Guardians

What Goes into an Estate Plan?

The thought of creating an estate plan can be intimidating, but this article from Brainerd Dispatch, “Navigating your estate plan,” wisely advises breaking down the process into smaller pieces, making it more manageable. By taking it step by step, it’s more likely that you’ll be comfortable getting started with the process.  The first step is understanding what goes into an estate plan.

What goes into an estate plan?
Deciding what goes into an estate plan that fits your life and accomplishes your goals should be done with the help of an estate planning attorney.

Start with Beneficiaries. This may be the easiest way to start. If you have retirement accounts, like IRAs, 401(k)s, 403(b)s or other retirement accounts, chances are you have already written down the name of the people you want to receive your assets after you pass away. The same goes for life insurance policies. The beneficiary designation tells who receives the assets on your death. You should also note that there are tax ramifications, if you don’t have a beneficiary. Your assets could become taxable five years after you die, without a named beneficiary.

Be aware that no matter what your will says, the name on your beneficiary designations on these accounts determines who gets those assets. You need to check on these from time-to-time to be sure the people you have named are still the people who you want to receive your accounts. You should review the designations every time you review your estate plan, which should be every three or four years.

You should also name a contingent beneficiary on all accounts that allow it.  The contingent beneficiary is the person who will receive the asset is the primary beneficiary is unable to receive it for any reason.

Where There’s a Will, There’s a Way. The will is a key ingredient that goes into an estate plan. It can be used to ensure that your family has the management assistance they need, and, if you have minor children, establish who will raise them is you’re unable to (in fact, a will is the only way you can name a guardian for your children.)

Not having a will leaves your family in a terrible position, where they will have to endure unnecessary expenses and added stress. Your assets will be distributed according to the laws of your state, and not according to your own wishes.

Directives for Difficult Times. Health care directives give your loved ones direction when a difficult situation occurs. If you become incapacitated, through an accident or serious illness, the health care directive tells your family members what kind of care you want—or do not want. You should also name a health care surrogate, so that a person can make medical decisions on your behalf if you’re unable to speak for yourself. Working with an estate planning attorney who is licensed in your state is is important for this item because different states have different laws concerning naming a healthcare surrogate and the decisions they can make.

In addition, you’ll need a financial power of attorney. This allows you to designate someone to step in and manage your finances in the case of incapacity. This is especially important if you are single, because otherwise a court may have to name someone to be your financial guardian.

What About Trusts? If you own a lot of assets or if your estate is complicated, a trust may be helpful. Trusts are legal entities that hold assets on behalf of your beneficiaries. There are many different types of trusts that are used to serve different purposes, from Special Needs Trusts that are designed to help families plan for an individual with special needs, to revocable trusts used to avoid probate and testamentary trusts, which are created only when you die. An estate planning attorney will know which trusts are appropriate for your individual situation.

Working with a qualified and experienced estate planning attorney will help you understand what goes into an estate plan that makes the most sense for you and accomplishes your goals.

Reference: Brainerd Dispatch (Aug. 11, 2019) “Navigating your estate plan”

Here’s Why a Basic Form Doesn’t Work for Estate Planning

It’s true that an effective estate plan should be simple and straightforward, if your life is simple and straightforward. However, few of us have those kinds of lives. For many families, the discovery that a will that was created using a basic form is invalid leads to all kinds of expenses and problems, says The Daily Sentinel in an article that asks “What is wrong with using a form for my will or trust?”  

Basic Estate Planning Forms
Online estate planning forms often lead to more problems and expense that they’re worth.

If the cost of an estate plan is measured only by the cost of a document, a basic form will, of course, be the least expensive option — on the front end. On the surface, it seems simple enough. What would be wrong with using a basic estate planning form like a will or a power of attorney?

Actually, a lot is wrong. The same things that make a do-it-yourself, basic form seem to be attractive, are also the things that make it very dangerous for your family. A basic estate planning form does not take into account the special circumstances of your life. If your estate is worth several hundreds of thousands of dollars, that form could end up putting your estate in the wrong hands. That’s not what you had intended.

Another issue: any form that is valid in all 50 states is probably not going to serve your purposes. If it works in all 50 states (and that’s highly unlikely), then it is extremely general, so much so that it won’t reflect your personal situation. It’s a great sales strategy, but it’s not good for an estate plan.

If you take into consideration the amount of money to be spent on the back end after you’ve passed, that $100 will becomes a lot more expensive than what you would have invested in having a proper estate plan created by an estate planning attorney.

What you can’t put into dollars and cents, is the peace of mind that comes with knowing that your estate plan, including a will, power of attorney, and health care power of attorney, has been properly prepared, that your assets will go to the individuals or charities that you want them to go to, and that your family is protected from the stress, cost and struggle that can result when wills are deemed invalid.

Here’s one of many examples of how the basic, inexpensive estate planning form created chaos for one family. After the father died, the will was unclear, because it was not prepared by a professional. The father had properly filled in the blanks but used language that one of his beneficiaries felt left him the right to significant assets. The family became embroiled in expensive litigation, and became divided. The litigation has ended, but the family is still fractured. This couldn’t have been what their father had intended.

Other issues that are created when basic estate planning forms are used: naming the proper executor, guardians and conservators, caring for companion animals, dealing with blended families, addressing Payable-on-Death (POD) accounts and end-of-life instructions, to name just a few.

Avoid the “repair” costs and meet with an experienced estate planning attorney in your state to create an estate plan that will suit your needs.

Reference: The Daily Sentinel (May 25, 2019) “What is wrong with using a form for my will or trust?”

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