Estate Planning Devices
Estate planning devices are used to transfer your property to your beneficiaries after death. The two most popular estate planning devices are will and living trusts. A will leaves some or all of your property to beneficiaries of your choice. It also can be used to name an adult guardian for your young children. The major disadvantage of a will is that generally it must go through probate. Probate is a costly and complex court proceeding that rarely provides any real benefit to your beneficiaries. A living trust on the other hand is similar to a will but has the advantage of avoiding probate.
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Other ways to transfer property while also avoiding probate include pay-on-death accounts, transfer-on-death real estate deeds, transfer-on-death vehicle registration, and joint tenancy. Under the laws of joint tenancy, the surviving joint tenant automatically receives the interest of the deceased joint tenant without going through probate. Generally, all of the above estate planning devices except for joint tenancy may be changed, amended, or revoked at any time and for any reason before your death. However, in order to do so, you must be legally competent. Being legally competent basically means having the mental capacity to make and comprehend your decisions regarding your property. It is also important to understand that the above estate planning devices do not reduce the value of your estate at death for estate tax purposes. Please advise your estate planning attorney if you believe your estate may be subject to estate taxes.
Estate Planning Overview
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Estate planning is basically deciding who gets your property and how the property will be transferred at your death. Many hesitate or post-pone making an estate plan for many reasons. Whatever the reason is, it is nonetheless important to have at least a basic estate plan if you own any property that matters to you and/or you have any minor children (under 18). This is especially true if you own an property that you want to go to a specific person after death. The major concerns for those with minor children are who will be raising the child and who will be making the children’s financial decisions. Legally, minors cannot own any significant amount of property outright.
When making an estate plan, there are of course many other things to consider. For instance, planning for incapacity where you are not able to take care of your medical and financial affairs. It is important to determine who will be responsible to make those decisions for you. Also, another concern is the possibility of your estate being subject to estate taxes upon your death. Further, another concern that is common to anyone is probate. Probate is a costly and time-consuming legal proceeding where the court is involved in determine who receives your property at death.
With all these reasons to have an estate plan, the next question is how can all this be accomplished. There are several common devices used in estate planning. Some of the most common devices used are wills, living trusts, powers of attorney and healthcare directives. Wills and trusts to leave some or all of your property to beneficiaries you choose. However, unlike a will, trusts are not subject to probate. Nevertheless, pour over wills are commonly used in combination with trusts. Powers of attorney and healthcare directives are used to allow a person of your choosing to make financial and medical decisions in case of incapacitation.