Join us as we discuss the basics of an estate plan, including a will, powers of attorney for health and property, and possibly, a probate-avoidance trust.
Attorney Bob Monahan and the Howe family discussed the importance of estate planning for a young family and common misconceptions surrounding wills and trusts. Many families do not have any plans in place for their estate. Some reasons for that include the imagined cost of an estate plan, no time in a busy schedule to see a lawyer or a misunderstanding of the benefits of having an estate plan. Additionally, many people do not hold the legal profession in high regard nor do they know any lawyers personally. Finally, people do not like to think about their future mortality or infirmity. However, understanding basic elements of estate planning may help young families make plans for their estate and protect their families for the future.
The basic elements of an estate include a will, powers of attorney and a trust. A will is a set of instructions that becomes operational upon death and names a guardian for minor children, appoints an executor, waives bond for the executor and distributes assets. Powers of attorney for healthcare and property name an agent who will make decisions for you while you are alive but disabled or infirm. A trust allows an estate to avoid probate court which can be costly and time consuming.
One misconception about a will is that it controls ALL assets of a decedent. That is not true as there are many assets that are not controlled by a will or probate. There are 3 types of assets; jointly -owned asset such as a house or bank accounts, contract assets such as an IRA or 401K with named beneficiaries and probate assets. Jointly owned assets such as a house will pass directly to the remaining individual named on the house title. Likewise, a contract asset will pass directly to the named beneficiary on that asset. These assets are not controlled by a will or probate. However, anything that is in the name of the decedent only, such as a car, will be governed by probate.
A will is not effective by itself; the probate court must be petitioned to open the estate, appoint an executor and issue letters of office. Then the executor (or administrator if there is no named executor or will) has the authority to collect all assets, pay the debts of the estate, distribute remaining assets to the heirs and then close the estate. Especially important to families with minor children is the use of a will to name a guardian for minor children. If there is no will with a named guardian, then the Court will decide who will take care of the minor children. Most people would rather have some input on the choice of guardian for their children than leave it up to the Court.
Finally, a trust is an estate plan that avoids the necessity of probate. Often, the only probate asset of a family is a house. For instance, a typical couple usually holds title to the house jointly. If 1 member of the couple dies, the jointly held house will automatically pass to the remaining member of the couple without the necessity of going through probate. However, when the remaining member dies, unless that member has a trust, the estate must go through probate before the house can be sold or distributed. A trust avoids the necessity of probate as the house is put into the trust and is now owned by the trust and the successor trustee can take care of that house and other trust assets.
Another advantage of having an estate plan (will and trust) in place is that bond can be waived for an executor of an estate. If there is no will or named executor, the court will name an administrator who essentially takes the place of an executor. That administrator will then have to post a bond (insurance) basically guaranteeing that he or she will not abscond with the estate’s assets. The advantage of a will, besides being able to name an executor, is that the will can waive or excuse the necessity of posting a bond for the executor.
Though it is difficult to think about estate planning and guardians for children, facing those issues with a visit to a lawyer about an estate plan to protect one’s family can bring peace of mind.
Robert Monahan, Esq. is a lawyer in Gurnee, IL with his own practice in personal injury. He has a radio show on Thursday nights at 7 pm, called “Everyday Law,” on WRLR 98.3 FM, where he tries to demystify the law for the ordinary person. “Everyday Law” can be downloaded as a podcast from iTunes or other various podcatchers. His two websites are www.monahanfirm.com and www.gurneepersonalinjuryattorney.com. He also has two Facebook pages – “Robert A. Monahan, Esq.” and “Everyday Law.”