A will is a legal document that specifies how you want your property distributed and sets forth your wishes for the care of your minor children after you die. There are several types of wills and you should carefully consider which type of will suites your needs. Always bear in mind that if you do not currently have a will, your loved ones may not receive the assets you wish to leave them in the event of your death. Creating a will gives you the benefit of naming someone to manage your assets and/or appointing a guardian for minor children. Tax considerations are another important issue to consider, as a properly prepared will can minimize tax liability. If you are unsure of where to start, read on for the basic information you need to know when you're considering making a will.
What are the Benefits to Having a Will?If you create a will, you have the sole discretion over how your assets will be distributed. For example, you can be very specific regarding who a particular asset should go to after you die, in what percentages the assets should be divided and when the transition should occur. If you want to leave a gift to a specific charity, institution or organization, a will lets you direct a specific gift to your chosen charity, institution or organization. If you have children who are under the age of majority, a will lets you make specific provision for their care.
What Happens if I die Without a Will?If you reside in California and die without leaving a will, state laws regarding intestate succession will apply to decide who gets what percentage, (if any), of your estate. The state will oversee the distribution of your assets. There is a specific formula that the state must adhere to under the law. The formula may result in half of your estate going to your spouse and the other half going to your children. Such a scenario can result in the sale of a residence or other assets. This can create financial and emotional difficulties, particularly if your spouse was counting on the bulk of your assets to maintain his or her standard of living. Further complications can arise if your children are minors, as the court will appoint a representative to look after their interests.
What do I Need to get a Will?It’s a very good idea to plan when you can:
Changing your will is easy. Talk to an attorney about how to create a new will to replace the old one, or make an addition using an amendment known as a codicil. Make any changes when you are of sound mind and in good health. This limits the likelihood that your wishes can be successfully challenged and avoids decisions made in haste or under intense emotional pressure.
I’ve got my Will, What Next?Creating your will is the first step in a two-step process. The second step is putting your will in the hands of your executor or professional advisor. Remember, your wishes can only be carried out if they are known. Putting your will in capable hands ensures that it will be available when it is needed. Making a will is a necessary process that can save your family time, money and grief as well as give you peace of mind as you move forward.
What is a Trust?A trust is a legal document through which an institution, or a natural person called a trustee holds legal title to property for the benefit of another person, called a beneficiary. A trust can be used to distribute property before death, at death or afterwards. In other words, it is effective as soon as you create it. It is a very useful estate planning device created in conjunction with a will. A will and a trust can both work together to create a complete estate plan.
Remember that a will and a trust are two different “animals” and are created to do achieve two different purposes. One main difference between a will and a trust is that a will goes into effect only after you die, while a trust is effective as soon as it is created.
Another difference between a will and a trust is that a will passes through probate. That means a court oversees the administration of the will, ensures the will is valid and the property gets distributed the way the deceased wanted. A trust passes outside of probate, so a court does not need to oversee the process, which can save time and money. Unlike a will, which becomes part of the public record, a trust can remain private.
Wills and trusts each have their advantages and disadvantages. For example, a will allows you to name a guardian for children and to specify funeral arrangements, while a trust does not. On the other hand, a trust can be used to plan for disability or to provide savings on taxes.
What is a Power of Attorney?Simply put, a Power of Attorney, (POA), is a document in which you appoint someone or an institution to manage your affairs if you become unable to do so. There are at least two different types of Powers of Attorney. The first is a general Power of Attorney, which gives broad powers to a person or organization to act in your behalf. A general power of attorney is often included in an estate plan to make sure someone can handle financial matters
Powers that can be included in a general Power of Attorney are:
General power of attorney is an effective tool if you will be out of the country and need someone to handle certain matters.
The second type of Power of Attorney is a Special Power of Attorney. In this document, you can specify exactly what powers may be exercised by your agent. This is often used when a person cannot handle certain affairs due to other commitments or health reasons. Selling property (personal and real), managing real estate, collecting debts, and handling business transactions are some of the common matters specified in a special power of attorney document.
What is a Health Care Directive?A health care directive grants your agent authority to make medical decisions for you if you are unconscious, mentally incompetent, or otherwise unable to make decisions on your own or for yourself.