Estate Planning: An Overview

What is Your Estate Plan?

Your estate plan sets forth, in writing, your wishes concerning the administration of your estate upon your incapacity or death.  For those with larger estate, tax planning is often required.

We tailor our approach to Estate Planning by using a set of legal instruments (including Wills, Trusts, Powers of Attorney, etc.) to specifically fit the unique needs of our clients.  By doing so, we are able to help you protect your property and ensure that it transfers efficiently, upon your death, to your named beneficiaries.

Few people ever want to think about death or disability, but creating an estate plan is one of the most important steps you can take to ensure financial security for yourself and your family.  A well-constructed estate plan maintains your control of your finances, but also helps your loved ones avoid the cost, delay, and frustration associated with directing your affairs should you become disabled or when you pass away.

An effective estate plan should provide for your loved ones by avoiding guardianship during life, probate at death, estate taxes, and costly and unnecessary delays, and consulting a qualified estate planning attorney will help you create this plan. After going over your family and financial situation and your goals, he or she will be able to explain the different options available to you.   With your estate plan established, you can rest assured in the knowledge that you have provided security for yourself and your family if the worst should happen.

Protecting What Matters by Avoiding Probate

The probate process occurs when you leave your estate to your loved ones using a will. This means that everything in your estate, everything you own, will pass through a process that is costly in both time and money, and is also open to the public in probate court.  The court retains control of the process until the estate has been settled and distributed.  In the meantime, it is not uncommon for probate courts to freeze assets pending final disposition of the estate. If you are married and have children, this can present an unfortunate and stressful situation in which your loved ones have no quick access to cash to make ends meet.  As a result, your survivors may have no choice but to apply to the probate court for the cash needed to pay immediate living expenses. This situation can last for weeks or even months while the court decides how to distribute your estate.   All this can be avoided, however: with proper estate planning, your assets can pass on to your family without going through probate, in a manner that is faster, less expensive, and private.

Providing for  Your Incapacity

Incapacitation not only affects you physically; it can have serious consequences for the management of your financial affairs.  It’s often mistakenly assumed that one’s spouse or adult children can automatically take control should he or she become incapacitated.  The truth is more complicated: to arrange for another person or persons to manage your finances, they must petition a court to declare you legally incompetent, a process that can be long, expensive, and stressful.  And if it so happens that the court appoints the person you would have wanted, they may be obliged to return to the court every year to account for how they are spending and investing your money, down to the penny.  Furthermore, other legal tools, such as a will (which does not take effect until death) or a power of attorney, may prove inadequate for the task. To enable your family to take over for you immediately, you must designate, in appropriate legal documents, a person or persons in whom you trust.  Then they will have the authority to withdraw money from your accounts, pay bills, take distributions from your retirement accounts, manage stocks, and refinance your home.

Besides considerations of your financial affairs during incapacity, it’s often wise to establish a plan for your medical care.  Much as you would designate a person or persons to make decisions about your finances while you are incapacitated, you can appoint someone you trust, like a family member or friend, to make decisions on your behalf about medical treatment options.  This designation is made by using a durable power of attorney for health care.  And as a final measure of security in the event that you become permanently unconscious or terminally ill, it’s important to have a living will that instructs others about your preferred medical treatments such as the use of extraordinary measures.

Providing for Minor Children

The upbringing of your children is another important aspect that your estate plan should address.  If you have younger children, you may want to consider creating a plan that will allow your spouse to work less outside the home and to devote more time to your children. Also, should you believe your spouse lacks the experience or capability to address financial and legal matters, you may want to make special counseling and resources available for him or her. It’s also important  to discuss with your attorney the possibility of both you and your spouse dying at the same time, or within a short time of one another.  A contingency plan in this situation should determine  who will manage your assets as well as the guardian you’d like to nominate to care for your children.  And these persons need not be one and the same; it may be beneficial, in fact, to choose different persons in order to maintain a system of checks and balances.  If a contingency plan is not in place, it will be for a court to decide upon a financial manager and guardian, which may require certain additional burdens and restrictions, such as having to provide yearly accounting.

You may also wish to decide how your beneficiaries receive your assets, whether directly or through a trust. With a trust, you can have the assets distributed based on a variety of factors of your choosing, including age, need, and perhaps incentive-based milestones linked to behavior or education.  By doing so, you can help ensure that your children will avoid the pitfalls that often accompany receiving significant assets before they are mature enough to handle them.

The choice of a guardian is important and deserves careful consideration. Among your considerations may be: Does he or she share the values you want instilled in your children? Do you have requirements regarding the age and financial condition of a potential guardian? Does the guardian have the skills necessary to raise your children?  Will my plan place too much of a financial burden on him or her?

Charitable Bequests – Planned Giving

If providing benefit to a charitable organization or cause is one of your goals, a planned giving estate plan can help.  Your estate plan can provide for charities in a number of ways, either during your lifetime or at your death.  Depending on your choice of giving plan, it may also let you receive an annuity (a source of fixed income for life), earn higher returns on investments, or reduce your capital gains or estate taxes.

Planning for Death Taxes

The federal estate tax, sometimes referred to as the death tax, is one of the last taxes you may owe the IRS.  In addition, many states levy their own estate and inheritance taxes. Determining how much of each of these you may owe depends on the size of your estate and how it is set up. Avoiding or reducing death taxes is possible through a variety of estate planning strategies, but it is important to begin the planning process early so that you can take advantage of many of these plans.