What is Estate Planning and Why Do I Need It?
by Julie O'Brien on September 22, 2009
The word “estate” can evoke an image of ownership of vast amounts of property by a wealthy person – hardly the image most of us have of ourselves. Yet “estate planning” is something each of us needs to do on some level – acknowledging that change is inevitable, and that we all have people and things about which we care. An estate plan is a coordinated effort to make decisions about the future, and a well-considered plan involves consideration of several different types of legal documents and their interrelationship to one another. Some of the documents that commonly make up an estate plan include:
A will is the most common estate planning document. As estate planning attorneys frequently say, if you die without a will, the state will provide one for you (disposition of assets according to the laws of intestacy.) The laws of intestacy provide a generic one-size-fits-all scheme for the distribution of assets. Understandably, most of us prefer to make our own choices.
A will can be simple, or it can be quite complex. A person or entity is named to oversee the estate – called a personal representative (sometimes referred to as an “executor” or “administrator”) Some of the functions of a personal representative are taking control of assets, paying bills and/or taxes, and distributing assets after death in accordance with the provisions of the will.
A trust can sometimes be a will substitute, or it can be part of a will or work in conjunction with it. A trust basically creates a three-way relationship among the person establishing the trust (the “trustor” or “grantor”), the person(s) for whose benefit the trust is created (the beneficiary), and the person overseeing the trust assets (the “trustee”). In many circumstances, one person fills more than one of these roles.
A crucial attribute of a trust is the ability to extend your wishes for how your assets are distributed past the time of death or disability – or even just past the end of the wish to continue managing your assets. Another desirable feature of a trust is the responsibility (referred to as “fiduciary duty”) the trustee must take on in order to protect trust assets for the benefit of the beneficiary according to the wishes and directions of the trustor.
The Community Property Agreement
Washington law provides that spouses can enter into a community property agreement, a binding contract between them. The most common form of a community property agreement is referred to as “three-pronged,” because it accomplishes three purposes: (1) converts existing separate property into community property, (2) provides that all property acquired in the future will be community property, regardless of the source of funds used to acquire it; and (3) transfers all property to the surviving spouse upon the death of the first spouse to die. While such agreements seem quite simple, they should be tailored to each couple to determine if they truly desire all three of these purposes. In addition, a community property agreement should be judiciously used because it can have serious consequences in the future. It gives a spouse an instant interest in all your property and inheritance right which may not be contested. It can easily interfere with tax planning, can affect the outcome of a property settlement in divorce, and can prevent planning for Medicaid benefits. Once entered into, most community property agreements cannot be revoked by one party alone.
Durable Power of Attorney for Property
A durable power of attorney for property designates a person who will make property and financial decisions for you in the event you become incapacitated or otherwise unable to make these decisions for yourself. This document has a great deal of flexibility in how it can be used – the powers it grants to the designated person (referred to as the “attorney-in-fact”) and in the circumstances under which it can be used. Typically, this document provides that it will only be effective upon your incapacity or disability (what is known as a “springing power”), but it can be, and sometimes is, effective immediately.
At The Meyer Law Firm, P.C., you will find professionals with the knowledge of this area of law combined with the experience and sensitivity to fully appreciate your particular needs. If you think you would like to know more about making an estate plan, give The Meyer Law Firm, P.C. a call to set an appointment to review your situation.