Did you know that if you do not create your own estate plan, the state and IRS have created one for you?
Most people are completely unaware of this and their heirs are often surprised and disappointed at the consequences. Only through a carefully considered estate plan can you have complete control over who receives your legacy.
Proper estate planning is crucial for the protection of those you love.
We will work to ensure taxes do not consume too much of what you have accumulated over many years of hard work and that your financial legacy is passed on to your loved ones. Our goal is to ensure that your belongings are passed down to the people that you choose at the time you choose, and under the conditions that you choose – and not pursuant to the state’s plan.
Even if you have an existing estate plan, did you know that an incomplete or outdated plan could be worse than no plan at all? At the Morton Law Firm, we review many estate plans and often find their original objectives to be obsolete, and changed circumstances to be completely unaddressed. We will be happy to review yours.
A good estate plan is also a way of preserving your family’s legacy – protecting the assets you have left to your children or grandchildren from creditors, predators or, in some cases, from your children themselves. At the Morton Law Firm, we can create the proper type of plan that will protect your hard-earned assets from passing to anyone other than those you intended.
Why Plan Your Estate
The knowledge that we will eventually die is one of the things that seems to distinguish humans from other living beings. At the same time, no one likes to dwell on the prospect of his or her own death. But if you postpone planning for your demise until it is too late, you run the risk that your intended beneficiaries — those you love the most — may not receive what you would want them to receive whether due to extra administration costs, unnecessary taxes or squabbling among your heirs.
This is why estate planning is so important, no matter how small your estate may be. It allows you, while you are still living, to ensure that your property will go to the people you want, in the way you want, and when you want. It permits you to save as much as possible on taxes, court costs and attorneys’ fees; and it affords the comfort that your loved ones can mourn your loss without being simultaneously burdened with unnecessary red tape and financial confusion.
All estate plans should include, at minimum, these important estate planning instruments: a durable power of attorney, a will, and a medical directive. The first is for managing your property during your life, in case you are ever unable to do so yourself. The second is for the management and distribution of your property after death. In addition, more and more, Americans also are using revocable (or “living”) trusts to avoid probate and to manage their estates both during their lives and after they’re gone.
Here are quick links to the information you need most:
- Your Durable Power of Attorney
- Your Will
- Your Trust
- Capacity Requirements
- Estate Taxation
- Making Gifts: The $10,000 Rule
- Charitable Gift Annuities
- Estate Administration
- Guardianship and Conservatorship
- FAQs about Estate Planning
- Medical Directives and Living Wills
Your Durable Power of Attorney
For most people, the durable power of attorney is the most important estate planning instrument available — even more useful than a will. A power of attorney allows a person you appoint — your “attorney-in-fact” — to act in your place for financial purposes when and if you ever become incapacitated.
In that case, the person you choose will be able to step in and take care of your financial affairs. Without a durable power of attorney, no one can represent you unless a court appoints a conservator or guardian. That court process takes time, costs money, and the judge may not choose the person you would prefer. In addition, under a guardianship or conservatorship, your representative may have to seek court permission to take planning steps that she could implement immediately under a simple durable power of attorney.
A power of attorney may be limited or general. A limited power of attorney may give someone the right to sign a deed to property on a day when you are out of town. Or it may allow someone to sign checks for you. A general power is comprehensive and gives your attorney-in-fact all the powers and rights that you have yourself.
A power of attorney may also be either current or “springing.” Most powers of attorney take effect immediately upon their execution, even if the understanding is that they will not be used until and unless the grantor becomes incapacitated. However, the document can also be written so that it does not become effective until such incapacity occurs. In such cases, it is very important that the standard for determining incapacity and triggering the power of attorney be clearly laid out in the document itself. Generally, we recommend our clients execute “immediate” powers rather than “springing” powers. If you are concerned that your chosen agent will take advantage of an immediate power and conduct himself improperly or take advantage of the power prior to your incapacity, what do you think that person will do while you are incapacitated? Where such reservations exist, you may be better off without a power of attorney, where a court can in fact oversee the handling of your affairs. In most cases, this is not a concern, and the “immediate” power removes one more hurdle (proving your incapacity) which could delay the effectiveness of your power of attorney.
Attorneys throughout the country now report that their clients are experiencing increasing difficulty in getting banks or other financial institutions to recognize the authority of an agent under a durable power of attorney. A certain amount of caution on the part of financial institutions is understandable: When someone steps forward claiming to represent the account holder, the financial institution wants to verify that the attorney-in-fact indeed has the authority to act for the principal. Still, some institutions go overboard, for example requiring that the attorney-in-fact indemnify them against any loss. Many banks or other financial institutions have their own standard power of attorney forms. To avoid problems, you may want to execute such forms offered by the institutions with which you have accounts. In addition, you may want to consider execution of a revocable living trust in part to avoid this sort of problem with powers of attorney.
While you should seriously consider executing a durable power of attorney, if you do not have someone you trust to appoint it may be more appropriate to have the probate court looking over the shoulder of the person who is handling your affairs through a guardianship or conservatorship. In that case, you may execute a limited durable power of attorney simply nominating the person you want to serve as your conservator or guardian. Generally, unless there is some “good cause” as to why your nomination for the office of guardian or conservator should not be honored, the Chancery courts in Mississippi will generally honor your requested appointee if set forth in a document under oath.
Your will is a legally-binding statement directing who will receive your property at your death. It also appoints a legal representative to carry out your wishes. However, the will covers only probate property. Many types of property or forms of ownership pass outside of probate. Jointly-owned property, property in trust, life insurance proceeds and property with a named beneficiary, such as IRAs or 401(k) plans, all pass outside of probate.
Why should you have a will? Here are some reasons:
First, with a will you can direct where and to whom your estate (what you own) will go after your death. If you died intestate (without a will), your estate would be distributed according to your state’s law. Such distribution may or may not accord with your wishes.
Many people try to avoid probate and the need for a will by holding all of their property jointly with their children. This can work, but often people spend unnecessary effort trying to make sure all the joint accounts remain equally distributed among their children. These efforts can be defeated by a long-term illness of the parent or the death of a child. A will can be a much simpler means of effecting one’s wishes about how assets should be distributed.
The second reason to have a will is to make the administration of your estate run smoothly. Often the probate process can be completed more quickly and at less expense to your estate if there is a will. With a clear expression of your wishes, there are unlikely to be any costly, time-consuming disputes over who gets what.
Third, only with a will can you choose the person to administer your estate and distribute it according to your instructions. This person is called your “executor” (or “executrix” if you appoint a woman). If you do not have a will naming him or her, the court will make the choice for you. Usually the court appoints the first person to ask for the post, whoever that may be.
Fourth, for larger estates, a well-planned will can help reduce estate taxes.
Fifth, and most important, through a will you can appoint who will take your place as guardian of your minor children should both you and their other parent both pass away.
Filling out our Estate Planning Intake Questionnaire will help you make decisions about what to put in your will. Bring it and any additional notes to your lawyer and he or she will be able to efficiently prepare a will that meets your needs and desires. Use the worksheet provided under the Resources tab above.
Your Medical Directive
Any complete estate plan should include a medical directive. This term encompasses both a durable power of attorney for health care and an advance health care directive (or “living will”).
A durable power of attorney for health care permits you to designate someone you choose to make health care decisions for you if you are unable to do so yourself. An advanced health care directive instructs your health care provider to withdraw life support if you are terminally ill or in a vegetative state. A broader medical directive may include the terms of an advanced health care directive, as well as providing instructions if you are in a less severe state of health, but are still unable to direct your health care yourself.