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We will often work with your accountant, financial advisor, insurance agent and other professionals to allow all of your consultants to participate in the estate planning process.
We have included some helpful definitions of important terms involved in estate planning to help you learn more about the types of documents that Edelman P.A. can help you draft and how they can benefit you and your family.
Will
A Will dictates how your assets will be distributed among the people and/or charities that you choose.
Edelman P.A. recommends that everyone create a Will. It allows you to create a Trust, which protects your assets when passing them along to your loved ones. In this situation, you would appoint a Trustee in the will to administer each Trust.
A Will also lets you appoint a guardian or guardians to care for your minor children and any assets that you leave behind for them. This will help prevent disagreements among family members that can negatively affect the lives of your children.
Edelman P.A. can draft your Will to reduce federal and state estate taxes. If you do not have a Will, your estate will pass pursuant to state law in a way that may defeat your intent. This could cause significant taxes, costs and interfamily arguments.
Trust
A Trust can be created under a Will or as a separate document. The creator is usually referred to as the “Settlor” or the “Grantor,” and the person the Trust benefits is the Beneficiary.
There are generally two types of Trusts—Inter Vivos trusts and Testamentary trusts. An Inter Vivos Trust becomes effective during the Settlor’s lifetime. A Testamentary Trust becomes effective after the Settlor’s death.
An Inter Vivos trust for a settlor is also called a Revocable Trust or a living Trust (see definition below). These are generally Trusts that a Settlor creates for himself or herself to avoid probate—the process that establishes the validity of a Will and for administration of an estate.
Testamentary trusts are usually created in a person’s Will to protect the assets of family members. A Testamentary Trust can last as long as the Settlor wants it to, can provide directions for payments at specific ages or at the Trustee’s discretion.
Benefits of a Trust include:
- Protection against creditors of the beneficiary.
- Protection against the beneficiary’s spouse in a divorce.
- Tax benefits to the beneficiary and/or his descendants
- Allowing the beneficiary to receive or continue receiving/qualifying for government benefits (e.g. Medicaid)
- Provide professional management and investment of trust funds
- Provide for the special needs of a disabled beneficiary
- A trust fund for charitable giving
Revocable Trust
Also referred to as a “living trust,” this document is created by a Settlor for himself or herself with the purpose of holding all or most of his or her assets.
Generally, this type of trust allows the Settlor’s estate to avoid probate—a legal process that’s necessary to dispense a person’s assets after death. The process is often long, complicated and expensive and can be avoided with a Revocable Trust.
With a Revocable Trust, a Settlor appoints one or more trustees to handle the Trust assets during his or her life and upon his or her death. Typically, the Settlor names himself or herself as the trustee, with his or her spouse as the co-trustee. If the Settlor is older, he or she may appoint one or more children as co-trustees as well.
Living Will
A living will outlines your wishes in case you are in a terminal condition, persistent vegetative state or end-stage condition with no reasonable probability of recovery.
A living will usually states your desire to cease or continue using life-sustaining equipment. This document is important because it states your wishes in writing, eliminating any confusion.
You should give a copy of the Designation to your physicians and any hospital you are admitted to.
Designation of Healthcare Surrogate
In a situation where you are not able to make your own healthcare decisions, designating a surrogate will allow the person of your choice to provide the necessary consent for medications or operations.
You should give a copy of the Designation to your physicians and any hospital you are admitted to.
Guardianships
A Guardianship appoints a person to administer the assets of a minor child or incapacitated person (Guardianship of the Property) or to take care of a child or incapacitated person (Guardianship of the Person).
Guardianships tend to be costly and can lead to family arguments. We generally recommend avoiding them if there are other ways to deal with the problem through Trusts, Durable Powers of Attorney or Designations of Healthcare Surrogate.
In Florida, you can appoint a “Pre-Need Guardian,” which is a guardian appointed by you prior to the need for guardianship. This designates a person to become your guardian in case the need arises, preventing someone you would not choose from instituting proceedings against you.
Durable Power of Attorney
A Durable Power of Attorney appoints a person or persons to make financial decisions for the donor of power in the event the donor becomes incapacitated and is unable to make decisions that are necessary.
This is important because it spells out all of the powers the agent is allowed to have, including selling property, signing tax returns, accessing the donor’s bank account, making gifts to family members, etc.
Having a Durable Power of Attorney is especially helpful if the donor of the power becomes incapacitated and needs a person he or she trusts to handle his or her affairs.
Without a Durable Power of Attorney or a Revocable Trust, your family members may need to set up a Guardianship, which can be expensive, to access your funds.
In Florida, a Durable Power of Attorney can be made effective immediately (often the preferred choice if you have trust in your agent) or can be made effective upon incapacity.
Beneficiary Designations
Beneficiary Designations allow you to name beneficiaries under a bank, brokerage account, pension plan or IRA, so that assets pass directly to the individuals so that they avoid probate.
While this is generally appropriate for pension plans, IRAs and some (usually small) bank and brokerage accounts, it is important to consider that naming beneficiaries has some drawbacks, for both tax and non-tax reasons.
For example, we do not recommend naming a minor as a beneficiary because you would need to create a Guardianship for the child, and the costs of this may outweigh the benefits. Also, if a beneficiary dies before you, a Beneficiary Designation may not allow you to detail alternate dispositions, whereas a Will or Revocable Trust would.
Beneficiary Designations can have significant tax effects, and you should always consult with your attorney before executing them.
Prenuptial Agreement
This is an agreement between a couple prior to marriage that governs the rights of the spouses after marriage.
Florida law requires that a surviving spouse receive 30% of a deceased spouse’s estate. This can lead to complications, particularly if the deceased spouse did not count on that amount being passed on to the surviving spouse.
A well-drafted prenuptial agreement can prevent these types of problems and can benefit both spouses and their children.
