Estate Planning is significantly more than planning just for death. Because the likelihood of disability occurring in your lifetime is three times greater than premature death, even for younger people, your estate plan must include provisions for an unexpected accident that causes injury or any physical or mental disability. Of course, at a minimum your estate plan should include a Last Will and Testament. Beyond these basics of estate planning, you should really take the time to evaluate what you want for you and your loved ones, today, not at some date in the distant future.
Additionally, estate planning is critically important if you have own land, a family farm or ranch or a family business. These assets represent the wealth you desire to pass on to your family. However, estate planning should also be a way for you to pass on life lessons, cherished stories about your family history and the values you live by; all of which may be lost forever if you're not able to share them during your lifetime.
For an estate plan to work, there must be a complete and thorough review of your investments, real property, businesses, life insurance policies, retirement accounts and plans and beneficiary designations. Involved in this review is the analysis and determination that sufficient liquidity is available for taxes and existing liabilities and what sources should be used to meet these expenses. You want your plan to work and estate planning is so much more than writing up a few documents and placing them in a leather bound binder.
Disability Could Happen To You
No one expects to be disabled or incapacitated, but what if it happened to you? If you were unable to make medical, financial or legal decisions for yourself; who would make them? Many of us believe that because we're married or have close family members nearby that that relationship entitles them to immediately step in and make those decisions for us. Unfortunately, without proper planning there would be a public hearing to establish guardianship or conservatorship so medical, financial and legal decisions could be made, all under the guise of court supervision. You can avoid this intrusive and very public court supervised process for handling your personal affairs.
The two primary planning tools you will need will be an Advanced Health Care Directive and a Durable Power of Attorney for Property Management.
Advanced Health Care Directive: This tool allows you to choose the individual who will make medical and health decisions on your behalf in accordance with you're carefully thought out directives. It can be set-up to only come into effect if you are temporarily or permanently unable to make healthcare decisions for yourself.
Durable Power of Attorney for Property Management: This tool also gives you the power to choose the individual who will make any financial decisions on your behalf. It allows them to manage your assets, maintain them and meet current expenses and obligations when you're not able to.
Death, a not so pleasant subject, is what most people think of when the topic of estate planning comes up. And at the very least, this part of the planning should take into account the payment of your debts and taxes and a documented determination of who will receive your remaining assets. But there are other very important aspects of estate planning, appointing guardians for families with minor children. In addition, various tools can be employed in the control and distribution of assets to minor children or grandchildren. Another aspect of estate planning that many don't conceive of when planning is the ability to protect your heir's from divorce, creditors and lawsuits. Your estate plan should address all of these things and accomplish them in a way that is tailored to your specific goals and circumstances.
The primary tool used in planning for death is the Last Will and Testament. A Will is a document that gives directives on how you want your estate handled. It only comes into effect after death, not before. A Will requires probate, a court supervised process that can be time consuming and expensive, resulting in delays and frustration for your heirs.
A Revocable Living Trust is an additional tool, and in many instances a preferable tool for estate planning. It is used to bring added flexibility and control over the estate during your lifetime and is used alongside the other legal tools described earlier. The Revocable Living Trust gives you the authority to choose who will manage your finances and assets if you're unable to do so and provides instructions to your family and loved ones on how to distribute your estate. The benefits of a Revocable Living Trust is potential savings in court fees, added attorney fees, and immediate access to your assets, thus eliminating the frustration of a long drawn out court supervised process.
At a minimum your Estate Plan should include the tools to respond to disability and death. As mentioned before, these areas of planning can be handled with an Advance Health Care Directive, Durable Power of Attorney for Property Management and Last Will and Testament. A Revocable Living Trust will give you added flexibility, along with peace of mind and help to minimize frustration and delays by avoiding probate.
There are other tools that you may need to employ for specific purposes, such as Special Needs Trust, Qualified Personal Residence Trusts, Irrevocable Life Insurance Trusts, Pet or Equestrian Trusts, Grant Retained Annuity Trusts, Family Limited Partnerships and LLC's. These tools will be the subject of our ongoing effort to bring you informative and educational materials.