What is An Estate?

HomeBlogEstate PlanningWhat is An Estate?

According to the Oxford dictionary, the first definition of estate is “an extensive area of land in the country, usually with a large house, owned by one person, family, or organization.” Because of this definition, we think of “estate planning” as something that only wealthy people engage in. 

However, for the purposes of “estate planning”, your estate includes all of your assets. The second definition makes more sense when we speak of estate planning; “all the money and property owned by a particular person, especially at death.”

Estate planning encompasses so much more than just thinking about your monetary assets though. A good estate plan takes into account how you will care for yourself medically and how you will leave your assets to your heirs.

Make Decisions Now

Much of estate planning is about making decisions. Decisions about how to hold money to stave off taxes or medical expenses. Decisions about what kind of medical care you desire, where you would like to live if unexpected events happen, and how your family will be cared for in the event that you can no longer support or care for them or yourself.

If you don’t make these decisions now, you may lose the right to make them in the future due to accident, illness, or death. 

Medical Power of Attorney

If you become incapacitated or incompetent and a family member takes you to court to prove you are no longer capable of caring for yourself, you could lose everything. In this situation, you could gain a guardian who is in charge of your finances and health decisions and lose your rights to decide your life decisions on your own. To avoid this type of situation, medical power of attorney documents are part of an estate plan.

With a medical power of attorney, you decide who will make healthcare decisions for you should you become incapacitated or incompetent. You also draw up advanced directives in a living will to declare exactly which types of medical life-saving procedures you want to have. Your living will lays out your decisions to medical staff about resuscitation procedures, IV nutrition and hydration, dialysis, repirators, and more. If the medical staff needs help making a decision that is not covered in your living will, they will ask your medical power of attorney. 

Probate Court

In North Carolina, your estate, the sum of all your assets, will go through a probate process after your death if your estate is worth more than $20,000 (or $30,000 for a couple). The probate process works whether you have written a will or not. The judge appoints a personal representative to account for your entire estate through an inventory. The judge then allows the personal representative to pay creditor claims, estate taxes, and income taxes. After this, the personal representative is involved in giving away the rest of the estate. If you have a will, you can name an executor to handle much of the estate and make these decisions.

If you do not write a will and decide on an executor beforehand, the personal representative could be someone who you would not have chosen. If you are estranged from your sister, it is still possible for her to swoop in and convince the judge to make her the personal representative of the estate. She can then choose to stir up trouble within the rest of your family and hurt feelings.

Retirement Accounts

Much of estate planning is working to avoid the fees, attorney costs, and public nature of probate. Property that passes directly to heirs through the beneficiary designations on a retirement account does not go through probate. There is no chance for someone else to inherit unless your beneficiary chooses to share some of the inheritance. 

Even if you write a will and name another person to inherit an account, your will does not override what your account states. If the account names Susie as beneficiary, but your will names Bob, he is out of luck. Susie will inherit the entire account. Bob gets nothing but your goodwill unless Susie is feeling generous and decides to share with him.

Trusts

Trusts are a legal framework that also does not pass through probate before going to the named beneficiary. One benefit to certain types of trusts is that you can use them to hold assets that you use for your own well-being but that do not count against you to qualify for Medicaid or other government programs. 

Medicaid pays for the bare minimum of health care treatments, but your income and assets must be under a certain level to qualify. If you qualify for Medicaid by keeping money in a trust fund, you can still manage the money and use a certain amount each month for your income. 

Keeping all of your money in checking and savings accounts can cause you to not qualify for Medicaid until you have spent most of your money. A trust fund allows you to continue to have that cushion of money while still staying under the asset requirements. 

One important thing to note is that when you apply for Medicaid, there is a 5 year lookback period. You may not qualify if you have moved large amounts of money into a trust fund within the 5 years prior to making your application. This is one of the reasons why it is better to make estate plans earlier instead of waiting.

Find Help

If you are ready to prepare for your future, give us a call at Vail Gardner Law. We work exclusively with estate planning and enjoy helping you set up your estate based on your needs. We focus on planning for your asset maximization, possible long term care needs, medical expenses, and financial goals for your heirs. We believe that planning for the future is a gift to your loved ones. We want to help you set your goals in motion and feel confident about your own future and that of your family.