Many Vermonters put off estate planning much longer than they should. Estate planning can seem complicated and daunting, and many people do not know where to start. Others feel they are too busy to dedicate the necessary time and energy to create an estate plan. In reality, basic estate planning, which is sufficient for most Vermonters, is not difficult, time-consuming, or expensive. However, failing to plan for one’s death can create unnecessary hardship for one’s loved ones at an already difficult time.

What Is Estate Planning?

A person’s “estate” refers to their property, and “estate planning” is planning for the transfer of property at the time of death to a person’s loved ones. If a person dies without estate planning, their estate is controlled by the laws of “intestacy,” which provide that the person’s property must go through the court-supervised probate process before it can be distributed to the deceased’s “next of kin.” The probate process can be lengthy and expensive (if not handled properly), and sometimes a person’s legal “next of kin” is not who that person would want to receive their estate. In order to ensure one’s estate gets to the right people with the minimum delay and expense, one needs to perform at least basic estate planning.

What Is a Will? What is a Trust?

Estate planning involves unique terminology that most people do not hear every day. Here are some of the basic terms used in estate planning:

• Probate: The court-supervised process of collecting and distributing a person’s estate when they die. Assets that are still owned by the deceased person at the time of death are considered “probate assets” and must go through the probate process. One can bypass the probate process through estate planning strategies which ensure that one’s assets are not in one’s name at the time of one’s death.
• Will (AKA “Last Will and Testament”): A will allows a person to specify what should happen with their probate assets (assets still owned in that person’s name) when they die. A will typically makes gifts of property to loved ones and nominates an Executor/Executrix to manage the deceased person’s estate. A will can also nominate a guardian for any minor children of the deceased.
• Executor/Executrix: The person appointed to manage a probate estate under the terms of a will is called the Executor (if male) or Executrix (if female). If there is no will, the person in charge is referred to as the Administrator or Administratrix. The Probate Court supervises the Executor/rix’s work on the estate, including the payment of debts, collection of assets, and distribution of assets according to the terms of the will, or according to state law if there is no will.
• Trust: A legal arrangement in which one person (the “trustee”) holds ownership of an asset for the benefit of another person (the “beneficiary”). Trusts are commonly used to accomplish the same goals as a will but without going through the probate process. Assets owned by the trustee of a trust are not considered “probate assets” and do not go through the probate process. “Revocable” trusts are especially popular—revocable trusts allow individuals to maintain complete control of their property during life but still avoid probate at death.
• Power of Attorney: A legal arrangement in which one person (the “principal”) gives another person (the “agent”) authority to act on behalf of the principal under certain circumstances. Elderly people frequently use powers of attorney to allow their children or other loved ones to help them pay bills and handle other financial matters in the event the elderly person becomes unable to do so themselves. A power of attorney does not authorize the agent to make medical decisions. A power of attorney expires when the principal dies.
• Advance Directive:

A document specifying (in “advance”) a person’s wishes for healthcare they do or do not wish to receive if the person is incapacitated and cannot make decisions for themselves. An advance directive can also nominate another person to make healthcare decisions for the incapacitated person. Confusingly, advance directives are also called “healthcare proxies,” “healthcare powers of attorney,” and worst, “living wills.”

• Beneficiary Designation: A beneficiary designation is a way to designate a person who should receive an asset when the current owner dies. Many banks and other financial institutions will allow account holders to establish beneficiary designations to identify a person or group of people who should receive the value of an account when the account holder dies. Accounts with beneficiary designations generally do not need to go through probate. Better yet, many people can set up beneficiary designations without the assistance of an attorney.
• Enhanced Life Estate Deed: Also called a “Ladybird Deed,” “Medicaid Deed,” or “LBJ Deed,” an enhanced life estate deed allows the owner of real estate to designate a loved one who will receive the land when the current owner dies. The current owner maintains complete control for the rest of their life, including the power to eliminate or change the gift of property at the time of their death. These deeds can also help to preserve the value of a person’s home and prevent the State from taking the home in the event that person needs Medicaid assistance for long-term nursing home care.

What Kind of Estate Plan Is Right for Me?

Most people want an estate plan that is simple, inexpensive, and efficient at the time of their death—passing assets as quickly and easily as possible to one’s loved ones. What strategy is right for each person depends on the person’s assets and objectives. A couple with one child, a house, and several bank accounts may be able to accomplish all of their goals, with no need for probate, through a simple deed and beneficiary designations. Individuals with several children may want to use a will or trust to impose additional terms to prevent fights over “who gets what,” such as terms requiring that property be sold and divided equally.
 

MSK Attorneys can help to create an estate plan that works best for your situation. Contact MSK Attorneys online or call us at 1-802-861-7000 for a consultation to discuss your specific needs.

 

Disclaimer: This information is for general guidance only and does not constitute legal advice. It is essential to consult with a qualified attorney for advice tailored to your specific situation.