Estate Planning From 10,000 Feet
It’s a common misconception that you need an “estate” or great wealth to justify having an estate plan. However, this is not the case. The legal definition of an estate is whatever you own, great or small. Everyone benefits from planning: a will to direct how your assets will be distributed on death, and powers of attorney to appoint a decision-maker if you are unable to make decisions for yourself. Failing to plan is planning to fail!
Let’s Look At Estate Planning From The “10,000-foot” View
These are the basics that everyone should consider. Typically, an estate plan addresses one inevitability – death; and one potential circumstance – incapacity. Let’s look at how to plan for death first.
When a person dies, their property passes to their heirs in one of two ways:
- Non-probate assets. Think life insurance policies, IRA’s, checking accounts. Typically, these assets allow you to designate a beneficiary to receive these assets on your death. If you can and do designate a beneficiary to receive a particular asset on your death, then that asset passes automatically on your death. Therefore, No will or probate is necessary.
- Probate assets. Anything that does not automatically pass to a designated beneficiary on your death is a probate asset. To efficiently get probate assets to your heirs, you need a will and that will have to be probated after your death. Probate is a process where the County Court authenticates a will. The process accepts it as the official instructions of the deceased as to who they want to manage their estate (the executor) and who will receive their assets (the beneficiaries).
Why You Should Have A Will
Having a will allows for the orderly and efficient administration of your estate. After you die, your executor probates your will and then undertakes to pay any final bills and then distribute your estate to your beneficiaries. One great feature of a well-prepared will is its flexibility to address different circumstances. For example, if a person has children who are minors at the time of their parents passing, a well-designed will can provide for trusts to manage assets for the minor children until they reach an appropriate age.
Not every person will be incapacitated during their lifetime. But, if that becomes a reality for you, who will make financial and medical decisions for you?
There are two common documents involved in an estate plan:
- Durable Power of Attorney, which allows you to designate one or more agents to make financial decisions for you if you cannot. You can customize a durable power of attorney to limit or expand the authority you give your agent.
- Medical Power of Attorney, which allows you to designate one or more agents to make medical decisions for you if you cannot.
Do You Have A HIPAA?
In addition to your medical power of attorney, it is important to include a HIPAA (Health Insurance Portability and Accountability Act) release. This allows medical agents can have access to your medical records. In addition, it is important that you designate in advance how you want your family and doctors to respond if you face a terminal or irreversible condition. Failing to do so leaves that decision with your family. Will they agree on a course of action? Will their decision be consistent with your wishes?
In conclusion, just like everyone’s “estate” is different, so should their estate plan be. Good estate planning is not a “one size fits all” approach. Each person’s assets, desires, and unique circumstances should be considered in developing an effective plan. An estate planning professional can help you to tailor one to fit your needs. Let us know if we can help you!