Nobody wants to think about death or disability, but establishing an estate plan—which involves thinking about both topics—is one of the most important steps you can take to protect yourself and your family.
Proper estate planning with the assistance of Lian, Zarrow, Eynon & Shea not only will put you in charge of your finances, it also will spare your loved ones the expense, delay and frustration that can be associated with managing your affairs when you die or become disabled without one.
Providing for Your Incapacity
Many are under the mistaken impression that their spouse or adult children can automatically take over managing their financial affairs if they become incapacitated. The truth is that before someone else can take over managing your finances, that person must petition a court to declare you legally incompetent—a process that can be lengthy, costly and stressful. Then he or she may have to return to court every year and show how each and every penny is being spent and invested.
If you want a member of your family to take over for you automatically and immediately, you must designate that person in a proper legal document so that he will have the authority to do such things as withdraw money from your accounts, pay bills, take distributions from your individual retirement accounts, sell stocks or refinance your home. A will does not take effect until you die, and a power of attorney may be insufficient.
Planning for Your Medical Care
Besides planning for the management of your finances, you should establish a plan for your medical care. The law allows you to appoint someone you trust—for example, a family member or close friend—to make decisions on your behalf about medical treatment options if you become unable to decide for yourself.
You can do this by creating a durable power of attorney for health care, in which you designate the person you want to make such decisions. In addition, you should have a “living will,” which informs others about your medical treatment preferences, for example, the use of extraordinary measures should you become permanently unconscious or terminally ill.
If you leave your estate to your loved ones via a will, everything you own will pass through probate. This process is expensive, time-consuming and public. In addition, the probate court will be in control until the estate has been settled and distributed.
It is not unusual for a probate court to freeze an estate’s assets for weeks or even months while the proper disposition is being determined. This means that your spouse could be forced to apply to the court for the money to pay current living expenses. You can imagine how stressful this could be.
Your family will have immediate access to money while your estate is being settled if you plan for your assets to pass to them without undergoing probate, in a process that is inexpensive, fast and private
Providing for Minor Children
It is important that your estate plan address the upbringing of your minor children. If your children are very young, you may want to consider implementing a plan that will let your spouse to devote more attention to them, free of the burden of work obligations. You may also want to provide for special counseling and resources for your spouse if you believe he or she lacks the experience or ability to handle financial and legal matters.
In addition, you and your spouse should discuss with your attorney a contingency plan in case you die together or within a short time of each other. This plan should designate a financial trustee to manage your assets, as well a guardian for the upbringing of your children. (These do not have to be the same person; in fact, in many situations you may want to designate separate people, in order to maintain a system of checks and balances.)
You and your spouse should think carefully about whom you choose for your children’s guardian, and make sure that he or she shares the values you want your children to learn. You also should consider a potential guardian’s age and financial condition. Some may lack the child-rearing skills you feel are necessary. In addition, make sure your plan does not create an additional financial burden on the guardian you choose.
If you have not decided who will manage your finances and raise your children, a court of law will decide. Even if the court selects the person or persons you would have chosen, it may impose undue burdens and restrictions on them, such as having to provide an annual accounting.
Another issue to consider in this respect is whether you would like the beneficiaries of your will to receive your assets directly, or whether you’d prefer to have your assets placed in trust and distributed based on factors you designate, such as age or need, or even on behavior and education. All too often, children receive substantial assets before they are mature enough to handle them properly, with devastating results.
Planning for Death Taxes
Whether there will be any federal estate taxes to pay depends on the size of your estate and how your estate plan works.
In addition, be aware that many states have their own separate estate and inheritance taxes. There are numerous, well-established strategies that reduce or eliminate death taxes, but many of them require that you start estate-planning early.
Charitable Bequests and Planned Giving
Do you want to benefit a charitable organization or cause? Your estate plan can provide for such organizations in a variety of ways, either during your lifetime or at your death. Depending on how it’s set up, your planned giving may also let you receive a stream of income for life or earn a higher yield on your investments, or it may reduce your capital gains or estate taxes.
A well-crafted estate plan should provide for your loved ones in an effective and efficient manner by avoiding guardianship during your lifetime, probate at your death, estate taxes and unnecessary delays.
A qualified estate-planning attorney can review your family and financial situation and your goals, and explain the options available to you. With an estate plan in place, you will have peace of mind knowing that you have provided for yourself and your family in case the worst happens.