What's in an estate plan anyway?

We all hear the good advice that we need an estate plan. But what's in an estate plan anyway? A recent article in Forbes, entitled Key Essentials for Estate Planning, outlines the essential tools that make up an effective estate plan. The bottom line is that an estate plan protects your estate in your lifetime and ensure it passes on to your loved ones the way you want it to. Of course, there are many unique circumstances that dictate what plan is right for you. But below we answer the basic questions about what you need, and why you need it, in your estate plan:

Why do I need a Will?

A will is a part of every single estate plan, even if you have a plan that includes a revocable living trust (described below).

A will is a legal document establishing your wishes about the distribution of assets after your death. This includes money, real estate, investments and even the care of minor children. If there is no will, the state law will control who receives assets, called “the laws of intestacy.” In other words, a court will make all of your decisions for you. Even though your estate may need to go through probate court, a will saves an enormous amount of time and expense in estate administration.

A will nominates guardians for your minor children. If there is a single reason why a couple with children should have an estate plan this is it! Think about it all of the time and energy you put into your kids - both mental and physical. You think about their futures, you provide them with a home, you choose their schools, you invest for their future - they are a huge part of your purpose. Well, don't stop short with all of that work and care for them by not planning for what happens to them in the unfortunate event you are gone while they are still minors. Nobody wants to think about that prospect, but we all know it happens. Drafting a will in place now protects them. Without a will nominating guardians, your choice is left to a court to decide who will take care of your kids. That's certainly not what you want. The choice should be yours.

What's a revocable living trust?

Wills are necessary, but even with a will, when you die your estate may have to go through probate. A revocable living trust helps avoid probate. It is trust that exists in your lifetime, with you in charge of it. After your death, the trust directs what happens with the transfer of your property instead of a probate court. And that's usually the primary purpose of a trust. In addition, you can be very specific about how your property is passed along, and when it is passed along. And since there is no probate proceeding, the details of your estate and how you passed it along remain private. Think of it as a plan you put in place that replaces the probate process.

What's a Marital Property Agreement?

Wisconsin is a community property state. That means that you have a one half interest in all marital property, and your spouse has the other half. You still own your separate property as an individual, but there is a presumption in favor of marital property if there is any question about the nature of the property. In an estate plan, the marital property agreement clearly defines what is marital property (and what isn't) and ensures property is moved into the trust, and thereby keeping it out of probate.

Why do I need a power of attorney?

In addition to the tools described above, a good estate plan will have a durable power of attorney for your finances, and a health care power of attorney to assist you in the event you become mentally or physically incapacitated to the extent you can no longer make your own health care decisions. These documents will help you designate who will make those critical decisions for you and will avoid the need for a guardianship hearing. Both types of POAs ensure you decide in advance who will be managing your affairs when you need it.

An estate plan will typically include all of these tools, although plans vary depending on your circumstances. While unpleasant to think about, such planning is our responsibility to our children, and will help avoid conflict, stress, and uncertainty when we pass. An estate planning lawyer will help you think about all of those contingencies and ensure your family is taken care of.

If you live in the Madison, WI area and would like to talk about how an estate plan might look for you, no matter how big or small your estate is, give us a call and we'd be happy to help.

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