Everyone wants to ensure their life’s work benefits the people and causes they care most about. Most often, we do this by entrusting our cherished possessions, hard-earned wealth, and most valued assets to our loved ones when we pass away.
Unfortunately, people are all too often intimidated by the prospect of estate planning: there’s tons of information online, but a lot of it is difficult to understand without a lawyer. Sometimes, too, the articles we come across aren’t specific to our state of residence or personal circumstances.
The 5 Foundational Pieces of Every Estate Plan
We can help you get started planning or reviewing your estate plan. To get started or better protect your progress, consider whether you’ve established the foundational items of every well-considered estate plan:
- Last Will and Testament
- Living trusts
- Beneficiary designations
- Durable power of attorney
- Healthcare power of attorney
Among the most basic—and necessary—features of any estate plan is a will.
A will, in essence, lets you decide who gets what assets after your death. In some cases, a will can also carry certain conditions for asset use or disbursal. While a will alone isn’t ideal for complex estates or people who hold many valuable assets, they are essential for anyone who has children. That’s because, here in Arkansas, a will is the only document in which you can appoint a guardian for your minor children. Without a designated guardian, a judge who doesn't know your family will decide who will take care of your children after your death.
However, wills are not the end-all of estate planning, even if many people think they are.
A living trust is, in many cases, advisable in addition to a will—especially if you own a home, transferrable stocks, or any other valuable assets that would excite the taxman or need to be protected for your heirs. Living trusts come in many different forms for a variety of purposes. Some examples include minor’s trusts, life insurance trusts, and even credit shelter trusts, which let you pass money along to your children tax-free. Our favorite is the Personal Asset TrustSM to best protect your loved ones from future divorces, creditors and taxes. The trust that is best for you depends largely on your personal circumstances as well as your values, goals, and priorities.
When you establish a living trust of any type, you can immediately begin transferring property into its care. Certain types of trusts also let you remove or strike assets that have been deposited. You can strike or add beneficiaries as needed or create more complex conditions for disbursal than a common will would allow. Perhaps the biggest benefit of trusts, for most Arkansas residents, is that they let you avoid probate proceedings on many high-value assets.
Beneficiary designations are sort of similar to wills and trusts, insofar as you can name a recipient or heir who will receive proceeds from an account once you’ve died.
However, beneficiary designations are both simple and exceedingly powerful. When you purchase life insurance, for instance, the named recipient is your beneficiary—this is the person who receives a payout when you pass away. Likewise, some bank accounts or stock portfolios may allow you to partake in a transfer-upon-death-type arrangement, whereby control of the account is passed to a designated individual when you die.
Beneficiary designations are important and often unavoidable—but they must be carefully considered. A beneficiary designation trumps whatever you have written in a will, which means a divorced spouse or estranged relative could take assets you saved for someone else unless you have a comprehensive estate plan. Beneficiary designations also give assets outright, with no future asset protection for heirs.
Finally, naming minor children as beneficiaries also causes many problems, as minors can't own assets until the age of majority (18 in Arkansas) so the court will hold those funds until the child turns 18 before giving them access.
How the Power of Attorney Protects YOU
Something that surprises many people is that estate planning isn’t all about wills, heirs, and inheritances: an estate plan benefits you, too, and can protect you in the event of an unexpected disaster.
Durable Power of Attorney
No estate plan is complete unless you’ve given a close friend or relative durable power of attorney. When someone has a durable power of attorney, they can act on your behalf, legally and financially, when you’re not able to make decisions for yourself. If you get into a car crash or experience cognitive decline from a serious disease such as Alzheimer’s, someone you trust can do what’s best for you when you can’t make informed decisions.
However, you can’t wait to assign this power; when you’ve reached a point where your cognitive facilities might already be compromised, the courts won’t consider your request valid.
Healthcare Power of Attorney
Similarly, a healthcare power of attorney permits someone to make medical decisions in your stead. Imagine if you got into a serious car crash and were in a medically-induced coma: how long would you want your loved ones to keep you on life support? What would you want the doctors to do?
If you haven’t appointed anyone as your healthcare power of attorney, these decisions may fall to a physician. While doctors are legally required to do what they think is in your best interest, their choices may not align with your values, preferences, or expectations.
You may also consider creating a living will in which you can grant someone the healthcare power of attorney and spell out your specific wishes for worst-case medical scenarios.
Your Estate Needs Could Be More Complex
To recap: most people need a will, a trust, up-to-date beneficiary designations, and power-of-attorney designations to have a truly comprehensive estate plan.
However, estate planning doesn’t end there. We live in a rapidly changing world, and there are other things you should consider. If you own cryptocurrency or own a website, what would happen to one or the other when you die? Each state, including Arkansas, has specific laws and statutes governing what your loved ones can and can’t do with your digital assets, as well as rules they must follow in attempting to access them after your death.
Many business owners also have advanced estate planning needs to consider, such as how the business will be passed on to other owners or children.
In sum, an estate plan helps you protect what you have; it also has the power to protect your life, finances, and health when you’re unable to call shots yourself.
A Rock-Solid Plan Shields You and Your Family From Life’s Curveballs
Consider, though, that each of the foundational aspects of estate planning we’ve talked about builds off each other. You need a will to name a guardian for your children, but a will isn’t necessarily the best way to pass on your house or ensure your kids get a tax-free inheritance.
Estate planning may not be easy, but it doesn’t have to be hard, either—Quraishi Law’s attorneys can help you configure an estate plan that fits your unique situation and needs. We know Arkansas, and we know how to help you use Arkansas’ legal system to preserve your peace of mind.
Contact Us Today
Send us a message, or give us a call today—even if you’re unsure of what to put in your will or don’t quite understand the different types of trusts, we can assist you in selecting the right solutions for you and your loved ones.