By definition, estate planning is a process designed to help manage and preserve assets while you are alive, and to conserve and control their distribution after your death according to your goals and objectives. What estate planning means to each individual depends on who they are. Age, health, wealth, lifestyle, life stage, goals, and numerous other factors determine your estate planning needs.
You may have a small estate and may be concerned only that certain people receive particular things. A simple will is probably all that is needed.
If you have a larger estate, minimizing any potential estate tax impact may be your foremost goal. You may need a more complex approach to your estate plan, such as a combination of trusts.
What estate planning means can vary by demographic and change drastically throughout your life. Some examples of what broad groups may need to think about are included here:
Any individual over the age of majority:
Incapacity can strike anyone, at any time (think Terri Schaivo or Bobbi Kristina Brown) – all adults over 18 should consider having:
A durable power of attorney: This document lets you name someone to manage your property for you in case you become incapacitated and cannot do so.
An advanced medical directive: The main types of advanced medical directives in Florida are (1) a living will, (2) a health-care surrogate designation (with a HIPAA release). Not all states allow each kind of medical directive – you will need to discuss where your wishes will be executed with the estate planning attorney.
Young, unmarried adults:
If you’re young and single, you may not need much estate planning. If you have some material possessions, you should at least write a will. If you don’t, the wealth you leave behind if you die will likely go to your parents, and that might not be what you would want. A will lets you leave your possessions to anyone you choose (e.g., your significant other, siblings, other relatives, or favorite charity).
Unmarried domestic partners:
You may have a life partner but aren’t legally married. A will is essential if you want your property to pass to your partner at your death. Without a will, Florida law directs that only your closest relatives will inherit your property, your partner may get nothing. If you share certain property, such as a house or car, you may consider owning the property as joint tenants with rights of survivorship. That way, when one of you dies, the jointly held property will pass to the surviving partner automatically.
In 2010 laws passed allowing the executor of a deceased spouse’s estate to transfer any unused estate tax exclusion amount to the surviving spouse without such planning. This provision is effective for estates of decedents dying after December 31, 2010. You may be inclined to rely on these portability rules for estate tax avoidance, using outright bequests to your spouse instead of traditional trust planning. However, portability should not be relied upon solely for utilization of the first to die’s estate tax exemption, and a credit shelter trust created at the first spouse’s death may still be advantageous for several reasons:
Portability may be lost if the surviving spouse remarries and is later widowed again
The trust can protect any appreciation of assets from estate tax at the second spouse’s death
The trust can provide protection of assets from the reach of the surviving spouse’s creditors
Portability does not apply to the generation-skipping transfer (GST) tax, so the trust may be needed to fully leverage the GST exemptions of both spouses
Married couples where one spouse is not a U.S. citizen have special concerns. At this time, the marital deduction is not allowed if the recipient spouse is a non-citizen spouse. A transfer to a properly drafted, qualified domestic trust (QDOT) will qualify for the marital deduction if it meets all of the requirements.
Married families with children:
If you are married and have children, you and your spouse should each have your own will. Wills are vital because you can name a guardian for your minor children in case both of you die simultaneously. If you fail to name a guardian in your will, a court may appoint someone you might not have chosen. You may also want to consult an attorney about establishing a trust to manage your children’s assets in the event that both you and your spouse die at the same time.
You may also need life insurance. Your surviving spouse may not be able to support the family on his or her own and may need to replace your earnings to maintain the family.
Individuals (and couples) approaching retirement:
If you’ve accumulated some wealth and you’re thinking about retirement estate planning overlaps with retirement planning. It’s just as important to plan to care for yourself during your retirement, as it is to plan to provide for your beneficiaries after your death. You should consider saving some of your accumulated wealth using other retirement and deferred vehicles, such as an individual retirement account and annuities.
If you or someone you know is in need of an estate planning attorney, call the Kendrick Law Group at 407-641-5847 to schedule your complimentary consultation.