Components of Estate Planning
At Ardent Legal, we take a comprehensive approach to estate planning. In this blog post, our Morgantown, WV estate planning attorney, Brianna W. McCardle, discusses the components of estate planning.
So, what exactly are the components of a well-developed estate plan? At its most basic, a properly-drafted estate plan should include several components: a Last Will and Testament (“Will”), Medical Power of Attorney, Living Will, and General Durable Power of Attorney. However, your estate plan may need more. Each estate plan is different, and your estate plan can be tailored to meet your individual needs and goals.
Depending on an individual’s needs or goals, estate planning can involve the following components:
Will: A Will is a legal document that outlines how a person's assets will be distributed and managed after their death. It typically includes instructions for the appointment of a personal representative (Executor/Executrix), who will be responsible for carrying out the provisions of the Will, and the distribution of the person's property and assets to their beneficiaries. A Will is an important tool for estate planning, as it provides a way to ensure that a person's assets are distributed according to their wishes, rather than being determined by state law. Without a Will, the distribution of a person's assets will be governed by the laws of intestacy, which may not reflect the person's wishes or provide for their beneficiaries as desired. It can also provide for guardianship and trust provisions for minor and disabled children.
Medical Power of Attorney: A Medical Power of Attorney is a legal document that allows a person to appoint someone else, known as an agent, to make health care decisions on their behalf in the event that they are unable to make decisions for themselves. Having a Medical Power of Attorney in place can provide peace of mind, as it ensures that a person's health care wishes will be respected even if they are unable to communicate or make decisions for themselves. The agent appointed in a Medical Power of Attorney is responsible for making decisions about the person's medical treatment, including decisions about medical procedures, medications, and life support. A Medical Power of Attorney typically takes effect only if the person becomes incapacitated or unable to make their own decisions, as determined by their health care provider. It's important to choose an agent who is trusted and understands the person's wishes, as their decisions will carry significant weight.
Living Will: A Living Will is a legal document that outlines a person's wishes for end-of-life medical treatment. It specifies the types of medical treatments a person does or does not want to receive if they are unable to make decisions for themselves or communicate their wishes (are in a persistent vegetative state or have a terminal condition). A Living Will can include instructions about the use of life-sustaining treatments, such as artificial nutrition and hydration, respirators, or other medical interventions. It can also include other specific instructions, such as a person's wishes regarding organ donation or funeral arrangements. The purpose of a Living Will is to ensure that a person's end-of-life wishes are respected, even if they are unable to communicate or make decisions for themselves. It can also help family members and health care providers make difficult decisions about medical treatment, as they have a clear understanding of the person's desires.
WV e-Directive Registry: The West Virginia E-Directive Registry is an online registry that allows individuals to register and store their advance directives, such as living wills, medical powers of attorney, and do-not-resuscitate orders, electronically. The registry is accessible by healthcare providers, who can use it to access a person's advance directives in real-time when needed. The use of the registry is optional, but it provides a secure and easily accessible way for individuals to ensure that their advance directives are available to healthcare providers in the event that they are needed.
General Durable Power of Attorney: A General Durable Power of Attorney is a legal document that allows a person, known as the "principal," to appoint another person, known as the "agent" or "attorney-in-fact," to act on their behalf and make decisions regarding their finances and property. The "durable" aspect of a General Durable Power of Attorney means that the document remains in effect even if the principal becomes incapacitated or unable to make decisions for themselves. The scope of a General Durable Power of Attorney can vary, but it typically gives the agent the authority to manage the principal's financial affairs, including paying bills, managing bank accounts, and investing funds, among others. Specific limitations can also be set on an agent’s power to act under the Power of Attorney. The agent is required to act in the best interests of the principal, and to follow any specific instructions outlined in the Power of Attorney document. A General Durable Power of Attorney can be a valuable tool for individuals who want to ensure that their finances and property are managed in the event that they are unable to make decisions for themselves. It's important to choose an agent who is trustworthy and competent, and to carefully consider the scope of the agent's authority before executing a General Durable Power of Attorney.
Trusts: There are several different types of trusts, each with its own unique purpose and structure, including revocable trusts, irrevocable trusts, testamentary trusts, and special needs trusts, among others. Trusts are often used as a tool for estate planning, as they provide a way to manage and distribute assets in the event of the grantor's death or incapacity, without the need for probate court proceedings. This can make the transfer of assets quicker, more private, and potentially less expensive than going through probate. The specific terms and conditions of a trust, as well as the rights and responsibilities of the trustee and beneficiaries, are outlined in the trust document.
Beneficiary Designations: Beneficiary designations are the instructions that specify who will receive the proceeds of a particular asset, such as a life insurance policy, retirement account, or bank account, upon the death of the owner. Beneficiary designations are an important aspect of estate planning, as they provide a simple and effective way to distribute assets upon a person's death. They can also help to ensure that assets pass directly to the intended beneficiaries, avoiding probate and the associated legal and administrative costs. It's important to regularly review and update beneficiary designations, as a person's circumstances and wishes may change over time. Beneficiary designations should be updated to reflect changes in a person's life, such as marriage, divorce, birth of a child, or death of a beneficiary. In addition to the primary beneficiary, a person may also name one or more secondary beneficiaries, who will receive the assets if the primary beneficiary predeceases the owner. A person may also name contingent beneficiaries, who will receive the assets if both the primary and secondary beneficiaries predecease the owner. Beneficiaries are also named in Will and Trust documents, and it is important to ensure that the beneficiary designations in all of your estate planning documents are the same.
Gift Giving: The process of giving gifts during one's lifetime to reduce the size of one's estate for estate tax purposes. In 2023, the annual gift tax exemption is $17,000. This means that a married couple can give $34,000 ($17,000 x 2) per recipient that year. For example, if a married couple has two children and six grandchildren they may give $272,000 in 2023 without affecting their joint $25.84 million overall lifetime tax exemption, which is the $12.92 million estate tax exemption for 2023 multiplied by two. In other words, if a gift exceeds the annual limit, that does not automatically trigger the gift tax. It is important to note that this exemption level is set to expire in 2025, when the federal tax exemption will revert back to 2018 levels. If an individual or couple planning on making significant gifts should take advantage of the increase prior to 2025. Gift giving is a common component of estate planning, as it allows a person to transfer assets to their beneficiaries during their lifetime, potentially reducing the size of their estate and the amount of estate taxes that must be paid upon their death. Gift giving can take many forms, including outright gifts of cash or property, gifts in trust, or gifts of stock. The specific type of gift given will depend on the person's financial situation, their estate planning goals, and the tax laws of the state in which they reside. In some cases, gift giving may also be used as a tool to reduce the size of a person's estate for Medicaid planning purposes, as gifts made within five years of applying for Medicaid may cause a person to become ineligible for Medicaid coverage. Gift giving can be a complex aspect of estate planning, and it's important to carefully consider the tax implications of gifts and to plan gifts in a manner that is consistent with a person's estate planning goals. Although most individuals and couples don’t have to worry about federal estate tax implications, it is important to be aware of the impact that gift giving may have on estate taxes.
Charitable Giving: Charitable giving is a common component of estate planning, as it allows a person to support the causes they care about, while also potentially reducing the size of their estate and the amount of estate taxes that must be paid upon their death. There are several ways to make charitable gifts as part of an estate plan. Charitable giving can provide significant tax benefits, as charitable gifts may be deductible for federal income tax purposes, and may also reduce the value of a person's estate for estate tax purposes. In some cases, charitable giving may also be used as a tool to reduce the size of a person's estate for Medicaid planning purposes, as gifts made within five years of applying for Medicaid may cause a person to become ineligible for Medicaid coverage.
Medicaid Long-Term Care Planning: Medicaid long-term care planning is an important aspect of estate planning for individuals who may need long-term care in the future and are concerned about the cost of such care. Medicaid is a joint federal and state program that provides health coverage for low-income individuals and families, and is also the primary payer of long-term care services in the United States. Planning while you are healthy can ensure that you are eligible for Medicaid when the time comes while protecting your assets.
The specific components of an estate plan will vary based on a person's individual circumstances and goals, that’s why it is important to seek the advice of a qualified estate planning attorney to ensure that your estate plan is comprehensive and meets your specific needs and goals. Regular review and updates may also be necessary to ensure that the plan remains current and effective.
Whether you are just starting the process of creating your estate plan or have an old estate plan that needs review and updates, contact our experienced Morgantown, WV estate planning attorney for a free initial consultation. You can give us a call at (304) 241-1055 or fill out our contact form on the web at: https://www.ardentlegalwv.com/contact.
Sources:
West Virginia Intestacy Statute
