specific instructions for the care of minor children or other dependents.
4. Agent Information: You'll need to provide the attorney with the names of persons that you want to name as your agents for financial and healthcare decisions.

WHAT IS THE ESTATE TAX?

The estate tax is a tax that is imposed on the transfer of wealth from a deceased person to their heirs. The “estate tax exemption” is the amount of money that can be passed on to heirs without being subject to such estate tax. In other words, if the value of the estate is less than the exemption amount, no estate tax will be due.

The estate tax exemption is set by the government and can vary over time, including by way of adjustments for inflation. It’s important to note that the estate tax exemption is different from the gift tax exemption, which is the amount of money that can be given away during a person's lifetime without being subject to the gift tax. 

WHAT IS THE PROBATE PROCESS?

Probate is the legal process through which a person's estate is settled after their death. Through probate a court will supervise the inventory, appraisal and distribution of the deceased person's assets, as well as the payment of any debts and taxes owed. The following are common, basic steps in probate. 

1. Filing a Petition:  The first step in the probate process is to file a petition with the court in the county where the deceased lived. 
2. Appointment of an Executor: The court will review the petition and, if everything is in order, appoint an executor to oversee the probate process. The executor is responsible for managing the deceased person's assets, paying any debts or taxes owed and distributing the assets to the beneficiaries named in the will.
3. Notice to Creditors: The executor must notify any creditors of the deceased person's death and give them an opportunity to file a claim against the estate for any debts owed.
4. Inventory and Appraisal: The executor will create an inventory of the deceased person's assets and have them appraised by a professional, if necessary.
5. Payment of Debts and Taxes: The executor must use the assets of the estate to pay any debts or taxes owed by the deceased person.
6. Distribution of Assets:  After all debts and taxes have been paid, the executor can distribute the remaining assets to the beneficiaries named in the will.
7. Closing the Estate: Once all of the assets have been distributed and all the necessary paperwork have been filed with the court, the estate can be closed and the probate process is complete. 

Individuals engage in estate planning often seek to minimize the need for probate, as it can be time consuming and expensive. This can be done through the use of trusts.