Back in my corporate days, long before becoming an attorney, I was a Trust Officer for a large national bank. My job was to manage trust accounts for our clients and assist them with their estate planning needs. At the time, I felt that trusts and estate planning were solely for the rich and wealthy, designed to help them avoid paying their taxes. Frankly, I didn't fully understand the importance of such planning for most families, regardless of financial standing. In the years that have since passed, I now have a family and realize how important estate planning is in my own household and for my family members.
Estate planning is not just about saving on taxes! The process is about protecting yourself and your family. After all, we work hard most of our adult lives to put away nest eggs and to acquire the finer things in life. Why run the risk of losing all of that and negatively impacting your family when you can plan now? As the title says, you can't take it with you, but you can TRY, as in try to ensure the safety and proper disposition of your assets after your death. Proper estate planning now can protect your estate from excessive estate taxes, legal fees, family disputes, and legal hurdles after your death.
WHAT IS AN ESTATE? An estate consists of all of your property and possessions, including cash, real estate, life insurance, jewelry and so on.
WHAT IS ESTATE PLANNING? Estate planning consists of creating and managing your wealth, while also planning for the passage of your estate on to those whom you've designated. These designees are called your heirs.
WHAT IS NEEDED TO GET STARTED? I suggest you start with five key documents:
- Financial Plan – This is a detailed summary and plan for all of your assets and potential assets. The size of your estate dictates whether you could be subject to estate taxes.
- Power of Attorney (POA) – This document gives financial or other authority to another individual to act on your behalf in the event you become disabled or incapacitated. There are several types of POA documents and an Attorney can determine which is best for you.
- Will – This document indicates who will receive your property and how. Without a properly executed Will, your assets will pass according to state law, not necessarily to those you wish!
- Trust – A trust transfers title of property and gives special powers to a Trustee who manages that property according to the terms of a trust instrument. The main purpose, in most instances, is to keep certain assets out of your estate.
- Healthcare Advance Directive – This is a legal document in which you appoint a health care agent to act on your behalf, and/or direct the withholding or withdrawal of life-sustaining procedures if you are in a terminal condition or a state of permanent unconsciousness. This is something to consider as all of your financial and estate planning can be jeopardized by huge medical bills while your quality of life is diminished or non-existent.
Strategic use of these documents, coupled with some good planning, can help protect you from financial tragedy. While you may be fortunate to escape the hurdle of a prolonged or expensive illness, death is a process none of us can avoid. What we can do is get prepared! I think about my kids, and the things I hope to pass on to them, and I rest easy knowing that I'm ready!