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This month we want to answer some questions that we have been frequently asked by our clients concerning Estate Planning.  A few of these questions and answers are as follows:


What is "Estate Planning" and is this process for everyone?


An estate plan will provide for your family after your death or disability. The goal is to allow your chosen beneficiaries to receive your property in a way which maximizes the benefits to them. If you do not have your own estate plan, the state of Arkansas will supply one for you. Rarely will the state laws result in property passing in the manner which you would prefer.   Only through an estate plan can you name the persons you want to serve as trustee and guardian for your children. There are several documents used to create an estate plan and they are as follows:


Will. This instrument allows you to designate the people that you want your assets to go to and the guardian of your minor children. The portion of your assets controlled by your Will is called the probate estate. It consists of assets which you own at the time of your death and are in your name alone. You may change your Will at any time. It takes effect only at your death.


Trusts. A trust is an arrangement where you transfer property to a trustee or trustees to manage for the benefit of your beneficiaries. The assets held by a revocable trust do not go through probate. There are several kinds of trusts: revocable, irrevocable, and testamentary.


Durable Power of Attorney. You may use a durable power of attorney to designate another person to manage your financial affairs during your lifetime if you are unable to do so. A durable power of attorney is valid if you become incapacitated.


Living Will. You may create a Living Will to communicate your feelings about life-sustaining treatment in the event you are in a terminal condition or permanently unconscious. Such an instrument may also designate a health care representative who is authorized to make medical decisions for you if you are unable to do so.


As you can see an estate plan is really for anyone who wants to plan the manner in which they would like for their property to be distributed.


When should a person review their Estate Plan?


An Estate Plan can be as simple as designating an executor (someone to take charge of your matters at death) and, if you have minor children, a designation of an appropriate guardian. Normally an Estate Plan includes at least a will, and probably a durable power of attorney, a living will (or health-care proxy) and perhaps a revocable trust. Here are some guidelines about appropriate times to review your existing Estate Plan.


(1)    Change in your material status. Marriage and/or divorce are examples of events that dramatically alter an estate plan. Marriage gives your spouse additional rights to your property, and a final divorce decree causes automatic changes to your will, without your action.


(2)    Birth or adoption of children. New children may alter whom you wish to name as their guardian and, without adequate estate planning, can cause property to be divided by law contrary to your intent.


(3)    Significant change in your net worth. If your estate planner has not seen an updated list of your assets, your will may not minimize your potential estate tax liability.


(4)    Substantial increase in your insurance coverage. An individual (even without other assets) who increases his or her life insurance above $2,000,000 may be creating potential estate taxes that could be avoided.


(5)    Death of a spouse. For the same reasons as a deliberate change in marital status.


(6)    Death of a beneficiary. If the death of a named beneficiary in your will isn't specifically addressed, your alternate wishes for that beneficiary's share may not be accomplished.


(7)    Change in the tax law. Several recent changes have been made in the estate and gift tax provisions, including adjustments to the unified credit and allowance of a deduction for family-owned businesses that requires many technical factors be met before qualification.


(8)    Development of special needs of a beneficiary. These needs can include physical or mental impairments that may require trust provisions, or creditor or marital problems of a beneficiary.


(9)    You change your mind about a fiduciary. As your children age, a different guardian may become more appropriate. Age, impairment, or geographic distances may affect a trustee's or executor's ability to serve.


(10) Five years pass. As a general rule, if none of the above conditions require an earlier change, look at your Estate Plan at least every five years.

What are "revocable trusts" or "living trusts" and how do they work?

The use of the terms "Revocable Trusts" or "Living Trusts" are synonymous and are terms used to describe a particular type of trust. A revocable trust is an arrangement in which property is transferred from the Grantor (the person creating the trust), to the Trustee (the person who will manage the property), to be held for the benefit of a person (the Beneficiary), on terms the Grantor spells out in the trust agreement. A revocable trust is a trust that the Grantor can revoke or change at any time. Generally, the Grantor is also the initial Trustee and Beneficiary of a revocable trust.


A typical revocable trust provides that property transferred to it will be held for the sole benefit of the Grantor as long as the Grantor lives. A revocable trust can be revoked by the Grantor prior to death. When the Grantor dies, the trust property is distributed to the remainder Beneficiaries, usually the spouse and/or children of the Grantor, or continues to be held in trust for their benefit.


A revocable trust has the following advantages:

- Avoids probate

- Maintains privacy and confidentiality,

- Expedites distributions,

- Reduces administrative expenses, and

- Provides the ability to manage your assets after death and during incapacity.

If you would like more information regarding Estate Planning, please contact us and we can provide such information.

Williams & Hutchinson

(479) 464-4944

What is Estate Planning?
When to review your Estate Plan?
What are revocable trusts or living trusts?

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If you would like more information regarding Estate Planning, please contact us and we can provide such information. 

Williams & Hutchinson
(479) 464-4944