We use the phrase “estate plan” dozens of times every day. It is useful for us attorneys because it describes a group of documents. Unfortunately, estate planning sounds much fancier than it is. Sometimes an estate plan is a simple Will, advance directives, and a power of attorney. Sometimes people ask whether they even need a Will. The problem is that your life may be simple now, but complications arise as we age and death is rarely simple.
Planning for our later years and eventual death, although difficult to discuss, is crucial. Those who plan ahead are ensuring that their wishes are followed and needs met by creating clear instructions for their agents and heirs. These instructions come in the form of documents including:
- Power of Attorney
- Health Care Proxy
- Living Will
- Last Will and Testament or Trust
A Last Will & Testament (or “Will”) is a document that states how you want your assets handled after your death. In that document, you nominate the person who will oversee your estate (Executor) and list the beneficiaries of your assets. You can leave a beneficiary a set dollar amount or certain specific items– called a specific bequest. The document also lists “residuary beneficiaries.” Residuary beneficiaries inherit the remainder of your estate in set percentages or shares. Oftentimes people mistakenly assume that the Will is simply shown after your death and your Executor immediately act.
News flash! Your Will has to go through the court process of “probate” after your death. Probate is the legal process in which a Will is reviewed to determine whether it is valid and authentic. Without probate, the Will is just a list of your wishes and intentions. The process is what validates the document and results in an Executor being formally appointed by the court. It is only then that the Executor can collect and distribute assets to your beneficiaries.
In New York, many assume the process of passing assets to heirs is simple and clear. Besides the necessary legal documents, probate requires that the deceased person’s legal next of kin be notified. If the next of kin are being disinherited or are difficult to locate, probate will likely be a timely and costly process worth avoiding. Owning real estate in different states also presents issues because the Will has to be probated in each state where the property is located.
The simplest most efficient plan is to avoid probate altogether. Joint ownership of property will avoid probate, as will naming a beneficiary on an asset. Another option you may consider is a document called a Trust. Once signed, this document creates a legal entity, an “alter ego” of the creator of the Trust, which can then own things. Trusts can own real property, brokerage accounts, CDs – even your books.
A Trust acts much like a Will at your death. The Trust lists who will handle trust assets in the event of incapacity or upon death, called a Trustee instead of an Executor. The Trust lists how trust assets will be distributed at your death. The trust lays out the rules of the game, including the powers of the trustees.
There are many types of trusts both Revocable and Irrevocable that Estate Planning Attorneys uses for specific purposes. Therefore, it would be best to contact a professional to discuss your specific situation and not leave your estate to chance. Although doing nothing might be simpler for you now, it adds unneeded stress for those you leave behind.