The Importance of Estate Planning

It is estimated that a majority of Americans, perhaps over 60%, die without an estate plan. The importance of having and updating an estate plan cannot be overstated.

So why is it that most of us have not done even the basic estate planning that is so important to our families? Death is not something we want to think or talk about. Thus, we procrastinate and put off dealing with these types of decisions. For most people, things like planning a vacation or family activities is a lot more fun than planning for death or the possibility of becoming incapacitated and unable to make decisions. Many people think that estate planning is the type of planning you do when you get older. However, I see many people in my practice in their 70’s or even 80’s who have not done their estate planning.

So, where should you begin in putting together the legal documents that comprise your estate plan?

Start by thinking of your estate plan as encompassing two different phases. The first phase is the plan that you have in place while you are still living to cover your disability or incapacity. The legal documents that are put in place are only good or effective while you were living and they die when you do. The basic documents that we recommend are a durable financial power of attorney, healthcare power of attorney, with included HIPAA authorization, a standalone HIPAA authorization, and a living will. These documents allow you to name those persons you want to make decisions on your behalf if you cannot make those decisions. The documents are intended to keep members of your family from having to go through an expensive and intrusive court process to be appointed your legal guardian and conservator.

The second phase is the plan you have in place when you die. Everyone has three basic options for legal documents when they die: do nothing, have a last will and testament, or have a revocable living trust. In the first option, if you do not have a will or a trust, you will die “intestate,” meaning you did not have a valid will or other testamentary legal document in place. State law determines who will get your property and who will manage your estate. Your family often loses control, and the proceedings are through the court. I, for one, prefer that the State not be the one to decide how my assets will be divided and to whom they will go.

The second option is to draw up a will. Working with an attorney is recommended because the details are important, as is the legal effect of the will as drawn up. A will has no lifetime application. It basically is your instruction booklet on what you want to happen after your death.

In both option one and option two, your estate goes through probate via the court, either with the will or without a will. Not only are there costs and delays associated with the probate procedure, it is also a matter of public record and if your privacy is important to you, that privacy is lost.

The third option is a revocable living trust. If funded properly while living, a trust allows for the easiest settlement of your estate. That’s because the property is no longer in your name but instead is re-titled in the name of the trust or is otherwise transferable upon your death through beneficiary designations, etc. You maintain control of your estate during your lifetime because as the creator of the trust you are also the manager or trustee and also are the beneficiary. The trust owns the assets but you still control and make all decisions for assets in the trust. It even has built-in lifetime disability planning because you name successor trustees to make decisions concerning the assets in the event you are incapacitated. Upon your death, a probate is not necessary because the assets are not owned by you, but rather are owned by the trust.

Simply put, the reason to do estate planning is to make it easier on your family if you can’t make decisions while living and, after you die, to make the estate settlement easier on your heirs.

If I were to ask you if you prefer to make it easier for your loved ones or harder for your loved ones to handle your affairs, what would your answer be? If your answer is what I expect it to be, then you should consider starting the ball rolling on your estate planning.

Jon