What is
estate planning?
Estate planning is a process to consider alternatives for, to
think through, and to set up legally effective arrangements
that would meet your specific wishes if something happens to
you or those you care about. Good estate planning is more than
just a simple Will. Estate planning also typically minimizes
potential taxes and fees, and sets up contingency planning to
make sure your wishes regarding health care treatment are followed.
On the financial side, a good estate plan coordinates what would
happen with your home, your investments, your business, your
life insurance, your employee benefits (such as a 401K plan),
and other property in the event you became disabled or if you
die. On the personal side, a good estate plan includes directions
to carry out your wishes regarding health care matters, so that
if you ever are unable to give the directions yourself, someone
you select would do that for you, and know when you would want
them to authorize heroic measures and when you would prefer
they pull the plug.
Does it make sense to use an attorney? Is it expensive?
Only an attorney who regularly practices in the fields of wills,
trusts, probate and estate planning is able to provide you with
really sound legal advice as you put your estate plan into place.
Attorneys are subject to regulation by state bar organizations,
many of which have continuing education requirements and mandatory
liability insurance in case the lawyer makes a mistake. When you
speak with an attorney, you can get answers to your questions --including
how much it would cost. Often the expense incurred in retaining
an attorney to prepare and help you put an estate plan into place
is worth hundreds of times what you and your family would pay with
no planning or poor planning. It would also avoid the financial
and emotional nightmares that can occur with a poorly drafted (or
improper) plan.
What is an
estate?
The term estate consists of all the property a person owns or controls,
whether in his or her sole name, held in a partnership, in a joint
ownership arrangement, or through a trust, and all other monies
that would be generated on the person`s death, such as through life
insurance. It includes: real property and things attached to it
(houses, buildings, barns, etc.) all personal property (including
automobiles, bank accounts, stocks and bonds, mutual funds, stock
options, cash, furniture, jewelry, art, collectibles, etc.) all
businesses and business interests (sole proprietorships, partnerships,
corporations, joint ventures, and the goodwill, inventory, tools
and equipment, accounts receivable, and other business property,
etc.) powers of appointment (the right to direct who gets someone
else`s property) life insurance and annuity contracts, pension benefits,
IRAs, 403(b)s, etc. all debts and obligations owed to others all
claims you have against others, such as for the pain and suffering
from an auto accident.
When should
I start my estate plan?
The only time that you can prepare and implement an estate plan
is while you are alive and have legal capacity to enter into a contract.
If you are unable to manage your own affairs or suffer from some
other disability which affects your legal capacity, your estate
plan may be effectively challenged by those who assert that you
lacked capacity at the time the documents were created, that you
were subjected to fraud, coercion or undue influence during the
creation and implementation of your plan. The best time to start
an estate plan is now, while you have the capacity to do so.
Should I
have an estate plan?
You should have an estate plan if: you are the parent of minor
children you have property that you care about you care about
your health care treatment. If you do not have minor children,
do not care about your property, and have no concerns about
your health care treatment, then you do not need an estate
plan. But if you meet any of these categories above, you should
have an estate plan.
What sort
of instructions are made as part of an estate plan?
An estate plan consists of one or more documents that set forth
instructions. Some documents are used to control health care decisions,
others control your property in the event of your incapacity, and
still other documents will control the distribution of your property
in the event of your death.
How can an
estate plan prevent a conservatorship prceeding?
An estate plan uses several tools which can prevent the court from
gaining jurisdiction over your affairs. A Living Will or Directive
to Physicians is used to determine if artificial life support systems
are to be used or withheld. A Durable Power of Attorney for Health
Care is used to provide authority to a person, in whom you have
the utmost trust and confidence, to make decisions regarding health
care treatment when you are unable to provide informed consent.
A Durable Power of Attorney for Property enables you to authorize
a person to act in your place and stead in the event of your incapacity;
this attorney-in-fact can manage your financial affairs without
the need to have intervention by the courts. A Trust or Family Limited
Partnership is used to hold property; the Trustees or Partners manage
the property held by either of these entities. Both the Trust and
the Family Limited Partnership continue to manage the property even
if you are incapacitated. Thus, a properly prepared estate plan
can enable you to avoid a Conservatorship proceeding over your estate.
Compared to the cost of a Conservatorship proceeding, an estate
plan can be very attractive.
What about
books on estate planning?
As you begin the process caveat emptor (let the buyer beware). There
is a lot of information out there; while some of it is very good,
some is misleading at best. There are many over-the counter guides
to estate planning available at bookstores. Some are pretty decent,
most are awful. If you are planning to do it yourself, be prepared
to spend a fair amount of time on this project.
What are
some typical estate planning documents?
Several of the following documents are typically used as part of
the estate planning process: A Will, sometimes called a Last Will
and Testament, to transfer property you hold in your name to the
person(s) and/or organization(s) you want to have it. A Will also
typically names someone you select to be your Personal Representative
(or Executor) to carry out your instructions and names a Guardian
if you have minor children. A Will only becomes effective upon your
death, and after it is admitted to probate. A Durable Power of Attorney
for Health Care or Health Care Proxy appoints a person you designate
to make decisions regarding your health care treatment in the event
that you are unable to provide informed consent. A Living Will or
Directive to Physicians is an advance directive which gives doctors
and hospitals your instructions regarding the nature and extent
of the care you want should you suffer permanent incapacity, such
as an irreversible coma. A Durable Power of Attorney for Property
appoints a person you designate to act for you and handle financial
matters should you be unable or perhaps unavailable to do so. A
Living Trust can be used to hold legal title to and provide a mechanism
to manage your property. You can select the person or persons you
want -- often even yourself -- as the Trustee(s) to carry out the
instructions you want in the Trustf and name one or more Successor
Trustees to take over if you cannot. Unlike a Will, a Trust usually
becomes effective immediately, continues in force during your lifetime
even in the event of your incapacity, and continues after your death.
Most Trusts are revocable which allows the person who creates the
Trust to make future changes, modifications and even to terminate
it. (If the Trust is irrevocable, changes, modifications and termination
are very difficult (and sometime impossible), although such Trusts
often carry some tax benefits.) Trusts also help you avoid or minimize
the expenses, delays and publicity of probate. A Family Limited
Partnership can be used to own and manage your property, in a similar
manner to a Trust, but allowing additional tax planning techniques
to be employed. Family Limited Partnerships are typically used for
those who have large estates and thus have a need for specialized
estate planning in order to minimize federal and state estate/death/inheritance
taxes as well as provide elements of asset protection.
