Estate planning can be a daunting undertaking for an individual. It is hard to know where to start, especially since death is a very unpleasant subject that many families avoid discussing. However, one should not wait to begin planning for the distribution of his or her assets upon death.
The most important reason a person should have an estate plan is to decide how assets are distributed instead of allowing the State of Missouri decide how the assets should be divided. Every family is different and each estate plan needs to be tailored to fit the needs of that particular individual and family. The tools of an estate planner include Last Will and Testament, trust, gifts, Durable Powers of Attorney and nonprobate transfers.
Estate planning should include the possibility of incapacity and disability. As people age, infirmity and disability can prevent him or her from handling his or her own financial affairs or make informed healthcare decisions. Therefore, individuals should have Durable Powers of Attorneys as part of the estate plan. A Durable Power of Attorney for Personal Financial Matters is a document that appoints a person called the attorney in fact to handle all personal financial matters when the individual is no longer able to handle those duties on his/her own. A Durable Power of Attorney for Healthcare matters is a document that appoints a person called the attorney in fact to make healthcare decisions for an individual that is incapacitated.
A Living Will, also known as a healthcare directive, is a document that states how an individual wants to spend his or her last days. This document details the types of treatments and machines that are not to be used when an individual is in a vegetative state or death is imminent. The types of treatments must include whether the person would like to receive artificial food and hydration when the person cannot eat or drink on his/her own. This is a very personal decision for each individual. Many individuals do not want to leave this heartbreaking decision to his/her loved ones to make; therefore, it is extremely important for a person to include this in an estate plan.
Making a gift during one’s lifetime, may be an option for some individual estate plans. For 2012, the federal annual gift exclusion is $13,000.00. In other words, any individual can make an annual gift up to $13,000.00 to any number of individuals without gift tax liability. In addition, a donor may make unlimited gifts to an individual as long as the gift is used for healthcare or education and the donor pays the gift directly to the healthcare or education provider. For instance, a grandparent may want to provide financial help to a grandchild for college expenses but does not want to be limited to the annual gift exclusion of $13,000.00. Thus, the grandparent can make direct payments to the university or college and not be limited to $13,000.00.
Another tool used in estate planning is the Missouri Non-probate Transfers Law. This allows an individual to title property in such a way as to make it “payable on death” or “transferable on death”. By doing this the individual avoids probate on those items and retains all legal rights to the property during his or her lifetime.