What Is An Estate Plan?
Frequently, people tend to shy away from having a conversation about estate planning. However, it’s crucial to understand that discussing these matters can help prevent possible issues for our loved ones in the future. The process doesn’t have to be complex. Various estate plans cater to individual needs, rather than a single solution for everyone. Your specific goals, assets, and personal desires play a significant role.
Taking the time to evaluate these options will provide you with reassurance, as you’ll know that your wishes will be upheld as intended. As a member of our Caring Network, Pearson Bollman Law explains what an estate plan is and what it can do for you in this article.
The bottom line is if you own something of value that you would like to pass on to someone else upon your death, you have an estate. Whether you know it or not, you also have an estate plan. The state has one for you free of charge (that you may not like) if you do not write your own will.
Broadly speaking, an estate plan (either a will-based estate plan or a trust-based estate plan) encompasses the accumulation, conservation, and distribution of an estate. A good estate plan will enhance and maintain the financial security of individuals and their families.
How to Design an Estate Plan
Designing an estate plan is a process. At Pearson Bollman Law, we will ask you a lot of questions. Below are just some of the questions we go through to assist us in designing an estate plan (either will-based or trust-based) that meets your goals.
- Do you want to provide for and protect your spouse?
- Do you want to provide for and protect your children?
- Do you want to avoid probate?
- Do you have a family business or farm you want to leave your children?
- Do you want to protect your assets from lawsuits or creditors?
- Do you want to protect your children’s inheritance from the possibility of failed marriages?
- Do you want to ensure your death shall not be unnecessarily prolonged by artificial means or other measures?
What Do I Need to Create an Estate Plan?
Some of the documents we utilize to implement your estate plan are as follows:
Will: This legal document outlines who will manage the probate process for you, how your belongings will be distributed, and, if applicable, who you want to be nominated guardian of your minor children or other disabled family members after you die. If you die without a will, the state makes these decisions – often at an added cost to those you love most.
Trust: This legal document is generally an alternative to a will. The primary purpose to use a revocable trust instead of a will is to avoid probate.
Financial power of attorney: This delegates the power to someone you name to legally handle your financial affairs should you become disabled or incapacitated. Without this, no one may be able to access your bank account, securities, or any other property in your name without lengthy legal proceedings.
Healthcare power of attorney: A healthcare power of attorney names a spouse or trusted relative to make health care decisions for you in case you are physically or mentally incapable of doing so on your own.
Living will: A living will informs medical personnel that you do not want certain life-sustaining procedures if you are in a terminal condition (which includes a persistent vegetative state and a coma) and unable to decide for yourself. It is important to inform your physician of your desire to deny any medical procedures, treatments, or interventions that use mechanical or artificial means to sustain, restore or supplant a spontaneous vital function and would serve only to prolong the dying process.
8 Common Estate Planning Mistakes
Avoiding common mistakes while creating an estate plan is essential. Ensure that you create a plan that is free of errors and protects your loved ones instead of creating stress for them.
Below are some of the most common estate planning errors:
1. Doing it yourself. You can prepare your will yourself, but an attorney from our firm will not simply prepare documents. Our estate planning lawyers will determine your objectives, advise on what documents you need to meet them, we’ll draft the documents to meet those objectives, and coordinate the titling of your assets.
2. Believing that you don’t need an estate plan. Parents with young children often have little extra cash but have life insurance and pension plans. The old saying of being “worth more dead than alive” applies to them. In the unlikely event that both parents die before their children reach age 18, without proper planning, a court-administered conservatorship will have to be established for each child. Each child will receive his or her share upon reaching age 18, to spend as he or she wishes.
3. Believing that having a will means that you will avoid probate. A will actually contains the instructions for the Court for the probate process, naming who you want as an executor, that you want your bills and taxes paid, and any specific bequests and who is to receive the residue of your estate.
4. Believing that your assets are going to pass under the terms of your will or trust. Simply because your will or trusts says who is going to receive your assets does not mean that is what will happen. Many assets pass outside the Will or Trust. Examples are life insurance, IRAs, annuities and other assets that have named beneficiaries.
5. Not updating your estate plan. Heath Ledger, who made his millions in movies (Brokeback Mountain and The Dark Knight), died at age 28. He had a will which left his assets equally to his parents and his siblings but left nothing to his infant daughter. Remember the 5 D’s of when you should update your estate plan: Divorce, Dependent, Disability, Death, and Decade.
6. Not planning for incompetence. Living wills, durable powers of attorney for health care decisions and durable power of attorney for financial decisions are a part of estate planning. Guardianship (over the body) and conservatorship (over the finances) proceedings are burdensome and expensive but are required for a people who do not have those documents and their decision-making capacity is so impaired that they are unable to make, communicate, or carry out important decisions concerning their own care and their financial affairs.
7. Failing to update beneficiary designations. Your retirement plan, life insurance policy and more have beneficiary designation forms. It is important to not only keep the primary beneficiaries updated, but you should have secondary or contingent beneficiaries named in the event that the primary beneficiary has died. Since these forms were often completed years prior when an account was opened or a policy purchased, it’s an easy task to overlook.
8. Not having enough ready cash to pay for the funeral and other final expenses. For example, having cash in accounts that are “payable on death” cannot be accessed without the death certificate which may take several weeks to get. As one of my clients said, after her husband died suddenly, leaving her with a mess, “I’d kill him, if he wasn’t already dead.” This is not the legacy you want to leave your family. You want a well-thought-out plan that you have developed with the help of an estate planning attorney.