Protecting Your Assets in Vermont: Planning for the Unexpected

In Vermont, the essential estate planning documents include: 1) A Will, which directs how your assets should be distributed after death; 2) A Durable Power of Attorney, which appoints someone to manage your finances if you become incapacitated; 3) An Advance Healthcare Directive, which includes a living will and healthcare power of attorney; and 4) Potentially a Trust, depending on your specific circumstances. These documents form the foundation of asset protection and ensure your wishes are followed if something happens to you.

If you die without a will in Vermont (known as dying 'intestate'), your assets will be distributed according to Vermont's intestacy laws. Generally, your assets would go to your closest relatives in a specific order: first to your spouse and children, then to parents, siblings, and more distant relatives. The court will appoint an administrator to manage this process. This can result in distributions that don't match your wishes and may cause family conflict. Creating a will gives you control over who receives your assets and can simplify the process for your loved ones.

To protect minor children in Vermont, you should: 1) Name a guardian in your will who would raise your children if both parents die; 2) Consider establishing a trust to manage assets for your children until they reach an appropriate age; 3) Designate a trustee to manage those assets; and 4) Consider life insurance to provide financial support. Without these provisions, a court would decide guardianship based on the 'best interests of the child' standard, which may not align with your preferences.

Probate is Vermont's court-supervised process of validating a will, paying debts, and distributing assets after death. To help heirs avoid or minimize probate: 1) Create a revocable living trust and transfer assets to it; 2) Hold property in joint tenancy with right of survivorship; 3) Designate beneficiaries on accounts like life insurance, retirement accounts, and payable-on-death bank accounts; and 4) For smaller estates, utilize Vermont's simplified probate procedures. Vermont allows estates valued under $45,000 (excluding real estate) to use a simplified probate process.

To protect assets during incapacity in Vermont: 1) Create a Durable Power of Attorney appointing a trusted agent to manage your finances; 2) Establish an Advance Healthcare Directive with healthcare power of attorney; 3) Consider a revocable living trust with a successor trustee who can manage trust assets if you're unable to; and 4) Review and update beneficiary designations regularly. Without these documents, your family may need to petition for guardianship/conservatorship through court, which is costly, time-consuming, and removes your ability to choose who manages your affairs.

Vermont does not have an inheritance tax, which is a tax paid by beneficiaries on assets they receive. However, Vermont does have a state estate tax that applies to estates exceeding $5 million (as of 2023). This tax is paid by the estate before assets are distributed to beneficiaries. For larger estates, consider working with an estate planning attorney to implement tax-saving strategies such as lifetime gifting, certain types of trusts, or charitable giving to minimize potential estate tax liability.

Yes, creditors can claim against your estate in Vermont after you die. During probate, creditors have a period (typically 4 months from public notice) to file claims. Certain assets may be protected from creditors, including assets in irrevocable trusts, life insurance proceeds paid to named beneficiaries, retirement accounts with named beneficiaries, and jointly-held property with rights of survivorship. To protect assets from creditors, consider establishing irrevocable trusts, maximizing contributions to protected retirement accounts, and maintaining adequate life insurance.

You should review your Vermont estate plan at least every 3-5 years and update it whenever significant life events occur, including: 1) Marriage, divorce, or remarriage; 2) Birth or adoption of children or grandchildren; 3) Death of a beneficiary, executor, or trustee; 4) Substantial changes in assets or financial situation; 5) Moving to a different state; 6) Major tax law changes; or 7) Changes in your wishes regarding asset distribution. Regular reviews ensure your plan remains current with your life circumstances and Vermont law.

In Vermont, a will is a document that takes effect after death, directing asset distribution through probate court. A trust is a legal arrangement where a trustee holds and manages assets for beneficiaries, potentially during your lifetime and after death. Key differences: 1) Wills go through public probate; trusts typically avoid probate; 2) Trusts can manage assets during incapacity; wills cannot; 3) Trusts offer privacy; probated wills become public record; 4) Trusts can provide long-term asset management for beneficiaries; and 5) Trusts generally cost more to establish but may save money and time later. Many Vermonters use both in their estate plans.