By Jacob A. Weil, Esq., EA.
A well-made estate plan not only accounts for what happens after you die, it also lays out your wishes for everything you want to happen in the event you cannot make decisions for yourself. A well-made estate plan will include several key components; and, depending on your situation, it may be advisable to add more items to the mix. In two parts, this article will review the components that every estate plan should have and cover why you may want to consider others.
The Last Will and Testament
The last will and testament, more commonly referred to simply as a “will”, is a document that lays out your wishes for how your property should be distributed upon your death. A will can cover everything from your real estate holdings to bank accounts to personal property. The document also nominates a person or persons to act as your personal representative (also referred to as an executor) in carrying out the plan you laid out.
The will is overseen by the probate court, typically in the jurisdiction where you last resided prior to your death. The probate court is overseen by a judge, who will appoint the personal representative, verify that assets are being distributed properly, present a forum for parties to contest the will, and make claims against the estate. In Florida estates with less than $75,000 in total assets can go through a process called “summary administration,” which is a less formal, abridged method of probate. Any estate over the $75,000-dollar limit is required to go through the process of “formal administration.” The formal administration process can last for 6 – 12 months (longer if disputes arise) and cost anywhere from 3% to 10% of the total asset value of the estate by the time you’re done. In Florida formal administrations require an attorney. They will typically charge 3% of the estate’s value for their services.
A Revocable “Living” Trust
While not required in every estate plan, it may be advisable to set up a revocable living trust. While you are alive, a living trust is inseparable from yourself, and it can be changed by you at any time and for any reason. But what is a trust? A trust is nothing more than a document, placing control and ownership of property into the hands of one person to be used for the benefit of another person. In the case of a living trust, the person controlling the property and the person benefiting from the property can be the same person.
Why use a living trust? There are a couple of reasons. Any assets placed in a living trust are not required to go through the probate process, which can save a great deal of time, money and headaches for your beneficiaries. Another reason is control. With a trust you have a lot more flexibility to place restrictions and controls on how the property you own is used. Yet another reason is the ability to lay out and give easy access to your assets to be used for your benefit in the event you are incapacitated.
If you were to become hospitalized and unable to make financial decisions on your own, who would pay the mortgage, the light bill, the hospital bill and the nurse? Who will ensure that you get the care you need? Creating a trust allows you to designate a person who can quickly and easily step into your shoes and take over these functions.
You can think of a trust more or less like a moving van. All of the property you place in the back of the moving van goes wherever the driver goes. In the event of your incapacity, the person you select can simply move you into the passenger seat and keep on driving, taking the property where it needs to go. Without a trust, you need to go to court, get an appointment and get orders allowing the access of funds. All of that takes time, effort and money. Unlike the moving van example, the court process is like having to move everything from one truck to another piece by piece. Part II will discuss The Living Will and Power of Attorney.
Jacob A. Weil, Esq. is president, The Weil Law Group, P.A., Fort Lauderdale, a law firm specializing in estate planning, business, and tax matters. Jacob is an Enrolled Agent with the IRS, Member of The Florida Bar, Broward County Bar Association, and a mediator trained in conflict resolution.