Creating an estate plan for the first time can be a bit intimidating for the uninitiated. If you find yourself ready to get started on your estate plan, but unsure how to proceed, you are hardly alone. The old adage “knowledge is power” is applicable here. Learning more about some of the most commonly used estate planning techniques may help you to decide what your estate planning goals are as well as help you to understand how you can reach those goals. For more personalized assistance with your estate plan, or to discuss specific questions or concerns, please feel free to contact the team at Thee Mendel Law Firm, L.P.
Techniques for Distributing Estate Assets
When you think of estate planning, you likely think of planning for the distribution of your assets. Common techniques used for accomplishing this most common of all goals include:
- Last Will and Testament – using a Will to distribute estate assets is the most traditional technique. A Will allows you to make specific and/or general gifts to as many beneficiaries as you wish.
- Trust – a trust can be activated prior to your death (living trust) or at the time of your death (testamentary trust). Assets are then transferred into the trust and managed by a Trustee until distributed to beneficiaries according to the terms of the trust agreement.
- Lifetime Gifting – some people choose to gift estate assets prior to death. This technique can have tax benefits and allows you the added benefit of being around to see you beneficiaries enjoy and use the gift.
Techniques for Avoiding Probate
Probate is the legal process that is required following a death. Formal probate can be extremely time consuming and the costs may diminish the estate’s value. Common techniques used to avoid probate include:
- Trust – trust assets bypass probate and may be distributed immediately if the terms dictate.
- Joint title – in most states, your interest in property titled jointly with “right of survivorship” passes automatically, outside of probate, to the surviving owner(s).
- POD or TOD account designation – “payable on death” and “transfer on death” account designations mean the assets held in the account automatically transfer to te named beneficiary when the account holder dies.
Techniques for Planning for Incapacity
Incapacity can strike at any time. If you were to become incapacitated tomorrow, what would happen to your assets? Who would make decisions for you? The following techniques allow you to plan ahead and answer those question:
- Power of attorney – a POA lets you appoint an Agent who will have generalized or specific authority to act on your behalf in legal matters.
- Revocable living trust – you appoint yourself as the Trustee and a trusted loved one as the successor Trustee. Major assets are transferred into the trust and managed by you unless you become incapacitated. If that occurs, your chosen successor takes over automatically, giving him/her control of trust assets.
- Advanced directive – lets you appoint an Agent to make healthcare decisions for you if you can’t make them.
Techniques for Parents of Minor Children
If you are the parent of a minor child, estate planning takes on a heightened importance because your child cannot inherit directly from your estate. Common techniques used by parents include:
- Last Will and Testament – although you cannot use your Will to gift assets to your minor child, your Will offers another extremely important benefit. Your Will is the only opportunity you have to nominate a Guardian for your child in the event one is ever needed.
- Power of attorney – you should always execute a POA giving a caregiver the authority to consent to medical treatment for your child in your absence.
- Life insurance – if you have yet to build up a significant estate, purchasing additional life insurance ensures that there will be sufficient funds available to support your child in the event of your death.
- Trust – a trust can be used to protect and grow the inheritance you leave behind for your child. Moreover, it can provide for staggered distributions of that inheritance so that your child isn’t handed a large lump sum at a very early age when he/she is ill prepared to manage it.
Techniques for Protecting Assets
If you fail to protect your assets while you are here, there won’t be any assets left to distribute upon your death. Techniques that help with asset protection include:
- Irrevocable living trust – assets that are transferred into an irrevocable living trust cannot be reached by creditors because you no longer have any legal ownership in the assets nor can you modify or terminate the trust because it is an “irrevocable” trust.
- Medicaid trust – this is a specialized trust that protects your assets in the event you need to qualify for Medicaid in the future to help cover the high cost of long-term care.
If you have questions or concerns about which estate planning techniques are right for your plan, contact an experienced Texas estate planning attorney at The Mendel Law Firm, L.P. by calling (281) 759-3213 to schedule your appointment today.