ESTATE PLANNING- DO I HAVE THE RIGHT STUFF?

Have you asked yourself any of the following questions?

  • DO I HAVE AN ESTATE PLAN?
  • DOES MY WILL, TRUST, POWER OF ATTORNEY, LIVING WILL DIRECTIVE AND HEALTHCARE SURROGATE DESIGNATION REFLECT MY CURRENT GOALS AND VALUES?
  • DO MY ESTATE PLANNING DOCUMENTS COMPLY WITH THE LAW, AND DO THEY PUT ME IN A BETTER TAX POSITION?
  • WHAT HAPPENS IF I BECOME INCOMPETENT AND UNABLE TO MAKE DECISIONS?
  • WHAT HAPPENS IF I AM ON LIFE SUPPORT AND HAVE NO CHANCE OF RECOVERY?
  • WHO IS GOING TO TAKE CARE OF MY CHILDREN IF I PASS AWAY?
  • WHO RECEIVES MY REAL OR PERSONAL PROPERTY WHEN I DIE?
  • HOW ARE MY DEBTS ADDRESSED WHEN I AM GONE?

 

These are just a few things to consider. You owe it to your family and yourself to address these inquiries. Preparation of an estate plan is essential to implement your strategies to help protect you and your family. Failure to have an effective estate plan in place, may subject your assets, health care, and care of your children to the direction of a court of law.

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Minimum Number of Instruments for a Successful Estate Plan

Estate plans and related documents may be comprised of various instruments to state and implement your instructions upon the occurrence of certain events. The most common vehicles of an estate plan come in the form of documents normally known as a Last Will and Testament, Living Will Directive, Health Care Surrogate Designation, and Power of Attorney. Many estate plans also encompass the establishment of a Trust.

Last Will and Testament

The foundation and cornerstone of an estate plan is the Last Will and Testament (“Will”). Failure to have a Will when one deceases (dying intestate) may limit your control over how you wanted your assets to be handled upon death. If you die without a Will, a court of law may determine who gets your possessions, who has care, custody and control over your children, direct the application of certain tax matters, and make determinations you may otherwise could have made. The execution of a Will may eliminate many of these concerns, help reduce family disputes, outline your directives, desires and wishes through instructions addressing how you would like your estate to be administered. For instance, if you die intestate, your spouse may not get one hundred percent of your assets.

A Will is a legal document by which the Testator (the person executing the Will) provides for how certain matters shall be handled when one passes away. A Testator must be at least eighteen years old, of sound mind, and not under any undue influence at the time of the execution of their Last Will and Testament for a Will to be effective. In Kentucky, “No will is valid unless it is in writing with the name of the testator subscribed thereto by himself, or by some other person in his presence and by his direction. If the will is not wholly written by the testator, the subscription shall be made or will acknowledged by him in the presence in at least two (2) creditable witnesses, who shall subscribe the Will with their names in the presence of the testator, and the presence of each other.” KRS 394.040.

Common Elements of a Will

  • THE APPOINTMENT OF AN EXECUTOR. An executor is a person or entity responsible for the administration and management of the estate. The executor’s job consists of the payment of debts, payment of funeral expenses, collection and management of assets, asset liquidation, and the distribution of assets to beneficiaries as directed by the Last Will and Testament. It is important that you chose wisely in your executor appointment. Many Testators appoint their spouse, children, a friend, or a corporate entity (such as trust department of a financial institution) as the executor. The executor selection should be based upon your belief that you can rely on that person or entity to properly, in their fiduciary capacity, carryout your instructions in accordance with your Will and the law.
  • PROVISION OF SPECIAL BEQUESTS. One can designate certain items that they want to be distributed to a specific beneficiary (e.g. my wedding ring to my daughter). Some Testators provide special bequests of personal property (excluding cash or any tangible personal property held for investment or income producing purposes) through the use of a memorandum. The Testator may direct in a memorandum who gets what items outside of their Will. A memorandum, if done in the testator’s own handwriting, allows one to modify the memorandum without going through the formalities and cost of drafting a Codicil (amendment) to the Will.
  • DISPOSITION OF RESIDUE. The ultimate disposition of your assets is one of the most important Will provisions. This provision designates who shall get what assets of the estate.
  • Minor children (those under eighteen years old) must have a guardian appointed if there is no parent alive. Therefore, the nomination of the individual who you wish to be responsible for your children should be identified as such in your Will. Otherwise, a court of law appoints someone who you may not want to have care, custody, and control over your children.
  • EXECUTOR/PERSONAL REPRESENTATIVE POWERS. A Will also may designate what authority an executor or personal representative may have in the administration of your estate. These powers include, without limitation, retention of assets, sale of assets, investment of assets, payment of income and principal to certain beneficiaries, division and distribution of assets, compromise and settlement of any claims, management of property, ability to encumber assets, and borrowing money.

Power of Attorney

An instrument establishing a Power of Attorney is an invaluable addition of your estate plan. A person provides an attorney-in-fact the power and authority to do things in one’s name such as to address financial items. There are basically two types of Power of Attorney. A limited Power of Attorney gives another authority to act on one’s behalf for designated purpose (e.g. purchase of real property). A general Power of Attorney provides your attorney-in-fact authority to stand in your shoes and address all matters as if they are that person. One should be careful in the appointment of an attorney-in-fact with a general power because of their ability to dissipate and manage your assets without your direction (as if you are giving them a blank check). Powers of Attorneys become effective normally immediately or upon the occurrence of a certain event (known as a Springing Power of Attorney). An example of a Springing Power of Attorney-springs into effect upon the occurrence of one’s disability or incapacity. Powers of Attorney are an important tool to utilize when one is unavailable or not able to address their financial concerns.

Declaration of Living Will Directive and Healthcare Surrogate

There may be instances in an individual’s lifetime when they are unable to make healthcare decisions on their own behalf. By executing a Declaration of Living Will Directive and Healthcare Surrogate, one appoints someone to make medical and other medical-like decisions on that person’s behalf. In the case of a Living Will Directive, one presents their instructions regarding life prolonging treatment, artificially provided nutrition and hydration when that person no longer has decisional capacity.

Trust

A Trust is an arrangement where a Grantor (person creating the trust) appoints a Trustee (person or entity managing the trust) to hold title to the assets of the Trust, manage those assets and distribute Trust assets to the beneficiaries (those individuals who benefit from the establishment of the Trust). The Trustee’s duties and powers are somewhat like those of an Executor of a Last Will and Testament. Whereby, the Trustee maintains Trust assets and distributes income and/or principal to the beneficiaries (such as a spouse or children). A Grantor may decide to provide certain individuals (e.g. spouse or children) limited benefits during their lifetime, and the terms of the Trust may afford others (e.g. grandchildren) with the ultimate distribution of Trust assets. There are generally two Trust types: a Revocable Trust (sometimes referred to as a Living Trust or an Inter Vivos Trust) and an Irrevocable Trust. The Revocable Trust enables the Grantor the ability to modify the Trust document during the Grantor’s lifetime. Thereby, giving the Grantor control on how the Trust is carried out upon certain changes in circumstances. It is important to understand that the income generated in a Revocable Trust passes through to the Grantor. An Irrevocable Trust is one that, once created, cannot be modified or revoked. An Irrevocable Trust is its own entity and must obtain a tax identification number. Income generated by the Irrevocable Trust is charged to the Trust.

There are various reasons for the establishment of a trust. These include, without limitation, (1) tax advantages (2) certain protections from creditors; (3) management of assets and distributions to beneficiaries for an extended time period after Grantor dies; (4) privacy- the existence or the terms of a Trust are not normally required to be publicly disclosed (unlike a Will if probated); and (5) estate planning purposes.

Conclusion

The implementation of an estate plan allows you to take comfort in the understanding that you are better protected, and your loved ones are provided a road map with direction on how you want your assets to be handled and distributed when you are unable to make decisions or when you are no longer breathing. The establishment of a Last Will and Testament, Power of Attorney, Declaration of Living Will Directive and Healthcare Surrogate, and a Trust go a long way to ensure that you and your family have peace of mind.

 

About Rick Greenberg

Following his graduation from Tulane University and The University of Louisville, Richard A. Greenberg began his practice as a private attorney focusing on business law and estate planning, and then expanding his practice to include environmental law early in his career. As an experienced and accomplished attorney, he has successfully advised and represented clients in the areas of business law, estate planning, and environmental law for nearly 30 years. In addition to practicing law, Rick remains an active member of his community. He has served on the board of a number of organizations and continuously raises money for well-deserving causes. Rick lives with his wife and their four children in Louisville, where they enjoy everything that the city has to offer, including its family environment, numerous independent restaurants, and exciting entertainment–particularly the live music and the many performances at the Kentucky Center for the Performing Arts.⁃ Rick Greenberg's Google+ Profile

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