Many people believe that “Estate Planning” only applies to wealthy families. Under current laws, very few people do estate planning for estate tax reasons. However, having a plan is important for everyone, and if you don’t create a plan, someone else will end up “creating” it for you.
What Is Estate Planning?
Estate planning is simply deciding now how you want certain things handled later, when you are not able to make the decision. Quite simply, estate planning is about choosing now what you want to control later.
Wills and Trusts
Do you want to make decisions about where all your assets and property will go when you pass? The only way to completely do that is with a will or trust. The difference between a will and a trust is that a will is fully effective upon death. After being probated, all property is transferred to the heirs. A trust, on the other hand, can live on after you pass, with a trustee who is responsible for carrying out your desires for your property. A will controls what happens to your property at your passing. A trust can potentially control what happens to your property for years after you pass. Dying without a will or trust is referred to as dying “intestate.”
Many people promote trusts for the purpose of avoiding probate, and they will do that — so long as everything you own is in the trust. If not, whatever was not owned by the trust will still have to go through probate.
Other reasons you might establish a trust include a desire to control what happens after you are gone, such as preventing a child or grandchild from receiving money before they are mature enough to handle it wisely, or requiring that money be used for a particular purpose, such as paying for college, or preventing creditors of your beneficiaries from getting what you leave behind.
Many people set-up revocable “Living Trusts” as a simple method to control the assets after the death of the trust maker (the “Grantor”). There are also many other types of trusts used for different planning situations.
It is important to note that assets held in a revocable Living Trust are generally considered available resources for Medicaid and VA benefit purposes. Planning for Medicaid or VA benefits eligibility often requires the use of a special type of trust. If you have property held in a trust, you should consult a qualified elder law attorney before applying for Medicaid or VA benefits.
Without a will or trust, any property that is held in the name of the decedent will pass to heirs according to Oklahoma’s intestacy statutes. That means, as a general rule, that half your estate will pass to a surviving spouse and half will pass to your children. Many people are surprised to learn that if one spouse dies without a will or trust, assets held in their name will not automatically go to the surviving spouse.
Powers of Attorney
Creating Powers of Attorney and an Advance Directive for Health Care are vital to making your own decisions about care.
Do you want to make decisions about who will care for you and how you wish to be cared for if you become unable to care for yourself? Almost everyone experiences some period in their life when they are unable to make decisions about medical treatment, where they will live, and so on. The only way to make that decision now is to create a Health Care Power of Attorney. Without it, family members or medical providers may be forced to go to court to ask a judge to appoint someone to make those decisions for you – usually referred to as a guardian of the person.
Do you want to make decisions about who will be responsible for your property, bank accounts and so forth, if you are not able to handle your own finances? Then you need a Durable Power of Attorney. Without a Durable Power of Attorney, if you ever become unable to handle your finances, a family member or friend will have to petition a court to appoint someone to act in your place – a guardian of the property.
Advance Directive for Health Care
Do you want to give directions to medical personnel about whether or not you want to be kept alive artificially? This is what an Advance Directive for Health Care accomplishes. Without it, the default position is that doctors will do everything in their power to keep you alive, which is why the news is full of stories about family legal battles over who will make decisions about end-of-life care and financial issues.
Remember, if you don’t make these decisions in advance, someone else will be forced to make them for you. In most cases, that means one or more family members or friends go in front of a judge and argue about who should be the decision maker. That takes time and costs a lot of money – usually yours.
The far better approach is to execute a basic estate plan which should include a will, a trust if desired, a Health Care Power of Attorney, a Durable Power of Attorney and an Advance Directive for Health Care. It’s not just for the sake of your heirs — your own quality of life makes you the biggest beneficiary of proper estate planning.
Creating or updating estate planning documents is an important part of elder care planning.
If you would like to create or review an estate plan, or you want to know if your current estate plan will enable you to get Medicaid or VA benefits, please contact us or call (405) 435-9700 to schedule a consultation.