A lot of people think that estate planning boils down to the execution of a simple will. This is definitely part of the equation, but there are other matters to consider, and a will is not always going to be the best asset transfer vehicle to utilize.
You should definitely take pause before you decide that you are going to use a will as the centerpiece of your estate plan. One of the potential problems with a will is the fact that you are leaving lump sum inheritances to your heirs.
In some cases, you may feel comfortable with this arrangement, but there are people that leave bequests to loved ones that are not good with money. There is also the matter of minor children, or young adults that are not prepared to handle significant resources.
Estate administration is another consideration. If you use a will, you would name an executor in the document to act as the administrator. The executor would not be able to act independently and distribute assets to the beneficiaries right away.
They would admit the will to probate, and the court would supervise while the estate is being administered. The inheritors receive nothing while the estate is being probated, and it will take eight months at minimum. More complicated cases can take considerably longer.
Another disconcerting thing about probate is the loss of privacy. You probably do not want anyone and everyone to know how you decided to distribute your resources, but probate records are available to the general public.
Expenses that accumulate reduce the value of the estate, and this is yet another drawback. A revocable living trust is an alternative vehicle of asset transfer that would facilitate probate avoidance. The court would simply not be involved when the estate is being administered.
If you establish a living trust, you would be the trustee while you are living, so you would have total control of the assets. A successor that you name in the trust declaration would administer the trust after you are gone.
They would be empowered to administer assets on behalf of a minor child if these circumstances develop. The successor trustee would also manage assets on behalf of adult beneficiaries if you feel as though you would like to take the financial decision-making out of their hands.
You can set up a distribution schedule and record it in the trust declaration. If you want the beneficiaries to receive a certain amount each month, or distributions of the trust’s earnings broken up into monthly installments, you can record these instructions.
A living trust is one of many different trusts that can be utilized when you are planning your estate. As a layperson, you are not going to be aware of all the options that are available, and this is why you should work with an attorney to develop your plan.
Letter of Last Instruction
A letter of last instruction is not legally binding, but it is a very important part of an estate plan.
The executor or trustee is going to need certain information to be able to complete their tasks effectively. We are talking about access codes, keys to property, hardcopy documents, login information for financial accounts, etc. You can pass along this information in a letter of last instruction.
Your plan should address end-of-life issues and possible cognitive impairment. A living will is an advance directive for health care that you use to state your life support preferences, comfort care medication choices, and organ and tissue donation designations.
A medical scenario that is not related to life-support that involves decision-making can present itself when you are unable to communicate. You can name a representative to act on your behalf under these circumstances in a durable power of attorney for health care.
To give your agent the ability to access your medical information, you should sign a HIPAA release form.
With regard to the inability to effectively manage your financial affairs, you can name a disability trustee if you have a living trust. This can be the successor that will take on the role after your passing, or you can name a different disability trustee.
To account for the management of financial assets that are not held by a trust, you can add a durable power of attorney for property.
Schedule a Consultation Today!
We are here to help if you are ready to work with a Hilton Head, SC estate planning lawyer to put a plan in place. You can call us at 843-815-8580 to schedule a consultation appointment, and you can use our contact form if you would rather send us a message.