Preparing an estate plan might sound like grim business, particularly since it deals with what happens to your estate should something critical ever happen. It is a necessity, however, especially if you anticipate issues such as legal wrangling, conflicts of opinion among family members and matters of probate, following your incapacity. To make the most out of your estate, you should keep these basic pointers in mind when estate planning:
Do you need an estate plan?
If you only have basic holdings (i.e., material possessions, some property, checking/savings accounts, other uncomplicated financial arrangements), then it might not even be necessary to draw up an estate plan; a simple will should suffice. If, however, the disposal of your estate is sure to run into some legal tangle (whether due to conflicting claims, issues with probate or similar other concerns), then an estate plan would be indispensable for you.
Create a will
Perhaps the most fundamental aspect of any estate plan, the will helps you specify who inherits your property and who serves as guardians to your children should something dire happen to you and your spouse. Wills can specify how you want your property to be distributed (whether to family, trusts, or charities), provisions for your children (even pets) and can name an executor who will manage the affairs. Note that in Connecticut, if you do not have any relatives to distribute property to, the state receives your estate.
Working around probate
Your will does not take into effect immediately following your incapacity; it first goes through probate. Probate is a process where your will is authenticated by a court that also names an executor. Afterwards, the creditors you have dealt with in the past will be notified that they can file claims against your estate, with the state government determining whose claims take higher precedence. The estate is also taxed when necessary. This process can put a drain on your estate, leaving what little is left of the funds to your beneficiaries.
To get around probate and ensure that your beneficiaries receive their due, consider options such as living trusts, property transfers and payable-upon-death beneficiary bank accounts. You could also make “lifetime gifts” that waive your ownership over select assets, discounting them from taxation.
The power of attorney
Your plan needs to clearly define to whom the power of attorney belongs to; your estate plan’s executor. You can have an executor with financial power of attorney and another with medical power of attorney. The former will handle financial decisions related to your estate while the latter makes health care choices in your stead.