What is Estate Planning?
Answers to Frequently Asked Questions Regarding
Probate, Wills, Estate Planning & Administration, and Powers of Attorney.
Estate planning is the process of anticipating and arranging, during a person's life, for the management and disposal of that person's estate during the person's life and at and after death, while minimizing gift, estate, generation skipping transfer, and income tax.
Whenever a person dies, his or her estate needs to be collected and managed. Estate administration involves gathering the assets of the estate, paying the decedent's debts and expenses, and distributing the remaining assets.
This is a common misconception people have regarding estate planning. For purposes of estate administration there are two types of property: probate property and non-probate property. Probate property is all real and personal property of a decedent, and any interest therein, which does not pass at death to another person by the terms of the instrument under which it is held (such as assets with beneficiary designations like life insurance and retirement plan benefits and assets owned by a trustee under a revocable trust agreement), or by operation of law (joint tenancy or tenancy by the entirety property). Non-probate property is real and personal property passing to persons by the terms of the instrument by which it is held, or by operation of law. One's Last Will & Testament only serves to determine the beneficiaries of your probate assets and designate who will administer your probate estate. One avoids probate by naming beneficiaries, creating joint tenancies, or a tenancy by the entirety with a spouse, or through a revocable living trust.
Why Make A Last Will & Testament?
What is Estate Administration?
A power of attorney is when you give another person authority to handle your personal business and make decisions on your behalf. A person creates the power of attorney for use in the event that he or she becomes incapacitated or otherwise unable to handle his or her own affairs. The type of power of attorney a person chooses to create depends on the situation and the type of decisions permitted under the legal document. A financial power of attorney authorizes your designated agent to handle your property, assets and personal business, while a health care power of attorney (or advance directive) authorizes your agent to make medical decisions on your behalf. Powers of attorney are intended to avoid the cost, expense, time delay and court supervision of a guardianship proceeding.
"I want to make a Will to avoid Probate."
A will serves a variety of important purposes. It enables a person to select his or her beneficiaries rather than allowing the state laws of descent and distribution to choose the heirs, who, although blood relatives, might be people who the testator would prefer not to be beneficiaries of his/her estate after death. A Will allows a person to decide who could best serve as the executor of his or her estate, distributing the property fairly to the beneficiaries while protecting their interests, rather than having the probate court appoint a person or persons according to state laws creating a priority in certain relatives to serve as administrator. A Will also safeguards a person's right to select an individual to serve as guardian to raise his or her young children in the event of his or her death.
What is an Estate?
An estate is the net worth of a person at any point in time alive or dead. It is the sum of a person's assets – legal rights, interests and entitlements to real and personal property – less all liabilities at that time. The issue is of special legal significance on a question of bankruptcy and death of the person.
After someone dies, someone (called the deceased person's 'personal representative', 'executor' or 'administrator') must deal with their money and property (the deceased person's 'estate'). They need to pay the deceased person's taxes and debts, and distribute his or her money and property to the people entitled to it.
What is Power of Attorney?