"I am not rich so I do not need an estate plan!" This is a misconception that I will often hear from many different people. The purpose of this blog post is to explain the importance of a simple estate plan, and therefore it will not cover tools that would be used in a more complex estate plan. A basic estate plan can benefit everyone by helping them make decisions with deed ownership, executorship, beneficiaries, minor children guardianship, powers of attorney, and health care documents.
Deed ownership is a very important part of estate planning. In Ohio, co-owners will usually own property as tenants in common or joint tenants with rights of survivorship. If two people hold title as tenants in common, when the first person dies, his/her interest will pass through probate. If two people hold title as joint tenants with rights of survivorship, when the first person dies, his/her interest will automatically transfer to the second owner. A survivorship deed is usually the most sought after kind of deed, because it is a way of avoiding probate. Another handy tool used in Ohio is called a transfer on death designation affidavit which allows an owner of property to file an affidavit with the recorder naming the successive owner of the property and thus avoiding probate.
Executor choice is another crucial decision to be made in an estate plan. An executor is the person chosen to administer your estate. By naming an executor, you can put someone trustworthy in that position. You can also name a back-up executor and request that bond be waived of any executor named in your will. If bond is not waived, the executor will have to get bonded by an insurance company. If the executor does not have good credit, he/she will usually not be able to get bonded.
One of the most critical parts of an estate plan is choosing beneficiaries. If you do not choose your beneficiaries, the intestacy laws of Ohio will decide how your property is to be divided. By having a last will and testament, you can designate who will get specific pieces of property. You can also designate who will get the residue or remainder of the estate. By designating a beneficiary, you can make sure your final wishes are carried out.
Many people often forget that a will allows them to designate a guardian for their minor children. This is an essential decision, because it allows for you to pick who will watch over your children if something happens to you. Although not controlling, a court will usually put heavy weight into the guardianship nomination when considering a guardian.
A financial power of attorney can be both a good and bad tool. It is a good tool because it designates someone to manage your finances. By naming someone such as a spouse or child as your power of attorney, it can usually help avoid a potential guardianship action. A financial power of attorney can be a bad tool because it designates someone to manage your finances. It is essentially a free pass to access all of your finances. If you decide to give someone power of attorney, make sure that you trust them 100%. I often recommend recording a power of attorney with the local recorder. This way, a certified copy can always be produced.
The last basic estate planning tools are health care documents. There are two types of health care documents: health care power of attorney and living will. A health care power of attorney designates who will make health care decisions for you when you are incapacitated and unable to do so yourself. A living will designates who will make end of life decisions for you when you have been declared brain dead by two different doctors. The documents also allow you to nominate potential guardians of your person and estate if you were ever were to be declared incompetent.
As you can see, there are many important decisions that need to be made in a basic estate plan. There are also many complex tools that can be used for more advanced estate plans. If you have any questions regarding your estate plan, contact me at (440) 390-2337 for a free 30 minute consultation. I am located in Parma Heights, Ohio, and would be pleased to answer your estate planning questions.