If you want to get your affairs in order, a high priority is making an estate plan. You never know what the future holds, and it’s always good to have a plan just in case. Creating an estate plan prepares you and your loved ones for whatever may come, and it is easier than you may think to make yours. Knowing what legal documents you need is half the battle. Learn about estate planning basics in 2021.
Passing Your Assets On
It is essential to limit court involvement in the distribution of your estate. Using legal tools to ensure your assets go directly to your chosen heirs ensures that they receive assets immediately upon your death. Probate courts can often hold assets up for years, especially if there is any family drama that leads to a court battle.
The assets that bypass probate include beneficiary accounts, trust funds, and properly owned real estate.
These types of accounts go directly to the named beneficiary. You do not need to worry about these assets going through a probate court with a named beneficiary.
- Payable on Death Bank Accounts: When you open a bank account, you can choose to make it a Payable on Death account and name the account’s beneficiary. When you pass away, the bank automatically assigns your beneficiary as the new owner.
- Joint Bank Accounts with “Right of Survivorship”: Most accounts owned jointly have “right of survivorship,” but it is crucial to ensure that yours has this designation.
Setting up a joint account is helpful when an older parent or loved one needs help with their financial organization. A joint account is also a good choice for married couples. When someone passes away, there is no probate.
- Retirement Plan Assets IRAs and 401(k)s: When you first create a retirement account, you designate a beneficiary. It is essential to update these designations whenever you go through life changes like deaths, divorces, or new babies in your family.
- Life Insurance Policy Proceeds: You designate beneficiaries when you set up a life insurance policy
- Annuities: As an insurance investment tool, annuities designate beneficiaries for the remainder left in the annuity after your death.
Trusts are a legal tool that allow you to place assets in a framework that you no longer own. You appoint a trustee to oversee the trust. You also determine the purpose of the trust and how the trustee will distribute the fund.
For example, your attorney can set up a trust to distribute all bank accounts and property to your heirs according to your will when you pass away. This method of distributing your assets cuts out any need for a probate court.
Another way to use a trust is to give small amounts to heirs at specific times in their lives in the future. You could set up a trust to provide a lump sum to a grandchild upon college graduation.
If you have a grandchild with a drug or gambling problem and want to ensure their support without giving them a lump sum, a trust can accomplish this with monthly distributions. Monthly sums may also help a special needs child or adult. There are also trusts expressly set up to help you plan for long-term care in your future. This type of planning is often called Medicaid planning.
You can add a property, real estate, cars, boats, bank accounts, and more to a trust. Trusts are an integral tool to plan your estate.
According to Nolo.com, “If you own property jointly with someone else, and this ownership includes the right of survivorship, then the surviving owner automatically owns the property when the other owner dies. No probate will be necessary to transfer the property, although of course it will take some paperwork to show that title to the property is held solely by the surviving owner.”
In North Carolina, you may hold joint ownership by:
- Joint tenancy: You can pass your property automatically to the other owners of your property when you die. If you hold property in joint tenancy, the other owner or owners inherit immediately upon your death.
- Tenancy by the entirety: Legally married couples in North Carolina may own real estate by tenancy in entirety. This means that both spouses own the real estate entirely. When one dies, the other automatically inherits without probate court.
Caring for Yourself With Estate Planning
There are essential legal documents to draw up with your attorney to protect your finances, your health, and your ability to choose how to live in the future. Consider these documents when drawing up an estate plan:
Healthcare Power of Attorney
Name someone who will make medical decisions if you cannot think for yourself anymore. The Health Care Power of Attorney grants these powers of judgment to another person of your choosing.
It is common to name your spouse as your healthcare power of attorney. Name the person you trust most in the world to care for you if you can no longer care for yourself. With a Healthcare Power of Attorney, you can give someone the legal authority to make medical decisions for you if you can no longer make them.
Durable Power of Attorney
Suppose you fall into a coma from a car accident. You don’t want your loved ones to worry about selling your home to pay for your medical bills. If you are incompetent or incapacitated and can’t share in decision processes, your chosen durable power of attorney may make personal and financial decisions for you.
Depending on the exact language, you can grant the durable power of attorney broad powers or limit their abilities to more specific situations or issues.
Living Will and Advance Directives
A living will is a set of advance directives about medical decisions for you. If you can no longer care for yourself, an advance directive may declare a Do Not Resuscitate order. You can also make decisions about respiration, hydration, nutrition, dialysis, blood transfusions, and more.
We Can Help
Making an estate plan can help set your mind at ease about your future and the future of your family. Another integral piece of planning for your future is a funeral plan. At Renaissance Funeral Home, we work with you to plan your service for your loved ones so that they don’t have to.
Making a funeral plan now gives your family a gift. With a plan in place, your family will not need to make difficult decisions. Instead, they can grieve your loss and celebrate your life together without added stress. Contact us today and find out how we can help you create your end-of-life arrangements.