You've completed your estate plan and you feel like a major weight is off your shoulders. Keep in mind, however, that this is not a one-time process. Remember, changes in your life might affect your estate plan.
For example, any of the following instances in your life would require you to make changes in your estate plan: marriage or divorce, birth of children, adoption, receiving an inheritance, selling or buying a business or property, winning the lottery, retirement, or moving to a new state.
Any of these changes in your life will require you to reevaluate your estate planning choices. When possible, it is always a good idea to plan a meeting with your estate planning attorney before the changes actually take place. You may want to update your plan because you wish to change beneficiaries or change the share being given to a particular beneficiary. You might change your opinion about people or loved ones. Your family structure might undergo a change. All these instances would require a change in your estate plan.
Apart from changes in your own life, tax and estate planning laws also keep changing. There may be new strategies of which you wish to take advantage. In all probability, a change would affect your estate plan, requiring an update.
If you are a client of Anderson, Dorn & Rader, you know the best way to avoid missing a required update or revision in your estate plan is to attend our annual client appreciation event. At our next event you will be invited to participate in an annual maintenance program that will allow you to be aware of law changes and to amend your trust for no additional fee, in many cases. In any case you should schedule a regular estate plan update every three to five years. Like a fine automobile, your estate plan will function more smoothly when the time comes to use it if it has regular checkups and service. If it has been a few years, give us a call and let's review it together.
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Are you thinking about creating joint accounts to avoid the process of probate? These co-owned accounts are a common way to assure that your funds pass quickly to your loved ones without the need for probate. You should be aware, however, there are some pitfalls involved in joint accounts that you will need to consider.
A joint account can transfer to the surviving account holder(s) upon the death of another joint owner. For this to happen, the survivor(s) will need to provide a death certificate to the institution where the account is held.
Perhaps you wish for more than one person to inherit the money in a joint account. Unless their name is on the account, they will not, even if you have so stated in your will or trust. The only way for another person to have a share of this money, if they are not on the account, is for the surviving account holder(s) to gift it to them. Because the funds in the account are now owned by the survivor, making such a gift may cause your loved ones to pay a gift tax if the gift is over the annual exclusion amount.
Another issue arises when one of the account holders has not contributed money into the account. When this is the case, if the account owner dies and the money passes to non-contributors, these funds may be considered a gift and the gift tax may be applicable.
Joint accounts are especially troublesome when there are creditors of one of the account holders. If one of the account holders loses a lawsuit, the account may be frozen or garnished to cover the liability. For this reason many people should avoid holding joint accounts.
What if you wish to leave your account holdings to a child who is still a minor? If you put the child on your account, upon your death your account will be controlled by a court appointed guardian until the child reaches eighteen. Then at age eighteen the entire account is available to that young person.
It is usually a better option to have the accounts held in a revocable living trust. In the event of disability, the trustee will still have access to your account, but their creditors will not. If the beneficiary is still too young, it can remain in trust and made available for their education and other needs, but not turned over to them until an age when they are more likely to have matured.
Joint accounts can be one among many useful estate planning tools. They are simple to set up and administer, but they may have serious disadvantages. Be sure to visit a qualified estate planning attorney to become fully informed.
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While a living trust and living will may sound similar they are actually two quite different things.
A living trust is designed to help protect and distribute your assets. The assets are actually titled in the name of the trust and depending upon the terms of your trust, you may have complete control or hand the management of the trust over to someone else. Upon your death, beneficiaries receive the assets according to your terms in the trust. A method of avoiding probate, it’s a way of bypassing the lengthy and often expensive court process of distributing your assets.
A living will, however, is a legal way of informing your physician what you want done in case of a terminal condition. It’s used when you can no longer communicate your wishes due to an injury or illness that leaves you incapacitated. Your living will should be accompanied by a health care power of attorney. This document designates a person to speak on your behalf and relay your wishes with regard to certain medical treatments and decisions. It might relate to resuscitation, feeding tubes, etc. These "advance directives" also give loved ones peace of mind knowing that they are doing what you would have wanted.
It’s highly recommended that everyone draw up advance directives including a living will and a health care power of attorney, whereas a living trust is especially beneficial for those with a certain level of assets. To get help with a living will or living trust, a good estate planning attorney is your best bet.