Estate planning makes sure your health care and property requests are honored. Having a complete estate plan address any of the legal issues that tend to crop up after death.
Preparing a will
Making a will is not hard, but dying without a will can be difficult for your family. Dying without a will is called dying intestate. An intestate estate is taxed to the maximum, and any property will be distributed according to the intestate succession law of Rhode Island. A will documents your property inheritance choices and names a guardian for any minor children if applicable. If you do not have surviving relatives, the state receives your estate.
A will should include:
- Property distributions such as gifts to family, trusts and charitable donations
- The name of the executor or executrix, who will administer your affairs
- Arrangements for your children and pets (address children and pets in the estate plan with a trust and guardian)
There are a few basic considerations to consider including in your will. Every individual situation is unique. You may wish to consult an attorney for any additional factors you may require.
Probate is a court-supervised process after death. It authenticates your will, names an executor, inventories property, manages debts, finds heirs and distributes the property per the will or state law if intestate.
- Property transfers to the surviving owner of joint ownership real estate, bank accounts, vehicle, brokerage account, and individual stocks and bonds, avoid probate. Payable-upon-death beneficiary bank accounts and CDs and transfer-upon-death registrations and deeds like cars and real estate can limit probate exposure.
- Transfer the assets you can while you are still alive, through an inter vivos gift. If you don't own it, it can't be taxed.
- Living trusts provide tax benefits to the trust beneficiaries, limiting taxation on the estate of a beneficiary. Trusts don’t go into probate and creditors can't access it.
Formal probate is time- and finance-consuming. It is best to avoid or limit what goes through probate. Like many states, Rhode Island offers simplified probate procedures for low value estates of $10,000 or less. Several assets can be transferred outside of probate.
Financial power of attorney
With a financial power of attorney, you choose the person you wish to make financial decisions on your behalf should you become incapacitated. This avoids the court making the choice instead.
Marking the document effective immediately gives you with coverage right away. Making the power durable allows the power to continue into the future. A durable power of attorney can also be springing, which activates later upon incapacitation.
Health care/end-of-life decisions
You have the right to make health care and end-of-life decisions in Rhode Island. Your decisions are enforced through an advance directive for any incapacitating illness or end-of-life choices:
- A living will document that contains your wishes regarding health care instructions including if you wish to receive life support systems
- Power of attorney for health care that specifies the appointment of a health care representative that will make health care choices on your behalf
There are many do-it-yourself forms in Rhode Island. If you would prefer a customized document, you should consult an attorney.
- With prepayments, you are assuming a degree of risk. Inflation may not keep up with funds set aside. Should you move, you may not receive a refund, or the company could go out of business.
- Note your final arrangement wishes through the witnessed will, power of attorney, living will or final letter of instruction. You can pay for your arrangements by an insurance policy made payable to an irrevocable trust, or by special bank account.
It is a prudent idea to include funeral provisions in your estate plan. It avoids burden, confusion, stress and expense to the family.
- Estate taxes should be set aside if your estate is over $5.25 million for the year 2013, and if your spouse would be unduly burdened or other family member, a life insurance policy could be helpful.
- Incorporate a buy-sell agreement, or trust for succession, or sale of your business. A limited partnership under the IRS estate freeze may reduce tax liability. Without planning, heirs may owe estate taxes as high as 55 percent.
It is wise to have at least the basic plans for the above items. Depending upon your individual situation, you may have additional things to consider.
Estate law is hard to keep up with. Federal and state laws change constantly. Be sure your estate is handled in accordance with your desires, and consult a Rhode Island estate planning attorney.