- Asset Protection Planning
- Business Succession Planning
- Charitable Giving
- Disability and Special Needs
- Elder Law
- Executor and Trustee Responsibilities
- Financial Powers of Attorney
- Inheritance Planning
- Lifetime Gifts
- Medical Directives
- Planning for Minors
- Retirement Accounts
Three Estate Planning Items Everyone Needs
Many people mistakenly believe that estate planning is only necessary for wealthy or older people. In reality, a basic estate plan is essential for everyone, regardless of income, net worth, or age, because we all want to minimize confusion, unnecessary costs, and stress for loved ones after a death or in the event of incapacity.
Estate planning can be a difficult topic for many families to address, but it is a necessary one. Without proper preparation and documentation, assets such as houses, retirement plans, and savings accounts can end up in limbo for years, sometimes requiring expensive legal assistance to straighten matters out.
At a minimum, everyone should have the following three items in place:
1. An up-to-date will or trust
Wills are easy to create, but they require probate for the distribution of assets. Probate is a legal process that involves
- validating a deceased person’s will;
- identifying, inventorying, and appraising the deceased person’s property;
- paying debts and taxes; and
- ultimately distributing the remaining property as the will directs.
The probate process often requires a lot of technical paperwork and court appearances, and the resulting legal and court fees are paid from estate property—reducing the amount that is passed on to heirs.
Trusts usually avoid probate, which helps beneficiaries gain access to assets quicker as well as save time and court fees. Depending on how it is structured, a trust may also reduce estate taxes owed and can protect an estate from heirs’ creditors.
A trust provides other benefits that a will cannot. When properly funded, trusts help avoid guardianship or conservatorship if you become incapacitated. A will only works after you have died; a trust, by contrast, works all the time, including periods of incapacity before death.
2. A durable power of attorney
A power of attorney is a written authorization that allows someone else to make financial and legal decisions for a person if that person should become hospitalized, disabled, or otherwise incapacitated.
Not all powers of attorney are created equal. Some are put in place for short periods of time only—while a person is vacationing overseas but dealing with legal matters at home, for example. That is why it is important to have a durable power of attorney in place, which simply means that the agreement is not for a temporary period of time. It may be valid immediately when it is signed, or it may go into effect at a later point. What makes it “durable” is the fact that it will survive your later incapacity. (If a power of attorney is not durable, it is revoked when you become incapacitated—the very moment when you need it most.)
Powers of attorney for property should only be given to trusted individuals, ideally those who are good with financial and legal matters. Medical powers of attorney, giving someone the authority to make healthcare decisions on your behalf, can be separate and given to someone else, if desired.
3. Updated beneficiary designation forms
Beneficiary designation forms on life insurance policies, retirement accounts, and other assets will generally override any conflicting provisions within a will or trust. It is essential to make sure all forms are checked and updated regularly, ideally on an annual basis.
An estate planning professional can help you create or update these basic items as well as provide suggestions for additional steps, if needed.