There are a variety of events in your life that may trigger the need for new or updated estate planning. Events such as a marriage, a divorce, a birth or a death may occur, creating a new need for changing existing planning documents. You spend a career working hard to earn money, generating equity in your company, and committing to a lifetime of saving and investing. With all of this effort to accumulate assets, we recommend that you consider spending time contemplating what you want to happen for your family, loved ones and/or favorite charities at your death.
We find that it is a great help and comfort to your family and friends when a proper plan is in place before something changes in your health or a tragedy strikes. Often, we find that people avoid setting up their estate plan because they are unsure of what exactly they need to include. As such, we have a quick list of the most important things to include in your estate plan, and the rationale for including these documents.
Update Your Will
If you die without a valid will, the court has no way of knowing how you wanted to distribute your assets. As such, the courts will distribute your assets based on the distribution schedule established in the state probate code. Given that little consideration is given to family dynamics in a probate code division, it may cause unnecessary clashes, bitterness and after-death disputes between your children and other family members. With this in mind, it is important to have a proper will in place and have it updated so that you are prepared for an unexpected event.
Ancillary Documents
We all remember the Terri Schiavo case and its high-profile drama. After hearing about this every evening on the news, many people started to realize the importance of not only having a will, but also having a living will. In addition, there are several other documents that should be included in your estate plan.
- Directive to Physicians (Living Will): Legally expresses what you want to occur if you are terminally ill or unable to speak for yourself. It also states who you would put in charge of making final decisions, if need be.
- Statutory Durable Power of Attorney: Should you become incapacitated, this allows someone to carry on your affairs and protect your property without formal judicial approvals.
- Medical Power of Attorney: Appoints someone as a representative to make decisions about medical treatment on your behalf if you become unable to make or communicate a responsible decision for yourself.
- HIPPA Power of Attorney: This document allows your agent to have access to your medical, dental and health records and supplements your medical power of attorney.
- Disposition of your Remains: If you are unmarried and have no children, you may want to consider having your attorney draft a document in which you name the decision-maker for the disposition of your remains. While it would seem reasonable that if someone steps forward to make arrangements, funeral directors are extremely cautious about carrying out your wishes without this document especially if you have chosen cremation. I have personally had to have a court order when a client failed to include this document in their estate plan even though they had already pre-paid for their cremation. Obtaining a court order is a lengthy process and should be avoided if possible.
- Beneficiary Designations/Guardians: As part of drafting a new or updated will, you need to designate beneficiaries to receive your assets. Take time to consider who you wish to receive certain assets. Also, make sure all of your insurance policies and retirement plans have the proper beneficiary designation and are updated when needed. Keep in mind that beneficiary designations on contracts such as Life Insurance policies and even retirement accounts avoid probate. As such, it is important to keep your beneficiary designations up to date on your contracts as updating your will may have no impact. If you have minor children, you can and should consider naming a guardian for your children in your will. You should make sure to discuss this with the person that you plan to name ahead of time. You should also consider if the person in charge of your children is also in charge of the finances. Sometimes the person who has the care skills the children require may not have the asset management and fiduciary skills that are required to manage your estate.
Setting Up a Trust
Depending upon the size of your estate and your situation in life, it may be necessary to include certain trusts in your estate plan. These trusts may include a bypass trust, a marital deduction trust, a survivor’s trust and a revocable living trust. If you have children, ask your estate attorney about including separate lifetime trusts for each one.
Investing assets over time, planning for the distribution of your estate, setting up trusts for your beneficiaries and designating fiduciaries are all very important. There are strategies that can be used to benefit you now and your family after your death. Planning for the unexpected is one of the best things you can do for the future happiness and success of your loved ones.
Caroline Marciano, J.D. is Vice President - Estate Planning and Administration with Kanaly Trust
