Q: Why should I make an estate plan?
A: If you die without an estate plan in place, it can be, at the least, inconvenient for your heirs, and, at the worst, significantly more expensive. You make an estate plan as a favor to those you leave behind. Below are some reasons to make an estate plan.
• Guardians for Minor Children
When you have children, your first priority is protecting them. If you do not name a person as a guardian, a court will decide what is in the best interests of your children, which will only delay the process of appointing a guardian.
Further, a person who asks the court for guardianship might be someone who does not share your ideals or practices a lifestyle that you would not want for your children. A will is often used to name a guardian, although the court will NOT automatically appoint the person you have selected. The court must consider your request, however, and will always give significant weight to your choice.
When you plan your estate, you should also nominate a guardian for your children in the event that you become incompetent. You can use a financial power of attorney to do this.
• Choose the Timing and Circumstances of Distributions
If you want to attach strings to the inheritance your loved ones will receive, you must set up a trust. Through the trust, you can protect a beneficiary from creditors and future ex-spouses. If a beneficiary has significant health problems, or if the beneficiary is a minor or not mature, you can have the estate assets be distributed over time so that your beneficiaries will receive only what they need. The remaining assets would be saved for a time when your beneficiaries will receive the maximum benefit.
If you have a special needs relative (such as one who is receiving government assistance) you can make sure your assets go to help your special needs beneficiary while not disqualifying the person from other assistance such as Medicaid.
• Choose Who Will Make Decisions for You if You Become Incompetent
Estate planning is not just about having a will. You should also have appropriate "powers of attorney" documents. These documents name someone to make your important financial or health care decisions if you can no longer make them yourself. Visit the Ohio State Bar Association’s Web site at www.ohiobar.org for more information about these documents.
• Taxes ! Taxes!
Proper estate planning can reduce Ohio estate taxes for taxable estates (estates of more than $338,333) and federal estate tax for federally taxable estates (in 2009, for estates of more than $3.5 million - for 2010 the budget proposal presumes the estate tax remains the same). In certain specific circumstances, a financial planner or estate planning attorney might also be able to help reduce your estate’s present or future income tax liability.
• Avoid Probating Your Estate by Appropriately Titling Your Assets
Any assets that are in your name alone when you die usually have to go through the probate process before they can be transferred to your heirs. This could cost thousands of dollars in fees and court costs. In Ohio, you can transfer all of your assets to your loved ones without setting up an expensive trust or going through probate court. Some assets, such as certain motor vehicles or a boat, pass by law to a surviving spouse automatically. To avoid probate, you can make almost all other assets “payable on death” (POD) or you can “transfer on death” (TOD). You can avoid probate court and possibly save money by titling all of your assets, but if this is not done correctly, your assets still may be subject to probate or go to an unintended beneficiary. A good estate-planning attorney can guide you through this process.
Q: How should I get started on an estate plan?
A: First, make a list of all of your assets and determine how each is titled. If you have significant assets, you might want to consult a financial planner before going to an attorney.
This “Law You Can Use” column was provided by the Ohio State Bar Association (OSBA). It was originally prepared by (retired) Clinton attorney Richard W. Ashley, and updated by Toledo attorney Joanne F. Gall, OSBA Cerfitied Specialist, Estate Planning, Probate & Trusts.