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Simple Steps to Peace of Mind

A FEW SIMPLE STEPS TO PEACE OF MIND

You've worked too long and too hard to just let the whims of law determine what happens to your estate after you are gone. Estate planning is not just for the wealthy. With a few simple and affordable steps you can determine who gets your estate...and who doesn't. You'll also get the peace of mind that comes from taking care of yourself and your family in the years to come.

A basic estate plan consists of as little as three documents: an advance health care directive, a durable power of attorney and a will and/or revocable trust.

•1. Advance health care directive:

This document was once known as a "living will." It allows you to state your preferences when it comes to your end of life medical care and funeral plans. More importantly, it allows you to designate someone you know and trust as your health care agent. In the event that you become unable to make medical decisions for yourself, your agent is authorized to make those decisions for you. (The alternative is that a court has to appoint a guardian to make those medical decisions; the risk is that the appointed guardian may not know you at all.)

•2. Durable Power of Attorney:

This document allows you to appoint someone to make financial decisions for you in the event you become incapacitated or unable to manage your own financial affairs. The mere fact that you are married doesn't necessarily mean that your spouse will be the person making the decisions for you. Some financial institutions won't talk to anyone about your accounts without a power of attorney. (And some financial institutions require that their own forms be used. It is worth finding out if your bank requires its own forms.)

Giving someone else control over our money can be scary. But state law prohibits your agent from doing some things (like making medical decisions or changing your will), and allows other things (like selling your property) only if you specifically say so in the power of attorney document. The power of attorney lets a trusted person apply for you for the benefits or assistance you may need, and allows that person to make sure your bills are paid. The alternative is that a court will have to appoint someone to make financial decisions for you; the risk is that this person may be someone you think is untrustworthy.

•3. Will and/or Revocable Trust:

People often ask if they need a will. The better question is not whether they "need" a will, but whether they "should" have a will. To answer this question it's necessary to understand what happens if you die without a will (known as "intestate.")

If you die without a will someone (could be just about anyone) will petition the probate court to open an estate. After all potential heirs are given notice, and after the estate is inventoried and liquidated, the court will distribute your assets according to state law. Generally this means your spouse and your children will share your estate. If you have no spouse, your kids (or grandkids) will share the estate. If you have no children then your parents...then your brothers and sisters ... then your nieces and nephews, etc., etc., etc. It's probably easy to imagine someone in that group of people you would not want to get any part of your estate. At the end of the line is the state, which gets your property if you die without a Will (and no heirs.)

If you have a Will when you die, someone will still have to petition the probate court, but that someone will be a person you chose. The probate process must still be followed, but when it comes time to distribute your estate it will be to those you intentionally chose (or not) in accordance with your own plan.

A Will can also allow you to state your wishes about who should be the guardian of your children. It can set up a trust for your children and grandchildren. You can make a bequest to your favorite charity through your will. Having a Will is having a plan.

Revocable Trusts

A downside to just having just a Will, however, is that a Will must go through the legal process of being "probated." Your estate executor is under the supervision of the probate court and your heirs are entitled to a hearing for any number of reasons. The probate process takes time and money. A revocable trust, however, provides the same benefits as a Will but avoids the probate process.

In a revocable trust you "transfer" your assets to a trustee to hold the assets on your behalf. "Transfer" is a loose term because the reality it is that you can be the trustee of your own trust; in other words, you are legally transferring your assets to someone else who also happens to be you! This means you get continued use, control and enjoyment of those assets. Up until the time of your death you can move assets in and out of the trust, or terminate the trust altogether.

A revocable trust also determines who gets those assets when you die. The plan you would ordinarily would have in a Will is set out in the trust. Your trustee distributes the trust assets according to your plan. Unlike a Will, however, there is no probate court process to go through. The time and expense of probating a Will is avoided by having a revocable trust.

But a trust works even better with a Will. To be covered by your trust (and thus outside of the probate process) the asset must be transferred into the trust prior to your death. If an asset is not included in your trust then it must go through the probate process. If you had only a trust, and no Will, your estate would be probated as "intestate." As we discussed above, this creates a risk that your estate will end go to someone you would not have chosen. A Will acts like a safety net when used in conjunction with a Trust. Any assets not in the trust "pour over" into the thrust through your Will. The probate process is still required for those assets (and only those assets) but you get to say where they end up. (A Will also acts as a safety net in the event that your any portion of your trust is not set up properly.)

A Will and a revocable trust may sound like complicated legal documents, but generally they are fairly straight forward and simple to prepare. But keep in mind that to be valid each of these documents must be executed as required by state law. The failure to execute a document properly can render the document null and void. There are plenty of "self-help" packages available out there, but it's always best to consult with an attorney.

Contact the office for more information about simple estate planning packages.

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Saint Johnsbury, VT 05819
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