Fundamentals of Estate Planning
If you neglect appropriate estate planning, your estate will be distributed according to Florida’s intestacy laws. This is the state of Florida’s “default” system for estate distribution and it may not necessarily reflect the wishes of you or your family.
Alternately, proper estate planning allows you to set up exactly how your estate will be administered.
Last Will & Testament
A last will and testament is actually only one part of a comprehensive estate plan. If a person deceases without a will in place, they are considered “intestate” and their assets will be distributed according to the state.
Here are some important things to know about wills:
- Wills are not legally binding until after a person’s death
- A will cannot be used to manage personal affairs if a person becomes incapacitated.
- A will cannot prevent an estate from becoming probate
A will can be used to determine guardianship of minor children orphaned in the event of a parent’s death. Appointing guardianship in a will can save prolonged family strife.
Trusts can serve a variety of purposes. Trusts can be used in relation to personal, investment and tax-planning purposes.
Essentially, a trust is a three-part legal entity comprised of: a trust maker (grantor or settlor), a trust manager (trustee) and a trust beneficiary. In some cases, one person can comprise all three parts or these can be represented by a married couple.
Revocable trusts allow a person to name themselves as trustee to manage assets for themselves as a beneficiary.
Trusts can have certain advantages, namely that of avoiding probate. They can also be used as a tax-shelter for beneficiaries. If properly drafted, trusts can remain effective even if the trust-maker dies or becomes incapacitated.
Powers of Attorney
A power of attorney is a legal document that gives a single party executive control over aspects of an estate, as determined by the estate owner. These may be wide-ranging executive powers or limited to specific aspects. All powers of attorney terminate upon the death of the estate owner and may terminate upon owner’s incapacitation.
If a power of attorney is designed as a back-up decision-maker in the event of an estate owner’s incapacitation, this is called a durable power of attorney. Durable powers of attorney should be updated frequently to remain in compliance with any requirements from a bank or financial institution.
Advance Directives and Health Care Documents
An advance directive is a legal document that designates medical and personal care for a person in the event of incapacitation.
Any person over the age of 18 may execute an advance directive. An advance directive can appoint who will be in charge of communicating medical decisions as well as designate conditions for life-prolonging treatment.
A health document that usually accompanies advance directives is an authorization for medical providers to release medical information to specified individuals.