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The Elements of Estate Planning

Wills: Used to distribute your property upon death, select an estate executor, and make your wishes for guardianship of minor children known. With a will, your estate will pass through probate.

Trusts: Used to distribute your property upon death, select a successor trustee, and make your wishes for guardianship of minor children known. With a trust, your estate does not pass through probate.

Financial Power of Attorney: Used to appoint a financial agent who will take care of your financial business when you are incapacitated.

Medical Power of Attorney: Used to appoint a medical agent who will take care of your medical business when you are incapacitated.

Living Will: A true end of life document that allows you to make decisions about life support now, while you are still in good health. Without a living will, your loved ones may need to make these decisions later, creating family trauma.

Pour-Over Will: Only used for estate plans based on trusts. Essentially, this is a miniature will that collects forgotten assets and "pours" them into your trust. If everything goes to plan, a pour-over will will not be used at all.

The Fundamentals of Trusts

All trusts are either revocable or irrevocable. A revocable trust may be amended or revoked at any time. An irrevocable is more permanent and not easily amended or revoked. Irrevocable trusts have become less common, but they may still be valuable for wealthy clients as a way to avoid federal estate taxes.

In addition, all trusts are either living or testamentary. A living trust is created during the client's life while a testamentary trust is created upon their death. Most estate plans are based on living trusts.

Trusts become more specialized based on the individual client and their needs. For example, some trusts also include spendthrift provisions. These are designed to prevent financially reckless beneficiaries from giving trust interests away or using them to satisfy debts. On the other hand, special needs provisions are required when leaving property to any beneficiary with any special needs. These provisions are designed to protect the beneficiary's access to government assistance. In general, these provisions provide supplemental support beyond what is offered by the government. Keep in mind that you can also create trust provisions that protect and care for beloved pets.

To mention a couple additional types of trusts, community property trusts are only available to married couples. These trusts can be very important in avoiding or reducing capital gains taxes. Gun trusts have also become very popular. They are vitally important for any estate that includes highly regulated firearms.

Probate

Probate is a legal proceeding in which the court oversees the distribution of a decedent's property according to the terms of their will or the rules of intestate succession. Typically, this is a lengthy (at least six months) and expensive process. A decedent's executor is responsible for managing the probate process. Most executors hire legal assistance because probate can be very complex. This partially explains why probate tends to be expensive.

More on Contracts

Contracts govern the business relationship between two or more parties. When entering into a business relationship, it is critical that you put the terms on paper. That way, everyone is legally bound by the promises they are making. Common types of contracts include: leases, employment agreements, severance agreements, residential/commercial property purchase agreements, non-competes, confidentiality agreements, stock purchase agreements, and asset purchase agreements.

More on Leases

Leases govern the relationship between a landlord and tenant. Any time you are renting a property or someone is renting from you, you need to have a lease to protect your interests. Leases typically focus on the following: term, extensions of term, rent, payment of utilities, payment of property taxes, payment of insurance, common area maintenance, pets, nuisances, approved use, and general maintenance/repair responsibilities.

Starting a Small Business

Every small business needs legal support to thrive. Small business owners need to make sure that their business plans are sensible and comply with the law. Businesses also require certain legal documents to ensure proper formation. For example, a limited liability company (LLC) needs articles of organization, an operating agreement, a FEIN number, and a beneficial ownership report. If you have partners, these formation documents are especially important because they control the relationship between you and your partners, including who can sell their ownership stake and who will run the business.

Proper formation is also important for managing liability. An owner needs to make sure all of their documentation is correct so that they are isolated from personal liability. Formation documents and general organization are also vital when selling a small business. If business records are incomplete or messy, a sale will be much harder to complete. Sales are usually accomplished through an asset purchase agreement or stock purchase agreement.

Other Important Agreements

If you are getting married, you and your future spouse may want to consider signing a pre-nuptial agreement. These are especially common for couples entering second or third marriages. Pre-nups are design to accomplish three main things: 1) keeping property separate between the spouses; 2) preventing spouses from making claims against the estate of the other; and 3) preventing spouses from claiming alimony in the case of divorce. They can also be helpful in organizing marital life, such as creating joint accounts or addressing expenses of the marital home.

Cohabitation agreements are very similar, except they deal with unmarried couples living together. If you are living with your significant other, it is very important to have an agreement defining your relationship. For instance, these agreements can lay out who will pay for home repairs and other such decisions.