Remember that estate planning is not just for the wealthy, and now that the federal exemption is so high, not just for the billionaires either. Estate planning is also much more than a will.
Your estate plan has a lot of work to do for you, both while you are alive and for your family when you have passed. A good article that explains it all comes from Investopedia, “How to Get Your Estate Plan on Track.” There are three key objectives that your estate plan needs to do:
- End-of-life health care decisions are documented in a legally binding document;
- Assets will be distributed according to your instructions, rather than state law; and
- Loved ones avoid the time, expense and stress of the probate process.
A basic estate plan should include advanced directives, such as a health care proxy and power of attorney, will (perhaps a “pour-over” will and a revocable living trust). If you want to ensure that you have a valid will that follows the laws of your state, avoid pitfalls and best protect your family, hire an experienced estate planning attorney to make certain you have professional legal knowledge, when considering the nuances of trusts and estate law.
A health care proxy, also called a health care power of attorney, accomplishes two goals. First, it authorizes a designated individual to make health care decisions on your behalf, if you are ill or otherwise can’t make these decisions on your own. Without this, a judge would decide who has this authority in those circumstances. A health care proxy also allows you to document specific decisions for your health care, such as end-of-life decisions.
Your estate plan should also include a power of attorney, which allows you to authorize a person to make financial decisions in your stead. It’s used if you’re not in a position to handle such affairs on your own (like a health care proxy).
Probate is the legal process where the court approves the distribution of your assets and gives creditors an opportunity to collect your debts. Going through probate can be stressful for your heirs. There are costs incurred and procedures that must be followed before assets are distributed. The probate process can take months and can be dragged out for more than a year in some situations.
Probate can be avoided with the right planning. For example, you can title certain assets like bank accounts, brokerage accounts, and property, so they pass directly by operation of law to your heirs, and bypass probate. Retirement assets are required to have beneficiaries and likewise will bypass probate. Make sure to have contingent beneficiaries, so these assets continue to bypass probate, if your beneficiaries predecease you.
For people with minor children, designating their potential guardian is one of the most critical elements of an estate plan. It is part of your will in most states. Remember, if you don’t name guardians in your will, and both you and your spouse pass away, the court will appoint a guardian, which may not be ideal for your children.
There are other unique situations that may warrant creating additional documentation and planning. These include having a business, adult children from a previous marriage, a potential liability against your estate or a child with special needs. In any of these situations, you’ll definitely need to review your circumstances with an attorney.
Those assets held jointly (your home perhaps) and assets that have a beneficiary (life insurance) aren’t included in the will. Each state has its own rules about where the property goes, when a person dies without a will.
Finally, remember that estate plans are not “one and done” documents. Just as your life changes, your estate plan needs to change. Tax laws also change, and anytime there is a big tax law change, you’ll need to be sure that your estate plan still achieves your desired goals. You might not need a revision, but you should have a review every few years.
An estate planning attorney in your state will be able to point you and your estate plan in the right direction.
Reference: Investopedia (October 17, 2018) “How to Get Your Estate Plan on Track”