Asset Distribution: Aspects And Relevance

Many people do an excellent job of paying their retirements as part of their financial planning but often fail to consider how their assets will be distributed after they die. An estate plan is made up of six key elements:

1. Will

A will is the most well-known component of an estate plan. A will determines two things. To begin with, it specifies who will act as your “personal representative” to pay your bills and transfer your assets.

Second, it explains how the personal representative should proceed. In the absence of a will, the state appoints a personal representative and determines how the assets are divided.

Unless your will specifies otherwise, your estate will almost certainly need to be administered in a costly, time-consuming, and court-supervised manner. In addition, your representative will almost certainly be required to deposit a bond, the cost of which is determined by the value of the estate as well as the personal representative’s credit score.

2. Trusts

A trust is a legal body that maintains assets for beneficiaries and is separate from the person who creates it. There are various types of trusts to consider, but revocable trusts are the most popular among middle-class families. Living trusts are another name for this type of trust.

The main advantages of a living trust are that you can choose a trustee of your choice to financially care for you with your assets if you become incapacitated for a short or long period. 

When you die, your trustee can use the assets you put in the trust during your lifetime or in your will to provide for your family. As a result, the trustee is bound to follow the exact instructions you provided in your trust to give you personal counsel. 

Irrevocable trusts, in addition to living trusts, can be used to protect assets that you want to put aside irrevocably for your chosen heirs. These assets are protected from your creditors and the creditors of your beneficiaries, and they can be utilized legally and legitimately to reduce estate taxes. 

A testamentary trust, often known as a living trust, can be established within your will. The assets you place in a testamentary trust, on the other hand, must go through probate.

Finally, families with special needs beneficiaries may benefit from creating a special needs trust, which can help provide for a disabled child or adult without disqualifying them from benefits available via federal and state programs.

3. Power of Attorney

A power of attorney is a legal document that names someone to manage your finances if you become disabled, such as a spouse or adult child. These are especially crucial for single people who do not have a clear candidate for the position. 

You have a lot of control over how much discretion and guidance you offer your designee, also known as your attorney-in-fact when administering your affairs in the event of your incapacity. 

If a guardian or conservator is required, you can even empower the attorney-in-fact to designate a person of your choice to serve as your guardian and/or conservator. If you don’t express your wishes in your power of attorney, a court will have to decide who should be appointed, which may or may not be your chosen person.

4. Healthcare Directives

Even though most medical providers supply a standard-form boilerplate health care directive, we usually combine a personalized Health Care Addendum with the Power of Attorney. 

The Health Care Addendum has two main functions. First, it appoints someone to speak for you if you are unable to speak for yourself owing to a medical condition. You could, for example, appoint your spouse, a parent, a brother, or an adult child to represent you and ensure that your desires are carried out.

Second, your Health Care Addendum expresses your beliefs and preferences regarding whether and to what degree heroic measures should be used to keep you alive in the event of a serious sickness or accident. 

5. Beneficiary Designations

Beneficiary designations are created when you make written decisions about life insurance policies, retirement accounts, and bank accounts. Beneficiary designations are most commonly associated with life insurance policies, although they can also be seen on retirement accounts and bank accounts. 

You can name a trust as the beneficiary and have the assets dispersed according to the terms of the trust instrument. However, it’s vital to note that beneficiary designations take precedence over your will’s disbursements.

6. Regular Review and Revision

It is not sufficient to just draught an estate plan and file it away. It’s critical to examine your estate plan regularly (we recommend once a year) and document any modifications you need. A “codicil” is a set of amendments to a will. Codicils can be made for a reasonable price, but they must be signed with the same formalities as a will.

Need Help With Your Estate Plans? Contact Louisville Estate Planning Lawyer Today!

Clients who want to create and document their estate plans can get help from a Louisville Estate Planning Lawyer. Give us a call right now, and we’ll assist in every way possible.