Some of the more difficult decisions clients have to make involve Estate Planning issues, including: how to distribute one’s property after death; who should be named as the Guardians and Trustees of minor children; and whether to use extreme measures to prolong one’s life. This requires clients to consider four issues: wills & trusts, health care decisions, financial power of attorney, and estate planning needs.
LAST WILL AND TESTAMENT:
The answer is that in Georgia, if you die without a Will, your estate will be distributed to your legal heirs, commonly known as your “next of kin.” Lacking a Will, the identity of your heirs is determined by law, not by you.
For example, the law states that a surviving spouse and children are a decedent’s heirs-at-law. However, without a Will, the law generally requires that the estate be split equally amongst the spouse and the children. A spouse gets no more than a child’s share. Moreover, the children, no matter how young, receive their bequest outright, rather than being held in trust until they are of suitable age and discretion. In order to have control over the minor child’s money, the surviving partner would have to petition the probate court to be appointed as the child’s conservator, a process that is costly, and unnecessary with good estate planning.
For clients who are not legally married and have no children, one’s legal heir could end up being an unknown second-cousin twice removed, if that person is the closest living blood relative to the decedent. And the cost of identifying distant relatives, and serving them with legal process, could be costly.
Instead of relying on the law to identify one’s legal heirs, clients may write a Will that identifies their beneficiaries by name.
Writing your Will is beneficial in other ways as well. For instance, in your Will, you can:
• Direct that property be held in trust for minor children, or disabled beneficiaries, and make decisions about how trust assets may be used;
• Name a trustee to invest and manage the funds in any trust;
• Name a guardian who will raise and care for your children;
• Name an executor to probate your Will;
• Direct that your executor be relieved of having to post a bond or file ancillary paperwork with the court, such as inventories, appraisals or returns, which would otherwise increase the legal costs of probating your Will.
PROBATE AVOIDANCE UTILIZING REVOCABLE LIVING TRUSTS: Depending on one’s family circumstances and financial situation, it may be advisable for clients to avoid probate entirely, utilizing a revocable living trust.
Probate is the legal process of proving that the Will is valid. Most executors hire a lawyer to complete the probate process, thereby incurring legal fees. It is possible to avoid probate entirely by creating a revocable living trust, and transferring one’s assets to the trust during one’s lifetime.
Probate avoidance becomes advisable when the major beneficiaries in a Will are not the decedent’s heirs-at-law, or next of kin. When a client plans to leave assets to individuals (or organizations) other than the heirs-at-law, there is always the risk that the family of origin will file an objection, contesting the will’s validity, thereby embroiling the estate in litigation.
In addition, probate avoidance is beneficial because it avoids the necessary freezing of assets that occurs during probate. When a person dies, all assets that the person owned in their individual name are frozen, and therefore inaccessible to the executor, until the probate process has been started and the executor has been sworn in by the court. This process takes a minimum of two weeks, and can last months in complicated situations. This can create a financial burden on the executor and the family, as they struggle to pay the decedent’s expenses while waiting for the legal authority to gain control over the decedent’s assets.
Finally, probate avoidance is beneficial where the client owns real estate outside the state of Georgia. The probate process in Georgia only gives the executor control over Georgia real estate. If the decedent also owned real estate outside of Georgia, it would require a second legal process in that other state, in order to gain control over the out-of-state real property.
In the initial consultation, an attorney discusses these issues with a client. The attorney will suggest various ways to transfer property to designated persons outside of one’s probate estate, including joint tenancies and/or a revocable living trusts. Each method has pros and cons that should be discussed in depth.
Minimizing Estate Taxes is an important issue to discuss in the initial consultation, especially if the client expects to have a large probate estate. At the present time (2016), the federal government provides a federal estate tax exemption of $5.45 million per person. What this means is that the first $5.45 million in the estate is not taxed at all. However, the amount over and above $5.45 million is taxed, at a top tax rate of 40%.
Prior to the initial consultation, a client should gather together all documentation of her assets and ascertain their current value. During the consultation, an attorney will discuss what avenues are available to minimize one’s federal tax debt, including utilizing the marital exemption for married couples, and living trusts.
HEALTH CARE DECISIONS: Many clients are concerned about the medical profession’s use of extreme health care measures to keep patients alive. Clients may address this issue in an Advance Directive for Health Care.
In the Georgia Advance Directive for Health Care or GADHC, a client may identify an agent who will make decisions about whether to use extreme measures to keep the client alive, or whether to withhold or discontinue such measures if it is in the best interests of the client to do so. The advance directive also allows the client to state her preferences concerning the use of extreme measures, in case her agent is unavailable or unwilling to act on her behalf.
Moreover, the GADHC gives the health care agent the right to visit and have full access to the client in the hospital, to talk with the client’s doctors, and to review the client’s medical record.
The GADHC also allows the client to name her guardian – someone who will be her caregiver, or who will ensure that her physical needs are provided for, in the event the client is unable to care for herself.
The GADHC then, is particularly vital to unmarried clients by allowing them to choose family or non-family members as their agent and guardian, and giving non-family members the right of access and visitation in the hospital.
PLEASE NOTE: EFFECTIVE JULY 1, 2007, THE GEORGIA ADVANCE DIRECTIVE FOR HEALTH CARE REPLACED THE GEORGIA DURABLE POWER OF ATTORNEY FOR HEALTH CARE AND THE GEORGIA LIVING WILL. ALL POWERS OF ATTORNEY AND LIVING WILLS SIGNED PRIOR TO JULY 1, 2007 WILL REMAIN FULLY VALID; HOWEVER, CLIENTS SHOULD CONSIDER WHETHER IT WOULD BE BENEFICIAL TO UPDATE THEIR HEALTH CARE DIRECTIVES USING THE NEW STATUTORY FORM.
FINANCIAL POWER OF ATTORNEY: Clients should plan for their future needs. For instance, with a financial power of attorney (“FPOA”), a client may appoint a family member, domestic partner, or friend to be her “agent,” so that if he becomes disabled, the agent can handle his finances and investments.
By law, the agent must act in the client’s best interest. Financial powers of attorney can be used to allow the agent to pay household bills, hire and pay for additional nursing care, or manage the client’s investments during the client’s disability.
The financial power of attorney is useful even when a couple own most of their assets jointly. For instance, elderly clients who need to move a spouse or partner into an independent or assisted living facility can use the FPOA to sell jointly held real estate, without the necessity of the partner attending the closing.