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What documents should I have for a comprehensive estate plan?
- Will
- Durable Power of Attorney
- Health Care Proxy
- Living Will
- Living Trust, if appropriate
What is a will?
A will is a written declaration of how an individual wants property titled in his or her name only distributed after death, and who the individual wants to administer his or her estate.
A will also nominates a guardian if there are any minor children.
Why and how should I change my will once it has been signed?
You should review your will every three to five years, to make sure it still accomplishes your desires; however, it may be necessary to review it even more frequently
if:
- You marry, divorce, or separate (marriage revokes a will entirely, while divorce revokes the provisions concerning the spouse);
- A child or grandchild has been born;
- You have sold or bought a house or other significant asset;
- There is a change in tax laws;
- Your assets have substantially increased or decreased in value; or
- Your relationship with a beneficiary has changed or a beneficiary's needs have changed.
A will can be changed, revoked or replaced by a new will at any time, so long as you are competent and you follow the formalities of signing a valid will.
To be considered competent, you must understand the nature of your act.
You can also change your will through the use of a codicil, which is an amendment or supplement to a will.
What is a personal representative?
A personal representative is a person named in a will who is responsible for overseeing the distribution of property and for paying valid debts of the estate.
Who should I appoint as personal representative of my estate?
People usually choose to appoint a spouse, a close family member or a close friend as their personal representative. However, if you have a particularly complex estate,
you may want to choose a professional, such as a bank or an attorney. Either way, you should choose someone who is trustworthy and competent.
What is a durable power of attorney?
A durable power of attorney is a document that you execute to give another person (known as the agent) the right to act on your behalf regarding your financial
affairs in the event that you become incapacitated.
What is a health care proxy?
A health care proxy is a document that you execute to give another person (known as the agent) the right to act on your behalf regarding your health care decisions in the even that you become incapacitated.
Who should I appoint as my agents in my health care proxy and my durable power of attorney?
People usually choose to appoint a spouse, a close family member or a close friend as their agents in their health care proxies and durable powers of attorney. However, some people prefer to appoint
a professional, such as a lawyer. Either way, you should choose somebody who is trustworthy and competent.
What is a living will?
A living will is a set of instructions that memorializes your wishes in the event you are diagnosed with a terminal illness. In Missouri, you cannot instruct in a living will that you do not want artificial
water or feeding tubes only your health care proxy can direct your health care providers in this regard.
What is a trust?
A trust is a device for holding property. There are generally three parties to a trust: the settlor, the trustee and the beneficiary.
The settlor is the original property owner who transfers the property into a trust. The trustee is the legal owner of the property who holds and manages the
property for the benefit of the beneficiary (or beneficiaries). The trustee is under a legal obligation to act fairly towards the beneficiaries.
Property in a trust is non-probate property, meaning it does not go through the probate process when the settlor dies.
What is a living trust?
A living trust is merely a trust that was established during the settlor�s lifetime.
What is a guardian?
A guardian is a representative who oversees the personal affairs of a person who is unable to do so, as in the case of a child or an incapacitated person.
A conservator is a representative who oversees the finances of a child, or disabled person. Guardianships & Conservatorships are established by court order.
What is the federal estate tax?
When a person dies, their assets get transferred to his/her heirs. The federal government imposes a tax on these after-death transfers if their combined value
is equal to or greater than the applicable exclusion amount ($12,060,000 for 2022).
Will my estate have to pay taxes after I die?
It depends. The federal government imposes an estate tax at your death only if your property is worth more than a certain amount, and that amount depends on
the year of death. But, because of the unlimited marital deduction, all property left to a U.S. citizen spouse is not subject to tax. Estate tax is also
not assessed on any property you leave to a qualified tax-exempt charity.
Your estate may also have to pay income taxes after your death.
Can't I just give all my property away before I die and avoid estate taxes?
It depends. If you give away your property during life, you may be subject to a �gift tax.� While making smaller gifts which are not taxable during life can
yield substantial estate tax savings, you should be wary of giving away all your possessions during your lifetime, as you may run the risk of
needing the assets for your care later in life.
What is a gift tax?
When you give away assets before you die, such as stock or cash, for less than the assets are worth, you have made a �gift.�
The federal government may impose a gift tax on this type of transfer.
Is every gift subject to a gift tax?
No. Each year, you can gift a certain amount (known as the "annual exclusion") gift tax free. Presently, you can give up to $16,000 per recipient to as many recipients as you would like. If you are married, each spouse can give each recipient up to $16,000 for a total of $32,000 per recipient.
Other types of gifts that are not taxed include: charitable gifts, gifts made to a spouse, and gifts in the form of direct tuition payments or medical expense payments made on behalf of another.
What is the unlimited marital deduction?
The unlimited marital deduction is a provision of federal tax law which allows a married individual to transfer as many assets during life or at death to his or her spouse
(as long as the spouse is a US citizen), without any gift or estate tax consequences.
Should I try to create a plan that will avoid probate after I die?
Probate can be a relatively expensive and time-consuming process. It can be a useful process if you anticipate your estate having complicated problems,
such as numerous debts that can�t easily be paid from the property you leave.
Deciding whether to avoid probate depends on a number of factors, most notably your age, health and financial status. A younger person with fewer assets may
be better off with a simple will, and in that situation, adopting a sophisticated probate-avoidance plan now may mean you�ll have to re-do it as your life
situation changes. But if you�re older, or in poor health or own a significant amount of property, you will probably want to do some estate planning to avoid probate.
If so, how can probate be avoided?
Probate can be avoided in a number of ways. Assets that avoid probate are called non-probate property. Perhaps the most popular method is the use of trusts.
Because the terms of the trust dictate how the property will be distributed, there is no need for trust property to pass through probate.
The same is true for life insurance policies; because the beneficiary is explicitly named in the policy, there is no question as to who gets the property
at the owner�s death, and thus probate is avoided.
Property held by joint tenancy also passes outside of the probate process. Joint tenancy is a form of ownership in which two (or more) persons share
undivided ownership of property during life. When one owner dies, his or her share automatically passes to the other owner(s).
How do I begin the estate planning process?
Call us to schedule an initial appointment with one of our attorneys at no cost to get the estate planning process on its way.
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