Estate Planning in Alabama
Avoid the 7 biggest mistakes people make when planning their estates, and learn the basics of estate planning in Alabama
Estate planning is the process of determining who you want to get your assets when you pass away, putting documents in place that reflect those wishes, and putting documents in place to allow someone to make financial and healthcare decisions for you if you live a long time, but become incapacitated or incompetent.
Determining who you want to inherit your assets when you pass away
Putting legal documents in place that reflect those wishes
Putting documents in place to allow someone to make financial and healthcare decisions for you
Unfortunately, most people only prepare for what happens when they die—who gets their assets, etc. However, people are living longer, into their 80s and 90s, and often become incapacitated or incompetent as they get older. Therefore, it is just as important to make sure that you have documents in place that allow trusted loved ones to make healthcare and financial decisions for you if you are no longer able to do so. Without these documents, a court will make all of these decisions regarding your finances and healthcare.
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Learn the 7 biggest mistakes people make in their estate plan, and how to avoid them.
Estate planning is a journey and not a one time event.
Too many lawyers treat estate planning as a one time event, where a client comes in and signs documents, puts them away in a drawer, and never updates those documents. Estate planning documents should be flexible, and updated as your circumstances in life change.
For example, when you’re in your 20s, your documents need to reflect who would you want to take care of your children, and who would manage your money on behalf of your children if you and or your spouse passed away.
During this phase of the estate planning journey, you’ll probably be asking yourself questions such as:
Who would you want to have custody of your children?
How would you want the money used?
Would you want the money distributed evenly to the children?
Who would you want to manage their money?
Would you want it used to pay for college?
Would you want the guardian to make those decisions?
As you grow older life circumstances may change.
For example, you may get a divorce. You would need to update your documents to take your ex-spouse out of any role they have in those documents. If you get remarried and your spouse has children by a prior marriage, your documents need to reflect what would happen if something happened to one of you. Would you want your children by your first marriage to get some of your assets? Would you trust that your spouse would make sure that your children by your prior marriage got assets when the spouse passed away? Are you concerned that, if the spouse got remarried, your kids by your first marriage may never get anything?
As you approach retirement years, your concerns are more about whether your money would last long enough to pay for long-term care if needed down the road.
You would also want to make sure your documents give powers to your trusted loved ones that are necessary as you become older to make sure that they can take care of you and that spell out how to do so. Unfortunately, most attorneys and most people treat estate planning as a onetime event. As their life circumstances change, the documents they paid for and put in place years ago may no longer be effective.
Every estate plan should be tailored to your specific needs.
Estate planning is not one-size-fits-all. When you go to the doctor, and see the other people in the waiting room, you are not all there for the same reason. The doctor does not prescribe the same course of treatment for everybody who comes in to see him or her. Your estate plan should be the same way because everyone’s circumstances are different. While most estate plans do have the same documents, those documents should be different and reflect your wishes and priorities.
Typical documents in estate planning include:
Financial Power of Attorney
This document is designed to allow someone else to make business and financial decisions for you if you are no longer able to do so. The financial power of attorney should be durable, meaning it should survive you becoming incompetent or incapacitated, and it should spell out all the powers that you’re giving to the other party. Most powers of attorney do not have all the powers necessary for people to act. As a result, people have a false sense of security that they have a power of attorney document, but it really doesn’t do everything that is necessary. Powers of attorney must be very detailed and explicit in the powers that are being given. Without a power of attorney, if you become incapacitated or incompetent then your loved ones have to go to the court and get a conservatorship and be supervised by the court as to how your money is spent. A durable financial power of attorney is probably the most important document that you can have in place.
Advanced Directive for Healthcare
This is a two part document that contains a living will and a medical power of attorney. A living will is a document you sign wherein you express your wishes for end of life treatment. If you are permanently unconscious or terminally ill or injured, would you want to be kept alive by a feeding tube? Would you want to be kept alive by drugs and machines that only kept you alive, but didn’t cure you? Unless you put these decisions in writing, then your family has to make these decisions for you if something like this should happen.
Part two of the advanced directive is a medical power of attorney. This is a document where you authorize a trusted loved one to make medical decisions for you. You may not be on your deathbed, so your living will doesn’t apply, but you have Alzheimer’s or dementia, and you’re not able to make healthcare decisions for yourself. If your doctor says you need a medical procedure, someone has to be able to make the decision as to whether you should have it or not. The medical power of attorney is authorized to do so and then to help carry out the terms of your living will.
Last Will & Testament
The last will and testament tells your family what you want done with your property when you pass away. When you pass away, the person you name in the will as a personal representative will take your will to the probate court and get the necessary authorization to carry out and probate your estate. You can also state inside your will how you want your heirs to receive their inheritance. Do you want them to get it outright? Do you have concerns about them being spendthrifts or having addictions? Is so, you might want to consider leaving their inheritance in a trust for someone else to manage.
Those are the basic three documents that everyone needs. Another tool we use in estate planning is a trust. A trust is a kind of like a separate legal entity that you set up to manage your assets. If you use a revocable trust, then you can take assets in and out of the trust anytime during your lifetime. You would set it up with you as the manager of those assets, also known as the trustee. The benefit to using a trust is that any assets that are owned by that trust when you die skip the probate process and go directly to your beneficiaries. If you’re interested in protecting your assets from potential creditors or predators, or preventing them from losing assets to the nursing home, you may want to consider using an irrevocable trust.
Whether you use a trust really depends on whether you want to avoid the probate process when you pass away. A trust is also a great way to name someone to manage your assets and give them instructions and limitations on how to do so if you become incompetent or incapacitated.
These are the basic documents that constitute an estate plan.
A proper estate plan takes all these things into account. Without an estate plan in place, you leave a heavy burden on your family if something happens to you. We get calls on a daily basis from family members who lost a loved one unexpectedly. They’re already grieving the loss of a loved one, and now they’re faced with the difficult tasks of making decisions without the proper legal authority to do so.
We work with families on a regular basis to help put estate plans in place.
Many families just need basic estate planning with power of attorney and advanced directive and a will. Others want more advanced planning to avoid probate or protect assets, so they will use trusts to do so. What type of plan you put in place is ultimately your decision.