• Matt Devitt

Components of a Comprehensive Estate Plan

While there is no one size fits all estate plan, there are common components that act as a foundation. These include 1) organization of records, correcting titles and beneficiary designation; 2) will; 3) trust; 4) durable power of attorney; and 5) health care power of attorney.


The thought of putting together an estate plan can be intimidating, especially with all of the different legal terms. However, with a basic understanding of each component and a good attorney, navigating these concepts is more than achievable. Below is a quick summary of each component of a comprehensive estate plan.


Organization of records, correcting titles and beneficiary designation – Planning your estate now will help to organize your records, titles and beneficiary designations, as well as, correcting errors. Incorrect designations can lead to troubling tax consequences and the need for a costly and time-consuming probate process.


Will - A writing specifying the beneficiaries who are to inherit the testator’s assets and naming a representative to administer the estate and be responsible for distributing the assets to the beneficiaries.


A will is an important legal document that will decide how your estate will be distributed, who will take care of your minor children, works to minimize the length and complexity of the probate process, and decides who will be in charge of winding up the affairs of your estate among other things.


Pros:

- Designates someone to wrap up your affairs after death

- Designates who will inherit your property

- Provides guidance to family about end-of-life wishes

- Appoints loved ones to act on your behalf for medical and financial decisions


Cons:

- Requires loved ones to go through the probate court process

- May require loved ones to seek guardianship through court process

- Does not protect children who are not ready to inherit whether due to disability, age, addiction issues, or other concerns

- Can result in your inheritance being squandered or allowing a loved one to engage in self-destructive behaviors like the "lottery winner" syndrome

- Provides little protection in the event of a period of disability


Trust - Trusts are legal arrangements that can provide incredible flexibility for the ownership of certain assets, thereby enabling you and your heirs to achieve a number of significant personal goals that cannot be achieved otherwise. The term trust describes the holding of property by a trustee, which may be one or more persons or a corporate trust company or bank, in accordance with the provisions of a contract, the written trust instrument, for the benefit of one or more persons called beneficiaries. The trustee is the legal owner of the trust property, and the beneficiaries are the equitable owners of the trust property. A person may be both a trustee and a beneficiary of the same trust.


There are two primary trust types; 1) testamentary trust, and 2) revocable grantor trust. While revocable grantor trusts are the most common vehicle used, both offer different pros and cons.


1) Testamentary Trust - A trust established in a person’s will to come into operation after the will has been probated and the assets have been distributed to it in accordance with the terms of the will.


Pros:

- Provides protections for children who are not ready to receive an inheritance due to age, immaturity, addiction concerns, disability or other issues.

- Slightly cheaper than revocable trust in initial setup and client doesn’t have to worry about funding the trust.


Cons:

- Requires loved ones to go through the probate court process

- May require loved ones to seek guardianship through court process

- Provides little protection in the event of a period of disability

- Lack of confidentiality

- Lack of continuity of the management of assets that are transferred to the trust during the settlor’s lifetime.


2) Revocable Trust - A trust created during lifetime over which the grantor reserves the right to terminate, revoke, modify, or amend.


Pros:

- Avoids the probate court process, saving in court costs and fees

- Provides protections for children who are not ready to receive an inheritance due to age, immaturity, addiction concerns, or other issues

- Helps provide guidance to loved ones to make intelligent decisions with their inheritance

- Provides protection for you in the event you become mentally disabled without the need for court intervention

- Allows for advanced planning including special needs, buy-sell agreements, cottage agreements, and blended family planning.


Durable Power of Attorney - Authorization, by a written document, that one individual may act in another's place as agent or attorney-in-fact with respect to some or all legal and financial matters. The scope of authority granted is specified in the document and may be limited by statute in some states. A power of attorney terminates on the death of the person granting the power (unless “coupled with an interest”) and may terminate on the subsequent disability of the person granting the power (unless the power is “durable” under the instrument or state law).


A durable power of attorney can either become effective as soon as it is properly signed, or it can become effective only if the principal becomes mentally incapacitated (springing durable power of attorney).


Health Care Power of Attorney & Living Will – A health care power of attorney is a document that appoints an individual (an “agent”) to make health care decisions when the grantor of the power is incapacitated. Also referred to as a “health care proxy” or “patient advocate.”


A living will is, a written document, intended to be the clear and convincing expression of a patient’s wishes in connection with certain health situations. Often, a living will expresses the patient’s intent concerning end-of-life decisions. Sometimes, the document expresses other desires, such as no autopsy or no surgeries.


** Disclaimer - The information you obtain from this blog post is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. (matt@mattdevittlaw.com or 734-335-0713)

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©2018 by Law Office of Matt Devitt

Livonia, Plymouth and Northville's local attorney, focusing on pragmatic value based solutions for your estate planning, small business, and real-estate legal needs. Give Matt a call (734) 335-0713 or set up an in office appointment at our 39111 Six Mile Rd, Livonia, MI 48152 location for a free consult. Our goal is to build long term relationships by earning your trust with every matter that we handle.

Disclaimer - The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.