ESTATE PLANNING DEVICES

ESTATE PLANNING DEVICES

 

An estate planning device is tools that estate planning attorney or individuals use when making an estate plan.  There are various devices in estate planning and I will discuss the basics of some of them here.  Some of these devices include wills, trusts, powers of appointment, and powers of attorney.

 

Wills: A Will, also known as testament or last Will, is a legal device where the testator names the person or persons who will manage his or her estate and states how his or her estate will be distributed at death.   At the testator’s death, the Will may be challenged in probate court.  If the court finds that the will is invalid, then the distribution of the estate will proceed under the laws of intestacy.

 

Trusts: A trust is an entity created to hold property.  The trustee holds the property for the beneficiaries’ benefit.  By transferring property to a trust, an individual is able to avoid having that property go through probate.  Trusts are commonly used for many purposes.  The terms of the trust are kept private unlike the terms of the Will which are may be made public in probate.  A trust can also provide more control as to how and when property is to be distributed at death.  Another purpose is if the individual wants to create a charity at death and use the accumulated wealth to benefit others through that charity.  The charity would then take the form of a trust.

 

Powers of Appointment:  Powers of appointment allow the testator to grant authority to a person to dispose of certain property under the will.  There are two types of powers of appointment, general and specific.  General power of appointment allows the holder of the power of appointment to appoint himself or his or her creditors to have the beneficial use and enjoyment of the specific property under the power of appointment.  A specific power of appointment on the other hand, allows the holder of the power of appointment to distribute the property among a specified group of people.  Depending on whether it is a general or specific power of appointment, the tax consequences may differ.

 

Powers of Attorney:  A power of attorney grants another person to act on your behalf, whether in private affairs, business, or legal matters.  Powers of attorney come in many variations such as the durable, healthcare or springing powers of attorney.

 

WHAT IS ESTATE PLANNING?

WHAT IS ESTATE PLANNING?

 

Before being able to answer what is estate planning, we must determine what is an estate in the first place.  An estate is essentially everything you own.  This includes all tangible and intangible possessions such as your care, any real estate you own, money, jewelry, life insurance, checking and savings accounts and investments to name a few.  Therefore, everyone has an estate, no matter how small or large.  An individual’s estate must be disbursed at the time of their death.

 

Estate planning is used to control how your estate is disbursed after death.  Essentially, an estate plan is a set of instructions stating who receives what part of your estate and when do they receive it while also minimizing the amount of taxes, legal fees, and court costs.  The recipients of any part of an estate are called beneficiaries.  If an individual does not have an estate plan, then the default rules are provided by the State, which is generally costly and is not in line with the individual’s intentions of how to disburse their estate at death.

 

Estate planning is for everyone, no matter how old or young, wealthy or not, because everyone has an estate.  An estate plan has other benefits besides fulfilling the individual’s wishes of how to disburse their estate and creating one does not have to be expensive.  Among other benefits, an estate plan helps you organize records and correct titles, provides peace of mind knowing that your wishes will be fulfilled and the right beneficiaries will receive what you intend them to receive, and it can maximize the amount your beneficiaries receive by minimizing the taxes and costs paid by your estate.

estate_planning_super_lawyer