Estate planning involves transferring property at death. It involves creating a will, trust, and taking other measures concerning your assets to ensure they go to the intended people after you're gone. Some of the three frequently asked questions regarding estate planning are probate, power of attorney, and the alternatives to creating a will.
What Is Probate?
Probate is a legal process that involves identifying all the assets owned by a deceased person. Probate also identifies a decedent's creditors and beneficiaries and determines how assets should be distributed. Probate happens whether or not you have a will.
Probate is usually necessary if your estate will have complex issues like many debts that cannot be settled with the wealth you leave behind. However, property that passes out of your will like a living trust and joint tenancy is normally not subject to probate.
Whether it's smart to avoid probate or not will depend on your health, age, and wealth. For example, a young, healthy, and average income individual should adopt a probate-avoidance plan. If you have little property, there's no need to waste your time avoiding probate since your property qualifies for the simplified probate procedure. Your estate planning attorney will advise you on strategies for avoiding probate.
What Is a Power of Attorney?
Power of attorney leaves one or more persons responsible for acting on your behalf. The power can be restricted to a specific activity, like closing the sale of your home. This power may grant permanent or temporary authority to a person to act on your behalf.
You can revoke a power of attorney after notifying the person named to act on your behalf. A power of attorney may be effective immediately after appointing an agent or after the occurrence of an event. The occurrence of an event may render you incapable of acting for yourself because of your mental or physical state.
A person who acts on your behalf is called an attorney-in-fact or agent. Your agent has to present the document giving them a power of attorney in order to invoke the power. For example, if you hire a person to sell your car for you, the motor vehicle department will require the power attorney before your agent is allowed to sign the title.
What Are the Alternatives to a Will?
One of the alternatives to a will is joint tenancy with the rights of survivorship. Under this form of ownership, a person can avoid probate. Property held in this way automatically passes to the surviving owner when one owner dies.
Another alternative to a will is the use of a "pay on death" account. This is where you designate a beneficiary for your bank account. While you're still alive, the one named to inherit the money in the account has no rights to it. If you want the money or no longer want the beneficiary you named to inherit it, you can name a different beneficiary, spend the money, or even close that account. Consult an estate planning attorney on the best alternatives to a will.