Estate Planning Law
1. Assets that are titled in your name are included in your estate. However, if they pass upon your death by beneficiary designation, such as life insurance, IRA benefits, retirement benefits, or some account that’s a transfer on death, or beneficiary designation, those would not be included in your name. But real estate titled in your name, personal property like cars that are in your name, bank accounts, stocks, bonds, any kind of physical assets, collections, jewelry, guns, anything that would be of a value. If it’s not a value then we usually don’t consider that included in your estate. We dispose of that. But assets that have value are included in your estate.
2. A health care Power of Attorney is a document that is created by an attorney for you that enables another individual to make medical decisions and medical arrangements for you, not only to make life and death decisions for you, but to enable you to get medical treatment, to be placed into a facility, such as a hospital, or doctor’s office, a nursing home, or to have any kind of medical treatment whatsoever. That’s what a Medical Power of Attorney would enable someone to do for you. It should be prepared by someone who knows state law, whether it be Florida or Kentucky, and what powers can be conferred upon the donee, the one who holds the Power of Attorney.
3. The cornerstone of a proper estate plan would be a will, a power of attorney, a living will and a medical power of attorney and a health care designate. The purpose of these cornerstone documents is to leave your property, have your property dealt with while you’re alive and you can’t take care of it yourself, or to have your medical decisions made for you while you’re alive obviously when you can’t make them for yourself. So those are the three documents: the will, the power of attorney and the living will/medical power of attorney.
5. A trust is a legal document. Many people use trusts to avoid probate in lieu of a will or in conjunction with what we call a pour over will. I don’t want to get too technical, but a trust is a recipient of title to your property. For example, if you own real estate, bank accounts, stocks and bonds, a car, tangible personal property like jewelry, firearms, any kind of property, you can transfer these in a trust. The purpose is to avoid probate, to have privacy, in some cases to avoid inheritance or estate taxes. Simplicity upon death is a major goal with any trust, and I’m finding more and more people these days who want to have living trusts.
6. When you ask what is a trust, which is a legal instrument and I have discussed this in the past, a revocable living trust is one of two types. The other type is an irrevocable. The revocable one you can change, cancel, void, mingle the property back and forth from your name into the trust or back into your name. An irrevocable trust, once the transfer of property occurs, it’s locked into that trust so a revocable living trust, which most people use, is one that is a very flexible, but it avoids probate and in conjunction with your will, it’s an effective estate planning tool.
7. Life insurance should be considered in the estate planning process. As an attorney, I don’t sell life insurance, but for a young family knowing that a widow or widower may need funds for taking care of kids upon the predeceasing spouse’s death, life insurance is a very effective tool. Life insurance also is very effective for large estates that are not liquid, to fund estate taxes. It’s used in many different ways, sometimes placed in trusts, sometimes payable into trusts, and sometimes strictly to a named beneficiary. Life insurance should always be considered.
8. In my years of practice I’ve find most of my clients coming in when they do their estate planning, and showing me a list of assets that are owned jointly with right of survivorship. It means that if they own their house in joint survivorship, for example, upon one person’s death title immediately goes to the other. It bypasses a will.
In Florida we call that tenancy by the entirety. Joint tenancy with a right of survivorship is an effective way to pass property without the formalities of probate. It avoids a lot of complications, makes things more quickly transferable upon the death of the predeceasing spouse. It’s effective. In larger estates it’s a tax strap. A competent attorney in estate planning will know when to tell you to keep it in joint tenancy or not.
9. We’ve all gone through life, and we’ve made our own medical decisions. Maybe as children we didn’t, but as we became adults, and all through the years we’ve dealt with our doctors, and our hospitals. As we get older, though, things happen medically to the detriment of you. Then, the Living Will comes into play. Your spouse could become a surrogate under a Living Will and make medical decisions for you. Need not be the spouse, it could be children. It could be friends, family, anyone. When you can’t make medical decisions for yourself the Living Will is there to assist someone else, under law, to make those medical decisions for you.
10. We’ve talked about trust already, but a spend thrift trust is a very strategic document. It is either a provision in a document or it’s a document in and of itself. First of all, you have the trust and your son Johnny who you want to leave your estate to, spends money like it’s going out of style. Or Johnny has criminal problems, drug problems, marital problems, civil suit problems. The spend thrift trust is designed to protect Johnny, or it could be your spouse or anyone who you leave property to, from themselves. Or from situations where their assets can be reached by people you don’t want to reach. The spend thrift trust limits the discretion of the trustee to access these assets, thereby keeping the assets in tact for long-term use.
11. If you can avoid probate, you’re making things simpler for your family if you die. It is the preferred way. I do not push it in my practice. It’s available through trusts or other estate planning options. In Kentucky, probate is not a very complicated process and is not the end of the world. There’s only a few steps in probate in Kentucky. It does take six months minimum to clear creditors. In Florida, there’s a three month period for creditors, but probate is very complicated in Florida. Especially if you’re a Florida resident, I would try to avoid probate. Kentucky, maybe less so, but still, it’s a good idea. It speeds the inheritance process.