Estate Planning

It’s not just for the rich

Estate Planning may sound like something only the wealthy need to be concerned about but that is simply not true. Estate planning is really another name for:

Family Protection:

When asked “What would happen to your spouse and/or under-age children if something happened to you?” most people are confident that they know the answer. They should not be quite so confident however, because more often than not, most will be significantly mistaken as to what would happen.

Your children:

Did you know that you need to put it in writing in a legal document if you want (or don’t want) a particular person or persons to obtain custody of your child?  How comfortable would you be with the thought that your child might end up in foster care with complete strangers – if only for a few days or even a single day?  This could certainly happen.  How would you feel if a despised in-law or other relative managed to obtain legal guardianship of your child even though that’s the last person you would have chosen?  Who will be in charge of your child’s health care decisions in an emergency if you or your spouse is incapacitated or unavailable?

Does the thought of what would happen if one of your children were to suddenly inherit and have direct access to a large chunk of your money make you queasy?

Planning for these possibilities is not high on anyone’s “fun things to do” list.  Probably buying homeowner’s or auto insurance isn’t either but you wouldn’t think of going without either of those protections and you value your family a little bit more than your house or your car.  It is a great relief to have the necessary plans in place so you and your family can get on with the business of living.

A Will or a Trust?

The Basics:

One of the questions I repeatedly get from new clients is “What’s the difference between a will and a trust?” Discarding all of the legal jargon, let’s compare the two types of documents in practical terms, at least as to the basics.

The similarities:

Both documents give directions as to what happens to your assets and possessions when you die.

The cost:

A will is less expensive to create than a trust.  A trust can cost 6-8 times more than a basic will.  But of course there are good reasons for this cost difference (“avoiding Probate”, for one, because probate takes more time and money than administering a trust).

Some distinctions:

Do you have a beneficiary who has special mental or physical needs or who has problems handling money and making good decisions?   Are you comfortable with leaving assets outright to such a beneficiary and then just hoping for the best?  Many think that in such situations the solution is to leave, via a will, the money to a more responsible beneficiary with instructions for them to use some or all of the estate assets to care for the one(s) who need help or supervision.   Almost always this is a very bad idea and, at best, is full of risk.   Although there may be ethical or moral reasons for this “responsible” person to carry out your instructions, legally, your instructions are mere wishes and the beneficiary to whom you left the money in your will does not have to follow them.

Given these same circumstances, a trust imposes a legal duty upon the trustee to carry out the instructions you put in your trust.  In other words, although you may be gone, you continue, through the directions put into your trust, to control how the assets in the trust are spent.

There are other distinctions between wills and trusts and there are other methodologies that can be used for estate planning but this is just a brief description of the differences.

Which one is right for you?  It depends upon what you are trying to accomplish and each set of circumstances is different from one individual to the next.  You should seek legal counsel and discuss your particular situation before you decide.

In addition to a Will or a trust, Estate Planning includes Advance Directives (Durable Powers of Attorney, Designation of Health Care Surrogates and Living Wills).

Advanced Directives

In addition to a Will and a Durable Power of Attorney (neither of which a mature adult should be without), there are three other personal documents, referred to as “Advance Directives” which are important for peace of mind and to save friends and family members unnecessary grief and pain should something happen to you.

Living Wills

If you have definite ideas about what you would or would not want done to you if you were to be suffering from a terminal illness from which there was no cure, or if you were to become irretrievably brain-damaged, then you should most definitely have a Living Will. If you would shun the tubes, machines, or artificial feeding and/or hydration process that may only serve to prolong your dying, then you must express those wishes before they are needed in a properly worded and legally executed Living Will.

Make sure that any Living Will you sign fully and accurately expresses your wishes. Take care to discuss and understand the legal significance of this document with an Elder Law attorney who will also make sure that the Living Will is properly executed with the necessary formalities to make it legally binding. An attorney will also be able to advise you on what you are to do with this document once you have signed it.

Designation of Health Care Surrogate

A related document, but one which is used in distinctly difference circumstances than the Living Will is the Designation of Health Care Surrogate. Should you suffer from a health condition which, although not terminal, makes it difficult or impossible for you to discuss possible treatments, therapies and medical protocols with your physician, this document allows you to designate someone whom you trust to do that for you. This document is not a substitute for a Living Will, but the two documents work together nicely to cover the health situations you may encounter.

Designation of Pre-Need Guardian

This document is particularly vital for individuals who are elderly or disabled and whose family members may be some distance away and not able to visit regularly. It is a sad but well-known fact that predators exist who would try to take advantage of older people, particularly those who live alone and may be lonely for companionship.

To keep such predators from gaining legal access to a loved one’s assets or taking control of their person by obtaining a voluntary guardianship, a Designation of Pre-Need Guardian, when filed with the court, will offer some protection to the loved one. This document names a trusted individual to be that person’s guardian should the person ever need one. Thus, would-be interlopers with bad intentions will be prevented from obtaining legal control over the individual.