1. What is estate planning?
2. Who needs estate planning?
3. What is included in my estate?
4. What is a will?
5. What is a revocable living trust?
6. What is probate?
7. Who should be my personal representative or trustee?
8. How should I provide for my minor children?
9. Are there other ways of leaving property?
10. What happens if I become unable to care for myself?

1. What is estate planning?

Estate planning is the process by which an individual or family arranges the transfer of assets in anticipation of death. An estate plan aims to preserve the maximum amount of wealth possible for the intended beneficiaries and flexibility for the individual prior to death. Estate planning is a process. It involves people—your family, other individuals and, in many cases, charitable organizations of your choice. It also involves your assets (your property) and the various forms of ownership and title that those assets may take. And it addresses your future needs in case you ever become unable to care for yourself.

Through estate planning, you can determine:

• How and by whom your assets will be managed for your benefit during your lifetime if you ever become unable to manage them yourself.
• When and under what circumstances it makes sense to distribute your assets during your lifetime.
• How and to whom your assets will be distributed after your death.
• How and by whom your personal care will be managed and how health care decisions will be made during your lifetime if you become unable to care for yourself.

Many people mistakenly think that estate planning only involves the writing of a will. Estate planning, however, can also involve financial, tax, medical and business planning. A will is part of the planning process, but you will need other documents as well to fully address your estate planning needs.

2. Who needs estate planning?

You do—whether your estate is large or small. Either way, you should designate someone to manage your assets and make health care and personal care decisions for you if you ever become unable to do so for yourself.

If your estate is small, you may simply focus on who will receive your assets after your death, and who should manage your estate, pay your last debts and handle the distribution of your assets.

If your estate is large, you will also want to discuss various ways of preserving your assets for your beneficiaries and reducing or postponing the amount of estate tax which otherwise might be payable after your death.

Unless you plan ahead, a judge will simply appoint someone to handle your assets and personal care, and your assets will be distributed to your heirs according to a set of rules known as intestate succession.

Contrary to popular myth, everything does not automatically go to the state if you die without a will. Your relatives, no matter how remote, and, in some cases, the relatives of your spouse will have priority in inheritance ahead of the state.

Still, they may not be your choice of heirs; an estate plan gives you much greater control over who will inherit your assets after your death.

3. What is included in my estate?

All of your assets. This could include assets held in your name alone or jointly with others, assets such as bank accounts, real estate, stocks and bonds, furniture, cars and jewelry.

Your assets may also include life insurance proceeds, retirement accounts and payments that are due to you (such as a tax refund, outstanding loan or inheritance).

The value of your estate is equal to the “fair market value” of all of your various types of property—after you have deducted your debts (your car loan, for example, and any mortgage on your home.)

The value of your estate is important in determining whether your estate will be subject to estate taxes after your death and whether your beneficiaries could later be subject to capital gains taxes. Ensuring that there will be sufficient resources to pay such taxes is another important part of the estate planning process.

4. What is a will?

A will is a traditional legal document which:

• Names individuals (or charitable organizations) who will receive your assets after your death, either by outright gift or in a trust.
• Nominates a personal representative who will be appointed and supervised by the probate court to manage your estate; pay your debts, expenses and taxes; and distribute your estate according to the instructions in your will.
• Nominates guardians for your minor children.

Most assets in your name alone at your death will be subject to your will. Some exceptions include securities accounts and bank accounts that have designated beneficiaries, life insurance policies, IRAs and other tax deferred retirement plans, and some annuities. These assets would pass directly to the beneficiaries and would not be included in your will.

In addition, certain co owned assets would pass directly to the surviving co owner regardless of any instructions in your will. And assets that have been transferred to a revocable living trust would be distributed through the trust—not your will.

5. What is a revocable living trust?

It is a legal document that can, in some cases, partially substitute for a will. With a revocable living trust (also known as a revocable inter vivos trust or grantor trust), your assets are put into the trust, administered for your benefit during your lifetime and transferred to your beneficiaries when you die—all without the need for court involvement.

Most people name themselves as the trustee in charge of managing their living trust’s assets. By naming yourself as trustee, you can remain in control of the assets during your lifetime. In addition, you can revoke or change any terms of the trust at any time as long as you are still competent. (The terms of the trust become irrevocable when you die.)

In your trust agreement, you will also name a successor trustee (a person or institution) who will take over as the trustee and manage the trust’s assets if you should ever become unable to do so. Your successor trustee would also take over the management and distribution of your assets when you die.

A living trust does not, however, remove all need for a will. Generally, you would still need a will—known as a pour-over will—to cover any assets that have not been transferred to the trust.

6. What is probate?

Probate is a court supervised process for transferring a deceased person’s assets to the beneficiaries listed in his or her will.

Typically, the personal representative named in your will would start the process after your death by filing a petition in court and seeking appointment. Your executor would then take charge of your assets, pay your debts and, after receiving court approval, distribute the rest of your estate to your beneficiaries. If you were to die intestate (that is, without a will), a relative or other interested person could start the process.

7. Who should be my personal representative or trustee?

That is your decision. You could name your spouse or domestic partner as your personal representative or trustee. Or you might choose an adult child, another relative, a family friend, a business associate or a professional fiduciary such as a bank. Your personal representative or trustee does not need any special training. What is most important is that your chosen personal representative or trustee is organized, prudent, responsible and honest.

While the personal representative is subject to direct court supervision and the trustee of a living trust is not, they serve almost identical functions. Both are responsible for ensuring that your written instructions are followed.

One difference is that the trustee of your living trust may assume responsibilities under the trust agreement while you are still living (if you ever become unable or unwilling to continue serving as trustee yourself).

8. How should I provide for my minor children?

First of all, in your will, you should nominate a guardian to supervise and care for your child (and to manage the child’s assets) until he or she is 18 years old.

Under Florida law, a minor child (a child under age 18) would not be legally qualified to care for himself or herself if both parents were to die. Nor is a minor legally qualified to manage his or her own property.

Your nomination of a guardian could avoid a “tug of war” between well meaning family members and others.

Or you might consider setting up a trust to be held, administered and distributed for the child’s benefit until the child is even older.

9. Are there other ways of leaving property?

Yes. Certain kinds of assets are transferred directly to the named beneficiaries. Such assets include:

• Life insurance proceeds.
• Qualified or non qualified retirement plans, including 401(k) plans and IRAs.
• Certain “trustee” bank accounts.
• Transfer on death (or TOD) securities accounts.
• Pay on death (or POD) assets, a common title on U.S. savings bonds.

Keep in mind that these beneficiary designations can have significant tax benefits and consequences for your beneficiaries—and must be carefully coordinated with your overall estate plan.

10. What happens if I become unable to care for myself?

You can help determine what will happen by making your own arrangements in advance. Through estate planning, you can choose those who will care for you and your estate if you ever become unable to do so for yourself. Just make sure that your choices are documented in writing.

If you set up a living trust, for example, the trustee will provide the necessary management of those assets held in trust. You should also consider setting up a durable power of attorney for property management to handle limited financial transactions and to deal with assets that may not have been transferred to your living trust. By doing this, you designate an agent or attorney in fact to make financial decisions and manage your assets on your behalf if you become unable to do so.

And by setting up an advance health care directive/durable power of attorney for health care, you can also designate an attorney in fact to make health care decisions for you if you ever become unable to make such decisions.

In addition, this legal document can contain your wishes concerning such matters as life sustaining treatment and other health care issues and instructions concerning organ donation, disposition of remains and your funeral.

Both of these attorneys in fact lose the authority to make decisions on your behalf when you die.

If you have not made any such arrangements in advance and you become unable to make sound decisions or care for yourself, a court could appoint a court supervised conservator to manage your affairs and be responsible for your care.

The court’s supervision of the conservator may provide you with some added safeguards. However, conservatorships can also be more cumbersome, expensive and time consuming than the appointment of attorneys in fact under powers of attorney.

In any event, even if you appoint attorneys in fact who could manage your assets and make future health care decisions for you, you should still document your choice of conservators in case a conservatorship is ever necessary.

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