Creating a Loving, Inclusive, and Sensible Estate Plan

They say that in Spring a young man’s fancy turns to love. In Fall an older – and hopefully wiser – man’s fancy should turn to estate planning – including  decisions about who gets what, when and how.

Whether you are a man or a woman, this final act of dealing with estate planning is definitely an act of love. Planning a legal and orderly distribution of what we have been blessed with during our lifetime is our last opportunity to say to those people and entities who have meant so much to us that we really did appreciate their being a meaningful part of our lives.

Roll Out the Documents!
Without proper planning, and without putting it down in writing in a legally accepted way, what you own at the time of your passing may not go to those you wish – and family members may end up squabbling over even the smallest things.

Taking the time now and thinking things through with your spouse and/or trusted advisor will save your family and loved ones time, money and turmoil.  From your wishes about your last days in a hospital or hospice care to those specific documents about how your material things are to be divided, you can answer your loved ones’ questions in advance.

There are four key documents you will need to prepare:
A Will makes it crystal clear who it is that you want to receive certain possessions or money from your estate after all legal obligations are paid. Your Will is the foundation upon which the rest of your estate plan is built. It is the most important part of your estate plan and should be reviewed periodically and changed, if necessary. Yet, as important and necessary as a Will is, court records show that about 55% of American adults – men and women – don’t have a Will or other estate planning documents in place at the time of their death.

Durable Power of Attorney.  This is the document that names whom it is that you want to make financial decisions for you when you are too sick or incapacitated to make them yourself. For example, who has the legal say-so to instruct your IRA manager or stock broker to sell assets in your account to pay your expenses? Who determines whether to renew your car insurance when you can’t drive your car?

The Advanced Medical Directive and Health-care Proxy.  Different states have different names for this document, but the intent is the same: who decides what end-of-life care you are to receive when you can’t decide this for yourself.  Obviously, it will be someone you trust and who loves you enough to carry out your final wishes. This person is someone with whom you have discussed this matter and who is emotionally stable and able to make the necessary decisions.

A Revocable Living Trust. A Trust is what its name implies: a document you can rely on to do the job that needs to be done. Unlike a Will, a Trust is not subject to probate and therefore is not open to public scrutiny. Because it is revocable, it can be changed, amended or even cancelled during your lifetime. It is Living because it is created while you are still alive, and it carries out its purpose even after you have died.

A Trust is an empty vessel until property is formally and legally transferred into it. Creating the Trust document costs time and money; formally transferring ownership of the property costs time and money; the feeling of losing control of the property, while only a feeling, often makes the owner uncomfortable – all of the above make people a bit uncomfortable in creating a Trust by which they transfer their valuable property into a separate entity.

It often boils down to whether or not you want to pay these Trust costs up-front, or let your estate and heirs pay a much greater expense after you are gone. It will be much greater because without a Trust your estate and heirs will bear the cost of Probate as well.

Following the steps below should help you make up your mind about this important decision.
1) Go to a book store and buy a good book on estate planning. Then read it.
2) Talk to a friend who has created his/her own Trust.
3) Find a lawyer who specializes in estate planning and have an initial discussion about whether having a Trust is right for you and your family.

Multiple Choices
If you don’t have a Will, you die intestate. The state in which you reside at the time of your death will decide how your estate will be distributed. The charities you supported, which may have represented your cherished values, are totally forgotten in this process.

While having only a Will guarantees that your estate will go through probate – and probate can be tedious, cumbersome and expensive – the best plan would be to organize your estate so that the least value you intend to pass to your heirs will be included in the probate process. This can be accomplished by using the following probate avoidance devices and documents, and, for the most part, without having an attorney prepare them for you:

Living Trusts allow you to keep full control over the property you have transferred to the Trust.  At your death this property is quickly transferred to your beneficiaries without being probated. (An attorney who specializes in estate planning is highly recommended to establish a Living Trust.)

Individual Retirement Accounts (IRAs) allow you to instruct your account manager to transfer your assets directly to your named beneficiaries outside of probate.

Property that is held in joint tenancy is automatically inherited by the surviving owner.  No probate is required.

Assets such as bank accounts and stocks can be designated as pay-on-death (POD) and transferred quickly and easily to the named beneficiaries without probate.

POD deeds and vehicle registrations pass real estate and vehicles to named beneficiaries without probate.

Life Insurance proceeds are paid by the insurance company directly to the policy beneficiary(ies) without probate.

Smaller Estates – State laws exempt from the normal probate process smaller estates to go through a simplified probate procedure or avoid probate altogether. These rules vary from state to state. Your executor will have to find out if your estate qualifies as a “small estate.”

Charitable Remainder Trust assets do not pass through probate and can cover a multitude of estate planning objectives, such as leaving a cash stream to heirs and the remainder to one or more charitable beneficiaries. (Requires an attorney to establish.)

It boils down to this: Who do you want to rememberyour family and the charities that represented your values? or your probate attorney?  Aside from avoiding probate altogether, if you significantly reduce the value of the probated estate, you will likely reduce attorney fees as well. If you plan wisely, you can reduce the size of your probate estate and perhaps even eliminate probate entirely.