Many people mistakenly think that only the wealthy need to have estate planning. However, the reality is that everyone should have a basic estate plan, no matter what their net worth or income is since we all want to minimize the amount of stress, unnecessary costs, and confusion for our loved ones after our death.
Estate planning can be a very hard subject for many families in Alexandria to deal with. However, it is necessary to address it. Without proper documentation and preparation assets such as savings accounts, retirement plans and houses could end up being in limbo for many years and require expensive legal help at times to get matters straightened out.
Everyone should have at least the following three items at a minimum:
1. An up-to-date trust or will.
It is easy to create a will, but they do require assets to be distributed through probate, which is a legal process involving:
- The validation of a deceased individual’s will
- The identification, inventorying and appraisal of a deceased person’s property
- Payment of taxes and debts
- Ultimately distributing whatever property is remaining as is directed by the will.
Frequently the probate process in Alexandria involves a lot of court appearances and technical paperwork, and the court and legal fees that result from this process get paid out of the estate property – which reduces how much is left to pass on to the heirs.
It can be a lot more expensive to set up a trust and does require professional help. However, it does provide benefits that a will doesn’t. First of all, when they structured correctly, trusts help avoid conservatorship or guardianship if you should become incapacitated. The only time that a will works is after you die; by contrast, a will works all of the time, which includes those times of being incapacitated before death.
Usually, trusts avoid probate. This helps beneficiaries get access to assets faster and also saves court fees and time. Depending on how a trust is structured, it might also protect the estate from the heirs’ creditors and reduce the amount of estate taxes that are owed.
2. A Durable power of attorney
This is a written authorization where someone else is allowed to make a person’s legal and financial decisions if the individual becomes disabled, hospitalized or incapacitated in some other way.
Not every power of attorney is created equal. There are some that are put in place for only a short amount of time – for example, while an individual is vacationing overseas, but legal matters need to be dealt with at home. That is why having a durable power of attorney put into place is crucial. It just means that the agreement isn’t for just a temporary period. It might not go into effect until a later point in time, or it might be valid as soon as it is signed. What makes a power of attorney “durable” is that it will survive after you become incapacitated. (When a power of attorney isn’t durable, then if you become incapacitated it is revoked – right when you need it the very most.)
Powers of attorney that cover properly only should be given to very trustworthy people, ideally someone who is good with legal and financial matters. If desired, you can separate medical power of attorney and give that to someone else.
3. Beneficiary designated forms that are up-to-date.
Beneficiary designation forms for 401(k) accounts, life insurance policies and other assets usually will override any provisions that conflict within a trust or will. It is critical to ensure that all forms are reviewed and updated on a regular basis, ideally at least once a year.
An estate planning professional can help anyone update or create these necessary items in addition to providing suggestions for any other steps that need to be taken.
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Misha Gill is an Alexandria estate planning attorney for his firm, Speedwell Law, PLLC. If you would like assistance in setting up your own will, living trust, and other estate planning documents, Misha can be reached at (703) 553-2577 or firstname.lastname@example.org.
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