In today’s digital age, information is readily available online. However, there remain misconceptions about estate planning. Many of us don’t invest time in understanding it, possibly because we underestimate its necessity and the advantages it offers. There are common misunderstandings about estate planning: assuming a will bypasses probate, thinking that marriage ensures automatic inheritance, and believing that minimal assets mean no need for an estate plan. Being educated about estate planning is crucial to avoiding potential complications in terms of time, money, and emotional distress. Take a moment to grasp the significance of an updated estate plan – it not only addresses post-mortem matters but also provides protection in the event of incapacitation for both you and your loved ones.
While there are many reasons to establish and update an estate plan, we are going to focus on three.
Reason # 1: An estate plan lets your loved ones know what you want.
Many shy away from contemplating death and avoid talking about it with their loved ones. Yet, it’s crucial to have conversations about what you envision after you’re gone. Your loved ones might not know the necessary steps to take amidst the grief of losing you. Offering clear guidance through an updated estate plan can ease their burden and prevent any added confusion or stress. This becomes even more crucial after significant life events like the birth or passing of a loved one.
Maintaining a current and thorough estate plan allows you to dictate and convey your desires for your assets and belongings. It also empowers you to make vital choices regarding the well-being of your minor children, pets, and your own end-of-life arrangements. Communicating your wishes through an up-to-date estate plan offers numerous advantages to your family. Additionally, there might be tailored strategies and documents for your specific family situation that could offer substantial benefits to you and your loved ones, of which you may not be aware.
Reason # 2: An estate plan is a legally enforceable way to carry out your wishes.
You might believe there’s no need to formally document your wishes for what happens to your assets after you’re gone, assuming your loved ones will honor your intentions. Yet, the future can bring unexpected challenges, and financial pressures may lead them to make different choices. For instance, while adding a child’s name to your property or accounts might seem like a safeguard against incapacity and probate, it carries significant risks. This confers ownership to the child, giving them sole control after your passing. They could potentially exclude other intended beneficiaries, causing conflicts. It’s important to remember that they might do this out of perceived necessity. This example underscores why an enforceable estate plan, crafted with a seasoned estate planning attorney, ensures your hard-earned assets go to your chosen recipients without discord.
Reason # 3: You get to choose what happens.
You might hesitate to consult with an estate planning attorney, possibly due to not fully understanding the benefits of having an updated estate plan. It’s crucial to realize that without your own plan, or if your plan is incomplete, the state will default to its own. This state-defined plan, called an intestate statute, dictates how your assets are distributed and may not align with your wishes. It won’t account for your unique family dynamics and relationships. If you’re in a blended family, have minor children, own a business, or are part of an unmarried couple, it’s highly recommended to consider the implications of not having a plan in place.
Having an estate plan safeguards you in case of incapacity resulting from accidents, injuries, or illnesses. Without one, you could face a court-appointed conservatorship or guardianship, with someone potentially taking control whom you wouldn’t have selected. Through your estate plan, you can designate someone to act on your behalf, sidestepping court interference and its associated challenges. It’s crucial to periodically review your documents to ensure that the individuals you’ve chosen to make important decisions for you are still the right choices.
Everyone should have a choice in their future. A qualified estate planning attorney can help you create a plan that illustrates your wishes. If you or your loved ones have any questions about creating or updating an estate plan, please give us a call.
Estate Planning Roll Call: Important Legal Tools You Should Have
Just like in a roll call, it’s crucial to ensure that everyone is present and accounted for. Likewise, when putting together an estate plan, various legal documents should be in place to achieve a thorough and comprehensive plan. While you’ve probably heard of estate planning, you might not be familiar with the specific legal instruments that make up a complete plan. Our aim is to inform you about these legal tools, what each one entails, and the benefits and protections they offer.
Will or Revocable Living Trust
Like any sound structure, a comprehensive estate plan requires a sturdy foundation. This foundation is established through either a will or a revocable living trust (trust). Wills and trusts are legal instruments crafted to guide and oversee the distribution of your assets and possessions. While a will offers guidance after your passing, a trust goes further by providing direction in case of your incapacity during your lifetime and upon your death. Hence, various factors need to be considered when deciding whether a will or trust serves as the best foundational tool for your specific situation.
Will
A will as a foundational legal tool often requires that your property go through the probate process upon your death, although certain accounts and property can be transferred outside of probate through the use of beneficiary designations or if the account or property is jointly owned with a right of survivorship. Probate is the court-supervised process in which everything you own is transferred to your loved ones (also known as beneficiaries, or heirs if you do not have a will) at your death. In your will, you elect an individual to be in control of carrying out your wishes and state who gets your accounts and property at your death. This person is commonly known as the executor, executrix, or personal representative. Prior to being able to carry out yourwishes, they must be formally appointed by the probate court. It should be noted that some states have restrictions on who can serve in the role of executor, executrix, or personal representative. It is very important that you meet with an experienced estate planning attorney to understand who to elect to serve in this role, as choosing the wrong individual can result in unnecessary delays.
Trust
Alternatively, the use of a trust as a foundational estate planning tool can allow you to avoid the probate process. However, a trust can only avoid probate when bank accounts and property that you own are retitled (also called funded) into the trust prior to your death or transferred to your trust at your death. Additionally, trusts have the added benefit of protecting your accounts and property that are part of the trust if you become unable to manage your own affairs.
You may be surprised to find out that even when utilizing a trust as a foundational legal tool, you still need a will. The type of will used in conjunction with a trust differs from a standalone will. Instead, a pour-over will is used, which essentially “pours” into the trust any accounts or property that were not titled in the trust at the time of your death. While a pour-over will ensures that accounts and property not funded into your trust during your lifetime are funded at your death, it also provides other essential benefits. A will allows you to nominate a guardian for your minor children and pets and direct your funeral arrangements (in some states).
A testamentary trust is another tool that may be appropriate for you in certain circumstances. The terms of the trust are stated in a will during your lifetime and the trust is created upon your death. Like with a revocable living trust, you can customize the provisions that control the distribution of money and property through the trusts. However, this type of trust is created during the probate process.
There are a variety of considerations that go into whether a will or trust is the right foundational tool, which is why it is best to speak with an experienced estate planning attorney to help ensure you choose the right one for your unique situation.
Financial Power of Attorney
You have likely heard the term power of attorney before. However, you may not realize that each financial power of attorney and the level and type of authority granted within it varies based on its contents. These legal tools can often be customized to accomplish specific goals, but may have some limitations depending on state law. It is helpful to first understand the roles within a financial power of attorney. The person who creates it is known as the principal, and the person who receives the authority through it is the agent. An agent’s role is to act as a fiduciary and on behalf of the principal for a variety of purposes.
Under a limited power of attorney, the agent is limited to performing very specific duties, such as executing a deed for a real estate transaction or transferring a vehicle. On the contrary, a general power of attorney allows the agent to step into the principal’s shoes and manage almost all aspects of their finances and property ownership to the extent of what is allowable under state law.
A financial power of attorney can take effect immediately (or as soon as the agent has officially accepted the role) or it can be springing. A springing power of attorney requires that a certain event occur before the agent can exercise their power. This is usually upon the declaration that the principal can no longer act for themselves. It is important to note that not all states allow for a springing power of attorney.
Lastly, there is a durable power of attorney. A durable power of attorney lasts through the principal’s incapacity, making it crucial for being able to grant someone authority to act for you if you cannot act for yourself.
Medical Power of Attorney
Our health and the way we manage it is largely dependent on our own beliefs and preferences. If you areunable to make your own medical decisions, you would likely want to make sure that the person making them for you is someone that you trust and who would follow your wishes. To have this control, your estate plan should include a medical power of attorney. A medical power of attorney is known by several names depending on what state you are in, such as a healthcare power of attorney or a designation of health care surrogate. You will designate an agent and several backup agents in your medical power of attorney to act on your behalf if your first choice is unavailable. You may be able to choose to delay the effect of the authority granted until incapacity if your state’s law allows.
Advance Directive
A comprehensive estate plan will also include an advance healthcare directive, also commonly known as a living will. An advance directive serves the important purpose of allowing you to decide what forms of end-of-life care you would like. Within this legal tool, you can memorialize your wishes as it relates to being placed on life support if you are in a persistent vegetative state or diagnosed with a terminal illness with no probable chance of recovery. This legal tool is commonly confused with a do not resuscitate order, which is not part of an estate plan and instead is typically filled out at the hospital and applies specifically to resuscitation.
HIPAA
Health Insurance and Accountability Act of 1996 (HIPAA) authorizations allow an individual to designate who the hospital or medical facilities can provide medical records and information to. These authorization forms became necessary following the enactment of the federal Health Insurance and Accountability Act of 1996, which provides guidelines to the healthcare industry for the protection of patient information. This is an important legal tool to have if you have multiple individuals who are not nominated under your medical power of attorney that you would like to have access to your medical information in the event of illness or injury. While these individuals will not have decision-making authority, they will be able to stay informed about your medical condition.
Appointment of Guardian
Planning for children is a high priority for parents. There are some states that have a separate legal tool for naming guardians of minor children. While a lot of states allow you to include this information in your will, it is important for you to meet with an estate planning attorney who can create a standalone tool if it is appropriate within your state of residence.
Temporary Guardianship or Delegation of Parental Powers
There are circumstances in which you may not be able to be with your children, commonly due to extended travel. This can be an appropriate circumstance for you to name a temporary legal guardian to make decisions on behalf of your minor child while you are unable to do so. There are state-specific guidelines for the length of temporary guardianships in addition to other limitations as to how and what decisions can be delegated to another individual.
Roll call complete! Now that you have learned more about what tools should be present in your estate plan, you can ensure that you have all of the essentials in attendance when you begin the estate planning process.
Do Not Become a Statistic
Estate planning is important for everyone. It is about protecting yourself, your loved ones, and your hard-earned money (even if you do not have a lot of it). However, the numbers do not lie: most people do not see the importance of estate planning. Whether you need to create an estate plan or update an existing one, do not put it off. The following are some scary statistics about the average American and estate plans. We are committed to working with our clients to make sure they do not become a statistic.
Most People Do Not Have a Will or Trust
Only one in three Americans have a will or trust. This statistic is not surprising due to the amount of misinformation and fear around establishing an estate plan. One in three Americans who do not have a will or trust believe they do not have enough money or property to justify having an estate plan. The belief that estate planning is only for the wealthy is just one reason people put off planning; other reasons include being too busy, viewing it as too complicated or expensive, or fear of discussing death. While these may all be valid reasons, the benefits of planning far outweigh delaying the process.
People Do Not Always Tell Others That They Have an Estate Plan
Some people may not see the point in discussing death with their loved ones, but having this difficult discussion can serve several purposes. Surprisingly, 52 percent of people do not know where their parents keep their estate planning documents, and only 46 percent of executors are aware that they are named in someone’s will. It is important to discuss with your loved ones where your important documents are stored, as they may need to access your original documents for multiple reasons. Additionally, when establishing or updating a plan, you must tell the individuals named in your documents that they have been chosen to serve in these roles. These discussions should focus on what their responsibilities are and highlight your wishes. Some estate planning attorneys offer family meetings after creating an estate plan to educate the individuals named in your plan on the roles they will play.
Conflicts Are Common
According to a survey conducted by LegalShield, 58 percent of adults in the United States say they or someone they know have experienced familial conflicts due to not having an estate plan or a will. Conflicts can arise from a lack of proper planning. Often these conflicts are related to arguments over how accounts and property should be distributed after a loved one’s passing. You should work with an experienced estate planning attorney to assist in establishing a plan that will reduce family conflicts and disagreements that could end in estrangement.
Now Is the Right Time to Create or Update Your Plan
Planning ahead has never been more crucial. American retirees are projected to pass on over $36 trillion to their beneficiaries in the next three decades. This underscores the growing importance of having a thorough financial and estate plan. Don’t let apprehensions hold you back – start or continue the planning process now to ensure you don’t become a statistic in estate planning. If you or your loved ones have any questions about creating or updating your estate plan, don’t hesitate to reach out to us.
At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, starting with a valuable and educational Family Wealth Planning Session. The Life & Legacy Planning Session will allow you to get more financially organized and make the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session (aka Family Wealth Planning Session) to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.
To learn more about our one-of-a-kind systems and services, contact us or schedule a 15-minute introductory call today.